United States District Court, D. New Jersey
Barry M. Epstein, Esq., Barbara G. Quackenbos, Esq., EPSTEIN & QUACKENBOS, P.C., Roseland, New Jersey, Bruce H. Nagel, Esq., Randee M. Matloff, Esq., NAGEL RICE, LLP, Roseland, New Jersey, James E. Cecchi, CARELLA BYRNE BAIN GILFILLAN CECCHI STEWART & OLSTEIN, PC, Roseland, New Jersey, Stephen A. Weiss, Christopher A. Seeger, SEEGER WEISS, Newark, New Jersey, Christopher Burke, Esq., Joseph Guglielmo, Esq., Amanda Lawrence, Esq., SCOTT SCOTT, New York, New York, Attorneys for Plaintiffs DARLERY FRANCO, DAVID CHAZEN AND CAMILO NELSON.
Brian J. McMahon, Esq., E. Evans Wohlforth, Jr., Esq., William P. Deni, Jr., Esq., GIBBONS P.C., Newark, New Jersey, William H. Pratt, Esq., Frank M. Holozubiec, Esq., Joshua B. Simon, Esq., Katherine L. McDaniel, Esq., Warren Haskel, Esq., KIRKLAND & ELLIS LLP, New York, New York, Attorneys for Defendants.
STANLEY R. CHESLER, District Judge.
This matter comes before the Court upon the renewed motion for class certification filed on September 9, 2013 by Plaintiffs Darlery Franco, David Chazen and Camilo Nelson (collectively, "Subscriber Plaintiffs"). Cigna has opposed the motion. The Court denied Subscriber Plaintiffs' first motion for class certification by Order dated January 16, 2013. The Opinion issued by the Court in connection with that Order provides a detailed factual background and defines key terms that likewise apply to this motion, for example "ONET" and "UCR." Because the Court writes for the parties only, it will continue to rely on the same background information without repetition here and will also continue to use the same abbreviated terms as defined in the January 16, 2013 Opinion. (The Opinion relating to the first motion for class certification is reported at 289 F.R.D. 121 (D.N.J. 2013) and will hereinafter be referred to as "Franco I.")
In Franco I, the Court found that Subscriber Plaintiffs had adequately demonstrated that the proposed ERISA class satisfied the Rule 23(a) requirements of commonality and typicality but denied certification in large part because Subscriber Plaintiffs did not carry their burden of demonstrating that common questions of law and fact would predominate over individual issues. The Court identified three major deficiencies preventing the first motion for class certification from meeting Rule 23(b)(3)'s predominance requirement. In their first motion for class certification, Subscriber Plaintiffs failed to demonstrate (1) that Cigna plan language concerning UCR-based ONET benefits was uniform such that it could be applied to the entire class's claim to recover unpaid benefits; (2) that a violation of plan terms by Cigna under the abuse of discretion standard could be established based on common evidence; and (3) that damages could be calculated based on a standard methodology. The Court also found that class certification was frustrated by a class definition which failed to incorporate the identifying aspects of membership: Cigna subscribers whose plans entitled them to ONET benefits based on a UCR standard to determine the allowed amount and whose ONET claims were determined using Ingenix data.
Subscriber Plaintiffs assert that this renewed motion for class certification is not, as Cigna has contended, an untimely motion for reconsideration in disguise. The briefs submitted by Subscriber Plaintiffs, however, unequivocally demonstrate that, in large part, Cigna's characterization of the motion is correct. The briefs contain numerous instances in which Subscriber Plaintiffs refer to the Court's conclusions on the prior class certification motion as "incorrect" and "mistaken." (Mot. at 22; Reply at 8 n.3.) Nevertheless, it is clear to the Court that portions of Subscriber Plaintiffs' motion indeed raise new arguments to address the impediments to class certification discussed in Franco I. The Court will, therefore, entertain this renewed motion for class certification pursuant to Federal Rule of Civil Procedure 23(b)(3), concentrating on Subscriber Plaintiffs' revised approach to demonstrating that the redefined classes - an ERISA Class and a RICO Class - meet the (b)(3) requirements.
This motion corrects some of the problems identified in Franco I. Subscriber Plaintiffs inject greater precision into the definitions of their two proposed classes. They also narrow the UCR language to two basic formulations widely used in Cigna plans during the relevant time period.
