K.D. v. Anthem Blue Cross, No. 2:21-cv-343-DAK-CMR, 2023 WL 6147729 (D. Utah Sep. 20, 2023) (Judge Dale A. Kimball)

Despite Congress’ clear and repeated attempts to eliminate disparities in the treatment of mental health and addiction claims when compared to other kinds of claims for medical benefits, ERISA plaintiffs have had only rare success in asserting mental health parity claims. This case represents one such success, which is probably not coincidentally from a district court in the Tenth Circuit.

Plaintiff A.D. has a long history of mental health disorders stemming from the death of her biological father by suicide when she was just 10 years old. In early adulthood, during her college years, A.D.’s health declined significantly. She was ultimately admitted to Fulshear Ranch Academy’s Treatment to Transition program, a nine-to-twelve-month program where patients first receive treatment in a residential treatment setting and then in a less intensive transitional living setting.

Anthem Blue Cross and Blue Shield let her stay at Fulshear for only sixteen days, however, after which it determined that A.D. no longer met the plan’s internal criteria for medical necessity because she was no longer acutely suicidal or a danger to others. In this action, A.D. and her mother K.D. challenged this determination and Anthem’s denial of benefits for A.D.’s continued treatment. They alleged two causes of action: a benefit claim under ERISA Section 502(a)(1)(B), and an equitable relief claim under Section 502(a)(3), based on alleged violations of the Mental Health Parity and Addiction Equity Act, as incorporated into ERISA.

The parties filed competing motions for judgment. The court began by resolving the dispute over the appropriate standard of review. It agreed with Blue Cross and the Plan that abuse of discretion review applied, given that the plan grants discretionary authority to Blue Cross and there were not serious procedural irregularities in the case warranting de novo review.

With the standard of review settled, the court got to the meat of the benefit claim. Noting that that A.D.’s “treatment providers opined that A.D. needed continued residential treatment…to maintain her improvements” and to prevent relapse to “self-harm and dysfunctional behaviors” the court concluded that the medical opinions supported “a finding that A.D.’s needs could not be met at a lower level of care after only a few days of inpatient treatment.” Moreover, quoting the Tenth Circuit’s recent decision in D.K. v. United Behavioral Health, 67 F.4th 1224 (10th Cir. 2023), the court concluded that defendants completely failed to “meaningfully engage” with the opinions of A.D.’s healthcare providers and determined that cutting off care after such a brief stay in a structured medical environment was not appropriate or medically necessary given A.D.’s long-standing and complicated mental health issues.

The court pointed out that “Defendants relied solely on conclusory statements that they relayed without factual support,” while at the same time, “ignor[ing] the opinions of A.D.’s treating professionals.” Thus, “Anthem’s denial letters leave the plan beneficiaries and this court with more questions regarding the decision than reasons supporting it.” This failure to have a meaningful dialogue with A.D.’s treating physicians, failure to address all of the relevant medical evidence, and failure to communicate clearly the reasons for the denial, all added up to an abuse of discretion by Anthem. The appropriate remedy for these many failings, the court concluded, was a remand to defendants “to make adequate findings or to explain adequately the grounds” for their decision.

The court then turned to the Parity Act claim. Plaintiffs argued that defendants violated the Parity Act because Anthem’s internal guidelines permit discharging residential mental health patients at any time after their admittance, but only allow discharging medical/surgical patients “after they are provided with a course of treatment and have completed [at least] two stages of their planned course of treatment.” The court agreed with plaintiffs both that these internal guidelines made a distinction between mental healthcare and other types of healthcare and these disparate discharge criteria violated the Parity Act.

In reaching this conclusion, the court reasoned that this materially different treatment protocol for medical/surgical patients versus mental health patients “significantly limits benefits for mental health treatment.” Moreover, the court pointed out how A.D.’s specific experience demonstrates how defendants can use these violative criteria to cut off a nine-to-twelve-month program designed to treat long-standing mental health disorders after only a matter of days, causing the exact type of harm and lack of access to mental health treatment that the Parity Act was designed to ameliorate.

Thus, this case proved the unusual Parity Act win for plaintiffs, who were granted judgment with respect to this second cause of action. Regarding appropriate equitable remedies for this claim, the court stayed its decision on the matter until after defendants reached a new decision on remand of the benefits claim.

The court concluded with an invitation to plaintiffs to submit a motion for reasonable attorneys’ fees and costs under Section 502(g)(1).

Your ERISA Watch editors see this decision as further proof of a turning tide, at least within the Tenth Circuit, for patients claiming wrongful denials of mental health claims.

