Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_04-cv-01600/USCOURTS-azd-2_04-cv-01600-0/pdf.json

Nature of Suit Code: 791
Nature of Suit: Employee Retirement Income Security Act (ERISA)
Cause of Action: 29:1132 E.R.I.S.A.-Employee Benefits

---

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

THOMAS E. BLANKENBAKER, D.C.,

formerly dba VAX-D Medical Centers, a

sole proprietorship, under assignment of

rights and benefits of Natana Long, et al.,

Plaintiff, 

vs.

UNITED HEALTHCARE OF ARIZONA,

INC.,

Defendant. 

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

)

No. 04-CV-1600-PHX-FJM (Lead)

No. 04-CV-1602-PHX-EHC (Consol.)

No. 04-CV-1604-PHX-SRB (Consol.)

No. 04-CV-1605-PHX-JWS (Consol.)

No. 04-CV-1611-PHX-MHM (Consol.)

No. 04-CV-1612-PHX-SRB (Consol.)

No. 04-CV-1613-PHX-LOA (Consol.)

No. 04-CV-1621-PHX-RCB (Consol.)

No. 04-CV-1622-PHX-NVW (Consol.)

No. 04-CV-1623-PHX-EHC (Consol.)

No. 04-CV-1624-PHX-NVW (Consol.)

No. 04-CV-1625-PHX-FJM (Consol.)

No. 04-CV-1626-PHX-JAT (Consol.)

No. 04-CV-1627-PHX-EHC (Consol.)

No. 04-CV-1628-PHX-SMM (Consol.)

No. 04-CV-1629-PHX-SRB (Consol.)

ORDER

The court has before it defendant's Motion for Summary Judgment (doc. 27),

plaintiff's Opposition (doc. 41), and defendant's Reply (doc. 46); plaintiff's Motion to Strike

(doc. 45), defendant's Response (doc. 49), and plaintiff's Reply (doc. 53); defendant's Motion

for Protective Order and Memorandum of Law (doc. 62) and plaintiff's Response (doc. 74);

plaintiff's Motion to Compel Designation and Production of F.R.C.P Rule 30(b)(6) Witnesses

(doc. 63), defendant's Response (doc. 76), and plaintiff's Reply (doc. 81); plaintiff's Motion

Case 2:04-cv-01600-FJM Document 84 Filed 11/18/05 Page 1 of 12
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 2 -

to Compel Production of Documents (doc. 70), plaintiff's Motion to Determine the

Sufficiency of Objections and Responses to First Requests for Admissions (doc. 72),

defendant's Motion for Leave to File Responses to Plaintiff's Motions (doc. 82), and

plaintiff's Response (doc. 83).

I.

Plaintiff Thomas E. Blankenbaker formerly did business as VAX-D Medical

Centers, where physical therapists performed vertebral axial decompression (VAX-D)

therapy. Sixteen patients at VAX-D Medical Centers were participants in group health

plans that were insured, or insured and administered, by defendant United Healthcare. 

Defendant denied most claims for VAX-D therapy because the therapy was unproven or

experimental, and therefore excluded from the coverage of the respective plans. 

Defendant denied other claims for insufficient documentation. The rights and benefits

under the participants' group health plans were assigned to the plaintiff, who raises claims

under the Employee Retirement Income Security Act (ERISA).

Plaintiff alleges that defendant violated 29 U.S.C. § 1133 by failing to provide plan

participants with adequate notice and review of claims denials; violated 29 U.S.C. §

1104(a)(1)(A) by failing to appropriately consider the claims and failing to provide

sufficient reasons for denying the claims; violated 29 U.S.C. § 1104(a)(1)(D) by failing to

act in accordance with the documents and instruments governing the plan; and violated 29

U.S.C. § 1106(b)(1) by engaging in fiduciary self-dealing. Plaintiff requests payment for

all physical therapy that is covered under the plans, attorney's fees, costs, and other just

and proper relief.