Even as pared down, however, the classes do not present common liability issues that will predominate over individual ones. As Cigna points out, even plans that use one of the two broad UCR definitions vary as to the information that Cigna may consider in determining ONET benefits. The record shows multiple combinations of the UCR provisions and additional clauses that influence the determination of an appropriate UCR and ONET benefit. For reasons the Court will discuss, these variations would have a significant impact on a liability analysis. Yet, Subscriber Plaintiffs fail to demonstrate how a classwide trial of the ERISA and RICO claims would cohesively address such combinations and permutations of applicable plan language. Another substantial obstacle to class certification is the lack of any demonstration that injury, an essential component of liability, is capable of classwide proof. The motion makes the erroneous assumption that, if Subscriber Plaintiffs succeed in proving at trial that Ingenix was a flawed database, harm to all members of the redefined ERISA and RICO Classes necessarily follows. In the discussion below, the Court will elaborate on the reasons that Subscriber Plaintiffs' current effort falls short of passing the rigorous analysis that must be applied to ascertain whether the proposed classes actually conform with Rule 23. Marcus, 687 F.3d at 591. Each proposed class will be addressed in turn.
II. ERISA CLASS
A. Revised Class Definition
The ERISA Class has been redefined in a manner that makes class membership readily ascertainable. According to this motion, the putative class would consist of:
All CIGNA subscribers from March 1, 1998 through the date of class certification ("Class Period") in a fully-insured or self-insured CIGNA plan in which CIGNA promised to pay reasonable and customary amounts defined as the charge of "most providers" in the "same geographic area" or promised a "maximum reimbursable charge" defined as a "percentile of all providers" in the "same geographic area" and for whom CIGNA used Ingenix data to determine its allowed amount and which allowed amount was less than the non-participating provider's billed charge for any medical service or supply, broadly defined to include medical services and supplies of all kinds, including dental and mental health. The Class excludes CIGNA's MRC2 plans that refer to payment to providers based on the federal Medicare program fee schedule. The Class excludes benefits where CIGNA's allowed amount was zero or which were determined under CIGNA's Network Savings Plan ("NSP") policy. The Class also excludes any judge involved in the adjudication of this action and Court personnel.
The revised definition includes objective criteria: specific plan language regarding the problematic UCR standard for ONET coverage, the use of Ingenix to determine the allowed amount on an ONET claim, and an allowed amount less than the provider's billed charge. Thus, in line with Subscriber Plaintiffs' theory of the case, the definition captures what the movants allege to be subscribers' rights under their Cigna plans, Cigna's conduct in violation of those rights and injury. In other words, it tailors the class to the ERISA claims at issue in this case: the alleged underpayment of an ONET claim in a manner contrary to plan language because of Cigna's use of Ingenix to determine UCR. The Court notes that the revised ERISA Class definition addresses the issue, raised in Franco I, presented by situations in which the allowed amount is less than the provider's billed charge for reasons unrelated to Ingenix, for example because Ingenix was not used at all or because the subscriber has not yet satisfied his deductible and thus the allowed amount on the claim is zero.
B. Predominance of Legal and Factual Issues
Rule 23(b)(3) requires that questions common to the class predominate such that the class will "prevail or fail in unison" on its claims. Amgen, Inc. v. Connecticut Retirement Plans and Trust Funds, 133 S.Ct. 1184, 1191 (2013). Predominance is similar to Rule 23(a)(2)'s requirement of commonality in that both are concerned with ensuring that the putative class presents common questions of law of fact. Indeed, the Rule 23(a) commonality requirement is generally regarded as subsumed by the more stringent Rule 23(b)(3) predominance requirement. Sullivan v. D.B. Investments, Inc., 667 F.3d 273, 297 (3d Cir. 2011) (en banc), cert. denied, 132 S.Ct. 1876 (2012). Predominance, however, imposes a "far more demanding standard, " as it "tests whether proposed classes are sufficiently cohesive to warrant adjudication by representation." In re Ins. Brokerage Antitrust Litig., 579 F.3d 241, 266 (3d Cir. 2009) (quoting Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 623-24 (1997)). A class of plaintiffs seeking to try claims by representation pursuant to Rule 23(b)(3) may satisfy the predominance requirements only when the plaintiffs demonstrate that the elements of their claim are "capable of proof at trial through evidence that is common to the class rather than individual to its members." In re Hydrogen Peroxide Antitrust Litig., 552 F.3d 305, 311-12 (3d Cir. 2009); cf. Newton v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 259 F.3d 154, 172 (3d Cir. 2001) ("If proof of the essential elements of the cause of action requires individual treatment, then class certification is unsuitable.").
