Peters v. Aetna Inc. et al

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF NORTH CAROLINA
ASHEVILLE DIVISION
CIVIL CASE NO. 1:15-cv-00109-MR
SANDRA M. PETERS, on behalf )
of herself and all others similarly )
situated, )
)
Plaintiff, )
)
vs. ) O R D E R
)
)
AETNA INC., AETNA LIFE )
INSURANCE COMPANY, and )
OPTUMHEALTH CARE SOLUTIONS, )
INC., )
)
Defendants. )
)
THIS MATTER is before the Court on the Plaintiff’s Motion to Compel
Aetna and Optum to Produce Documents Improperly Redacted or Withheld
as Privileged [Doc. 89].
I. BACKGROUND
This a putative class action brought by the Plaintiff Sandra M. Peters
against the Defendants Aetna, Inc., Aetna Life Insurance Company
(collectively, “Aetna”), and OptumHealth Care Solutions, Inc. (“Optum”),
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asserting claims pursuant to the Employee Retirement Income Security Act
of 1974, as amended, 29 U.S.C. § 1001, et seq. (“ERISA”). [Doc. 1].1
The Plaintiff is a former2 member of an ERISA plan (“the Mars Plan” or
“the Plan”) self-funded by her husband’s former employer, Mars, Inc.
(“Mars”), for its employees and retirees. Mars, through its benefits
committee, is the “Plan Administrator” for the Plan. [Aetna Ex. 6: Summary
Plan Description at 57]. Through a Master Service Agreement, the Mars
Plan hired Aetna to perform certain enumerated administrative services for
the plan, including a specific delegation to act as the Plan’s “Claim Fiduciary”
with respect to adjudicating benefits claims and the first two levels of appeals
under the Plan. In that regard, Mars delegated “discretionary authority [to
Aetna] to determine entitlement to benefits . . . including discretionary
authority to determine and evaluate facts and evidence, and discretionary
authority to construe the terms of the Plan.” [Aetna Ex. 2: Master Service
Agreement at 00002790]. In another section titled “Fiduciary Duty,” the
Master Service Agreement provides that Mars “retains complete authority
1 The Plaintiff also asserted claims pursuant to the Racketeer Influenced and Corrupt
Organizations Act, 18 U.S.C. § 1961, et seq. (“RICO”). The Plaintiff’s RICO claims,
however, have been dismissed. [See Doc. 54].
2 The Plaintiff had primary medical coverage under the Mars Plan from approximately
1980 to February 1, 2015. Currently, she has coverage through Medicare. [Optum Ex.
2 at 5].
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and responsibility for the Plan, its operation, and the benefits provided
thereunder,” and that Aetna is “empowered to act on behalf of [Mars] in
connection with the Plan only to the extent expressly stated . . . .” [Id. at
00002772].
Beginning in 2012, Aetna entered into a series of provider contracts
with Optum, by which Aetna agreed to pay Optum flat “per visit” rates for
physical therapy, occupational therapy, and chiropractic services in
particular markets. In exchange, Optum agreed to provide Aetna and its
customers with access to Optum’s network of treating providers, along with
clinical oversight (also referred to as “patient management”), claims
processing, and other administrative services related to this network. [Aetna
Ex. 7: Aetna 30(b)(6) Dep. at 19; Aetna Exs. 12-15]. Optum would also pay
its contracted providers for the services they performed. Because of this
structure, there would often be a difference between the per visit rate paid
by Aetna to Optum and the rate paid by Optum to its downstream treating
provider, which would be paid to Optum as an “administrative fee.”3
3 In some instances, the amount paid by Optum to its downstream provider exceeded the
amount Aetna paid to Optum. When that occurred, Optum absorbed that loss as a part
of its overall operating arrangement with Aetna. [Optum Ex. 8: Eichten Dep. at 124-25].
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In her Complaint, the Plaintiff alleges that Aetna and Optum
fraudulently misrepresented such administrative fees as medical expenses.
The Plaintiff alleges that these misrepresentations allowed Aetna to illegally
(i) obtain payment of Optum’s administrative fees directly from insureds
when the insureds’ deductibles have not been reached; (ii) use insureds’
health spending accounts to pay for these fees; (iii) inflate insureds’ co-
insurance obligations using administrative fees; (iv) artificially reduce the
amount of available coverage for medical services when such coverage is
subject to an annual cap; and (v) obtain payment of the administrative fees
directly from employers when an insured’s deductible has been exhausted
or is inapplicable. [Doc. 1]. The Plaintiff alleges that in so doing, the
Defendants breached their fiduciary duties as plan administrators, in
violation of 29 U.S.C. § 1132(a)(2) (Count III) and 29 U.S.C. § 1132(a)(1),
(a)(3), and/or 29 U.S.C. § 1104 (Count IV). [Id.].
In November 2016, the Plaintiff served discovery requests on
Defendants, seeking the production of certain documents. In response, the
Defendants served their initial privilege logs asserting the attorney-client
privilege. After meeting and conferring, the Defendants agreed to serve
revised privilege logs, and the Plaintiff agreed to provide a list of categories
of documents that were of particular interest to the Plaintiff under the
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fiduciary exception to the attorney-client privilege. The Plaintiff’s categories
included legal advice related to the following topics:
1. Whether Optum was providing services that were covered
under the terms of Aetna’s plans;
2. Whether Defendants were permitted to use Optum’s rates
when assessing member and plan responsibility;
3. Whether it was proper for Defendants to represent Optum
as a “provider” to plans and members;
4. Defendants’ use of CPT4 codes for services not performed
by actual providers (“dummy codes”) when administering
claims for benefits;
5. Communications with plans and members about the
Optum arrangement or related plan changes;
6. Defendants’ medical loss reporting obligations;
7. The use of plan assets to compensate Optum (such as the
provision in the Provider Agreements requiring Aetna to
make direct payment to Optum from plans); and
8. Whether Optum’s services were medically necessary
under Aetna plans.
