
BlueCross BlueShield of Tennessee v. Nicolopoulos, No. 24-5307, __ F. 4th __, 2025 WL 1338242 (6th Cir. May 8, 2025) (Before Circuit Judges Kethledge, Larsen, and Mathis)
Fertility rates have been declining in the United States for decades and have reached historic lows in the past several years. It is no wonder that state insurance regimes have begun to address fertility treatment, although, as with most state insurance matters, far from uniformly. This case presents the intersection of two such state regimes with federal preemption under ERISA.
BlueCross BlueShield of Tennessee is both the insurer and claims fiduciary for an ERISA-governed group health plan sponsored by PhyNet Dermatology, a Tennessee-based company with employers in many states. In 2020 and 2021, B.C., a PhyNet employee and plan participant, submitted claims for fertility treatment, which BlueCross denied because the plan expressly excluded such treatment.
This exclusion was allowed under Tennessee law, but not under New Hampshire law, which mandates insurance coverage for fertility treatment. Because of this mandate, the Insurance Commissioner for New Hampshire reached out to BlueCross to inform it that, as the issuer of a group policy that covers employees in New Hampshire, it must follow New Hampshire mandates with respect to such employees. BlueCross nevertheless persisted in its refusal to cover B.C.’s fertility treatments.
In response, the Commissioner issued a show cause and hearing order. This order also requested that BlueCross be ordered to pay a penalty of $52,500 and cease and desist from offering health insurance to people in New Hampshire. BlueCross then filed suit in federal court in Tennessee. BlueCross argued that ERISA’s broad preemption provision, Section 514, barred the New Hampshire proceeding.
Eventually, after the parties agreed to stay the state administrative proceedings, the district court denied BlueCross’ motion for summary judgment and granted summary judgment in favor of the Commissioner, concluding that its state-law proceeding was saved from ERISA preemption under the insurance savings clause in Section 514(b)(2)(A).
On appeal, the Sixth Circuit viewed the “crux” of the matter to be “whether the Commissioner brought the Show-Cause Order against BlueCross in BlueCross’s capacity as an ERISA fiduciary or as an insurer.” The Court agreed with the Commissioner that it was the latter.
As an initial matter, however, the court disagreed with the Commissioner that BlueCross waived the argument. The court noted that, to the contrary, Blue Cross had “consistently framed the Show-Cause Order as one targeting BlueCross for actions it took as a fiduciary.”
Turning to the merits, the court pointed out that the “capacity question matters because ERISA’s saving clause permits states to enforce their insurance laws against insurers.” The Court relied on the provisions of ERISA itself to help it “discern the nature of the New Hampshire proceeding against BlueCross,” noting that, because the Commissioner was not a participant or beneficiary of the Plan, “he cannot challenge BlueCross’s fiduciary-capacity determination of B.C.’s benefits.” But again, pointing to ERISA’s insurance savings clause, the court noted that the Commissioner was permitted to “enforce New Hampshire’s insurance laws against insurers.” And the show cause order itself underscored that the Commissioner was doing so, expressly “directing BlueCross to cease and desist from providing health insurance in New Hampshire,” and assessing a penalty for violation of New Hampshire insurance law.
The court conceded that the administrative proceeding was initiated as a reaction to BlueCross’s denial of B.C.’s claims. But the court was persuaded that the claims denial was not the basis for the state administrative proceeding, but instead merely provided evidence to the Insurance Commissioner that BlueCross was violating New Hampshire insurance law.
The court found confirmation of its conclusion that the proceeding was directed at BlueCross as an insurer in Supreme Court case law, which “establishes that fiduciary duties created by the terms of an ERISA-governed employee benefit plan are not an escape hatch from valid state insurance regulations.”
Nor was the court persuaded by BlueCross’s contention that the real question in the case was which state law was saved from preemption: Tennessee law, which did not require fertility coverage, or New Hampshire law, which mandated such coverage. “That framing,” the court insisted, “relies on adopting BlueCross’s factual position – that the Commissioner seeks to regulate BlueCross as a fiduciary,” which the court had already rejected.
The court next rejected BlueCross’ argument that it should prevail because ERISA Section 502(a)(3) provides a viable remedy by allowing plan fiduciaries to seek declaratory and injunctive relief. The court found this true but irrelevant, concluding that Section 502(a)(3) does not allow relief with respect to “state enforcement actions brought against insurers.”
Nor was the court persuaded by the argument that allowing actions such as this will undermine ERISA’s goal of minimizing the administrative and financial burden of potentially having to comply with the laws of 50 states. The court was satisfied that this potential for disuniformity was a natural consequence of the insurance savings clause itself.
