Caldwell v. UnitedHealthcare Insurance Company ( 2023 )

1 2 3 4 5 6 UNITED STATES DISTRICT COURT 7 NORTHERN DISTRICT OF CALIFORNIA 8 9 10 MARY CALDWELL, 11 Plaintiff, No. C 19-02861 WHA 12 v. 13 UNITEDHEALTHCARE ORDER RE MOTIONS FOR INSURANCE COMPANY and FINAL APPROVAL OF 14 UNITED HEALTHCARE CLASS SETTLEMENT AND SERVICES, INC., ATTORNEY’S FEES AND 15 COSTS Defendants. 16 17 INTRODUCTION 18 19 In this certified class action to recover health benefits under an ERISA plan, plaintiffs 20 move for final approval of class settlement and for attorney’s fees and costs. Defendant 21 insurers oppose the latter, but not the former. To the extent stated herein, plaintiffs’ motions 22 are GRANTED. 23 STATEMENT 24 25 The facts of this action, briefly summarized below, are explained in greater detail in prior 26 orders. See Caldwell v. UnitedHealthcare Ins. Co., No. C 19-2861 WHA, 2020 WL 7714394, 27 at *1–2 (N.D. Cal. Dec. 29, 2020). Plaintiff Mary Caldwell brought this action on behalf of 1 Company and United HealthCare Services Inc. (together, “United”). Plaintiff alleges that 2 United violated ERISA by improperly denying on a categorical basis all health insurance 3 claims for liposuction to treat lipedema as unproven and not medically necessary. A prior 4 order certified the following class: “All persons covered under ERISA health plans, self- 5 funded or fully insured, that are administered by United and whose claims for specialized 6 liposuction for treatment of their lipedema were denied as unproven between January 1, 2015 7 and December 31, 2019.” Id. at 6. Based on United’s records, the class thus consists of 28 8 members (Dkt. No. 205). 9 The parties have moved for class settlement three times, having been rejected twice 10 before. The first proposed settlement was rejected because “class counsel get vast amounts of 11 cash but the class members get merely a cosmetic settlement.” Caldwell v. UnitedHealthcare 12 Ins. Co., No. C 19-02861 WHA, 2021 WL 5359428, at *1 (N.D. Cal. Oct. 12, 2021). The 13 second try fared better in that it was no longer a collusive deal, but any purported benefit to the 14 class remained illusory (Dkt. No. 225). The parties’ third proposed settlement was 15 preliminarily approved in July 2023, with the caveat that class members’ participation in the 16 settlement post-approval would shed light on whether the purported benefits could be realized 17 (Dkt. No. 251). 18 No class member opted out of the settlement, although two object, only one of which was 19 timely made (Baessler Decl. ¶¶ 23–29). A patient advocate, Ms. Karie Kozak, appeared at the 20 final approval hearing on behalf of three class members to inform the court of her concern 21 regarding the practical use of the settlement for class members who no longer have United 22 HealthCare insurance and her concern regarding the cost of lipedema surgery. After hearing 23 from Ms. Kozak and both parties, the court found that class members who no longer have 24 United HealthCare insurance are addressed under the terms of the settlement and may submit a 25 request to United to review their claim. However, because the cost of lipedema is outside the 26 scope of this matter, Ms. Kozak’s second objection was overruled. This order follows full 27 briefing and oral argument. 1 ANALYSIS 2 This order addresses the outstanding motions for class settlement and attorney’s fees in 3 order. 4 1. FINAL APPROVAL OF PROPOSED CLASS SETTLEMENT. 5 Plaintiff moves for final approval of the proposed class settlement (Dkt. No. 257). 6 Defendants have filed a statement of non-opposition (Dkt. No. 258). 7 Rule 23(e) provides that “[t]he claims, issues, or defenses of a certified class . . . may be 8 settled, voluntarily dismissed, or compromised only with the court’s approval.” When a 9 proposed settlement agreement is presented, the court must perform two tasks: (1) direct notice 10 in a reasonable manner to all class members who would be bound by the proposal, and (2) 11 approve the settlement only after a hearing and on finding that the terms of the agreement are 12 fair, reasonable, and adequate. FRCP 23(e)(1)–(2). “The class action device, while capable of 13 the fair and efficient adjudication of a large number of claims, is also susceptible to abuse and 14 carries with it certain inherent structural risks.” Officers for Just. v. Civ. Serv. Comm’n of S.F., 15 688 F.2d 615, 623 (9th Cir. 1982). 16 A. Adequacy of Notice. 17 For class notice of settlement to be adequate, it must be “reasonably calculated, under all 18 the circumstances, to apprise interested parties of the pendency of the action and afford them 19 an opportunity to present their objections.” Mullane v. Cent. Hanover Bank & Tr. Co., 339 20 U.S. 306, 314 (1950) (citations omitted). It must also “describe[] the terms of the settlement in 21 sufficient detail to alert those with adverse viewpoints to investigate and to come forward and 22 be heard.” Mendoza v. Tucson Sch. Dist. No. 1, 623 F.2d 1338, 1352 (9th Cir. 1980). 