Aetna advised that it was not aware of any legal advice aside from
advice falling into categories 5 and 6 (communications with plans and
4 Current Procedural Terminology, or “CPT Codes” are standardized codes used to bill
medical outpatient and office procedures. See generally https://www.ama-
assn.org/practice-management/cpt-current-procedural-terminology?-process-how-code-
becomes-code= (last visited July 26, 2018).
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members about the Optum arrangement or related plan changes and the
Defendants’ medical loss reporting obligations), and Optum advised that it
was only aware of the existence of legal advice falling into category 4
(Defendants’ use of CPT codes for services not performed by actual
providers when administering claims for benefits). The Defendants,
however, refused to stipulate that they received no legal advice regarding
the other categories.
The Defendants served revised privilege logs on December 8 and 11,
2017, and Optum served a supplemental log on December 22, 2017. At the
Defendants’ request, the Plaintiff sought to further narrow the dispute by
highlighting documents that the Plaintiff believed were either subject to the
fiduciary exception to the attorney-client privilege or were likely to be subject
to that exception. The parties met and conferred again but were unable to
resolve the dispute.
The Plaintiff now moves to compel the Defendants to produce certain
documents that the Defendants have redacted or withheld as privileged. The
Plaintiff contends that such documents must be produced because they are
subject to the fiduciary exception to the attorney-client privilege. The Plaintiff
further contends that Aetna is also improperly asserting work product
privilege with respect to certain notes taken by Aetna employee Shiron
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Hagens (“Hagens’ Notes”) regarding her communications with Optum
employees concerning the Plaintiff’s ERISA plan. Accordingly, Plaintiff asks
the Court to: (1) compel Aetna and Optum to produce the withheld
documents that fall within the fiduciary exception; (2) conduct an in camera
review of certain withheld documents that appear likely to be subject to the
fiduciary exception; and (3) compel Aetna to produce Hagens’ Notes. [Docs.
89, 90 (sealed), 91 (redacted)]. The Defendants filed Responses in
opposition [Docs. 100 (redacted), 101 (sealed), 102 (redacted), 103
(sealed)], and the Plaintiff filed Replies to each Response [Docs. 112
(sealed), 113 (sealed), 114 (redacted), 115 (redacted)]. The Court held a
hearing on the Plaintiff’s motion on June 19, 2018.
II. STANDARD OF REVIEW
Rule 26 of the Federal Rules of Civil Procedure provides, in pertinent
part, as follows:
Parties may obtain discovery regarding any
nonprivileged matter that is relevant to any party's
claim or defense and proportional to the needs of the
case, considering the importance of the issues at
stake in the action, the amount in controversy, the
parties’ relative access to relevant information, the
parties’ resources, the importance of the discovery in
resolving the issues, and whether the burden or
expense of the proposed discovery outweighs its
likely benefit. Information within this scope of
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discovery need not be admissible in evidence to be
discoverable.
Fed. R. Civ. P. 26(b)(1). Under Rule 37 of the Federal Rules of Civil
Procedure, “a party may move for an order compelling disclosure or
discovery.” Fed. R. Civ. P. 37(a)(1). The decision to grant or deny a motion
to compel is generally an issue within the broad discretion of the trial court.
See Lone Star Steakhouse & Saloon, Inc. v. Alpha of Va., Inc., 43 F.3d 922,
929 (4th Cir. 1995). However, the application of the attorney-client privilege
presents a mixed question of law and fact for the Court. See In re Grand
Jury Proceedings, 33 F.3d 342, 353 (4th Cir. 1994).
III. DISCUSSION
A. The Attorney-Client Privilege and the Fiduciary Exception
“The attorney-client privilege is the oldest of the privileges for
confidential communications known to the common law.” Upjohn Co. v.
United States, 449 U.S. 383, 389 (1981). “The privilege is intended to
encourage full and frank communication between attorneys and their
clients.” United States v. Mett, 178 F.3d 1058, 1062 (9th Cir. 1999).
Because the attorney privilege “impedes the full and free discovery of
the truth,” the privilege must be “narrowly construed.” Hawkins v. Stables,
148 F.3d 379, 383 (4th Cir. 1998) (citations and internal quotation marks
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omitted). Thus, the Fourth Circuit has explained that the attorney-client
privilege applies only when the following factors are met:
(1) the asserted holder of the privilege is or sought to
become a client;
(2) the person to whom the communication was
made (a) is a member of the bar of a court, or his
subordinate and (b) in connection with this
communication is acting as a lawyer;
(3) the communication relates to a fact of which the
attorney was informed (a) by his client (b) without the
presence of strangers (c) for the purpose of securing
primarily either (i) an opinion on law or (ii) legal
services or (iii) assistance in some legal proceeding,
and not (d) for the purpose of committing a crime or
tort; and
(4) the privilege has been (a) claimed and (b) not
waived by the client.