The Court's Rule 23(b)(3) analysis must not consider whether the merits questions will be answered in a plaintiff's favor, but it does "entail some overlap with the merits of the plaintiff's underlying claim'" to determine whether the class seeking certification has presented common liability questions which are capable of classwide adjudication. Amgen, 133 S.Ct. at 1194-95 (quoting Dukes, 131 S.Ct. at 2551); see also Sullivan, 667 F.3d at 306 (holding that the court may have to examine the elements of a plaintiff's claim on a motion for class certification, not to determine the validity of the claim but to evaluate whether the elements can be proved through evidence common to the class). In this case, to conduct a proper analysis of predominance, the Court must take a close look at the plan language on which the ERISA claims are based, as it defines the legal obligations of Cigna towards class members. At a minimum, predominance of legal and factual issues requires that the duty owed be uniform as to the class. Then, the Court must review the evidence presented by Subscriber Plaintiffs to determine whether injury is capable of classwide proof. Named Plaintiffs Franco, Chazen and Nelson wish to adjudicate their own ERISA claims and, in a representative capacity, the claims of other class member subscribers. To do this, they must demonstrate that it is possible to adjudicate the question of whether Cigna's allegedly offensive conduct resulted in harm to all class members, without individual inquiries overwhelming the common issues.
1. Plan Language Concerning UCR and ONET Benefits
In an ERISA action for recovery of unpaid benefits and/or for breach of fiduciary duty, the critical liability questions depend on plan language. Indeed, the Supreme Court has repeatedly held that adherence to the written terms of the plan in enforcing ERISA rights and obligations is of paramount importance. Heimeshoff v. Hartford Life & Accident Ins. Co., 134 S.Ct. 604, 612 (2013) (citing various other Supreme Court decisions holding that the written terms of the plan are the "linchpin" of ERISA's statutory scheme); see also Egelhoff v. Egelhoff, 532 U.S. 141, 150 (2001) (noting "ERISA's requirements that plans be administered, and benefits be paid, in accordance with plan documents."). The Third Circuit, in an ERISA breach of fiduciary duty case, stressed that "the statute dictates that it is the documents on file with the Plan, and not outside private agreements between beneficiaries and participants, that determine the rights of the parties." McGowan v. NJR Svc. Corp., 423 F.3d 241, 246 (3d Cir. 2005), abrogated on other grounds by Kennedy v. Plan Adm'r for DuPont Sav. and Inv. Plan, 555 U.S. 285 (2009); see also 29 U.S.C. § 1104(a)(1)(D) (providing that ERISA plan administrators must discharge their duties "in accordance with the documents and instruments governing the plan"). Likewise, it has stressed that "Section 502(a)(1)(B) of ERISA allows a participant to bring a claim to recover benefits due to him under the terms of the plan. " Miller v. Am. Airlines, Inc., 632 F.3d 837, 845 (3d Cir. 2011) (emphasis added) (citing 29 U.S.C. § 1132(a)(1)(B)).
The ERISA claims in this case revolve around the plan term which would trigger the use of Ingenix data: UCR. In Franco I, the Court held that Subscriber Plaintiffs cannot meet the predominance standard of Rule 23(b)(3) unless they demonstrate that the same or substantially similar UCR language applies to the entire proposed class. On this renewed motion for class certification, Subscriber Plaintiffs have partially met this requirement. They have presented evidence that during the Class Period, Cigna's plans generally used one of two definitions of UCR. To adopt Subscriber Plaintiffs' nomenclature for distinguishing between the two, the Court will refer to one as the "Reasonable and Customary" or "R&C" definition and the other as the "Maximum Reimbursable Charge" or "MRC1" definition.
The "R&C" definition appears in Named Plaintiff Franco's plan for the years 2001 to 2005. The language in ...