II.

The parties disagree on the appropriate standard of review. Defendant argues that

we should review its determinations for an abuse of discretion because the plans give it

discretionary authority to determine eligibility for benefits. Plaintiff argues that we

should review the claims determination de novo because defendant acted upon a conflict

Case 2:04-cv-01600-FJM Document 84 Filed 11/18/05 Page 2 of 12
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

1

 Plaintiff disputes defendant's discretionary authority under some plans in Plaintiff's

Opposition to Defendant's Motion for Protective Order at 3, which was filed after briefings

on the Motion for Summary Judgment were complete. We disregard plaintiff's argument

because it was untimely raised and accordingly is prejudicial to the defendant.

2

 Defendant claims that it does not act as the insurer for any of the plans in

Defendant's Motion for Protective Order at 3, which was filed after briefings on the Motion

for Summary Judgment were complete. We disregard defendant's argument because it was

untimely raised and accordingly is prejudicial to the plaintiff.

- 3 -

of interest, and because some claims were deemed denied merely because defendant

failed to timely consider them.

A.

Where a benefit plan gives an ERISA plan administrator discretionary authority to

construe the terms of the plan, or to determine the eligibility of benefits, it is appropriate

to review the administrator's decision for an abuse of discretion. See Firestone Tire &

Rubber Co. v. Bruch, 489 U.S. 101, 115, 109 S. Ct. 948, 956-87 (1989). If the plan

administrator is also the insurer, that conflict of interest is a "facto[r] in determining

whether there was an abuse of discretion." Id. at 114, 109 S. Ct. at 956 (quoting

Restatement (Second) of Trusts § 187, Comment d (1959)). If the plan participant can

produce "material, probative evidence beyond the mere fact of the apparent conflict" to

show that the denial of benefits was caused by the administrator's self-interest, the burden

shifts to the administrator to produce evidence to show that the conflict of interest did not

affect its decision to deny benefits. Atwood v. Newmont Gold Co., Inc., 45 F.3d 1317,

1323 (9th Cir. 1995). If the administrator cannot show that the conflict of interest did not

affect its decision to deny benefits, it is appropriate to review the claim denial de novo. 

Tremain v. Bell Industries, Inc., 196 F.3d 970, 976 (9th Cir. 1999).

It is undisputed that the plans at issue give the defendant discretionary authority to

construe the terms of the plan and to determine the eligibility of benefits.1

 Defendant acts

as both the insurer and the administrator for some of the plans at issue. Opposition at 19;

Reply at 10.2

 Defendant argues, however, that no "formal" conflict exists because it treats

Case 2:04-cv-01600-FJM Document 84 Filed 11/18/05 Page 3 of 12
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 4 -

all claims equally, whether it acts as the insurer and the administrator of the plans, or only

as the administrator. The defendant has a conflict of interest with regard to some claims

and an interest in maintaining consistency with the processing of all claims; accordingly,

the defendant has an incentive to process all claims pursuant to its self-interest. 

Therefore, the apparent conflict of interest attaches to all claims at issue.

Plaintiff must produce material, probative evidence beyond the mere fact of the

apparent conflict to show that the denial of benefits was caused by the administrator's

self-interest. For instance, in Friedrich v. Intel Corp., 181 F.3d 1105, 1110 (9th Cir.

1999), there was sufficient evidence that the administrator acted upon its conflict of

interest where the participant was not notified that his claim was being processed and

accordingly did not submit information to support his claim, and was not notified that his

claim was denied. Also, in Lang v. Long-Term Disability Plan of Sponsor Applied

Remote Tech., Inc., 125 F.3d 794, 799 (9th Cir. 1997), there was sufficient evidence that

the administrator acted upon its conflict of interest where it changed its reasons for

denying a claim after the initial reasons were disproved by a physician.

