Steve Herman Examines Certification of Narrow Damages Class Under ERISA & RICO Related to Inflated Balance-Billing Practices

Fishman Haygood special counsel Steve Herman recently published an article on the U.S. District Court for the Northern District of California’s certification of a narrow damages class under ERISA and RICO. Continue reading below or click here to read on JD Supra.

The U.S. District Court for the Northern District of California recently certified a narrow damages class under ERISA and RICO in L.D. v. United Behavioral Health,[1] a case involving allegations of inflated balance-billing practices. Initially, the Court declined to certify the class on adequacy and commonality grounds. On a renewed motion, however, the Court found there was evidence that enough individuals had actually paid balance bills to satisfy numerosity and that the key questions in the case predominated over individual differences, making class certification appropriate.

Case Background

Plaintiffs allege that United Behavioral Health, together with its third-party repricing partner Viant, systematically undervalued out-of-network intensive outpatient program (IOP) claims. Plaintiffs were members of ERISA-governed health plans that promised reimbursement for out-of-network services at “usual, customary, and reasonable” (UCR) rates. They contend that, instead of using a genuine UCR methodology, United relied on a repricing process that consistently produced artificially low reimbursement amounts. As a result, patients were left responsible for large balance bills issued by their medical providers.

According to the Plaintiffs, this underpayment scheme was not disclosed to members or providers. They allege that United and Viant failed to explain how rates were calculated, misrepresented the nature of the reimbursement process during calls, and routed claims through a repricing system that had no relation to market rates. Plaintiffs contend that these practices constituted a denial of promised plan benefits under ERISA and a coordinated enterprise to suppress payments in violation of RICO.

As a matter of procedure, Plaintiffs further claim that United’s reimbursement process denied them meaningful appeal rights. Because the repricing decisions were not identified as adverse benefit determinations, members were not given the explanations or review procedures that ERISA requires – which issues formed an important basis for the Court’s consideration on class certification.

Class Certification Process

The Court initially refused to certify the proposed class because the named Plaintiffs had not demonstrated that they were adequate representatives and that the issues in the case were not sufficiently common. The Court also found that Plaintiffs were not eligible for prospective injunctive relief, which prevented certification under Rule 23(b)(1) and (b)(2). For a damages class, the Court determined that the record did not show whether the class met the requirements of numerosity – largely due to an absence of a showing with respect to the members who had actually paid an inflated balance, which the Court required for Article III standing purposes.

Plaintiffs filed a renewed motion, arguing that receiving an inflated balance bill should constitute an injury-in-fact, even if unpaid. The Court rejected that argument but accepted the alternative theory that individuals who had paid any portion of a balance bill had suffered a concrete injury. In order to satisfy their evidentiary burden, the plaintiffs were able to submit a sampling of discovery from several high-volume providers which allowed the Court to assess the size of the injured group more accurately.

Numerosity and Predominance

Plaintiffs’ supplemental evidence identified at least thirty-seven individuals who had paid balance bills, drawn from just four providers out of more than 1,500 involved in the case. Combined with the five named Plaintiffs, the evidence strongly suggested that the total number of affected individuals would exceed the typical forty-member threshold once all providers were considered. The Court emphasized that reviewing each bill individually would be an improper merits inquiry and that plaintiffs had demonstrated a reasonable method for identifying additional class members.

With respect to predominance, Defendants claimed that differences in standards of review across different plans would overwhelm the common questions. The Court rejected this argument, noting that only two standards exist, and sorting members accordingly is manageable. Discovery showed, further, that there were fewer relevant plans than the defendants had suggested, and determining the correct standard for each plan was not overly complicated. Ultimately, the Court found that these differences did not outweigh the common legal and factual issues regarding the Defendants’ practices, thus satisfying predominance.

Conclusion

The Court’s decision to certify a narrow damages class reflects a careful balance between the interests of the Plaintiffs, on the one hand, and judicial standing and manageability concerns, on the other. By focusing on actual payments of balance bills, the Court found both numerosity and predominance, allowing a limited class to move forward, despite the rejection of broader claims for plan-wide injunctive relief.

Steve Herman represents both plaintiffs and defendants in commercial, class action, and professional liability cases. Steve teaches complex litigation at Tulane University Law School and class actions at Loyola University New Orleans College of Law, and he is often asked to provide expert testimony in such matters.

[1] L.D. v. United Behavioral Health, No.20-2254, Rec. Doc. 516 (N.D.Cal. Oct. 3, 2025).