23 The undersigned judge previously approved the form, content, and planned distribution 24 of the class notice. Revisions to the proposed class notice were ordered at the hearing granting 25 preliminary approval of class settlement, and a subsequent order issued prescribing further 26 revisions before ultimately approving the class notice (Dkt. Nos. 248, 250, 251). The 27 settlement administrator asserts that the approved class notice of settlement was mailed to all 1 with an email address on file were also emailed the class notice on August 10, 2023. A class 2 notice regarding a change in the final settlement approval hearing date was also mailed and 3 delivered to all 28 class members (Baessler Decl. ¶¶ 9–16). 4 The settlement administrator has fulfilled the notice plan given the foregoing. This order 5 accordingly finds that notice to class members was adequate. Additionally, class counsel is 6 ordered to submit a report to this court by JANUARY 31, 2024, detailing any efforts made to 7 inform the class of the settlement and encouraging all class members to avail themselves of it. 8 B. Fairness of Settlement. 9 To determine whether a proposed class settlement is fair, reasonable, and adequate, a 10 district court may consider what is known as the Churchill factors: (1) the strength of the 11 plaintiffs’ case; (2) the risk, expense, complexity, and likely duration of further litigation; (3) 12 the risk of maintaining class action status throughout the trial; (4) the amount offered in 13 settlement; (5) the extent of discovery completed and the stage of the proceedings; (6) the 14 experience and views of counsel; (7) the presence of a governmental participant; and (8) the 15 reaction of the class members to the proposed settlement. In re Bluetooth Headset Prod. Liab. 16 Litig., 654 F.3d 935, 946 (9th Cir. 2011) (quoting Churchill Vill., L.L.C. v. Gen. Elec., 361 17 F.3d 566, 575 (9th Cir. 2004)). That list is not exhaustive, as “[t]he factors in a court’s fairness 18 assessment will naturally vary from case to case.” Ibid. 19 Experienced class counsel asserts that plaintiffs have a strong case, given that the state of 20 the law for showing a treatment is unproven means that “United would have been hard pressed 21 to carry the heavy burden framed by this Court’s summary judgment ruling” (Approval Br. 6, 22 Dkt. No. 257 (citing Wise v. MAXIMUS Fed. Servs., Inc., 478 F. Supp. 3d 873, 888 (N.D. Cal. 23 2020) (Judge Lucy H. Koh))). This action teetered on the edge of a bench trial twice before 24 obtaining a preliminary approval of settlement, so this settlement avoids the risks and expenses 25 of trial while reflecting a developed litigation record. 26 Ultimately, the settlement grants all 28 class members the relief requested in the 27 complaint: the settlement covers lipedema surgery for all class members under the terms of 1 While class counsel represents that “the reaction of the Class Members has been 2 overwhelmingly positive,” two objections from the class members have been received 3 (Approval Br. 12). Class member Marianne Klaczynzki submitted an objection by the 4 deadline to do so, October 20, 2023 (Baessler Decl. ¶ 26). Her objection appears to be targeted 5 at seeking redress outside the scope of our certified class. For example, multiple objections 6 target United’s current policies on lipedema and how they should be changed (Baessler Decl. 7 Exh. D ¶¶ 3–5). But class members’ claims being subject to reevaluation under United’s 8 current policies was explicitly disapproved of when this district court rejected prior settlement 9 proposals. 2021 WL 5359428, at *1. Class members under the current settlement are entitled 10 to coverage irrespective of what United’s current lipedema policies are: 11 A Class Member will be eligible to receive coverage for previously denied liposuction services 12 as set forth in this Agreement upon re-review if (i) she had coverage under her plan at the time of the 13 original denial, (ii) her surgeon verifies that the request is for medically necessary liposuction to 14 treat lipedema, and (iii) the liposuction for lipedema will be provided in an in-network or out-of-network 15 setting (e.g., a hospital or ancillary facility in the United States) as covered under her plan. 16 17 (Settlement Agreement 10–11, Dkt. No. 233-2). Furthermore, the objection attaches 18 declarations from several people identified as current or former members of United plans, none 19 of whom are the 28 class members (Baessler Decl. ¶ 27). Tellingly, those declarations air 20 grievances over United’s coverage of lipedema, despite the fact that the class settlement covers 21 class members’ lipedema surgery irrespective of United’s policies (Baessler Decl. Exh. D). 