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Peters v. Aetna Inc.

United States District Court, W.D. North Carolina, Asheville Division

July 27, 2018

SANDRA M. PETERS, on behalf of herself and all others similarly situated, Plaintiff,



         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”), 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 former[2] 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 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]

         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 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 CPT[4] 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 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 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.


         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 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).


         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 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 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 ...

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