Finally, the court rejected BlueCross’ belated attempt to raise due process concerns, noting that it admittedly had not done so in the district court. The court of appeals thus took “no position on whether [BlueCross] has actually engaged in the practice of insurance in New Hampshire or whether [BlueCross’s] contacts with New Hampshire are enough to subject it to New Hampshire’s jurisdiction,” pointing out that BlueCross could presumably raise these issues as part of the state administrative proceeding.
Below is a summary of this past week’s notable ERISA decisions by subject matter and jurisdiction.
Breach of Fiduciary Duty
Sixth Circuit
England v. DENSO International Am., Inc., No. 24-1360, __ F. 4th __, 2025 WL 1300923 (6th Cir. May 6, 2025) (Before Circuit Judges McKeague, Griffin, and Larsen). In this putative class action current and former employees of the automotive part maker DENSO International America, Inc. who participate in the DENSO Retirement Savings Plan allege that the plan’s fiduciaries breached their duties of prudence and monitoring under ERISA by failing to control recordkeeping and administrative costs. Crucially, the plaintiff-appellants contend that the plan paid its recordkeeper, Empower, approximately $71 per participant for its services, more than double what they assert the costs should have been for the standard and fungible bundled recordkeeping and administrative services they received. Relying on the Sixth Circuit’s pleading standards in Smith v. CommonSpirit Health, 37 F.4th 1160 (6th Cir. 2022), the district court dismissed plaintiffs’ complaint for failing to set forth “context specific” facts about the type and quality of services provided to render their allegations of overpayment for recordkeeping services plausible under ERISA. (Your ERISA Watch covered that decision in our August 9, 2023 edition). Plaintiffs appealed. In this published decision the Sixth Circuit not only affirmed the district court’s dismissal and upheld the pleading standards it announced in Smith, but expanded upon them in some subtle but significant ways. To begin, the Sixth Circuit doubled down on its stance that assessing the plausibility of allegations like those alleged here “requires identifying the alleged problematic financial metric and then comparing it to a ‘meaningful benchmark.’” Measured against that standard, the court of appeals was adamant that plaintiffs failed to allege the fees were excessive relative to the services rendered. The appeals court noted that the complaint not only lacks specifics about the type or quality of the administrative and recordkeeping services received relative to the comparator plans to which paid less, but indeed acknowledges that there are variations in the level and quality in recordkeeping and administrative services provided to mega plans like DENSO’s. The Sixth Circuit was unwilling to accept plaintiffs’ allegations that these differences are immaterial and that mega plans have the obligation to negotiate favorable rates based on their economies of scale. The appeals court summed up its holding by stating, “there is a distinction between generally alleging that bundled recordkeeping and administrative services provided to mega plans all offer essentially the same thing and alleging that the services offered to and utilized by the Plan here did not justify the cost difference in fees; here, plaintiffs alleged the former, and under Smith, they needed to sufficiently allege the latter.” Plaintiffs attempted to distinguish their action from Smith by asserting that the Smith complaint was dismissed because those plaintiffs compared their plan to averages from industry publications while they compared the DENSO plan to other similar mega 401(k) plans. But the Sixth Circuit was not receptive to this attempted distinction. If there was any ambiguity before, the court of appeals made it explicitly clear here that Smith should not be interpreted to mean that anything other than industry publications is enough. Doing so, the court said, “would limit Smith’s rule to its factual application. That we will not do.” Recognizing that its ruling was in tension with other Circuit Courts and recent decisions out of the Supreme Court, the Sixth Circuit tiptoed around the Supreme Court’s and the Seventh Circuit’s holdings in Hughes v. Northwestern Univ., and attempted to distinguish the Hughes case by stressing that that lawsuit involved two recordkeepers, not one. “And even were we to accept Hughes’s premise as consistent with our caselaw, lacking here is a specific allegation that Empower’s competitors could have stood in its shoes for less money.” Rather than focus too heavily on Hughes, or on an unpublished decision out of the Third Circuit, Mator v. Wesco Distrib., Inc., the Sixth Circuit instead stated that its pleading standard for these types of excessive fee allegations is in “good company” with “many of our sister circuits,” including the Second Circuit, the Eighth Circuit, and the Tenth Circuit. For these reasons, the Sixth Circuit remained resolute in its pleading standards and affirmed the district court’s dismissal of the case.
