18th Annual Workplace Class Action Report - 2022 Edition

344 Annual Workplace Class Action Litigation Report: 2022 Edition M.F., et al. v. Magellan Healthcare, Inc., 2021 U.S. Dist. LEXIS 55761 (N.D. Ill. March 24, 2021). Plaintiffs, a group of employees of the State of Illinois, filed suit against Defendants, a private company that administered the mental health benefits under the Illinois Plan as well as two employees responsible for the Plan administration, after Defendants denied coverage for the mental health treatment of Plaintiffs’ children. Plaintiffs alleged that their children suffered serious mental health conditions and required treatment at residential facilities. Plaintiffs broadly asserted that the State of Illinois’ statutes, administrative regulations, practices and policies established their right to medically necessary healthcare coverage in accordance with generally accepted standards of care. As such, Plaintiffs alleged that Defendants violated their constitutional rights to due process under 42 U.S.C. § 1983 and their rights under federal and state mental health parity laws. Defendants moved to dismiss Plaintiffs’ complaint pursuant to Rule 12(b)(6) for failure to state a claim upon which relief could be granted. After Defendants’ motion was fully briefed, Plaintiffs moved for leave to file a third amended complaint. Defendants attached the Illinois Plan document to its brief, and Plaintiffs did not dispute its authenticity. The Court found that the language in the plan was different than the allegations in the operative complaint in that the Plan only covered behavioral health services deemed medically necessary by the Plan administrator. Because Plaintiffs failed to state a claim for due process violations under the U.S. Constitution and did not have a private right of action under the mental health parity laws, the Court granted Defendants’ motions to dismiss. The Court reasoned that Plaintiffs’ children required mental health treatment and the denial of coverage may have breached the Plan and been contrary to appropriate medical judgment. However, by framing their claims under § 1983 and federal and state mental health parity laws, Plaintiffs had not advanced a plausible claim for relief. Since Plaintiffs were unable to allege a due process violation or a private right of action, the Court dismissed the claims based on these legal theories with prejudice. Additionally, since Plaintiffs’ proposed complaint did not change the Court’s analysis, it denied Plaintiffs’ motion for leave to file a third amended complaint as futile. For these reasons, the Court granted Defendants’ motion to dismiss pursuant to Rule 12(b)(6). Masten, et al. v. Metropolitan Life Insurance Co. Employee Benefits, 2021 U.S. Dist. LEXIS 110963 (S.D.N.Y. June 14, 2021). Plaintiffs, a group of participants in a retirement fund, filed a putative class action against Defendants alleging that their retirement plan’s use of outdated mortality tables to calculate alternative benefits violated the requirements of the ERISA. Defendants filed a motion to dismiss, which the Court denied. Plaintiffs alleged that Defendants’ use of the mortality tables to calculate the amount of non-SLA annuities decreased their present value in violation of the ERISA’s requirement that such alternative benefits be "actuarially equivalent" to the Plan’s SLA. Id . at *9. Plaintiffs contended that the prevailing standards of practice of the Actuarial Standards Board required actuarial tables to "be adjusted on an ongoing basis to reflect improvements in mortality." Id . Plaintiffs asserted that by their calculations, the use of outdated mortality assumptions reduced the present value of Plaintiff McAlister’s benefits by $7,459 and Plaintiff Masten’s benefits by $7,385. Id . at *10. Similarly, Plaintiffs alleged that "just moving from the 2000 mortality table to the 2014 table would increase pension liabilities by 7%." Id . at *69. The Court concluded that the ERISA required that Plan administrators use reasonable actuarial assumptions when converting SLAs into alternative benefits. Id . at *18- 19. The Court determined that allowing plans to set their own definition of actuarial equivalence would eliminate any protections provided by the ERISA. The Court thus concluded that the imposition of reasonableness as a requirement was consistent with the structure and purpose of the law. As a result, the Court concluded that benefit plans must use actuarial assumptions that are reasonable in order to qualify as actuarially equivalent within the meaning of the ERISA. Defendant contended that Plaintiffs failed to adequately plead unreasonableness in terms of Defendants’ decision-making. The Court disagreed. It ruled that the Plan’s use of the outdated mortality tables was unreasonable in this context, and thus Plaintiffs had adequately pled a violation of the ERISA. Id . at *19. Defendants further argued that Plaintiffs’ claim of fiduciary breach should be dismissed in the absence of any statutory violation. Plaintiffs countered that they had alleged a statutory violation and that the ERISA mandates that plan administrators follow plan terms consistent with the Act’s substantive requirements. The Court agreed that Plaintiffs correctly noted that the ERISA requires fiduciaries to discharge their duties in accordance with plan requirements insofar as those are consistent with the Act, and thus, a violation of one of ERISA’s substantive requirements may constitute a breach of the Act’s requirements of fiduciary duty. Id . at *23-24. For these reasons, the Court denied the motion to dismiss on that basis.