United States v. Jones, 696 F.2d 1069, 1072 (4th Cir. 1982) (citation
omitted). The privilege does not protect all aspects of an attorney-client
relationship; rather, it “protects only confidential communications occurring
between the lawyer and his client.” Hawkins, 148 F.3d at 383-84. The party
claiming the protection bears the burden of demonstrating the applicability of
the attorney-client privilege. In re Grand Jury Proceedings, 33 F.3d at 353.
The Fourth Circuit has recognized an exception to the attorney-client
privilege when the client procuring the legal advice is acting as a fiduciary for
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another. As the Court explained in Solis v. Food Employers Labor Relations
Association, the fiduciary exception is “[r]ooted in the common law of trusts”
and “is based on the rationale that the benefit of any legal advice obtained
by a trustee regarding matters of trust administration runs to the
beneficiaries.” 644 F.3d 221, 226 (4th Cir. 2011). “Consequently, trustees
cannot subordinate the fiduciary obligations owed to the beneficiaries to their
own private interests under the guise of attorney-client privilege.” Id. at 226-
27 (citation and internal quotation marks omitted). Noting that the exception
has been applied to fiduciary relationships outside the context of traditional
trusts, the Solis Court observed that courts typically rely on one of two related
rationales for the application of the exception:
[S]ome courts have concluded that the ERISA
fiduciary’s duty to act in the exclusive interest of
beneficiaries supersedes the fiduciary’s right to
assert attorney-client privilege. Other courts,
however, have reasoned that the ERISA fiduciary, as
a representative of the beneficiaries, is not the real
client in obtaining advice regarding plan
administration and thus never enjoyed the privilege
in the first place. Under either rationale, where an
ERISA trustee seeks an attorney’s advice on a
matter of plan administration and where the
advice clearly does not implicate the trustee in
any personal capacity, the trustee cannot invoke
the attorney-client privilege against the plan
beneficiaries.
Id. at 227 (internal citations and quotation marks omitted; emphasis added).
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The ERISA fiduciary exception, however, is not without its limits. “The
exception will not apply, for example, to a fiduciary's communications with
an attorney regarding her personal defense in an action for breach of
fiduciary duty.” Id. at 228; see also Mett, 178 F.3d at 1064 (“where a plan
fiduciary retains counsel in order defend herself against the plan
beneficiaries . . . the attorney-client privilege remains intact”). Likewise,
“communications between ERISA fiduciaries and plan attorneys regarding
non-fiduciary matters, such as adopting, amending, or terminating an ERISA
plan, are not subject to the fiduciary exception.” Solis, 644 F.3d at 228.
Ultimately, determining whether communications relate to fiduciary matters
such that the fiduciary exception applies “is a matter of context and content.”
Tatum v. R.J. Reynolds Tobacco Co., 247 F.R.D. 488, 495 (M.D.N.C. 2008).
While the Solis Court did not explicitly state who bears the burden of
proving the applicability of the fiduciary exception,5 the Fourth Circuit has
held with respect to other exceptions to the attorney-client privilege that the
party seeking to overcome the attorney-client privilege bears the burden of
5 While not stating so explicitly, the Fourth Circuit appeared to acknowledge in Solis that
the party asserting the fiduciary exception has the burden of proving that the exception
applies. See Solis, 644 F.3d at 228 (rejecting argument that good cause must be shown
in order “to overcome a privilege”).
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establishing that an exception applies. See, e.g., Grand Jury Proceedings,
33 F.3d at 352 (discussing crime-fraud exception to attorney-client privilege);
accord Mett, 178 F.3d at 1064 (discussing fiduciary exception to attorney-
client privilege).6
The attorney-client privilege is a significant cornerstone of our justice
system. It fosters open and frank consultation with learned counsel
regarding legal matters. See Upjohn, 449 U.S. at 389. Accordingly, once a
party has established that the attorney-client privilege is applicable to its
communications with counsel, there is a presumption that the material is,
and should remain, privileged. Any exceptions to that privilege are narrowly
construed. “[W]here attorney-client privilege is concerned, hard cases
should be resolved in favor of the privilege, not in favor of disclosure.” Mett,
178 F.3d at 1065. “An uncertain privilege, or one which purports to be certain
but results in widely varying applications by the courts, is little better than no
privilege at all.” Upjohn, 449 U.S. at 393.
6 The Plaintiff argues that, in light of their purported roles as fiduciaries, the Defendants
bear the burden of demonstrating that the fiduciary exception does not apply to the
challenged documents. It makes no sense, however, to require a party – in this case, the
Defendants – to bear the burden of demonstrating that the attorney-client privilege applies
and then require the same party to prove a negative, that is, that an exception to that
privilege does not apply. This latter burden rightly falls on the shoulders of the Plaintiff.
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B. The Disputed Documents
The Plaintiff moves the Court to compel the Defendants to produce a
number of documents identified in their privilege logs as protected under the
attorney-client privilege. Significantly, the Plaintiff does not challenge the
applicability of the attorney-client privilege to any of these documents; rather,
the Plaintiff argues that these documents should be produced to her under
the fiduciary exception to the attorney-client privilege.
1. Optum Disputed Documents
The Plaintiff argues that Optum should produce the following
categories of documents identified in its privilege log:
• Optum’s Claims and Payment Process. These log entries
include legal advice about “claims-payment flow”; “claims
processing and payment workflow”; “Aetna claims flow”;
“per-visit pricing”; “payment process”; “Aetna claims
process”; “claims-payment process”; “claims process”;
“service model presentation”; “Aetna appeals process”;
and “billing practices meeting”. [See, e.g., Pl. Ex. 2: Optum
Supp. Priv. Log Nos. 5, 208].