Below is a summary of this past week’s notable ERISA decisions by subject matter and jurisdiction.

Breach of Fiduciary Duty

Second Circuit

Popovchak v. UnitedHealth Grp., No. 22-CV-10756 (VEC), 2023 WL 6125540 (S.D.N.Y. Sep. 19, 2023) (Judge Valerie Caproni). In the United States healthcare billing is opaque. In this action, three beneficiaries of ERISA-governed healthcare plans, plaintiffs Alexandra Popovchak, Oscar Gonzalez, and Melanie Webb, are seeking some transparency. The trio have sued UnitedHealth Group Incorporated and its subsidiaries United Healthcare Insurance Company, United Healthcare Services, Inc., and UnitedHealthcare Service LLC for recovery of benefits, breaches of fiduciary duties, self-dealing, and co-fiduciary liability. The plaintiffs allege in their complaint that the United defendants have enacted a scheme to enrich themselves, to the detriment of the ERISA plans and their participants and beneficiaries. Plaintiffs allege that defendants have done this by calculating eligible expenses using proprietary repricing methodologies which result in benefit payments to out-of-network providers far below the market geographic rates that United is required by the terms of the plans to pay. According to plaintiffs, United then charges “savings fees” to the ERISA plans, even though defendants do not reach agreements with the providers and are generating no savings. As a result, the plans are charged expenses for these illusory savings, and the plan participants are left to pay the difference between the billed amounts and the tiny sums United ends up paying to the providers. In the case of Mr. Gonzalez, for instance, defendants allegedly paid just $1,914.21 of his $81,500 in medical bills, leaving him on the hook for nearly $80,000, despite being insured. The complaint thus “alleges that Defendants’ conduct was primarily motivated by their interest in profiting from purported savings fees through a scheme that redounded to the Plan participants’ detriment,” through which defendants allegedly siphoned billions of dollars from the Plans. Defendants moved to dismiss all but the claims for benefits. Their motion was granted in part and denied in part in an order covering a lot of ground. The court began by addressing the timeliness of plaintiffs’ claims and considering whether plaintiffs had exhausted administrative procedures prior to taking legal action. First, the court held that the claims were timely given defendants’ failure to comply with ERISA’s requirement that denial letters give notice of applicable statutes of limitations. Next, the court was satisfied that plaintiffs appealed their denials at least twice prior to bringing their ERISA action, and concluded that they were not required to appeal any more times in order to have properly exhausted their administrative procedures. With these preliminary matters settled, the court moved on to determining whether plaintiffs stated their claims. Starting with plaintiffs’ breach of fiduciary duty claims, the court determined that plaintiffs adequately pled that defendants acted disloyally, but that plaintiffs’ claims for failure to satisfy the plans’ written terms and failure to treat similarly situated claimants the same were duplicative of the claims for benefits. With respect to plaintiffs’ claim for breach of duties of loyalty and care and for self-dealing under Section 502(a)(2), the court found that these claims satisfied Rule 8 pleading and were distinct from the claims for benefits. Specifically, the court held that plaintiffs alleged enough to infer losses to the plans caused by defendants’ conduct and that “Defendants effectively transferred Plan assets that should have gone to benefit payments under the Plans to themselves.” The court therefore declined to dismiss these claims. However, the court granted the motion to dismiss Defendants UnitedHealth Group Incorporated and United Healthcare Insurance Company entirely from this action, concluding that the complaint was devoid of factual allegations that these two defendants “engaged in the conduct that gave rise to Plaintiffs’ claims.” Finally, with respect to plaintiffs’ request for a jury trial, the court stressed that it was unclear whether the damages plaintiffs sought were legal or equitable in nature. However, “because the Second Circuit has long held that ERISA benefit claims do not trigger the right to a jury trial, the Court grants Defendants’ motion to strike Plaintiffs’ jury demand without prejudice to Plaintiffs renewing their demand in the event they seek damages for breach of fiduciary duty.” Thus, at the end of this lengthy decision most of plaintiffs’ complaint was left intact, and, as a result, this interesting and important healthcare case will move forward.