Ninth Circuit
Madrigal v. Kaiser Foundation Health Plan, Inc., No. 2:24-cv-05191-MRA-JC, 2025 WL 1299002 (C.D. Cal. May 2, 2025) (Judge Monica Ramirez Almadani). Plaintiff Stacey M. Madrigal filed this putative class action against the Kaiser Foundation Health Plan, Inc. (“KFHP”), Southern California Permanente Medical Group, the Kaiser Permanente Administrative Committee, and ten Doe defendants alleging they violated their fiduciary duties and ERISA’s anti-inurement provision, and engaged in prohibited transactions under Section 1106, by utilizing forfeited nonvested employer contributions to reduce their own costs towards future contributions rather than to defray the 401(k) plan’s expenses. Defendants moved to dismiss the complaint. The court granted the motion to dismiss, with leave to amend, in this order. As an initial matter, the court granted plaintiffs’ request that it take judicial notice of the plan’s Form 5500s, as they are a matter of public record and their accuracy cannot be questioned. The court then turned to defendants’ arguments for dismissal. At the outset, the court agreed with defendants that KFHP and Southern California Permanente Medical Group were not carrying out any fiduciary functions with respect to the forfeitures – the basis of Ms. Madrigal’s claims. The court held, “the language of the Plan does not imbue KFHP with the power to allocate the Plan’s assets. This power to allocate assets, which is central to the basis of Plaintiff’s claims, appears to be restricted to the Administrative Committee (as is logical, given that Plaintiff admits the Defendants created the Administrative Committee for exactly this purpose). Although the Plan makes clear that KFHP had some control over the administration of the Plan, KFHP’s status as an administrator is not enough to support Plaintiff’s claims.” Having found that the complaint fails to allege these two defendants acted as a fiduciary of the plan with respect to the conduct at issue, the court dismissed the fiduciary breach claims asserted against them. However, there was no dispute that the Administrative Committee was a fiduciary, managing the assets of the plan. Thus, the court considered whether the complaint stated a claim that the Committee breached its duties of prudence and loyalty by spending the forfeitures in a way that benefited the employer. It found that the complaint failed to do so. Not only did the court view Ms. Madrigal’s central thesis as “a significant departure from previously well-settled law,” a reference to the governing U.S. Treasury regulations, but the court also emphasized that the Committee’s actions and defendants’ use of the forfeitures was in keeping with the language of the plan. “Here, as Defendants point out, there are no allegations in the FAC that Plaintiff failed to receive any benefits that she was contractually owed.” Accordingly, the court granted the motion to dismiss the breach of fiduciary duty claims asserted against the Administrative Committee. Moreover, absent an underlying fiduciary breach claim, the court agreed with defendants that the derivative failure to monitor claim must also be dismissed. Next, the court dismissed the anti-inurement claim, determining that it was not viable because the complaint fails to allege that any of the forfeited assets at issue ever left the plan. “Plaintiff’s failure to allege that any assets left the Plan is sufficient to foreclose her claim.” Ms. Madrigal’s prohibited transaction claim did not hold up any better. The court concluded that the “the reallocation of assets within the Plan is not enough to trigger § 1106.” Because the court found that Ms. Madrigal failed to identify a transaction that falls under the scope of the prohibited transaction rules, the court agreed with defendants that she failed to state a claim for relief. For these reasons, the court granted defendants’ motion to dismiss the complaint in its entirety, leaving only the issue of leave to amend. In the end, the court decided that granting leave to amend would not be futile and therefore permitted Ms. Madrigal leave to amend her pleading to correct the deficiencies identified herein.