• Optum’s Administrative Fees and CPT Codes. These log
entries include legal advice about “administrative fees”;
“administrative fees for Aetna claims”; “CPT codes”;
“coding question”; “EOBs … and … administrative fees”;
“DOI process/CPT coding”; and “administrative fees, CPT
code, and coinsurance”. [See, e.g., Pl. Ex. 2: Optum Supp.
Priv. Log Nos. 20, 45, 46, 195].
• Optum’s Compensation Structure. These log entries
include legal advice about “compensation schedule”; “fee
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schedule”; “services-and-compensation schedule”;
“services-and-compensation provisions”; and “services-
and-compensation addendum.” [See, e.g., Pl. Ex. 2:
Optum Supp. Priv. Log Nos. 49, 65, 88].
For the reasons that follow, the Court concludes that the Plaintiff has failed
to establish that Optum was functioning as a fiduciary in relation to any of
the issues addressed in these documents.
In determining the existence of a fiduciary duty, “the threshold question
is not whether the actions of some person employed to provide services
under a plan adversely affected a plan beneficiary’s interest, but whether that
person was acting as a fiduciary (that is, was performing a fiduciary function)
when taking the action subject to the complaint.” Pegram v. Herdrich, 530
U.S. 211, 226 (2000) (emphasis added). ERISA defines a “fiduciary” as
follows:
[A] person is a fiduciary with respect to a plan to the
extent (i) he exercises any discretionary authority or
discretionary control respecting management of such
plan or exercises any authority or control respecting
management or disposition of its assets, (ii) he
renders investment advice for a fee or other
compensation, direct or indirect, with respect to any
moneys or other property of such plan, or has any
authority or responsibility to do so, or (iii) he has any
discretionary authority or discretionary responsibility
in the administration of such plan.
29 U.S.C. § 1002(21)(A).
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Here, only Aetna has a contractual relationship with Mars and the Mars
Plan. The contracts between Mars and Aetna specify that Mars is the “Plan
Administrator” for the Mars Plan and “retains complete authority and
responsibility for the Plan, its operation, and the benefits provided.” [Optum
Ex. 6 at 2]. These contracts further designate Aetna as the “Claim Fiduciary”
with the “discretionary authority to determine entitlement to benefits under
the applicable Plan documents.” [Id. at 20, 46].
Optum has no contractual relationship with the Mars Plan. Rather,
Optum contracts directly with Aetna to create and maintain provider networks
for chiropractic and physical-therapy services. The Aetna-Optum relationship
at issue comprises various contracts, including two Provider Agreements,
two Delegated Credentialing Agreements, two Contract Oversight Claims
Management Agreements, and two Delegated Patient Management
agreements. Aetna negotiated those contracts with Optum for its system-
wide business, not for the benefit of any particular Aetna plan. [See Optum
Ex. 4: Optum 30(b)(6) Dep. at 47]. None of the Aetna-Optum contracts
delegates to Optum discretionary authority to make benefits determinations
for Aetna plans or gives Optum control over any plan’s assets.
Optum plays a limited ministerial role in Aetna’s claims process. When
an Aetna plan member visits an Optum-contracted chiropractor or physical
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therapist, that downstream network provider performs a service for the Aetna
plan member and submits a claim to Optum. If a claim is untimely or missing
required information, Optum processes what is called an “administrative
denial.” [Optum Ex. 8: Eichten Dep. at 66; Optum Ex. 4: Optum 30(b)(6)
Dep. at 73-74]. This denial does not involve any discretion on the part of
Optum; rather, it is a mechanical process governed by Aetna’s claims-
submission rules.
If the claim is timely and includes the required information, then Optum
forwards the claim to Aetna. Aetna then determines whether to cover the
claim and (if covered) how much to pay and sends its determination back to
Optum. If Aetna decides that the claim is covered under the Aetna member’s
plan, then Aetna determines the member’s financial responsibility (if any)
and communicates its decision to Optum. Optum then pays the treating
provider the contracted rate between Optum and that provider minus the
amount that Aetna calculated as the member’s financial responsibility.
[Optum Ex. 8: Eichten Dep. at 111; Optum Ex. 4: Optum 30(b)(6) Dep. at 62,
117]. Depending on the services and plan at issue, Aetna may pay Optum
more or less than what Optum pays the downstream providers. [Optum Ex.
8: Eichten Dep. at 124-25].
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Here, the actions that are the subject of the Plaintiff’s Complaint are
the benefits determinations that Aetna makes under the Mars Plan and the
EOBs that Aetna sends to plan participants for approved claims. According
to the Plaintiff, Aetna should have calculated her financial responsibility
based on the rates that Optum separately negotiated with its contracted
network providers and not on the rates that Aetna separately negotiated with
Optum. [See e.g., Optum Ex. 1: Peters Dep. at 52, 248].
With respect to this issue, the Mars Plan makes clear that Aetna, not
Optum, has the authority to determine a plan member’s financial
responsibility. Because it is clear that Optum did not manage or administer
this aspect of the Plan, the Court must conclude that Optum was not acting
in a fiduciary capacity with respect to the actions complained of by the
Plaintiff.
The Plaintiff nevertheless claims that Optum is a fiduciary because: (1)
Aetna granted Optum the authority to grant or deny benefit claims; (2) the
contract between Aetna and Optum allowed Optum to control its own
compensation for its services; and (3) Optum had control over the amount of
administrative charges it would collect, which charges were taken out of plan
assets.