Plaintiff relies on many processing inconsistencies in order to show that defendant

acted upon its conflict of interest. Some VAX-D therapy claims were paid while other

similar claims were denied, Plaintiff's Statement of Facts at ¶¶ 16, 41, 44; defendant

claimed not to have received medical records that plaintiff repeatedly submitted, see, e.g,

Plaintiff's Statement of Facts, Exhibit 2.6 at TEB 669-71; many documents that plaintiff

sent to defendant are not included in the administrative record, Plaintiff's Statement of

Facts at ¶ 12; some claims were paid on appeal after plaintiff merely reproduced medical

records, id. at ¶¶ 63, 68; some claims were paid even when otherwise required

documentation was not submitted, id. at ¶ 66; and plaintiff never received payment for

some claims that defendant agreed to process; id. at ¶ 46, 61, 69. Defendant disputes

most of these claims and argues that processing errors were caused by plaintiff's failure to

properly code claims. See Defendant's Statement of Facts. Reply at 5-6, 10-11. In light

of the closed yet incomplete discovery, and our finding below that summary judgment is

Case 2:04-cv-01600-FJM Document 84 Filed 11/18/05 Page 4 of 12
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

3

 The violation of ERISA regulations requiring timely claims determinations is

insufficient to alter the standard of review. Gatti v. Reliance Standard Life Ins. Co., 415 F.3d

978, 982 (9th Cir. 2005). Therefore, plaintiff's claim fails to the extent that it is based on

ERISA regulations as opposed to plan provisions.

- 5 -

inappropriate even under review for an abuse of discretion, we need not decide the

appropriate standard of review at this stage.

B.

Where a claim is denied as the "mechanical result of a time expiration" pursuant to

plan provisions, "rather than the exercise of discretion," a de novo standard of review is

appropriate. Jebian v. Hewlett-Packard Co., 349 F.3d 1098, 1105 (9th Cir. 2003). It is

undisputed that the plans of participants Janet James, Krystle Lee, and Natana Long, all

provide that a claim, or appeal from a denial of a claim, is "deemed denied" if the

administrator has not responded within a certain period of time.3

 Plaintiff argues that the

defendant failed to respond to their claims within the requisite period, and therefore the

claims were deemed denied and the denials should be reviewed de novo. Plaintiff's

Statement of Facts at 10-12.

Defendant did, however, respond to the claims within the requisite period of time. 

Plaintiff's own exhibits include documents titled Provider Explanation of Benefits, which

state that the services were denied. Plaintiff's Statement of Facts, Exhibit 2.7, TEB 717-

19; Exhibit 2.9, TEB 799-800; Exhibit 2.10, TEB 818-21. All of the documents were

dated within the requisite time periods. Plaintiff is correct that the documents do not refer

to some service dates, and do not refer to plaintiff's alleged appeals of the denials. 

Plaintiff was, however, well aware that defendant denied all or almost all of the VAX-D

therapy claims because the therapy was deemed unproven, not as a mechanical result of a

time expiration. See, e.g., Plaintiff's Statement of Facts, Exhibit 2.10, TEB No. 869. 

Therefore, the claims were not deemed denied, and accordingly, this argument does not

justify de novo review.

III.

Case 2:04-cv-01600-FJM Document 84 Filed 11/18/05 Page 5 of 12
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 6 -

Defendant moves for summary judgment on Janet James', Krystle Lee's, Natana

Long's, Loren Wagner's, and George Karvanek's claims because they failed to exhaust

administrative remedies by not filing the requisite appeals. Defendant argues that it

requested additional information on each of these claims, but that it never received the

information, and never received the appeals. Motion for Summary Judgment at 10-12. 

Plaintiff submits evidence that suggests that it provided the requested information,

appealed the denial of these claims, and defendant failed to respond. Plaintiff's Statement

of Facts at 32-39, 54-55, 70. We need not decide the issue of exhaustion at this stage

because that will neither promote judicial efficiency, nor protect administrative agency

authority, since the remainder of the claims are undisputedly justiciable. See McCarthy v.