Class Actions
Ninth Circuit
Coppel v. SeaWorld Parks & Entertainment, Inc., No. 21-cv-1430-RSH-DDL, 2025 WL 1346873 (S.D. Cal. May 8, 2025) (Judge Robert S. Huie). Five former employees of SeaWorld Parks and Entertainment, Inc. brought this action under ERISA on behalf of SeaWorld’s 401(k) retirement savings plan, individually and as representatives of the participants and beneficiaries of the plan, against the plan’s fiduciaries, alleging they breached their duties by failing to control plan costs, by selecting and maintain underperforming investments, and by incurring losses when they switched the plan’s recordkeeper from Mass Mutual to Prudential. On November 1, 2023, plaintiffs moved for class certification. The court granted their motion and certified a class of all participants and beneficiaries of the plan through the class period, as well as three subclasses: (1) the Mass Mutual subclass; (2) the Prudential subclass; and (3) the injunctive relief subclass of current plan participants. After discovery concluded, the parties engaged in mediation with “a mediator experienced in ERISA class actions lawsuits involving 401(k) plans.” On September 6, 2024, the parties notified the court they had reached a settlement agreement wherein the SeaWorld defendants agreed to pay a gross settlement amount of $1,250,000. “The following will be deducted from the gross settlement amount: (1) attorneys’ fees, not to exceed 35% of the gross settlement amount, or $437,500; (2) Class Counsel costs, not to exceed $273,000; (3) a Class Representative Service Award of up to $7,500 to Plaintiffs; (4) Settlement Administrative Expenses, not to exceed $17,500; and (5) recordkeeper costs.” After these deductions, the net settlement amount will be $483,000, from which each class member will be paid a pro rata share calculated based on the sum of each individual’s account balances. Before the court here was plaintiffs’ unopposed motion for preliminary approval of the settlement. The court granted plaintiffs’ motion. To make its preliminary fairness determination the court assessed the adequacy of representation, whether the negotiation took place at arm’s length, the adequacy of relief compared with the maximum potential recovery, the effectiveness of the proposed method of distribution, and the proposed means and content of the class notice. To begin, the court adopted its conclusions from when it certified the classes to conclude that the adequacy of representation requirement factor is satisfied. Next, the court agreed with plaintiffs that the settlement was the result of an informed, arm’s length negotiation. In evaluating the adequacy of the settlement, the court compared the $1.25 million amount to the potential recovery of approximately $10.8 million. It concluded that 11.5% of the maximum recovery falls within the range that other courts have accepted in similar ERISA class action settlements and appropriately discounts the risks and costs of continued litigation. The court also concluded that the plan of allocation provides for equitable treatment of all class members. Finally, the court determined that ILYM Group Inc. is reasonably suited to administer plaintiffs’ proposed class notice plan, the content of the notice is satisfactory, and that the plan of sending class notice is reasonable, sufficient, and adequate. The court did briefly note its skepticism about the proposed 35% of the common fund allocated for the payment of attorneys’ fees, and the $7,500 class representative service awards to each of the five class representatives, but stated that it would not closely scrutinize them at this time as preliminary approval of the settlement does not hinge on the court’s approval of either of these award amounts. Accordingly, the court granted plaintiffs’ motion for preliminary approval of class action settlement, set in motion the notice plan, and set the date of the upcoming fairness hearing.
Disability Benefit Claims
Ninth Circuit
LaLonde v. Metro. Life Ins. Co., No. 2:24-cv-01781-DSF-MBK, 2025 WL 1324139 (C.D. Cal. May 7, 2025) (Judge Dale S. Fischer). Plaintiff Rick LaLonde filed this action against Metropolitan Life Insurance Company (“MetLife”) seeking a judicial order reinstating his terminated long-term disability benefits. Before he was injured in a hit-and-run accident in 2017, Mr. LaLonde was an employee of Providence Health & Services, managing a sterile processing department for medical supplies and equipment. On February 22, 2017, Mr. LaLonde’s life changed drastically after he was badly injured in the accident. His spine was damaged, requiring surgery, and he was left with chronic pain and long-term psychiatric and neurological issues. In a letter dated August 31, 2017, MetLife informed Mr. LaLonde that it was approving his claim for benefits under Providence’s group disability policy. Then, in April of 2019, MetLife learned that Mr. LaLonde had been arrested and charged with attempted murder. He was later convicted and incarcerated. After this, MetLife terminated Mr. LaLonde’s benefits. Its medical reviewers determined that Mr. LaLonde did not have any functional limitations from a physical or psychological perspective and therefore did not qualify for continued benefits. After he was released from jail, Mr. LaLonde appealed MetLife’s decision. He was ultimately unsuccessful with his administrative appeal, which led him to filing the present action. In this order the court made its findings of fact and conclusions of law, conducting a de novo review of the record. Ultimately, the court determined that a preponderance of the evidence showed that Mr. LaLonde’s medical symptoms related to his spinal conditions and chronic pain rendered him disabled under the terms of the policy. The court noted that during his incarceration, the record reflected that Mr. LaLonde continued to suffer from pain and continued mobility deficits, including multiple falls and the use of a walker and wheelchair. Moreover, the court stressed that Mr. LaLonde’s treating providers have consistently reported that he faces functional limitations from his physical conditions which render him disabled. “Against the background of his lengthy treatment history, the Court finds it appropriate to give greater weight to the opinions of LaLonde’s treating physicians, each of whom had a ‘greater opportunity to know and observe’ LaLonde than the MetLife-retained physicians who based their opinions solely on a paper review of LaLonde’s file.” Furthermore, the court expressed its view that MetLife’s consulting doctors failed to meaningfully engage with the totality of Mr. LaLonde’s medical records and selectively focused on certain bits and pieces to suit a certain framework. The court added that it also found it problematic that MetLife failed to discuss why it reached a different conclusion from the Social Security Administration. The court said MetLife’s “decision to completely disregard the SSA’s contrary disability determination is particularly problematic here, where the basis for MetLife’s termination of benefits was its determination that LaLonde did not have any functional limitations from a physical or psychological perspective. Even without the SSDI claim file, it is patently obvious that MetLife’s determination that LaLonde has no functional limitations whatsoever cannot be reconciled with the SSA’s determination that LaLonde satisfies the stringent federal standard for SSDI claims.” For these reasons, the court found that Mr. LaLonde met his policy’s definition of disabled on the basis of his physical conditions, and therefore did not consider the parties’ arguments related to his psychiatric conditions. The court thus found in favor of Mr. LaLonde, and directed him to submit a proposed judgment and meet and confer with MetLife to discuss an award of attorneys’ fees and costs.