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Contrary to the Plaintiff’s argument, however, the record before this
Court shows that Aetna retains all discretionary authority to pay or deny
benefits claims. Aetna sends the EOBs for benefits claims processed under
the Aetna-Optum contracts, and Aetna possesses the unilateral right to
change the claims-processing rules that Optum must follow. Optum, on the
other hand, serves a “purely administrative role” in this process — managing
a network of its own contracted providers and processing claims under
Aetna’s rules to send to Aetna so that Aetna can determine coverage. See
McKeehan v. Cigna Life Ins. Co., 344 F.3d 789, 792 (8th Cir. 2003)
(distinguishing between a third party hired to perform “ministerial claims
processing functions” and “a plan administrator wielding discretionary
authority”); 29 C.F.R. § 2509.75-8 D-2 (“[A] person who performs purely
ministerial functions . . . within a framework of policies, interpretations, rules,
practices and procedures made by other persons is not a fiduciary because
such person does not have discretionary authority or discretionary control
respecting management of the plan, does not exercise any authority or
control respecting management or disposition of the assets of the plan, and
does not render investment advice with respect to any money or other
property of the plan and has no authority or responsibility to do so.”).
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Optum has no authority to decide whether a particular claim is covered
under a particular Aetna plan and cannot pay itself, much less pay itself out
of a particular plan’s assets. Rather, Optum “review[s], bill[s], and pay[s]”
claims to providers who render services in accordance with Aetna’s rules.
[Optum Ex. 11: PT/OT Contract Oversight Claims Mgmt. Agmt., at 3, § 1.6;
id. at 4, § 2.1]. Optum does not make benefits determinations; Aetna does
and decides all appeals from its members. [Id. at 7, § 2.5]. Optum simply
has no discretion with respect to the granting or denying of benefit claims.
See Baxter v. C.A. Muer Corp., 941 F.2d 451, 455-56 (6th Cir. 1991) (holding
that claims processor who only had authority to pay out benefits according
to the terms of the established plan was not an ERISA fiduciary). No
discretion equates to no fiduciary status.7
The Plaintiff also argues that Optum is a fiduciary because it “control[s]
its own compensation for its services.” [Doc. 90 at 21]. Contrary to the
Plaintiff’s argument, however, Optum does not unilaterally set its own
7 At the hearing on the motion to compel, the Plaintiff’s counsel argued that Optum is a
fiduciary even if it has no discretion because it “exercises . . . authority or control
respecting management or disposition of [plan] assets,” citing 29 U.S.C. § 1002(21)(A).
The Plaintiff cites to no court that has interpreted this provision in such a manner. Indeed,
the Plaintiff’s interpretation of this language turns basic fiduciary concepts on their head.
A fiduciary is obligated to act in the best interests of its beneficiaries. If the fiduciary has
no discretion in the discharge of its duties, the fiduciary has no ability to alter its conduct
in order to further the beneficiaries’ interests.
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compensation. Optum’s compensation was a product of arm’s length
negotiations. [See Doc. 91-1: Hagens Decl. at ¶ 5; Optum Ex. 4: Optum
30(b)(6) Dep. at 59]. “[W]hen a service provider and a plan trustee negotiate
at arm’s length over the terms of their agreement, discretionary control over
plan management lies not with the service provider but with the trustee, who
decides whether to agree to the service provider’s terms.” Santomenno v.
John Hancock Life Ins. Co., 768 F.3d 284, 293 (3d Cir. 2014). If Aetna
decides to cover a particular claim, the contracts specify how much Aetna
will pay Optum. That amount does not change unless the parties renegotiate
their contract. [Optum Ex. 7: PT/OT Prov. Agmt. at 44-233]. Further, Optum
negotiated at arm’s length with its network providers regarding what those
providers would accept as payment for services. In those circumstances,
the service provider “owe[s] no fiduciary duty” to the plan. See In re Express
Scripts/Anthem ERISA Litig., No. 16 Civ. 3399, 2018 WL 339946, at *15
(S.D.N.Y. Jan. 5, 2018) (“[T]hat ESI earns its compensation by charging an
insurance provider more than it paid to the retail pharmacy . . . does not
transform it into a fiduciary.”), appeal filed, Feb. 5, 2018; In re UnitedHealth
Grp. PBM Litig., No. 16-cv-3352, 2017 WL 6512222, at *10 (D. Minn. Dec.
19, 2017) (“negotiating and setting discounted rates . . . [are] not [] fiduciary
function[s]”).
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The Plaintiff also argues that Optum is an ERISA fiduciary because it
controls plan assets by deciding how much to charge Aetna for
administrative services. As discussed above, however, Optum (as a third-
party service provider) and Aetna (as claims administrator) “negotiate[d] at
arm’s length over the terms of their agreement,” so “discretionary control
over plan management lies not with [Optum] but with [Aetna], who decides
whether to agree to the service provider’s terms.” Santomenno, 768 F.3d at
293. Because Aetna “exercise[s] final authority in deciding whether to accept
or reject” the terms of the contracts with Optum, Optum “owe[s] no fiduciary
duty” to any specific Aetna plan. Id. In any event, a third-party vendor does
not control plan assets simply by charging for its services. See, e.g., Malone
v. Teachers Ins. & Annuity Ass’n of Am., No. 15-cv-8308, 2017 WL 913699,
at *4 (S.D.N.Y. Mar. 7, 2017) (“[T]hat the fees used to pay for the
recordkeeping services are collected from Plan assets does not give the
collector of those fees authority over Plan assets.”) (emphasis in original).