Madigan, 503 U.S. 140, 146, 112 S. Ct. 1081, 1087 (1992). Accordingly, defendant's

Motion for Summary Judgment on the claims of these participants for the failure to

exhaust administrative remedies is denied (doc. 27).

IV.

Defendant argues that it appropriately denied the claims because VAX-D therapy

is unproven and because plaintiff failed to provide adequate documentation to support the

claims. We conclude that summary judgment is inappropriate even under an abuse of

discretion standard of review.

A.

Plaintiffs bring this action in part to "recover benefits due . . . under the terms of

[the] plan[s]." 29 U.S.C. § 1132(a)(1)(B). It is undisputed that the plans exclude

coverage for experimental or unproven therapies and devices. The sixteen plans at issue

do not define "experimental" or "unproven" uniformly. Defendant cites a single

definition, which is undisputedly typical of the definitions under all of the plans:

Experimental or investigational refers to medical, surgical, diagnostic or other

health care technologies, supplies, treatments, procedures, drug therapies or

devices that are determined by United Healthcare (at the time it makes a

determinations [sic] regarding coverage in a particular case) to be:

• Not approved by the U.S. Food and Drug Administration (FDA) to be

lawfully marketed for the proposed use and not identified in the

Case 2:04-cv-01600-FJM Document 84 Filed 11/18/05 Page 6 of 12
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 7 -

American Hospital Formulary Service, the United States

Pharmacopoeia Dispensing Information, or the American Medical

Association Drug Evaluations as appropriate for the proposed use.

• Subject to review and approval by any Institutional Review Board for

the proposed use.

• The subject of an ongoing clinical trial that meets the definition of a

Phase 1, 2 or 3 Clinical Trial set forth in the FDA regulation, regardless

of whether the trial is actually subject to FDA oversight.

• Not demonstrated through prevailing peer-reviewed medical literature

to be safe and effective for treating or diagnosing the condition or

illness for which its use is proposed.

Motion for Summary Judgment at 4. The definition is ambiguous because it lacks

conjunctions between the four bulleted items. However, similar definitions in other plans

include the conjunction "or" between each of the bullet points. Defendant's Statement of

Facts, Exhibit 1.4 at UHC 395; Defendant's Statement of Facts, Exhibit 1.7 at UHC 770. 

Neither party addressed the ambiguity of the definition. Given the incoherence of the

definition, and the inclusion of the conjunction "or" in the otherwise identical definitions,

we conclude that a procedure or device can be considered unproven or experimental if it

is either not approved by the FDA to be marketed for the proposed use, or if it has not

been demonstrated through prevailing peer-reviewed medical literature as safe and

effective for treating or diagnosing the condition or illness for which its use is proposed.

It is undisputed that the VAX-D therapeutic table, which is used in VAX-D

therapy, has been approved by the FDA as a Class II device. Accordingly, further

analysis of the FDA approval process is unnecessary. Pursuant to the definition, the

VAX-D therapy may still be experimental, however, if it has not been demonstrated

through prevailing peer-reviewed medical literature as safe and effective for treating the

condition or illness for which its use is proposed.

Plaintiff relies on medical studies on VAX-D therapy and argues that they 

demonstrate that VAX-D therapy is safe and effective. Defendant argues that it reviewed

the studies, and determined that they lack sufficient size, randomization, control groups,

blinding, and results. Motion for Summary Judgment at 17-20; Defendant's Statement of

Facts, Exhibit A at ¶ 4. Plaintiff argues that defendant evaluated only 3 of the 6 studies,

mischaracterized the studies that it did review, and accordingly, incorrectly designated

Case 2:04-cv-01600-FJM Document 84 Filed 11/18/05 Page 7 of 12
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 8 -

VAX-D therapy as unproven or experimental. Plaintiff's Statement of Facts at 7-9;

Opposition at 6. This factual dispute is inappropriate for summary judgment. 

