:: Class Action Complaint Sufficient To Meet Twombley Standards

he complaint, however, clearly states what Anthem is alleged to have done: deny, as a matter of policy and in violation of ERISA, Plaintiff’s request for insurance benefits to cover RFA treatment, on the basis that the treatment is considered investigational. This is far from a “formulaic recitation of the elements of a cause of action,” id., and is sufficient to withstand a motion to dismiss. Nor does Anthem need a more definite statement in order to enable it to raise its defenses in the answer. Cady v. Anthem Blue Cross Life & Health Ins. Co., 2008 U.S. Dist. LEXIS 76783, 17-18 (N.D. Cal. Oct. 2, 2008)

Cady presents a challenge to denial of health plan benefits based upon an “investigational” classification in a class action context.  The lexicographical bent of this case showed itself ahead of the dispute over what treatments are investigational, however, as the principal defendant began with the parsing of terms descriptive of the “plan administrator.”

Anthem concedes that Plaintiff has standing to sue it, but asserts that the complaint is nonetheless insufficient to state a claim against it. It notes that the complaint does not identify Anthem as a “plan administrator,” and argues that it is therefore not a proper defendant.

For this proposition, Anthem relied upon Everhart v. Allmerica Financial Life Insurance Co., 275 F.3d 751, 756 (9th Cir. 2001), which affirmed that an ERISA action for benefits may not be brought against a third-party insurer who acts as a claims administrator, but rather must be brought against the plan administrator. The district court turned to its dictionary.  The OED resolved the dispute in favor of the plaintiff, as the court observed that:

It is true that the complaint does not state that Anthem is the “plan administrator.” But it states, “Cady is a participant in a group health plan . . . administered by defendant BC Life [(Anthem)].” Compl. P 49. Alleging that the plan is “administered by Anthem” is no different than alleging that Anthem is the “plan administrator.” (citing, Oxford English Dictionary, 2d Ed. (1989) (defining “administrator” as “[o]ne who administers”)).

Personally, I am a bit leery of case outcomes determined by resort to dictionaries.  If a statute defines a term, as does ERISA, usage should be ascertained by that special, technical lexicon, not the OED.  In this case, however, the outcome appears substantially justified, and the issue may be revisited if warranted by further factual developments as noted below.

From the plaintiff’s point of view, however, it seems clear enough that specific reference to defendants by statutory designation in the drafting of the complaint will avoid needless linguistic speculations at the motion stage of the case.

The dispute then turned to specificity in the allegations.  Here, the standard is defined in Bell Atl. Corp. v. Twombly, 127 S. Ct. 1955 (2007), a case that is getting cited quite a bit these days.  In that case, the Supreme Court stated that:

in order to survive a motion to dismiss, the factual allegations “must be enough to raise a right to relief above the speculative level.” 127 S. Ct. at 1965.

Once again, the plaintiff cleared the hurdle.

he complaint, however, clearly states what Anthem is alleged to have done: deny, as a matter of policy and in violatiTon of ERISA, Plaintiff’s request for insurance benefits to cover RFA treatment, on the basis that the treatment is considered investigational.  This is far from a “formulaic recitation of the elements of a cause of action,” id., and is sufficient to withstand a motion to dismiss. Nor does Anthem need a more definite statement in order to enable it to raise its defenses in the answer.

Note: The OED will not have the last word.  The issues arose in the posture of a motion to dismiss.  Subsequent proceedings may show that Anthem is not the plan administrator, and that would be a critical failing of the plaintiff’s claims:

Anthem also cites Ford v. MCI Communications Corp. Health and Welfare Plan, 399 F.3d 1076 (9th Cir. 2005), in support of its position. In Ford, the Ninth Circuit characterized its decision in Everhart as “reject[ing] the argument that an insurer who controlled the administration of the plan and made the discretionary decisions as to whether benefits were owed could be sued under § 1132(a)(1)(B).” Id. at 1082 (internal quotation marks omitted). The court also noted that ERISA defines a “plan administrator” as “the person specifically so designated by the terms of the instrument under which the plan is operated.” 29 U.S.C. § 1002(16)(A)(I). However, neither Ford nor Everhart addressed the sufficiency of the allegations in the complaint on a motion to dismiss; in both cases, it had already been established that the defendant, despite arguably administering the plan, was not designated as the plan administrator in the operative instrument. If the evidence demonstrates that Anthem is not in fact the administrator designated in the plan’s instrument, Anthem may move for summary judgment. However, dismissing the complaint at this stage would elevate form over substance and would not serve the goal of judicial efficiency, in that Plaintiff would be given leave to amend the complaint to allege that Anthem is the plan administrator.

Detailed Factual Obligations Not Required – From Twombley

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While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, ibid.; Sanjuan v. American Bd. of Psychiatry and Neurology, Inc., 40 F.3d 247, 251 (CA7 1994), a plaintiff’s obligation to provide the  ”grounds” of his “entitle[ment] to relief” requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do, see Papasan v. Allain, 478 U.S. 265, 286, 106 S. Ct. 2932, 92 L. Ed. 2d 209 (1986) (on a motion to dismiss, courts “are not bound to accept as true a legal conclusion couched as a factual allegation”). Factual allegations must be enough to raise a right to relief above the speculative level, see 5 C. Wright & A. Miller, Federal Practice and Procedure § 1216, pp 235-236 (3d ed. 2004) (hereinafter Wright & Miller) (”[T]he pleading must contain something more . . . than . . . a statement of facts that merely creates a suspicion [of] a legally cognizable right of action”), on the assumption that all the allegations in the complaint are true (even if doubtful in fact), see, e.g., Swierkiewicz v. Sorema N. A., 534 U.S. 506, 508, n. 1, 122 S. Ct. 992, 152 L. Ed. 2d 1 (2002); Neitzke v. Williams, 490 U.S. 319, 327, 109 S. Ct. 1827, 104 L. Ed. 2d 338 (1989) (”Rule 12(b)(6) does not countenance . . . dismissals based on a judge’s disbelief of a complaint’s factual allegations”); Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S. Ct. 1683, 40 L. Ed. 2d 90 (1974) (a well-pleaded complaint may proceed even if it appears “that a recovery is very remote and unlikely”).

Twombley has particular importance for ERISA practitioners given the substantial amount of motion practice in this field.  LEXIS shows over 10,000 cites to the opinion (granted not all in the ERISA context) which I think is simply amazing given its relatively recent vintage