In sum, the Plaintiff has failed to demonstrate that Optum was
functioning as a fiduciary with respect to any aspect of the Mars Plan.
Accordingly, the Court concludes that the fiduciary exception does not apply,
and Optum is not required to produce any documents that it has claimed are
subject to the attorney-client privilege.
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2. Aetna Disputed Documents
The Plaintiff argues that Aetna should produce a number of documents
identified in its privilege log. The Plaintiff argues that these documents are
not privileged pursuant to the fiduciary exception to the attorney-client
privilege. While Aetna does not dispute that it served in a limited fiduciary
role in the administration of the Plaintiff’s Plan, it argues that the documents
at issue relate to legal advice obtained with respect to its non-fiduciary
functions.
In arguing in favor of disclosure, the Plaintiff asserts that essentially
everything that Aetna does as a plan administrator is “related to plan
administration” and thus is subject to disclosure under the fiduciary
exception, unless it is a communication specifically related to the defense of
this legal action. The authorities the Plaintiff cites in support of this
proposition, however, do not support such an expansive rule. As stated by
the Court in Solis, the application of the fiduciary exception with respect to
any particular communication is a question of “context and content.” Solis,
644 F.3d at 231 (citing Mett, 178 F.3d at 1064; Tatum, 247 F.R.D. at 495).
The Solis Court also acknowledged, however, that the fiduciary exception is
“not without limits” and therefore will not apply to communications between
an ERISA fiduciary and its counsel “regarding non-fiduciary matters.” Solis,
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644 F.3d at 228. Accordingly, to determine whether these otherwise
privileged documents are subject to the fiduciary exception, the Court must
first determine whether these documents relate to issues of “plan
administration” as opposed to other non-fiduciary functions of Aetna as the
claims administrator.
The Plaintiff first seeks Aetna’s privileged communications regarding
“Aetna’s Decision to Hire Optum/Contract Negotiations with Optum.” [Doc.
90 at 13]. Aetna’s privilege log identifies these documents as including
“legal advice of counsel regarding response to Optum Statement of Work”;
legal advice “regarding contract negotiations with Optum”; and legal advice
“regarding Optum provider contracts.” [See, e.g., Pl. Ex. 1: Aetna Initial
Privilege Log at PRIV-015, PRIV-052, PRIV-081]. All of these
communications, however, concern Aetna’s negotiations with Optum to
establish and maintain a provider network that benefited a broad range of
health-care consumers and were not directly associated with the Plaintiff’s
Plan or any other particular benefit plan. In this regard, Aetna sought counsel
regarding a prospective business arrangement and association. Courts
have held that these type of network contracting negotiations are not
fiduciary functions. See, e.g., DeLuca v. Blue Cross Blue Shield of Mich.,
628 F.3d 743, 747 (6th Cir. 2010). Aetna, not the Plaintiff, was the “real
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client” when Aetna’s network personnel sought legal advice while negotiating
and implementing this system-wide contractual relationship.
The Plaintiff argues that Aetna nevertheless acted as a fiduciary
because “appointing an ERISA fiduciary is itself a fiduciary act.” [Doc. 90 at
25-26]. However, there is nothing in the record to show that Aetna ever
appointed Optum as a fiduciary. As noted above, the only claims processing
function performed by Optum exclusively involved the “review, billing, and
payment of health care claims to” treating providers who contracted with
Optum. [Aetna Ex. 14: Contract Oversight Claims Mgmt. Agmt. at 2 § 1.6].
At all times, Aetna retained decision-making authority over coverage
determinations and decided all appeals from its members. [Id. at 7 § 2.5;
Aetna Ex. 15: Delegated Patient Mgmt. Agmt. at 6 § 2.4; id. at 22 § 3; see
also Aetna Ex. 11: Optum 30(b)(6) Dep. at 53 (Aetna “make[s] all final
decisions”); Aetna Ex. 7: Aetna 30(b)(6) Dep. at 109 (stating that Optum does
not make claims determinations; “Aetna adjudicates the claims”)]. Optum’s
discrete claims processing and clinical oversight functions, which relate to
the administration of its own network of treating clinicians, do not transform
Optum into a fiduciary to any of the plan participants. See, e.g., HealthSouth
Rehab. Hosp. v. Am. Nat’l Red Cross, 101 F.3d 1005, 1009 (4th Cir. 1996)
(“Given [the administrator’s] limited role in processing claims under the Plan
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and reading a computer screen to determine who is and who is not covered,
it is clear that [the administrator] is not a fiduciary under the Plan”); Baxter,
941 F.2d at 455-56 (holding that claims processor who only had authority to
pay out benefits according to the terms of the established plan was not an
ERISA fiduciary).
The Plaintiff also moves to compel production of Aetna’s privileged
communications about “Draft Communications about Optum Relationship.”
[Doc. 90 at 13]. The documents at issue involve drafts of Aetna’s “field
communications” to its internal account teams: “communications to and for
use by Aetna accounts teams regarding [the] Optum relationship,” including
any “attached draft field communication[s] and draft plan sponsor letter[s].”
[See, e.g., Pl. Ex. 1: Aetna Initial Privilege Log at PRIV-025]. Aetna issued
these field communications to its account teams (the teams that interact with
plan sponsors for particular “accounts”) to announce Aetna’s roll-out of the
Optum relationship in particular markets (or, in later years, changes to the
relationship). [Aetna Ex. 7: Aetna 30(b)(6) Dep. at 130, 131]. The purpose
was to educate Aetna’s account teams so that they could understand the
Optum relationship and communicate with plan sponsors about it as needed.