Accordingly, defendant's Motion for Summary Judgment on the ground that VAX-D is

unproven or experimental is denied (doc. 27).

B.

Defendant moves for summary judgment arguing that some claims were

appropriately denied because plaintiff failed to provide adequate medical records, and in

particular, failed to provide daily logs of services. Motion for Summary Judgment at 20-

22. Plaintiff argues, however, that it submitted adequate documentation on all claims, and

that daily logs are not required documentation because some claims were paid without

production of the daily logs. Opposition at 7-8; Plaintiff's Statement of Facts at ¶¶ 51, 59,

66, 68. Furthermore, plaintiff argues that defendant's administrative record does not

include all the documentation that plaintiff submitted. Plaintiff's Statement of Facts at ¶¶

52, 56. This factual dispute is inappropriate for summary judgment. Accordingly,

defendant's Motion for Summary Judgment on the ground that plaintiff failed to provide

adequate documentation is denied (doc. 27).

V.

Plaintiff moves to strike materials submitted as exhibits to defendant's Motion for

Summary Judgment. Plaintiff argues that portions of the affidavit of Richard A. Justman,

M.D., portions of the affidavit of Suzanne Darsow, and portions of Exhibits 2.1-2.6, 2.8,

and 2.11-2.16, are inadmissible and should therefore be stricken. These materials had no

bearing on the decision to deny the Motion for Summary Judgment. Accordingly,

plaintiff's Motion to Strike is denied as moot (doc. 45).

VI.

The court has before it four separate discovery motions which suggest that there is

a breakdown of professionalism between the lawyers. The tone of the memoranda

Case 2:04-cv-01600-FJM Document 84 Filed 11/18/05 Page 8 of 12
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 9 -

suggests that the lawyers are quarreling with each other over litigation rather than helping

their clients resolve the underlying dispute. Counsel are directed to read the Lawyers

Creed of Professionalism of the State Bar of Arizona which appears on page six of the

2005-2006 Membership Directory and this court's Code of Conduct for Attorneys, which

appears at www.azd.uscourts.gov.

Defendant moves for a protective order (doc. 62); and plaintiff moves for the court

to compel the designation and production of witnesses (doc. 63), to compel the

production of documents (doc. 70), and to determine the sufficiency of objections and

responses to the first request for admissions (doc. 72). Defendant failed to timely respond

to the Motion to Compel Production and the Motion to Determine the Sufficiency of

Objections and Responses to First Requests for Admissions. Defendant's Motion for

Leave to File Responses to those motions is, however, granted (doc. 82) and we

considered defendant's Response to Plaintiff's Motion to Compel Production of

Documents and defendant's Response to Plaintiff's Motion to Determine the Sufficiency

of Objections and Responses to First Requests for Admissions. Defendant's Motion for

Leave to File Responses, Exhibits A, B.

The parties dispute the scope of permissible discovery. We may consider evidence

outside of the administrative record when determining whether a plan administrator's

decision was affected by a conflict of interest, and when reviewing an administrative

decision de novo. Banuelos v. Constr. Laborers' Trust Funds for Southern Cal., 382 F.3d

897, 904 (9th Cir. 2004). In light of our decision on the standard of review, defendant's

Motion for a Protective Order is denied (doc. 62), plaintiff's Motion to Compel the

Designation and Production of F.R.C.P. Rule 30(b)(6) Witnesses is granted (doc. 63), and

defendant is directed to respond to plaintiff's request for admissions accordingly (doc.

72).

Defendant objects to the production of some documents on the ground that the

production is overly burdensome. Defendant references the Declaration of Suzanne

Darsow, which discusses the costs of compliance with the request for admissions, not the

Case 2:04-cv-01600-FJM Document 84 Filed 11/18/05 Page 9 of 12
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 10 -

request for production. Plaintiff's requests for production are reasonable and accordingly,

plaintiff's Motion to Compel Production of Documents is granted (doc. 70).

