22-2702-cv
The Medical Society et al. v. UnitedHealth et al.
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A
SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED
BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1.
WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY
MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE
NOTATION “SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST SERVE A
COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.
At a stated term of the United States Court of Appeals for the Second Circuit,
held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the
City of New York, on the 17th day of January, two thousand twenty-four.
PRESENT:
GUIDO CALABRESI,
ALISON J. NATHAN,
Circuit Judges,
PAUL A. ENGELMAYER,
District Judge. ∗
_____________________________________
The Medical Society of the State of New
York, on behalf of its members, Society of
New York Office Based Surgery Facilities,
on behalf of its members, Columbia East
Side Surgery, P.C., both directly and as the
representatives of Patients C, D, E, and F,
Plaintiffs-Counter-
Defendants-Appellants,
∗ Judge Paul A. Engelmayer, of the United States District Court for the Southern District of New
York, sitting by designation.
Albert B. Knapp, M.D., P.C., on its own
behalf and in the name of his business,
which is identical, both directly and as the
representative of Patient G; and on behalf
of all others similarly situated, Dr. Darrick
Antell, in the name of his business and on
its own behalf, Podiatric or of Midtown
Manhattan, P.C., on its own behalf and on
behalf of its patients, and on behalf of all
others similarly situated, Dr. Jeffrey Adler,
in the name of his business and on its own
behalf,
Plaintiffs,
v. No. 22-2702-cv
UnitedHealth Group Inc., United
Healthcare Services, Inc., United
Healthcare Insurance Company, United
Healthcare Service LLC, Optum Group,
LLC, Optum, Inc., Oxford Health Plans
LLC,
Defendants-Counter-
Claimants-Appellees.
_____________________________________
FOR APPELLANTS:
NELL Z. PEYSER (D. Brian Hufford, on
the briefs), Zuckerman Spaeder LLP,
New York, NY; Adam Abelson,
Zuckerman Spaeder LLP, Baltimore,
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MD; John W. Leardi, Buttaci Leardi
& Werner LLC, Princeton, NJ.
FOR APPELLEES:
MEAGHAN VERGOW (Brian D. Boyle,
Meredith Garagiola, on the briefs),
O’Melveny & Myers LLP,
Washington, DC; Anton Metlitsky,
O’Melveny & Myers LLP, New York,
NY.
Appeal from a judgment of the United States District Court for the Southern
District of New York (Oetken, J.).
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED,
ADJUDGED, AND DECREED that the judgment of the district court is
AFFIRMED.
Plaintiffs the Medical Society of the State of New York, the Society of New
York Office Based Surgery Facilities, and Columbia East Side Surgery, P.C. appeal
from a September 14, 2022 judgment of the United States District Court for the
Southern District of New York (Oetken, J.) dismissing their class action under the
Employee Retirement Income Security Act of 1974, 29 U.S.C. §§ 1001 et seq.
(ERISA).
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Defendants (collectively, United) 1 administer ERISA-governed health
benefit plans. United employs an automated processing system to adjudicate the
thousands of claims it receives every day under these plans. A subset of those
claims seek coverage of facility fees for outpatient surgery. Plaintiffs represent a
class of participants in United-administered plans who received outpatient
surgery at office-based surgery venues (OBSs) in New York State. Class members
were denied payment of OBS facility fees on grounds that that their health benefit
plans only cover fees for procedures performed at facilities “licensed” in New
York, and OBSs are not licensed facilities. Pointing to the 2007 enactment of
Section 230-d of New York’s Public Health Law, which authorized and regulated
surgeries performed at OBSs, Plaintiffs challenge the automated process United
employs to adjudicate claims for facility fees as unreasonable under ERISA and
seek reprocessing of their claims. Following a five-day bench trial, the district
court concluded that United did not violate ERISA when it determined that
physicians performing office-based surgeries in the state of New York are not
entitled to a “facility fee.”
1 Defendants include UnitedHealth Group Inc., United HealthCare Services, Inc., United
HealthCare Insurance Company, United HealthCare Service LLC, Optum Group, LLC, Optum,
Inc., and Oxford Health Plans LLC.