[Id. at 130]. Aetna’s network personnel sought legal advice on these field
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communications because they related to Aetna’s contracts with Optum, as
well as other contractual and legal requirements.8
Aetna’s draft field communications do not fall within any fiduciary
function under the Plaintiff’s plan or any other plan. These communications
do not relate to any particular benefits claim, and there is no evidence that
the Plaintiff or any other ERISA plan beneficiary ever saw the field
communications. The cases that the Plaintiff cites involving direct
communications to ERISA plan beneficiaries are inapposite. See, e.g.,
Durand v. Hanover Ins. Grp., Inc., 244 F. Supp. 3d 594, 624 (W.D. Ky. 2016)
(communication “to Plan beneficiaries”); Tatum, 247 F.R.D. at 496-97
(same). Moreover, Aetna’s field communications were not part of any
fiduciary function owed to the Plaintiff’s plan or any particular ERISA plan;
they were system-wide communications to Aetna’s account teams, including
teams responsible for non-ERISA plans completely irrelevant to this case.
The Plaintiff has failed to demonstrate that these documents come within the
8 It should be noted that Aetna has produced the final field communications. [See Aetna
Ex. 16]. The Plaintiff, however, seeks to discover the attorney advice and input regarding
the drafting of these communications. In Solis, the Court specifically identified
communications between an ERISA fiduciary and the plan’s attorneys regarding actions
in amending a plan as “non-fiduciary matters” and thus not discoverable. See Solis, 644
F.3d at 228. Likewise, legal advice received by Aetna regarding how to communicate to
the Plans regarding the modification or amendments to the manner of processing claims
would be a “non-fiduciary matter.”
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purview of the fiduciary exception. Accordingly, the Court concludes that
these draft communications are not subject to disclosure under the fiduciary
exception.
The Plaintiff seeks privileged communications about Aetna’s medical
loss ratio (or “MLR”) reporting to government agencies. [See, e.g., Pl. Ex. 1:
Aetna Initial Privilege Log at PRIV-164]. Under the Affordable Care Act,
“health insurance issuer[s] offering group or individual health coverage” must
submit data reflecting the proportion of premium revenues spent on clinical
services and quality improvement as opposed to all other non-claims costs.
42 U.S.C. § 300gg-18(a). Insurers must annually submit aggregated MLR
reports (not broken down by plan) to the Secretary of Health and Human
Services. See 45 C.F.R. § 158.120.
The Plaintiff has failed to show how the reporting of this data falls within
Aetna’s fiduciary functions to her or her Plan. Indeed, because the Plaintiff’s
plan is self-funded, these MLR requirements are not even applicable to the
Mars Plan. [Aetna Ex. 17: CMS, CCIIO Technical Guidance (CCIIO 2012-
2): Questions and Answers Regarding the Medical Loss Ratio Regulation,
Answer #23]. Accordingly, the Court concludes that Aetna should not be
required to produce these documents under the fiduciary exception to the
attorney-client privilege.
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C. In Camera Review
The Plaintiff contends that the Defendants have either redacted or
withheld documents as to which it appears highly likely that the fiduciary
exception will apply, although the Plaintiff contends that the Defendants’
descriptions of these documents are too vague for the Plaintiff to tell whether
they do in fact contain legal advice regarding the performance of any
fiduciary obligation. For these categories, the Plaintiff asks that the Court
compel Defendants to produce a sample of these documents for an in
camera review. For Aetna, these entries include documents containing legal
advice relating to:
(1) “complaint to North Carolina Department of
Justice”;
(2) “Optum relationship” and “Optum contractual
relationship”;
(3) “Optum claims handling”;
(4) “relationships with Optum-contracted
providers” and “provider relationships”;
(5) “North Carolina Department of Insurance
inquiry”;
(6) “lawsuit, with attached filed complaint”; and
(7) “vendor relationships.”
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[See Doc. 90 at 14]. For Optum, these documents include legal advice
relating to:
(1) “draft provider agreements” and “provider
agreement”;
(2) “provider complaints”;
(3) “Aetna contract” and “contract language” and
“Aetna contractual arrangement” and “legal
review of contract” and “Aetna MA Base
Agreement” and “Aetna addendum” and
“contract negotiation” and “various Aetna
contract issues”;
(4) “Aetna’s and Optum’s relationship”;
(5) “proposed geographic expansion” and
“classification (risk vs. ASO) of contractual
geographic expansion” and “[s]preadsheet
about transferring risk”;
(6) “legal advice about litigation” and “legal work
on unrelated litigation” and “Aetna contracts
and litigation status”;
(7) “Aetna SE … Gross vs Net Accounting”;
(8) “Aetna Maryland issues”;
(9) “historic legal advice … about administrative
fees”;
(10) “right to appeal”;
(11) “chiropractic services agreement” and
“physical health services agreements”;
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(12) “southeast physical health deals”;
(13) “contractual risks in Aetna … markets”; and
(14) “spreadsheet displaying Aetna Action Log.”
[Id. at 14-15].
The Court may engage in an in camera review of documents that are
claimed to be privileged in order to determine whether an exception to such
privilege applies. United States v. Zolin, 491 U.S. 554, 572 (1989)
(permitting in camera review to determine whether crime-fraud exception
applies). Before the Court may engage in such a review, the movant must
present “a factual basis adequate to support a good faith belief by a
reasonable person . . . that in camera review of the materials may reveal
evidence to establish the claim that the . . . exception applies.” Id. (internal
citation omitted). Once that threshold showing is made, the determination of
whether to engage in an in camera review is a matter of the Court’s
discretion. Id.; In re Grand Jury Proceedings, 33 F.3d at 350.
