Case 3:19-cv-02861-WHA Document 206 Filed 10/12/21 Page 1 of 4
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`UNITED STATES DISTRICT COURT
`
`
`NORTHERN DISTRICT OF CALIFORNIA
`
`MARY CALDWELL,
`
`
`
`Plaintiff,
`
`v.
`
`UNITEDHEALTHCARE INSURANCE
`COMPANY, et al.,
`
`No. C 19–02861 WHA
`
`
`
`ORDER DENYING PRELIMINARY
`SETTLEMENT APPROVAL
`
`Defendants.
`
`
`
`
`Sadly, this is another class settlement proposal in which class counsel get vast amounts of
`
`cash but the class members get merely a cosmetic settlement. Under the proposed settlement, the
`
`parties have agreed that class counsel will get $875,000 under a clear sailing agreement. Our
`
`court of appeals has held that this is a red flag indicating a potentially collusive settlement,
`
`because “when the parties negotiate a ‘clear sailing’ arrangement providing for the payment of
`
`attorneys’ fees separate and apart from class funds,” a settlement carries a risk of “enabling a
`
`defendant to pay class counsel excessive fees and costs in exchange for counsel accepting an
`
`unfair settlement on behalf of the class.” In re Bluetooth Headset Prod. Liab. Litig., 654 F.3d
`
`
`
`
`
`
`
`
`
`
`
`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
`
`Northern District of California
`
`United States District Court
`
`

`

`Case 3:19-cv-02861-WHA Document 206 Filed 10/12/21 Page 2 of 4
`
`
`
`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
`
`935, 947 (9th Cir. 2011). In fact, the Court’s prior order herein regarding class actions and class
`
`action settlements forbids such agreements for this exact reason (Dkt. 22). The order states:
`
`
`To avoid collusive settlements, the Court prefers that all
`settlements avoid any agreement as to attorney’s fees and leave
`that to the judge. If the defense insists on an overall cap, then the
`Court will decide how much will go to the class and how much
`will go to counsel, just as in common fund cases. Please avoid
`agreement on any division, tentative or otherwise. A settlement
`whereby the attorney seems likely to obtain funds out of proportion
`to the benefit conferred on the class must be justified.
`
`This violation stands out as a sore thumb and a red flag.
`
`The proposed settlement is further unfair to class members because it is impossible to
`
`know if they will qualify under the new criteria or not (and, as explained below, the current
`
`medical records for class members suggest that some potentially deserving class members will
`
`not meet the criteria).
`
`A prior order asked the parties to analyze how many class members would qualify. United
`
`found that six class members are likely ineligible, four class members meet many of the criteria
`
`for eligibility, thirteen class members meet most of the criteria, and five class members lack
`
`sufficient records for a determination of potential eligibility under the criteria.
`
`Plaintiffs’ independent analysis of eligibility found that five members likely meet the
`
`criteria, that seven will be disqualified based on symptoms linked to comorbid lymphedema, and
`
`that fifteen members’ files lack sufficient evidence to determine eligibility (e.g., their files did
`
`not include photographs).
`
`Plaintiffs’ conclusion about the seven class members who may have lymphedema is
`
`especially important. Plaintiffs’ review suggests that seven class members have pitting edema
`
`(an exclusion from eligibility) and two of these seven class members also have a negative
`
`Stemmer sign (another exclusion). Plaintiffs contend that comorbid lymphedema could account
`
`for these outcomes. Lipedema in its late stage can turn into lipo-lymphedema (comorbid
`
`lipedema and lymphedema). Therefore, the presence of pitting edema and a negative Stemmer
`
`sign as exclusionary criteria could deny coverage to deserving class members whose lipedema
`
`has become so severe that it has morphed into lipo-lymphedema. Even plaintiffs acknowledge
`
`2
`
`Northern District of California
`
`United States District Court
`
`

