Kazda v. Aetna Life Insurance Company

Background

Michala Kazda sought certification of a class of people covered by Employee Retirement Income Security Act (ERISA) health plans administered by Aetna Life Insurance Company whose claims for liposuction treatment of lipedema were denied as cosmetic. Kazda alleged claims for denial of plan benefits and breach of fiduciary duty under ERISA and sought declaratory and injunctive relief.

Kazda has advanced lipedema, a condition involving abnormal fat buildup that can cause pain and mobility problems. She requested coverage for tumescent liposuction and related procedures. Aetna denied her request and appeals, stating that it considered suction lipectomy cosmetic and that medical necessity was not met. After Kazda filed suit, Aetna revised Clinical Policy Bulletin 0211 in August 2020 to state that water-assisted liposuction could be medically necessary for people with lipedema who had pain and disability, had tried at least three months of conservative treatment, and met specified diagnostic criteria. Kazda alleged that Aetna had not notified affected class members or reprocessed their earlier denials.

Class-certification standards

Federal Rule of Civil Procedure 23 requires a proposed class to satisfy four initial requirements: sufficient size, common legal or factual questions, typical claims by the proposed representative, and adequate representation. The proposed class must also fit at least one additional Rule 23 category. Kazda sought certification under Rules 23(b)(1)(A) and 23(b)(2). The court explained that class certification is not the stage for a broad merits inquiry; merits issues may be considered only as relevant to the Rule 23 requirements.

Standing, typicality, and adequacy

Aetna argued that Kazda lacked standing to seek an injunction because its policy had changed and she had not shown that she would again suffer the same injury or qualify for coverage under the new policy. The court agreed that Kazda had not sufficiently shown a likelihood of future injury for prospective relief requiring Aetna to stop using the old policy.

The court nevertheless held that Kazda had standing to seek retrospective relief requiring Aetna to reprocess previously denied claims and notify affected class members. The court treated that relief as addressing the continuing harm from the earlier denials. It also held that Kazda did not need to prove at the certification stage that her claim would ultimately be covered under Aetna’s revised guidelines.

The court found Kazda’s claims typical because the proposed class members allegedly suffered similar denials arising from the same alleged Aetna policy or practice. It found no indication of conflicts between Kazda and other class members and no reason to conclude that Kazda or her counsel would not pursue the case vigorously.

Commonality

Kazda identified common questions including whether Aetna’s pre-August 2020 coverage position improperly treated lipedema surgery as cosmetic and whether Aetna should be required to notify affected members and reprocess earlier denials under appropriate medical-necessity criteria.

Aetna argued that it never had a uniform policy of categorically denying lipedema-surgery claims and that it evaluated claims individually. The court found that, at the class-certification stage, Kazda had shown enough evidence of a common policy or practice. Aetna’s bulletins described suction lipectomy as cosmetic, and Aetna relied on those bulletins when denying Kazda’s claim and other claims. Whether Aetna had a policy or practice of denying lipedema-surgery claims as cosmetic was a common question capable of driving the litigation’s resolution. The court did not decide the ultimate merits of that question.

Numerosity

The parties disputed the proposed class’s size. Kazda identified at least 25 people with ERISA plans whose lipedema-surgery requests were denied as cosmetic. Aetna argued that the class had 11 or 15 members, depending on which claims and former members were excluded. After reviewing claims Aetna had treated as involving questionable lipedema diagnoses, the court counted 29 potentially relevant claims, excluded six involving non-ERISA plans, and reached an estimated class size of 23. The court concluded that the class could reasonably be viewed as containing 23 to 25 members.

Although that class was small, the court held that joinder—the requirement that each person sue separately—would be impracticable under the circumstances. The court relied on the likely geographic diversity of members, the request for declaratory and injunctive relief, and the judicial efficiency gained by resolving the issues in one case.

Rule 23(b) requirements

The court held that certification was appropriate under Rule 23(b)(1)(A) because separate lawsuits could produce conflicting decisions about whether Aetna’s denials were improper and what medical criteria should govern reprocessing. Those different decisions could establish incompatible standards for Aetna’s conduct.

The court also held that certification was appropriate under Rule 23(b)(2) because Kazda alleged that Aetna had acted under grounds generally applicable to the class and sought the same type of relief for all members: notice of the policy change and reprocessing of previously denied claims.

Ruling on class certification

Judge Hiam H. Orrick granted Kazda’s motion for class certification. The certified class is: “All persons covered under ERISA health plans, self-funded or fully insured, that are administered by Aetna and whose claims for liposuction treatment of their lipedema were denied as cosmetic.” The court appointed Kazda as class representative and her counsel as class counsel. The order also set a case-management conference for May 31, 2022, and required a joint case-management statement by May 24, 2022.

Motions to seal and other filings

The court granted requests to seal Kazda’s medical records and specified records containing third-party medical information. It granted in part a request to seal portions of documents referring to third-party medical records, while denying the request as to other portions. It denied requests to seal specified letters denying third-party claims and the portions referring to those letters. It denied the request to seal Exhibit E to Aetna’s supplemental declaration because it was not narrowly tailored, while allowing Aetna to file a narrower request within 14 days.

The court granted requests to seal specified internal Aetna records containing non-public business information and granted requests to seal portions of filings referring to those records. The court also overruled Kazda’s objection to a declaration. The order stated that several additional filings were improper under the local rules, although the court said those materials did not affect its analysis.