22 Ms. Klaczynzki moreover allowed Karie Kozak to appear on her behalf at the final approval 23 hearing. As Ms. Kozak explained at the hearing, she runs coverlipedema.com, which helps 24 advocate for coverage for lipedema surgery (Barrio Decl. ¶¶ 3–5, Dkt. No. 257-1). 25 Ms. Klaczynzki also objects that: 26 Retired class members, who after being denied by UHC, did not have the money to pay cash for 27 surgery and now do not have access in their area to receive a cash settlement based in FAIR health non- 1 network rates to proceed with surgery. 2 (Baessler Decl. Exh. D ¶ 1). The settlement at hand automatically covers expenses for 3 lipedema surgery under the original cost-share plan for all class members who were enrolled in 4 a United plan during the class period (Settlement Agreement 8–11). The objection could 5 mean, however, that certain class members can no longer afford their portion of cost-sharing, 6 and therefore are forced to forgo lipedema surgery altogether. While this order sympathizes, a 7 class member’s current financial situation remains outside the scope of the certified class. The 8 ability to pay the cost-share under a United plan in the first place is outside the scope of this 9 lawsuit, which was to have lipedema surgery covered under United plans. If those class 10 members suffered financial hardship because of uncovered lipedema surgery paid for out of 11 pocket, the settlement explicitly reimburses such expenditures pursuant to cost-sharing 12 (Settlement Agreement 8). In any event, the objection does not assert that this concern applies 13 to any of our 28 class members, nor did any of them opt out of this settlement including Ms. 14 Klaczynzki herself, so it remains unclear to whom this concern is directed. 15 The objection that the Special Master should oversee potential re-submission requests 16 because class counsel stands to profit from their obligation to do so is without merit. This 17 order makes clear that class counsel’s attorney’s fees are as laid out in this order, and not 18 contingent upon processing of re-submission requests. Specifically, class counsel shall not 19 receive the full fee amount until the conclusion of the reimbursement and reprocessing phase 20 and all claims have been processed. 21 The settlement administrator also received a late objection from class member Velma 22 Leggett, postmarked October 21, 2023 (Baessler Decl. ¶ 28). That objection is substantively 23 identical to that of Ms. Klaczynzki, and includes the same declarations from parties who are 24 not class members (see Baessler Decl. Exh. E). Ms. Kozak likewise spoke on Ms. Leggett’s 25 behalf at the final approval hearing and voiced concern regarding how United will review 26 requests for lipedema surgery coverage by those who do not currently have United insurance 27 but are otherwise covered under the settlement. Ms. Kozak also raised concern for treatments 1 that may be needed after lipedema surgery but may or may not be covered under United 2 insurance. 3 This order finds the objections to the settlement misplaced and therefore unavailing. A 4 sticking point in rejecting prior settlements was that the scope of the release should be limited 5 to the claims asserted in this action. The settlement agreement’s release does not apply to any 6 class member that does not receive a reimbursement or coverage, nor to future, additional 7 requests for coverage for lipedema surgery (Settlement Agreement 13). This settlement is not 8 the proper vehicle to address other grievances with United’s coverage of lipedema, and class 9 members themselves are not precluded from pursuing claims not asserted here. 10 Distinct from the eight Churchill factors, Rule 23(e)(2) requires “scrutinizing the fee 11 arrangement for potential collusion or unfairness to the class” by an approving district court, 12 among other considerations. Briseño v. Henderson, 998 F.3d 1014, 1025–26 (9th Cir. 2021). 13 The first proposed settlement was rejected for precisely those reasons. 2021 WL 5359428, at 14 *1. This settlement was approved in part because there was no contingent fee arrangement and 15 prior concerns had been addressed. Given the foregoing, this order finds that the proposed 16 class settlement is fair, reasonable, and adequate under FRCP 23(e). Plaintiff’s motion for 17 final approval of class settlement is GRANTED. 18 2. ATTORNEY’S FEES AND COSTS. 19 A district court must ensure that attorney’s fees are “fair, adequate, and reasonable.” 