Plaintiff moves for us to determine the sufficiency of objections and responses to

the first request for admission. Plaintiff's motion is granted and defendant is directed to

respond to plaintiff's request for admissions (doc. 72).

Defendant refuses, on relevancy grounds, to admit or deny that the relevant plan

documents do not require pre-approval for out of network physical therapy; that

defendant's Medical Technology Assessment Committee did not review two studies on

VAX-D therapy; and that defendant's employees have training in physical therapy and

physical therapy coding. Defendant's objections are overruled, and defendant is directed

to respond to these requests for admissions (doc. 72).

Defendant also refuses to admit or deny that it paid for back pain treatments that

have less support in medical literature than VAX-D therapy, and that defendant has

previously paid for VAX-D therapy. Defendant argues that the request is overly

burdensome and will require defendant to reveal non-party confidential information. The

objections are overruled, but the parties are directed to confer and stipulate to a more

practical means of discovering the desired information which may include redaction of

patient identity (doc. 72).

Plaintiff argues that defendant abused the discovery process, and accordingly

requests attorney's fees in connection with plaintiff's three discovery motions. But

plaintiff also abused the discovery process; it was unreasonable for plaintiff's counsel to

appear in Phoenix for a deposition when he was warned that the deponent would not

arrive due to delays caused by Hurricane Rita. It was also unreasonable to oppose

defendant's Motion for Leave to File Responses. Accordingly, all of plaintiff's requests

for attorney's fees pursuant to Rule 37(a)(4)(A) of the Federal Rules of Civil Procedure

are denied (docs. 63, 70, 72).

Case 2:04-cv-01600-FJM Document 84 Filed 11/18/05 Page 10 of 12
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 11 -

The parties are directed to agree upon a reasonable venue for the deposition of

defendant's corporate representative. Phoenix is a reasonable venue because it is the

forum and it is defendant's principal place of business. Answer at 1.

Defendant moves to strike plaintiff's Motion to Compel Designation and

Production of F.R.C.P. Rule 30(b)(6) Witnesses because defendant exceeded the Rule 16

page restrictions. Defendant's Motion to Strike is denied because plaintiff was required to

set forth additional information pursuant to L.R. Civ. 37.1 (doc. 76).

VII.

IT IS ORDERED DENYING defendant's Motion for Summary Judgment (doc.

27).

IT IS FURTHER ORDERED DENYING plaintiff's Motion to Strike (doc. 45).

IT IS FURTHER ORDERED DENYING defendant's Motion for a Protective

Order (doc. 62).

IT IS FURTHER ORDERED GRANTING plaintiff's Motion to Compel

Designation and Production of F.R.C.P Rule 30(b)(6) Witnesses (doc. 63).

IT IS FURTHER ORDERED GRANTING plaintiff's Motion to Compel

Production of Documents (doc. 70).

IT IS FURTHER ORDERED GRANTING plaintiff's Motion to Determine the

Sufficiency of Objections and Responses to First Requests for Admissions (doc. 72), and

directing defendant to respond to plaintiff's first request for admissions in accordance

with our rulings herein.

IT IS FURTHER ORDERED DENYING plaintiff's request for attorney's fees

(docs. 63, 70, 72).

IT IS FURTHER ORDERED DENYING defendant's Motion to Strike (doc.

76).

Case 2:04-cv-01600-FJM Document 84 Filed 11/18/05 Page 11 of 12
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

- 12 -

IT IS FURTHER ORDERED GRANTING defendant's Motion for Leave to File

Responses to Plaintiff's Motions to Compel Production of Documents and Determine

Sufficiency of Objections and Responses to First Requests for Admissions (doc. 82).

DATED this 16th day of November, 2005.

Case 2:04-cv-01600-FJM Document 84 Filed 11/18/05 Page 12 of 12