Discovery
Sixth Circuit
The W. & S. Life Ins. Co. v. Sagasser, No. 1:23-cv-742, 2025 WL 1311270 (S.D. Ohio May 6, 2025) (Magistrate Judge Stephanie K. Bowman). The Western and Southern Life Insurance Company, Western & Southern Agency Group Long Term Incentive and Retention Plan, and The Western and Southern Life Insurance Company Executive Committee imitated this lawsuit under both ERISA and federal common law to recoup nearly $300,000 in forfeited benefits and taxes paid to or on behalf of defendant Ronald Sagasser, a former employee of Western and Southern who was terminated for violating the company’s policies. After the lawsuit was filed, two intervenor plaintiffs filed an intervenor complaint against both Mr. Sagasser and Western and Southern alleging that while serving as their Western and Southern Financial Representative, Mr. Sagasser misappropriated $185,000 of their funds. The intervenor plaintiffs seek recovery for conversion, embezzlement, misappropriation, theft, fraud, breach of a promissory note, and intentional infliction of emotional distress. All discovery-related motions have been assigned to Magistrate Judge Stephanie K. Bowman. Both the Western and Southern plaintiffs and the intervening plaintiffs have repeatedly sought discovery from Mr. Sagasser to no avail. “Despite repeated promises by defense counsel to provide responses, none have been provided.” Mr. Sagasser’s failure to participate in discovery even resulted in the cancellation of his previously scheduled deposition. Furthermore, his counsel did not appear when the presiding judge held a discovery hearing on February 26, 2025. As a result, the court permitted the parties to file formal motions to compel. The plaintiffs and the intervening plaintiffs promptly did so. Mr. Sagasser failed to respond to these motions. Only when the undersigned Magistrate held a telephonic discovery conference on May 6 did counsel for Mr. Sagasser finally make an appearance. Given this history, the Magistrate not only granted both plaintiffs’ and intervenor plaintiffs’ motions to compel Mr. Sagasser to provide responses to all outstanding written discovery requests, but also agreed with them that sanctions against Mr. Sagasser were appropriate given his “wholly unjustified” failure to provide the requested discovery in a timely manner. Judge Bowman additionally warned Mr. Sagasser and his counsel that it would not hesitate to impose further sanctions should his behavior continue. As a result, Mr. Sagasser was ordered to produce all outstanding discovery, and plaintiffs and intervening plaintiffs will be paid attorneys’ fees and costs for their time preparing for and appearing at the two telephonic conferences and for their time spent preparing and filing the motions to compel.