20 Staton v. Boeing Co., 327 F.3d 938, 963–64 (9th Cir. 2003) (quoting Rule 23(e)). Class 21 counsel seeks fees under the ERISA statute’s fee-shifting provision, which states: “In any 22 action under this subchapter (other than an action described in paragraph (2)) by a participant, 23 beneficiary, or fiduciary, the court in its discretion may allow a reasonable attorney’s fee and 24 costs of action to either party.” 29 U.S.C. § 1132(g)(1). The Supreme Court has held that this 25 provision means “a court ‘in its discretion’ may award fees and costs ‘to either party,’ . . . as 26 long as the fee claimant has achieved ‘some degree of success on the merits.’” Hardt v. 27 Reliance Standard Life Ins. Co., 560 U.S. 242, 245 (2010) (quoting Ruckelshaus v. Sierra 1 Our court of appeals “has adopted the hybrid lodestar/multiplier approach used by the 2 Supreme Court in Hensley v. Eckerhart, 461 U.S. 424, 103 S.Ct. 1933, 76 L.Ed.2d 40 (1983), 3 as the proper method for determining the amount of attorney’s fees in ERISA actions.” Van 4 Gerwen v. Guarantee Mut. Life Co., 214 F.3d 1041, 1045 (9th Cir. 2000) (citations omitted). 5 “First, a court determines the ‘lodestar’ amount by multiplying the number of hours reasonably 6 expended on the litigation by a reasonable hourly rate. . . . Second, a court may adjust the 7 lodestar upward or downward using a ‘multiplier’ based on factors not subsumed in the initial 8 calculation of the lodestar.” Ibid. (citations omitted). 9 Though the lodestar figure is “presumptively reasonable,” . . . the court may adjust it upward or 10 downward by an appropriate positive or negative multiplier reflecting a host of “reasonableness” 11 factors, “including the quality of representation, the benefit obtained for the class, the complexity and 12 novelty of the issues presented, and the risk of nonpayment.” 13 14 In re Bluetooth Headset Prod. Liab. Litig., 654 F.3d at 941–42. “Foremost among these 15 considerations, however, is the benefit obtained for the class.” Ibid. 16 Class counsel seeks $1,005,170.62 in attorney’s fees. The accompanying declaration 17 explains that a total of 1,909.1 hours were spent on this action, and both the allocation of hours 18 spent and the billing rates of the four lawyers that worked on this action do not seem 19 unreasonable (Davis Decl. 8–10). Class counsel thus calculated a lodestar of $1,340,227.50, 20 which they then discounted by 25% to arrive at their fee request. 21 United’s objections to class counsel’s fee request are grounded in prior rejected proposed 22 settlements. United explains that the current request is $250,000 more than the arrangement 23 provided for in the first rejected settlement. United also argues that the fee request is 24 disproportionate to the benefit conferred upon the class, citing reimbursement caps from prior- 25 rejected settlements and estimates of what coverage payouts would be under the current 26 settlement agreement. United argues that because it made “significant concessions” to settle, 27 class counsel should likewise do so by having their requested fees reduced. United finally 1 excessive such that they are unreasonable, specifically asserting that “[t]here was no reason for 2 Plaintiff’s counsel to spend nearly 400 hours and to incur $250,000 in fees preparing for a 3 bench trial that was likely to last only a few days . . . on the verge of being finally settled for a 4 third time” (Fees Opp. 3–12, Dkt. No. 255). 5 United’s objections are largely without merit. Prior proposed settlements were rejected, 6 and thus reference to any fee arrangements at the time — which were inappropriate in the first 7 place — are irrelevant here. Class counsel submits that 128.8 hours were spent on settlement, 8 while 381.5 hours were spent on trial preparation, representing 6.7% and 20% of total attorney 9 time spent on this case, respectively (ibid.). Each time a proposed settlement was rejected, it 10 was not until trial was rescheduled and imminent that a new settlement was proposed (Dkt. 11 Nos. 221, 231). This order will not speculate on the dynamics of settlement negotiations, 12 which side was more responsible for such delay, or the degree of concessions made to arrive at 13 settlement. Attorney time preparing for trial does not appear unreasonable given the proximity 14 to trial when the current settlement was achieved, and class counsel’s 25% discount 15 nevertheless assuages such concerns. 