Blue Shield of California and Magellan Ghost Network Lawsuit Continues
By Ashleigh Hollowell | September 29, 2026
A class action lawsuit alleging that Blue Shield of California and Magellan Health maintained a ghost network directory of inaccurate information for mental health clinicians in its network will continue after a U.S. District Judge partially denied Blue Shield’s motion to dismiss.
The class action lawsuit first opened in November 2025 as an Employee Retirement Income Security Act (ERISA) lawsuit, which regulates employer-sponsored benefit plans, health plans and related benefits. In the latest development, Blue Shield of California sought dismissal of all 11 claims against it, arguing that the plaintiff parties had not tied their ghost network allegations to patient impact, concrete injury or enforceable plan promises.
On Sept. 23, District Judge William H. Orrick III for the Northern District of California validated a central argument of the plaintiffs’ case. He pointed out that while some claims were duplicate and "superfluous," and that at this stage all inferences should be drawn in favor of the plaintiffs:
“The contract between Blue Shield and plaintiffs’ employers is to provide health benefits to the employees. The plaintiffs are third-party beneficiaries of the employer contracts and can enforce violations of them.”
“They do not plead that plaintiffs requested out-of-network authorization, submitted a claim or grievance and received a denial.”
Magellan’s role in the case also came under scrutiny, but Judge Orrick distinguished between delegated operations and Magellan's direct legal liability.
A spokesperson for the payer told Behavioral Health Business that Blue Shield of California does not comment on pending litigation.