Here, the Plaintiff has failed to demonstrate a factual basis sufficient to
support a good faith belief that in camera inspection may reveal evidence
that the information in the materials is not privileged under the fiduciary
exception to the attorney-client privilege. First, the Defendants’ privilege logs
show that these privileged communications relate to non-fiduciary functions;
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31
for the reasons discussed above, these communications remain privileged.
Moreover, the Defendants’ privilege logs reveal that several of these
communications relate to legal advice given once Aetna’s relationship with
the Plan’s participants became adversarial. For example, Aetna has entries
on its privilege log related to “legal advice relating to . . . ‘complaint to North
Carolina Department of Justice’; . . . [and] ‘North Carolina Department of
Insurance inquiry.’” [Pl. Ex. 1: Aetna Initial Privilege Log]. These documents,
which date from December 2014, involve Aetna’s responses to state
regulators regarding Plaintiff’s complaints about alleged “up-charging fraud.”
[See, e.g., Aetna’s Ex. 18, July 23, 2014 Letter]. These communications do
not appear to involve Aetna’s fiduciary function but rather concern advice
sought to protect Aetna from liability. See Mett, 178 F.3d at 1066 (“while the
fiduciary exception does apply to advice on matters of plan administration,
the attorney-client privilege reasserts itself as to any advice that a fiduciary
obtains in an effort to protect herself from civil or criminal liability”). In short,
the Plaintiff has failed to establish a factual basis sufficient to support a good
faith belief that in camera inspection may reveal evidence that the
information in these documents relate to plan administration. Accordingly,
the Court in the exercise of its discretion declines to conduct an in camera
review of these additional documents.
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D. Hagens’ Notes
Finally, the Plaintiff moves to compel the production of handwritten
notes taken by Shiron Hagens, an Aetna employee. Aetna withheld
production of these notes on the grounds that they were prepared at the
direction of counsel in connection with Aetna’s ongoing defense of this
litigation and thus constitute protected work product. The Plaintiff counters
that the fiduciary exception applies equally to the work product privilege, and
these notes fall within that exception. Further, even if the notes are protected
work product, the Plaintiff argues that she has a substantial need for their
disclosure because, due to the timing of Aetna’s disclosure of the existence
of these notes, the Plaintiff was unable to question Ms. Hagens about the
underlying communications.
In order to invoke the work product privilege, a party must show that
the work product in question was prepared by, or at the direction of, an
attorney in anticipation of litigation. E.I. Dupont de Nemours and Co. v. Kolon
Indus., Inc., 269 F.R.D. 600, 604 (E.D. Va. 2010). Fact work product, such
as the notes at issue here, is discoverable only “upon a showing of both a
substantial need and an inability to secure the substantial equivalent of the
materials by alternate means without undue hardship.” In re Grand Jury
Proceedings, 33 F.3d at 348.
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The notes that the Plaintiff seeks were prepared by Shiron Hagens, a
Senior Network Manager at Aetna who worked on the Optum relationship.
Ms. Hagens explains in her Declaration that she prepared these notes in
2017 at the direction of two Aetna in-house attorneys in connection with
Aetna’s defense of this case. [Aetna Ex. 19: Hagens Decl.]. On March 30,
2017, the two Aetna attorneys (Stephen Fisher and William Kramer) advised
and directed Jennifer Cross (Ms. Hagens’ supervisor) to have a discussion
with Optum about questions raised by the Plaintiff’s plan sponsor in
connection with this litigation. [Id. at ¶ 3]. Ms. Cross conveyed that direction
to Ms. Hagens, who had a discussion with Optum and took notes so that she
could report back to Ms. Cross and Aetna’s legal counsel. [Id.]. Ms. Hagens
and Ms. Cross reported back to the same two Aetna attorneys on April 11,
2017, at which point Ms. Cross and Ms. Hagens were advised and directed
by counsel to have another discussion with Optum, which occurred on April
12, 2017. [Id. at ¶ 7, 8]. Ms. Hagens again took notes so that she could
report back to counsel. [Id. at ¶ 8]. Ms. Hagens understood that she was
acting at the direction of Aetna’s in-house attorneys in connection with
Aetna’s defense of this litigation. [Id. at ¶ 4]. She has kept the notes
confidential. [Id. at ¶ 9].
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Hagens’ notes fall squarely within the work product doctrine. They
were prepared at the direction of counsel in the midst of ongoing litigation
with the Plaintiff.9 And even assuming that the fiduciary exception applies to
work product, it is clear that Aetna’s relationship with the Plan was
adversarial at the time these notes were taken. As such, the fiduciary
exception is simply not applicable. Further, the Plaintiff has not
demonstrated any substantial need for these notes, as the Plaintiff’s counsel
has already been able to question two Optum employees regarding any non-
privileged facts that could be learned from their discussions with Hagens,
and has discovered the notes of those Optum employees. For all of these
reasons, the Plaintiff’s motion to compel Hagens’ Notes is denied.
O R D E R
IT IS, THEREFORE, ORDERED that the Plaintiff’s Motion to Compel
Aetna and Optum to Produce Documents Improperly Redacted or Withheld
as Privileged [Doc. 89] is DENIED.
9 The notes of the Optum participants in the meeting were not prepared at counsel’s
direction and thus have been produced.
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IT IS SO ORDERED. Signed: July 27, 2018
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