16 However, the lodestar amount is due for a downward adjustment. The settlement 17 requires the 28 class members to submit claims to United, including those who have not gotten 18 lipedema surgery. Purportedly, these renewed applications for coverage of surgery will be 19 approved, but until those surgeries actually happen and United pays, no benefit will have been 20 received by such class members. Likewise, for class members who have already had lipedema 21 surgery and now must submit reimbursement claims, until those checks are cashed no benefit 22 will have been received. The settlement agreement contemplates that claims will be paid 23 “within 60 days of receiving the claim, unless United needs additional information” 24 (Settlement Agreement 4.C, Dkt. No. 233-2 (emphasis added)). Class representative Mary 25 Caldwell has been fighting United over her claim since 2017. There is no telling how much 26 longer she may have to wait under the terms of the settlement. 27 Class counsel also asserts that “[a]s a direct result of this litigation, United eliminated its 1 longer denies Lipedema Surgery as ‘unproven’” (Davis Decl. ¶ 32). Of course, even if the 2 “hundreds of covered surgeries over the next five years, that would otherwise have been denied 3 as unproven” are attributable to this litigation, those are not benefits the class members here, 4 who number only 28 (ibid.). And just because United no longer outright denies such claims as 5 “unproven” does not mean it is now automatically covering all lipedema surgery. 6 “[T]he Supreme Court has instructed district courts to instead ‘award only that amount of 7 fees that is reasonable in relation to the results obtained,’” and to evaluate factors such as “the 8 quality of representation, the benefit obtained for the class, the complexity and novelty of the 9 issues presented, and the risk of nonpayment.” In re Bluetooth Headset Prod. Liab. Litig., 654 10 F.3d at 941–42 (quoting Hensley v. Eckerhart, 461 U.S. 424, 436 (1983)). This action 11 involved a closed universe of 28 class members, for which the law places the burden on United 12 to prove that the treatment in question is unproven. See Caldwell, No. C 19-02861 WHA, 13 2021 WL 275467, at *4 (N.D. Cal. Jan. 27, 2021). Class counsel does not assert that this 14 action was particularly complex, nor that it contained novel issues or was unique within ERISA 15 litigation. Class members must still wrangle with United through a claims process without 16 guarantee of full reimbursement. A further 50% discount is thus warranted to the lodestar 17 amount, which results in $670,113.75 in fees. 18 As this settlement provides no cash to the class, attorney’s fees will only be awarded 19 insofar as a benefit has been conferred to the class. To that end, this order awards class 20 counsel $100,000 at this time but permits class counsel to seek additional fees in about a year. 21 This court will wait and see if class members avail themselves of the settlement and will then 22 adjust attorney’s fees upon a finding that some additional benefit has been conferred to the 23 class. Class counsel should therefore file a motion by NOVEMBER 5, 2024, which explains the 24 extent to which class members availed themselves of this settlement in order to justify an 25 award of additional attorney’s fees. 26 Class counsel also seeks $125,677.96 in costs, which includes (among other things) fees 27 for plaintiffs’ expert and the class administrator, deposition costs, and travel costs for 1 type customarily billed to a fee-paying client. There have been no objections from class 2 members to recovery of the requested fees and costs. 3 In light of the foregoing, to the extent stated above, plaintiffs’ motion for attorney’s fees 4 is GRANTED IN PART AND DENIED IN PART. Class counsel is AWARDED $100,000 in 5 attorney’s fees and $125,677.96 in costs for a total of $225,677.96 at this time. Class counsel 6 may file a motion for this court to adjust attorney’s fees by NOVEMBER 5, 2024 by explaining 7 how many of the 28 class members have either obtained reimbursement or have had lipedema 8 surgery approved for coverage and scheduled. 9 CONCLUSION 10 For the reasons stated above, final approval of the proposed class settlement is 11 GRANTED. The request for an award of attorney’s fees and costs is GRANTED IN PART AND 12 DENIED IN PART. Payment of $225,677.96 shall be made by United within 28 days of this 5 13 order. Judgment will be entered accordingly. 14 In addition, class counsel are ordered to submit a report to this court by JANUARY 31, 3 15 2024, explaining their efforts to notify class members of the settlement. Class counsel are also 16 ordered to submit a report to this court by NOVEMBER 5, 2024, explaining how many out of the 3 17 28 class members have availed themselves of the settlement in order for this court to award 18 additional attorney’s fees. 19 Both sides are ordered to appear in person on DECEMBER 5, 2024, AT 11:00AM for a 20 status conference. 21 22 IT IS SO ORDERED. 23 Dated: December 22, 2023. 24 25 f rN xl □ WILLIAM ALSUP 26 UNITED STATES DISTRICT JUDGE 27 28