`

`Case 3:19-cv-02861-WHA Document 206 Filed 10/12/21 Page 3 of 4
`
`
`
`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
`
`that they should collaborate with United to “address[] the issue of modifying the criteria to
`
`account for this dual diagnosis” (Br. at 3).
`
`Both parties state that updated information is needed to definitively determine eligibility.
`
`United points out that the evidence provided by treating doctors in support of prior requests for
`
`liposuction may not have been complete because the submissions were based on the prior policy.
`
`Plaintiffs also point out that existing records could be supplemented by class members seeking
`
`reprocessing of their claim and that more complete records will likely garner more approvals.
`
`These responses underscore one issue with the settlement, namely, that class members
`
`must submit new claims with supplemental information instead of United automatically
`
`readjudicating the prior claims. Thus, class members bear the burden of righting an improper
`
`denial. United does not even agree to affirmatively request the additional information needed for
`
`reprocessing prior denials of class members still covered by United or to work with physicians of
`
`denied class members.
`
`True, plaintiff’s expert has submitted a declaration stating that the new agreed-upon criteria
`
`are reasonable. That is hardly an unbiased source. Of course plaintiff’s counsel, once the parties
`
`agreed on the $875,000 in attorney’s fees, has a strong prejudice in favor of the deal.
`
`But even if the new agreed-upon criteria were reasonable in this case, it would be unfair to
`
`bind the class to the criteria forever and prevent them from challenging the reasonableness of the
`
`criteria (even if they can dispute the application of the criteria to their particular circumstances
`
`with their own ERISA claim). The agreement provides no help from class counsel to obtain
`
`coverage under the new regime. The agreement provides no assurance that class counsel will
`
`represent class members if their claim is denied under the new criteria and they seek to bring an
`
`ERISA action challenging the application of the new criteria to their particular circumstances.
`
`The settlement waives all damages claims with the exception of a fund for out-of-pocket
`
`expenses, which is determined as follows (Settlement at 8):
`
`
`For class members who have paid out of pocket for liposuction to
`treat lipedema and who are not covered under a United Plan as of
`the Effective Date, there will be an aggregate cap of $76,200 for all
`such claims. If this cap is exceeded by 10% ($83,820), then the
`parties will negotiate in good faith to formulate a new cap based
`3
`
`Northern District of California
`
`United States District Court
`
`

`

`Case 3:19-cv-02861-WHA Document 206 Filed 10/12/21 Page 4 of 4
`
`
`
`upon the amount of the approved claims not to exceed a cap of up
`to an additional $123,800 (for an overall total of $200,000).
`
`If the out-of-pocket expenses of class members exceed the $83,820 in funds, then United is
`
`under no obligation to formulate a new cap, it must only negotiate in good faith. If the out-of-
`
`pocket expenses surpass $200,000 then class members will be out of luck for any amount above
`
`that.
`
`The Court attempted to appoint an independent expert to determine the extent to which
`
`deserving patients would be denied coverage under the new medical criteria. The Court
`
`contacted Dr. Karen Herbst, a medical doctor and researcher specializing in adipose disorders,
`
`who was willing to serve as a court-appointed medical expert under Federal Rule of Evidence
`
`706. Dr. Herbst was introduced to both parties in a telephone conference and was questioned
`
`about potential conflicts of interest. United then objected on multiple grounds, including the fact
`
`that Dr. Herbst participated in a May 2019 telephonic meeting with United’s medical policy
`
`committee to discuss the use of liposuction for lipedema. This warranted excusing Dr. Herbst
`
`from serving as a court-appointed expert. The Court has been left to evaluate the medical criteria
`
`without an expert independent to the parties.
`
`The Court sees such a large fee for the attorneys, little benefit to the class members, and
`
`substantial downsides to the class — namely, that class members are forced to accept the new
`
`medical criteria and cannot challenge them (even when they do not qualify under the new
`
`criteria) and that potentially deserving class members will be excluded. For these reasons, this
`
`order denies preliminary approval for the proposed settlement.
`
`
`IT IS SO ORDERED.
`
`
`
`Dated: October 12, 2021
`
`
`
`
`
`
`
`WILLIAM ALSUP
`UNITED STATES DISTRICT JUDGE
`
`4
`
`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
`
`Northern District of California
`
`United States District Court
`
`