Exhaustion of Administrative Remedies
Seventh Circuit
Brickler v. Building Trades United Pension Trust, No. 24-CV-491-SCD, 2025 WL 1358554 (E.D. Wis. May 9, 2025) (Judge Stephen C. Dries). Plaintiff Robbin Brickler sued the Building Trades United Pension Trust and its eligibility committee under ERISA alleging they wrongfully suspended his early retirement benefits under the pension plan. The gravamen of Mr. Brickler’s action is that a pension fund trustee advised him, during a telephone call he made to inquire about benefits, that working as a dump truck driver for his then-current employer would not violate union rules and that he would be eligible for early retirement benefits under the plan. Mr. Brickler added that the plan’s website directed all inquiries to this phone number. At first, it seemed the assurances from the phone call were well-founded. The pension fund’s trustees approved Mr. Brickler’s application for early retirement benefits, and paid him for approximately two years. However, defendants ultimately terminated his benefits after they determined that his work as a dump truck driver constituted disqualifying “Plan Related Employment” such that he was subject to the plan’s benefit suspension rules. Mr. Brickler appealed to the eligibility committee, which upheld its previous determination and advised Mr. Brickler that he could appeal its decision to the executive committee, and after that, to bring a civil action. But Mr. Brickler did not file a second-level appeal to the executive committee, and instead went straight to federal court. He filed this action alleging that defendants improperly suspended his pension payments in violation of 29 C.F.R. § 2530.203.3, that they made an arbitrary and capricious decision to suspend his benefits, they breached their fiduciary duties, as a result of their oral assurances they should be estopped from suspending the benefits, and they breached their duty of fair representation. Defendants filed a motion for summary judgment under Federal Rule of Civil Procedure 56. They argued that Mr. Brickler failed to exhaust his administrative remedies, and in any event, his five claims each fail as a matter of law. Because the court agreed with defendants on the issue of administrative exhaustion it granted their motion for judgment. In fact, Mr. Brickler did not contest that he failed to file a second-level appeal, as required by the plan. Nor did he argue that the court should excuse his failure to exhaust for any reason. The court thus found that there was no dispute that Mr. Brickler failed to exhaust his administrative remedies prior to filing suit, and he had not argued that he was excused from doing so. “Accordingly, I find that Brickler’s failure to exhaust his administrative remedies bars this lawsuit in its entirety.” Despite this holding, the court continued and discussed the merits of each of Mr. Brickler’s claims. First, the court held that under the Seventh Circuit’s controlling precedent Mr. Brickler could not sustain his claim for improper suspension of his pension payments pursuant to 29 C.F.R. § 2530.203.3, because the Circuit has read the regulation to exclude claimants who have not attained normal retirement age from its protection. Perhaps the most interesting part of the decision was its discussion of the merits of Mr. Brickler’s claim that defendants made an arbitrary and capricious decision to suspend his early retirement benefits. Under the language of the plan post-retirement employment is disqualifying if three conditions are met: (1) the participants must work in the same industry involving the same business activities as employees covered by the plan; (2) the participant must work in the same trade or craft as is covered under a collective bargaining agreement requiring the employer to contribute to the pension fund; and (3) the work must be performed in Wisconsin. Although the court held that the work Mr. Brickler was performing was unquestionably done in Wisconsin in the same industry as employees who could be qualified by the plan, it held that defendants failed to meet their evidentiary burden to prove the latter portions of the first and second elements, namely that “employees covered by the Plan were employed when benefits commenced’ and that the trade or craft was ‘covered under a collective bargaining agreement requiring the employer to contribute to the Pension Fund.’” The court said the fact that the plan includes such industries does not mean that it had any active collective bargaining agreement within that trade or craft, and that it would not make this “leap in logic.” Therefore, had Mr. Brickler exhausted his administrative remedies, the court was clear that it would deny the defendants’ motion for summary judgment on this claim. However, the same was not true for the remainder of Mr. Brickler’s causes of action. The court agreed with defendants that (1) the fiduciary breach claim was duplicative of the claim for recovery of benefits; (2) the estoppel claim was not viable because the oral misrepresentation could not be grounds for such a claim given the fact the plan language was unambiguous; and (3) federal labor law does not impose a duty of fair representation on defendants because they are not employee representatives. For these reasons, the court concluded that if Mr. Brickler had successfully countered defendants’ exhaustion argument, four of his five claims would fail on the merits. But because he did not mount an exhaustion defense, this was ultimately a moot point. Summary judgment was therefore entered in favor of defendants and the action was dismissed with prejudice.
Plan Status
Sixth Circuit
Shakespeare v. MetLife Legal Plans, Inc., No. 2:25-cv-02250-TLP-atc, 2025 WL 1341897 (W.D. Tenn. Apr. 30, 2025) (Magistrate Judge Annie T. Christoff). Pro se plaintiff Tan Yvette Shakespeare sued MetLife Legal Plans, Inc. and Prime Therapeutics LLC asserting claims of breach of contract, bad faith, negligence, and discrimination in connection with the legal representation she received under MetLife’s prepaid legal services plan throughout her divorce proceedings. Defendants moved to dismiss. They argued that Ms. Shakespeare’s state law claims are preempted by ERISA and that she failed to state a claim upon which relief may be granted for all of her causes of action. Magistrate Judge Annie T. Christoff issued this report and recommendation recommending the court deny the motion to dismiss as to ERISA preemption and failure to state claims of breach of contract, bad faith, and negligence. As for the discrimination claim, the Magistrate found the allegations as currently pled to be entirely conclusory and lacking in factual support, and therefore subject to dismissal. However, rather than recommend dismissal, the court permitted Ms. Shakespeare an opportunity to amend her complaint to remedy these deficiencies, and held the discrimination claims in abeyance pending further action of this court. Regarding ERISA preemption, the court agreed with Ms. Shakespeare that the current record does not support the conclusion that the prepaid legal services plan was endorsed by her employer. Absent clear evidence showing that the legal services plan is governed by ERISA, the court found that ruling on the applicability of the safe-harbor exemption is premature and more appropriately presented for the summary judgment stage. And because the court cannot determine at this juncture whether the plan is governed by ERISA, it also could not comment on whether the state law claims “relate to” the plan for the purpose of judging ERISA preemption.
