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Wilson v. Anthem Health Plans of Kentucky, Inc.

United States District Court, W.D. Kentucky, Louisville Division

December 17, 2019

MARGARET WILSON, individually and on behalf of a Class of persons similarly situated, Plaintiffs
v.
ANTHEM HEALTH PLANS OF KENTUCKY, INC. Defendant

          MEMORANDUM OPINION AND ORDER

          Rebecca Grady Jennings United States District Judge.

         Plaintiff Margaret Wilson (“Wilson”) sues Defendant Anthem Health Plans of Kentucky (“Anthem”) seeking relief for alleged violations of Employee Retirement Income Security Act of 1974, 29 U.S.C. §§1001, et seq. (“ERISA”) and the Mental Health Parity and Addiction Equity Act of 2008, 42 U.S.C.A. § 300gg-26 (“MHPAEA”). [DE 1 at 1]. Before the Court is Wilson's unopposed Motion for Preliminary Approval of Class Settlement, Approval of Notice to the Class, and Scheduling Final Fairness Hearing (“Motion”). [DE 76]. The matter is ripe. For the reasons below, the Motion is GRANTED.

         I. BACKGROUND

         Wilson is the mother and legal guardian of M.W., a minor child with Autism Spectrum Disorder (“ASD”). [DE 1 at 2]. According to Wilson's complaint, “Autism cannot be cured, but it can be treated” and Applied Behavior Analysis (“ABA”) is the “most common and recognized method” of treatment. Id. at 3. Wilson and her son are insured by Anthem. Id. at 2.

         M.W. enrolled in the Highlands Center for Autism to receive ABA treatment. Id. at 10. Wilson submitted claims to Anthem “seeking coverage for the cost” of M.W.'s treatment. Id. at 11. Anthem “paid small amounts of some claims” but, because of coverage limitations, did not reimburse most of the treatment costs. Wilson has continued to seek treatment for M.W.'s ASD but claims that “Anthem has continued to impose coverage limitations on it.” Id. at 11. Wilson has spent “tens of thousands of dollars in unreimbursed expenses for the medically necessary care” of M.W. Id.

         Wilson filed a Class Action Complaint, arguing that Anthem violated ERISA and MHPAEA by “routinely impos[ing] caps and limits on benefits under its health insurance policies for insureds seeking treatment for Autism Spectrum Disorders.” Id. at 1. Because of Anthem's allegedly unlawful practices, Wilson sought relief for herself and on behalf of a class of similarly situated individuals.

         The Court certified the class[1] requested by Wilson and named Robert R. Sparks and Strauss Troy Co., L.P.A., as class counsel. [DE 47 at 3157]. The parties then “engaged in discovery related to the merits of the class claims . . . includ[ing] depositions of Anthem's representatives as well as the exchange of reports of expert witnesses and the depositions of those individuals.” [DE 76-1 at 3265].

         The parties then negotiated a Class Action Settlement Agreement (the “Settlement”) with help from Magistrate Judge King. The Settlement was “hotly contested by the parties” with “each party required to evaluate complex legal, factual, and procedural issues in evaluating their settlement position.” [DE 76-1 at 3267]. During negotiations, the parties considered: Wilson's ability to prove the size of the class; the amount of damages the Court could award; the time, expense, and difficulty of continued litigation and trial; and the likelihood of success on the merits and on appeal. Id.

         The compensatory terms of the Settlement are:

On behalf of the class members involved in this action, Anthem has agreed to create a fund totaling $300, 000. No. part of this fund reverts to Anthem. The settlement fund is to be used to provide settlement to Class Members and pay attorney fees, costs, and incentive awards approved by the Court.
The Net Settlement Fund will be distributed to Class Members. That fund is expected to total $175, 000. Class Members who had claims denied by Anthem using the denial reason description “Benefit Maximum Met” or “Units exceed a utilization management authorization” shall receive a pro rata share of the Net Settlement Fund or a minimum payment of $250.00, whichever is greater. All other Class Members shall receive $250.00.
Margaret Wilson, the Class Representative, will seek an award of $10, 000. Class Counsel has agreed to apply to the Court for approval of attorneys (sic) fees and costs, which will not exceed $115, 000.00. Anthem has agreed not to oppose a fee application which is in accord with the above referenced procedure. The comprehensive settlement agreement is attached and incorporated herein as Exhibit “A”.
Any funds remaining from uncashed settlement checks after 120 days following payments to Class Members shall be disbursed as a cy pres award to Families for the Effective Treatment of Autism (FEAT) of Louisville.

