A class settlement proposal between plaintiff Mary Caldwell, along with the class that she represents, and UnitedHealthcare Insurance has been denied by United States District Judge William Alsup. Judge Alsup noted that “The Court sees such a large fee for the attorneys, little benefit to the class members, and substantial downsides to the class.”
UnitedHealthcare is in the business of administering health insurance, with most of their plans being “employer-sponsored and governed by the Employee Retirement Income Security Act of 1974 (ERISA).”
The original complaint by Caldwell was brought about when the insurance company denied claims she had filed for coverage of the surgical treatment of lipedema. UnitedHealthcare allegedly denied the claims on the basis that they were unproven, despite lipedema being a “rare condition that is chronic, progressive, painful, and immobilizing.” Further, the surgical treatment of lipedema is the only available therapy for the condition.
UnitedHealthcare had denied a multitude of lipedema claims, leading Caldwell to seek class certification in her initial complaint on behalf of herself and all others similarly situated. The suit was filed in the Northern District of California.
Judge William Alsup denied the proposed class settlement on Tuesday. The document detailing the denial explained that the judge saw the deal as unfair to class members because it was impossible to be sure whether the class members would even qualify for claim reconsideration under the terms of the settlement. Further, the settlement raises the issue that it would require class members to be the ones submitting new claims rather than UnitedHealthcare righting the improper denials they made.
If Judge Alsup had approved the settlement as is, he would have been risking “enabling a defendant [in this case, UnitedHealthcare] to pay class counsel excessive fees and costs in exchange for counsel accepting an unfair settlement on behalf of the class.” In order to avoid a collusive settlement, he stresses that the judge must be the determinant of attorney’s fees. Any settlement in which the attorney obtains “funds out of proportion to the benefit conferred on the class” must be accompanied by an acceptable justification.