Pleading Issues & Procedure
Ninth Circuit
Pessano v. Blue Cross of Cal., No. 1:24-cv-01189-JLT-EPG, 2025 WL 1342690 (E.D. Cal. May 8, 2025) (Judge Jennifer L. Thurston). Plaintiff Emily Pessano brought this ERISA action on behalf of her minor daughter seeking to compel Blue Cross of California to pay the costs for air ambulance transportation services. Before the court here was Ms. Pessano’s motion to file under seal, or redact, various documents that contain communications between her and her counsel regarding the case and information that reveals, at least potentially, the settlement amount. In this straightforward decision the court granted Ms. Pessano’s motion, agreeing that the communications at issue fall within the attorney-client privilege and should therefore be filed under seal. As for the settlement amount information, the court agreed that it too should be redacted or sealed and permitted the same for any information in the subject filings.
Eleventh Circuit
McKinney v. Principal Financial Services Inc., No. 5:23-cv-01578-HNJ, 2025 WL 1347480 (N.D. Ala. May 8, 2025) (Magistrate Judge Herman N. Johnson, Jr.). Dr. Julian Davidson was a participant in an ERISA-governed 401(k) plan associated with his employment by Davidson Technologies, Inc. When Dr. Davidson died, the funds in his retirement account passed to his wife, Dorothy Carolyn Smith Davidson, and were deposited in a beneficiary account under her name. Mrs. Davidson was also a participant in the 401(k) plan with her own separate participant retirement account. Mrs. Davidson designated her three nieces as the beneficiaries of her own participant account. However, she did not designate a beneficiary for the account derived from her husband, and therefore, under the terms of the plan, Mrs. Davidson’s Estate was the default beneficiary. Mrs. Davidson died on May 11, 2021. Following her death Davidson Tech and Principal Life Insurance Company paid the funds from both the participant account and the beneficiary account to the three nieces. In this action plaintiff Rebekah Keith McKinney, in her capacity as personal representation of Mrs. Davidson’s Estate, alleges that under the terms of the plan the funds in the beneficiary account were improperly paid to the nieces and should have been paid to the Estate. She contests the distribution of those funds to the nieces and seeks payment of funds from Davidson Technologies and Principal Life. Ms. McKinney asserts claims for benefits under Section 502(a)(1)(B) and for breach of fiduciary duty under Section 502(a)(3). More than five months after defendant Davidson Tech answered Ms. McKinney’s complaint, it filed a motion for leave to file a third-party complaint. The proposed third-party complaint asserts a claim for restitution and unjust enrichment pursuant to Section 502(a)(3) against the nieces. Davidson Tech maintains that the nieces “cannot fairly and equitably retain those funds.” It requests the court impose an equitable lien and/or constructive trust on the funds the nieces received. Principal Life supports Davidson Tech’s motion, but Ms. McKinney opposes it. In this decision the court granted the motion and allowed the filing of the third-party complaint. The court held that the third-party complaint against the nieces both satisfies the requirements of Federal Rule of Civil Procedure 14 and the relevant discretionary factors. In particular, the court agreed with Davidson Tech that the nieces “may bear liability for all or part of Plaintiff’s claims against” Davidson Tech because it may have wrongfully distributed the beneficiary account funds to them. The court thus agreed with Davidson Tech that if Ms. McKinney’s claims are viable, the nieces’ liability to the company will “derive from and be conditional upon the outcome of Plaintiff’s claims against [Davidson Tech].” The court was also confident that at least Davidson Tech’s request for an equitable lien or constructive trust amounted to appropriate forms of equitable relief under Section 502(a)(3), even if its request for a “return of funds” is not. The court further stressed that allowing the proposed third-party complaint will promote judicial efficiency as it will allow the court to resolve all the issues at once. Ms. McKinney argued that she would suffer prejudice through the addition of the third-party complaint and the third-party defendants because this would further delay the proceedings, but the court did not agree. Instead, it viewed Davidson Tech’s proposed third-party complaint as aligning rather than conflicting with the interests of Ms. McKinney’s complaint. For these reasons, the court granted the motion and Davidson Tech was permitted to file its third-party complaint against the nieces.