Id. at 3266

         Wilson then filed her Motion [DE 76], attaching a Settlement Agreement [DE 76-2], a Notice of Class Action Settlement (the “Notice”) [DE 76-2], and an Order Preliminarily Approving the Class Action Settlement Agreement, Scheduling Final Approval Hearing, and Directing Notice to Class [DE 76-3]. After review, this Court entered an Order [DE 80] granting Wilson leave to supplement the Motion to address two questions: 1) does the $175, 000 in the net settlement fund wholly or partially compensate the class? and 2) why do some class members receive a pro rata share or a minimum payment of $250.00 and others receive only $250.00? Wilson sufficiently responded to the Court's questions in her Supplemental Memorandum in Support of Plaintiff's Motion for Preliminary Approval of Class Settlement, Approval of Notice to Class, and Scheduling a Final Fairness Hearing (the “Supplemental Memorandum”) [DE 82], and so the Court will now GRANT the Motion.

         II. STANDARD

         Class action suits may be settled only with court approval. Fed.R.Civ.P. 23(e). Approval of a class action settlement involves two-stages: 1) “The judge reviews the proposal preliminarily to determine whether it is sufficient to warrant public notice and a hearing”; and 2) “If so, the final decision on approval is made after the hearing.” Ann. Manual Complex Lit. (Fourth) § 13.14 (2019); see also Thacker v. Chesapeake Appalachia, L.L.C., 259 F.R.D. 262, 270 (E.D. Ky. 2009) (referencing Tenn. Ass'n of Health Maint. Orgs., Inc. v. Grier, 262 F.3d 559, 565-66 (6th Cir. 2001)). “At the stage of preliminary approval, the questions are simpler, and the court is not expected to, and probably should not, engage in analysis as rigorous as is appropriate for final approval.” Spine & Sports Chiropractic, Inc. v. ZirMed, Inc., No. 3:13-CV-00489, 2015 WL 1976398, at *1 (W.D. Ky. May 4, 2015) (quoting Ann. Manual Complex Lit. § 21.662 (4th ed.)). Courts apply a degree of scrutiny to proposed settlement agreements sufficient to avoid “rubber-stamp[ing]” a proposed settlement agreement, while still being “mindful of the substantial judicial processes that remain to test the assumptions and representations upon which the [proposed settlement agreement] are premised.” In re Inter-Op Hip Liab. Litig., 204 F.R.D. 330, 338 (N.D. Ohio 2001).

         To approve a proposed settlement, the court must determine whether it is “fair, reasonable, and adequate.” Whitlock v. FSL Mgmt., L.L.C., 843 F.3d 1084, 1093 (6th Cir. 2016). Rule 23(e) provides the court with factors to consider when making this determination. The Advisory Committee, in amending Rule 23(e), did not intend to displace factors developed by the circuit courts in deciding whether to approve a proposed settlement agreement, but rather to “focus the court . . . on the core concerns . . . that should guide” the court's determination. Federal R. Civ. P. 23(e) advisory committee's note to 2018 amendment. This Court thus considers both the Rule 23(e) factors and the factors set forth by the Sixth Circuit. See Peck v. Air Evac EMS, Inc., No. CV 5: 18-615-DCR, 2019 WL 3219150, at *5 (E.D. Ky. July 17, 2019).

         III. DISCUSSION

         A. The Settlement is “Fair, Reasonable, and Adequate.”

         Because the Court has already certified the class, appointed class counsel, and approved the class representative, [DE 47], its analysis here focuses on whether “giv[ing] notice is justified by the parties' showing that the court will likely be able to . . . approve the proposal under Rule 23(e)(2).”[2] Fed.R.Civ.P. 23(e)(1)(B). Because the parties' showing satisfies the Rule 23(e)(2) and Sixth Circuit factors, the Court will likely be able to approve the Settlement as “fair, reasonable, and adequate.”

1. Analysis Under Rule 23(e)(2).
Under the Rule 23(e)(2) factors, a settlement is “fair, reasonable, and adequate” if:
(A) the class representatives and class counsel have adequately represented the class;
(B) the proposal was negotiated at arm's length;
(C) the relief provided for the class is adequate, taking ...

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