Ninth Circuit Rules in Favor of Kaiser Health in Suit Alleging Breach of Fiduciary Duty

The Ninth Circuit on Tuesday affirmed a previous decision that granted summary judgment to Kaiser Foundation Health Plan Inc. (KFHP) after a class action complaint alleged that KFHP breached its fiduciary duties under the Employee Retirement Income Security Act (ERISA).

The putative class claimed that KFHP breached its duties “by excluding residential treatment programs from its plan and by failing to provide adequate procedures that would enable providers to refer eating disorder patients to residential treatment programs,” the court explained. The Northern District of California sided with KFHP, and the plaintiffs now appeal, purporting that the district court “overlooked numerous factual disputes.”

The circuit court explained that in order to prove that the defendant breached its fiduciary duty, the plaintiffs must show “both (1) that there is a remediable wrong, i.e., that the plaintiff seeks relief to redress a violation of ERISA or the terms of a plan; and (2) that the relief sought is ‘appropriate equitable relief.'” The judges said the plaintiffs failed to establish the first element.

Part of the plaintiff’s argument was that KFHP’s plan excluded residential treatment for eating disorders; however, according to the court, the plaintiff’s “own course of treatment belies this argument,” as they had spent five days at a residential treatment facility, where it was evidenced that the treatment was covered under the KFHP plan.

“Undisputed evidence shows that KFHP covered residential treatment, that it had contracts with residential treatment centers to provide in-network options, and that it had a referral system to allow for approval of out-of-network care when necessary,” the court explained, and despite this, the plaintiff “repeatedly refused to take advantage of” the residential treatment options KFHP would cover and instead opted for out-of-network treatment.

The plaintiff also argued that KFHP failed to offer a procedure for providers to refer eating disorder patients to residential treatment centers, alleging breach of fiduciary duty; the court disagreed.

“Simply put,” the court said, “there is no evidence that KFHP’s procedures (or lack thereof) inhibited (the plaintiff) from obtaining residential treatment. … Instead, it was (the plaintiff) who either refused to consider residential treatment or would only consider out-of-network programs when the option was raised.” The court also noted that “administrators like KFHP cannot be held vicariously liable for its providers’ medical judgments. … His doctors are not KFHP employees.”

The plaintiff was represented by Kantor & Kantor. The defendant was represented by Manatt, Phelps & Phillips.