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Plaintiffs raise two arguments on appeal: (1) the district court erred by
relying on evidence outside the administrative record; and (2) the district court
erred by failing to interpret the plain meaning of the plan terms. For the reasons
described below, we disagree. We assume the parties’ familiarity with the
underlying facts, procedural history, and issues on appeal, to which we refer only
as necessary to explain our decision affirming the judgment of the district court.
I. Administrative Record Claim
Plaintiffs argue first that the district court improperly considered evidence
outside the administrative record. “The decision whether to consider evidence
beyond the administrative record lies in the discretion of the district court and is
not disturbed absent an abuse of that discretion.” Krizek v. Cigna Group Ins., 345
F.3d 91, 97 (2d Cir. 2003). Moreover, “the admission of evidence in a bench trial
is rarely ground for reversal, for the trial judge is presumed to be able to exclude
improper inferences from his or her own decisional analysis.” Browe v. CTC Corp.,
15 F.4th 175, 207 (2d Cir. 2021) (citation omitted).
Even assuming that the district court considered evidence outside the
administrative record, we find no abuse of discretion. Although a court’s review
of the reasonableness of a benefit denial under ERISA is ordinarily limited to the
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administrative record that was before the plan administrator when it made its
benefit determination, it may exercise its discretion to admit additional evidence
for good cause. Halo v. Yale Health Plan, 819 F.3d 42, 60 (2d Cir. 2016). So, for
instance, in cases raising issues “distinct from the reasonableness of the plan
administrators' decision, the district court will not be confined to the
administrative record.” Zervos v. Verizon New York, Inc., 252 F.3d 163, 174 (2d Cir.
2001). And relevant here, the First Circuit has said that “[w]here the challenge is
not to the merits of the decision to deny benefits, but to the procedure used to reach
the decision, outside evidence may be of relevance.” Orndorf v. Paul Revere Life
Ins. Co., 404 F.3d 510, 520 (1st Cir. 2005) (emphasis added). We agree.
In this case, Plaintiffs challenge the district court’s decision to admit several
categories of evidence, including medical coding evidence, industry standards
such as Medicare practices, other payors’ OBS facility fee policies, and United’s
correspondence with regulators. When Plaintiffs moved before trial to exclude
this evidence, United opposed on grounds that the case is about “United’s claims
adjudication processes” and “necessarily implicates the basis for United’s
interpretation of the plans and the process by which United effectuates that
interpretation.” Supp. App’x at 124. The district court then denied Plaintiffs’
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motion “substantially for [those] reasons.” App’x at 202. The district court
further explained that “as the fact [] finder I do want a complete picture of the
claims adjudication process and the background of how United developed its
reimbursement practices[,]” and that the evidence at issue was “very likely to be
relevant to the reasonableness of those practices.” Id.
Consistent with the district court’s reasoning, we conclude that the
challenge in this case is to United’s claims-adjudication process and, therefore, the
district court did not abuse its discretion by admitting evidence related to that
process. Relevant here, Plaintiffs moved to certify two class claims following
discovery: (1) a claim for damages under § 502(a)(1)(B) of ERISA seeking payment
of benefits under the plans; and (2) a claim for declaratory and injunctive relief
under § 502(a)(1)(B) or 502(a)(3) seeking reprocessing of the class members’ benefit
claims. The district court denied certification of the benefits payment claim,
reasoning that “[g]iven the centrality of plan interpretation to determining liability
for the class’s benefit claims, . . . these individualized questions would
predominate at trial” over “any common questions relevant to the proposed class’s
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benefits claims.” Special App’x at 75–76, 76 n.11. 2 The district court granted
certification of claim (2), however, because it did not turn on individualized
interpretation of plan terms. Instead, the district court concluded that “[w]hether
United’s vetting, onboarding, and C-flagging processes actually involve
interpretation of plan terms in the ultimate decision to deny OBS facility fee claims,
as a factual matter—and whether these processes satisfy ERISA, as a legal matter—
present [] common questions.” Id. at 55 (emphasis added).
The issue before the district court, then, was the reasonableness of United’s
automated claims-adjudication process—irrespective of its interpretation of any
particular plan terms. And given that the court was faced with a challenge to the
procedure used to reach a decision denying benefits, it could permissibly consider
evidence outside the administrative record that explained what United’s process
is, how it designed that process, and why that process is reasonable.
