Take Three: Ninth Circuit Reverses Class Win Against United Behavioral Health

On March 22, 2022, the Ninth Circuit issued an unpublished memorandum in this matter at Wit v. United Behav. Health, No. 20-17363, 2022 WL 850647 (9th Cir. Mar. 22, 2022), opinion withdrawn on denial of reh’g, No. 20-17363, 2023 WL 446880 (9th Cir. Jan. 26, 2023). We wrote about the decision here. After the Plaintiffs filed a petition for rehearing, with amicus support, on January 26, 2023, the Ninth Circuit issued a published opinion at Wit v. United Behav. Health, 58 F.4th 1080 (9th Cir. 2023), opinion vacated and superseded on reh’g, No. 20-17363, 2023 WL 5356640 (9th Cir. Aug. 22, 2023). We wrote about that decision here.

On August 22, 2023, in Wit v. United Behav. Health, No. 20-17363, __F.4th__, 2023 WL 5356640 (9th Cir. Aug. 22, 2023), the Ninth Circuit panel granted the Plaintiffs’ motion for panel rehearing and vacated and replaced the January 26, 2023 opinion. The substantive change in the recent decision has to do with whether the district court erred when it excused unnamed class members from demonstrating compliance with the ERISA plans’ administrative exhaustion requirement.

In the January 26^th opinion, the Ninth Circuit found that the district court erred when it excused unnamed class members from demonstrating compliance with the plans’ mandatory exhaustion requirements. The court explained that when an ERISA plan explicitly mandates exhaustion of administrative procedures before suing, and provides no exceptions, application of judicially created exhaustion exceptions would conflict with the written terms of the plan which is inconsistent with the Rules Enabling Act.

In the recent opinion, the Ninth Circuit remanded for the district court to determine in the first instance the threshold issue of whether the exhaustion requirement applies to the fiduciary breach claim under ERISA Section 502(a)(3), and if so, whether the requirement was satisfied by the unnamed class members or should be excused. The court noted that it has held that exhaustion is not required for statutory breach of fiduciary duty claims. But exhaustion is required if the statutory claim “is a disguised claim for benefits.” The district court did not decide this issue, instead, it held that the class members were excused from exhausting their claims because the named Plaintiffs exhausted their remedies which put UBH on notice of the class members’ facial challenges to the Level of Care Guidelines and Coverage Determination Guidelines. The Ninth Circuit declined to reach the merits of this issue and remanded to the district court to determine whether Plaintiffs’ breach of fiduciary duty claim is a disguised claim for benefits subject to the exhaustion requirement.