Remedies
Tenth Circuit
Watson v. EMC Corp., No. 1:19-cv-02667-RMR-STV, 2025 WL 1333806 (D. Colo. May 7, 2025) (Judge Regina M. Rodriguez). Plaintiff Marie Watson sued her late husband’s former employer, EMC Corporation, after she was denied $633,000 in life insurance benefits under his ERISA-governed welfare benefit plan. Ms. Watson asserted a breach of fiduciary duty claim against EMC Corp., seeking equitable relief under ERISA Section 502(a)(3)(B). She maintained that EMC breached its fiduciary obligations when it responded to Mr. Watson’s written inquiry about the status of his employment benefits when he was leaving his position under a voluntary separation program. EMC replied that if he continued to pay for his benefits they would remain active during the transition, but neglected to mention that his life insurance coverage under the group policy had already ended and that he needed to convert his coverage to an individual policy, and to do so soon. If EMC had informed Mr. Watson that he needed to convert his life insurance coverage and given him instructions on how to do so, Ms. Watson argued that he would have, and that she would have then been eligible for benefits following her husband’s death. Because EMC did not, the family lost out on those benefits. On summary judgment, the court ruled that even assuming EMC had breached its fiduciary duty to Mr. Watson under ERISA, Ms. Watson was not entitled to equitable relief. Ms. Watson appealed that decision to the Tenth Circuit. The Tenth Circuit reversed the district court’s ruling. It held that the court erred by treating Ms. Watson’s Section 502(a)(3) claim for fiduciary breach as if it were a claim for recovery of plan benefits under Section 502(a)(1)(B). The court of appeals remanded to the district court to decide two key issues: (1) whether, under the circumstances, EMC had breached its fiduciary duty to Mr. Watson in response to his benefit inquiry; and (2) whether Ms. Watson is entitled to equitable relief in the form of surcharge pursuant to 29 U.S.C. § 1132(a)(3). (Your ERISA Watch featured the Tenth Circuit’s decision as our case of the week in our February 14, 2024 edition.) In this decision the court resolved those two issues. To begin, the court held that EMC had breached its fiduciary duty to provide complete and accurate information in response to Mr. Watson’s benefit inquiry. “As an ERISA fiduciary, EMC had an obligation to respond to his inquiry with complete and accurate information regarding all benefits, including the information that his life insurance policy would need to be converted in order for him to maintain those benefits.” The court noted that other courts have found a breach of fiduciary duty under similar circumstances, and although Mr. Watson did not specifically inquire about his life insurance benefits, EMC, as the administrator of the plan, nevertheless was aware of his status and the fact that he needed to convert his life insurance benefits or lose coverage. While the inquiry was made after the group life insurance policy coverage had ended, it was still within the eligibility window for converting the coverage to an individual life insurance policy. As a result, the court concluded that a prudent fiduciary would have responded to Mr. Watson’s inquiry with information about how to continue both his health insurance and life insurance coverage. Instead, EMC directed him to simply continue paying his bills. Although Mr. Watson was in possession of documents that explained the end date of his life insurance coverage and the need to convert to an individual policy, the court found that this fact could not relieve EMC of its fiduciary obligation to respond accurately and fully to Mr. Watson’s written inquiry. For these reasons, the court concluded that EMC committed a fiduciary breach. Having so found, the court then considered the appropriate remedy. Relying on the Supreme Court’s decision in Cigna v. Amara, the court stated that Ms. Watson was entitled to surcharge because she demonstrated actual harm from EMC’s breach, namely the failure to convert the life insurance coverage which resulted in Ms. Watson losing out on benefits. The court then found that surcharge in the amount of the lost benefits – $633,000 – was appropriate equitable relief under Amara. The court did not find that interest was appropriate equitable relief, although it agreed with Ms. Watson that the surcharge amount should be reduced by the amount of any premiums that would have been required in order to maintain the coverage in order to avoid a windfall. Accordingly, Ms. Watson’s request for equitable relief in the form of surcharge was granted in part, and Ms. Watson was ordered to submit a proposed judgment and a separate motion for attorneys’ fees and costs. (On appeal and on remand Ms. Watson was represented by Kantor & Kantor attorneys Glenn R. Kantor and Your ERISA Watch co-editor Peter S. Sessions.)