Even if consideration of this evidence was permissible, Plaintiffs proceed to
question the evidence’s relevance. They argue, for instance, that information
2 Plaintiffs’ damages claim (Count I of the complaint) was thus limited to the individual denial-
of-benefits claims assigned to Columbia East Side. These claims involved thirty-one benefit
claims on behalf of twenty-nine patients. United observes that the individual damages claims
assigned to Columbia East Side have been abandoned.
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about other payors’ OBS facilities policies or industry guidance “say nothing about
United’s plan language.” Appellants’ Br. at 35. Applying an abuse of discretion
standard here as well, see United States v. Baez, 349 F.3d 90, 94 (2d Cir. 2003), we
disagree. As the district court put it, the information at issue “provides important
background information and context relevant to how the plans were created and
how United reasonably determined that the plans did not provide for a separate
facility fee for procedures performed in physician offices.” Special App’x at 104.
II. Plan Terms Claim
Plaintiffs next challenge the district court’s conclusion that United’s
interpretation of the plan terms—specifically, its determination that Section 230-d
OBSs are not licensed as facilities—was reasonable. But the district court only
made that determination with respect to the individual damages claims assigned
to Columbia East Side, see Special App’x at 106—claims which Plaintiffs do not
defend on appeal and which we therefore treat as abandoned. See Reply Br. at 21.
The argument that United improperly construed the terms of particular plans is
only relevant to Plaintiffs’ classwide reprocessing claim challenging United’s
claim-adjudication procedure if the allegedly improper constructions of the terms
of particular plans is shown to be so frequent as to cast doubt on the process used.
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No such showing has been made here. Indeed, to obtain class certification of that
claim, Plaintiffs expressly disclaimed reliance on individual plan interpretation.
See, e.g., Supp. App’x at 49 (“Plaintiffs will prove through common evidence that
United denied these claims without consulting or relying on the actual written
terms of its Plans.”).
In any event, even if interpretation of plan terms is relevant to the class
claims, Plaintiffs cannot prevail under the controlling arbitrary-and-capricious
standard of review. In an ERISA case, after a “bench trial ‘on the papers’ with the
District Court acting as the finder of fact,” also known as a motion for judgment
on the administrative record, we review the district court's factual findings for
clear error and its legal conclusions de novo. Muller v. First Unum Life Ins. Co., 341
F.3d 119, 124–25 (2d Cir. 2003). When reviewing de novo the district court’s legal
conclusion that United’s plan interpretation was reasonable, we apply the same
arbitrary-and-capricious standard the district court applied below. See Miller v.
United Welfare Fund, 72 F.3d 1066, 1070-71 (2d Cir. 1995). Under that standard, a
denial of benefits may be overturned “if the decision is without reason,
unsupported by substantial evidence or erroneous as a matter of law.” Fay v.
Oxford Health Plan, 287 F.3d 96, 104 (2d Cir. 2002) (quotation omitted).
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The district court’s findings were not without reason. Plaintiffs argue first
that OBSs constitute “licensed” facilities under the term’s plain meaning because
OBSs are accredited under Section 230-d of New York State’s Public Health Law,
which is a form of licensure. But the district court’s conclusion to the contrary
that the term “license” in these plans refers specifically to facilities licensed under
Article 28 of New York’s Public Health Law was not without reason. See Special
App’x at 98, 106. The district court reasonably considered the fact that this
construction of the term “license” is consistent with Medicare reimbursement
policies and the practices of all major private payers. See Special App’x at 96-97.
Plaintiffs argue second that the plain meaning of the plan term “facility” includes
OBSs. Here again, we conclude that the district court’s contrary interpretation—
noting that United’s plans distinguish between “offices” on the one hand and
“facilities” on the other—was not arbitrary and capricious. Special App’x at 106.
* * *
We have considered Plaintiffs’ remaining arguments, which we conclude
are without merit. Accordingly, we AFFIRM the judgment of the district court.
FOR THE COURT:
Catherine O’Hagan Wolfe, Clerk of Court
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