Hockenstein v. Cigna Health & Life Ins. Co., No. 22-cv-4046 (ER), 2023 WL 6124047 (S.D.N.Y. Sep. 19, 2023) (Judge Edgardo Ramos). Plaintiff Jeremy Hockenstein brings this putative class action seeking monetary and injunctive relief against Cigna Health and Life Insurance Company under ERISA for failing to fully reimburse the cost of COVID-19 tests as required under the Families First Coronavirus Response Act and the CARES Act. Mr. Hockenstein asserts three causes of action in his complaint, each alleging a violation of both ERISA Sections 502(a)(1)(B) and (a)(3). In the first count, Mr. Hockenstein alleges that Cigna failed to fully reimburse the tests in violation of its statutory requirements, its fiduciary duties, and its discretionary authority under the plan. In the second, Mr. Hockenstein claims that Cigna provided insufficient notice and failed to accurately disclose reasons for denials in its explanation of benefits. Finally, Mr. Hockenstein’s third cause of action claims that Cigna failed to conduct a full and fair review of the appeals. Cigna moved for partial dismissal, seeking dismissal of all three causes of action only under Section 502(a)(3). The court granted in part and denied in part the partial motion to dismiss. To begin, the court denied the motion to dismiss Count 1 pursuant to Section 502(a)(3). It held that Section 502(a)(3) is an appropriate avenue for relief because there is no remedy available under the terms of the plan for COVID testing reimbursement “making Hockenstein’s claim under § 502(a)(3) proper.” Additionally, the court was satisfied that money damages for breach of fiduciary duties are available under Section 502(a)(3), and that these are proper forms of equitable relief. The court did however grant the motion to dismiss the Section 502(a)(3) claims for insufficient notice and failure to conduct a full and fair review, as Cigna is neither the plan nor the plan administrator. “Accordingly, because Hockenstein cannot allege that Cigna is the Plan or Plan Administrator, there is no underlying § 503 violation and the § 502(a)(3) claims under Counts II and III are dismissed.” The court granted dismissal of these two claims without leave to amend, because it concluded that amendment could not help plaintiffs plausibly allege that Cigna is the plan or plan administrator, making amendment futile.

Rolleri & Sheppard CPAS, LLP v. Knight, No. 3:22-CV-1269 (OAW), 2023 WL 6141142 (D. Conn. Sep. 20, 2023) (Judge Omar A. Williams). Plaintiffs John Rolleri and Ryan Sheppard and defendant Michael Knight were all partners in a firm together called Knight Rolleri Sheppard CPAs, LLP. Defendant Darlene Knight, Michael’s wife, also worked at the firm, and both Mr. and Mrs. Knight were trustees and fiduciaries of the firm’s ERISA-governed Cash Balance Plan. In this action, Mr. Rolleri and Mr. Sheppard allege that the Knights unlawfully transferred $1.6 million in plan assets into personal accounts and that the couple was silent about their improper withdrawals of money. Plaintiffs bring two claims against defendants – breach of fiduciary duty and civil theft. Three motions were before the court. First, plaintiffs filed a motion seeking a prejudgment remedy of damages and interest. Second, defendants moved to dismiss the complaint for lack of standing. Third, plaintiffs moved for a temporary restraining order and preliminary injunction. The court began with the motion to dismiss for lack of standing. The court granted the motion to dismiss the Rolleri & Sheppard CPAs, LLP firm. It agreed with the Knights that this firm does not exist as a legal entity and that neither Mr. Rolleri nor Mr. Sheppard purport to have expelled Mr. Knight from the firm. It also held that plaintiffs failed to show that continued operation of the Knight Firm would have been unlawful “and consequently they have failed to show that their attempted dissociation of Mr. Knight was proper under Connecticut law.” Regarding Mr. Rolleri and Mr. Sheppard, themselves, however, the court denied the motion to dismiss either individual plaintiff for lack of standing, as it is undisputed that both men are trustees and fiduciaries of the Cash Balance Plan and as such they have standing under ERISA to bring suit for breach of fiduciary duty. Next, the court addressed plaintiffs’ prejudgment remedy motion, which it denied. Ultimately, the court found it unclear that Mr. Knight stole from the Plan and that the money he took was not in fact his own. “Each of the defendants and each of the individual plaintiffs simultaneously is an employer, trustee, fiduciary, and participant under the Plan, and each has distinct rights and responsibilities in each role, under the contours of ERISA and the facts of this case. The interplay of these various roles is not entirely clear at this early stage of litigation. Plaintiffs’ bare legal conclusion that Defendants stole from the Plan, absent any contractual or statutory basis for that conclusion, is insufficient to show probable cause.” Although the court expressed that plaintiffs may be able to prove their claims of civil theft and breach of fiduciary duty, it stated that the present record does not support granting their motion for prejudgment remedy. Finally, because the temporary restraining order motion asks for injunctive relief dependent on the court granting the prejudgment remedy motion, the court also denied the temporary restraining order motion.

Class Actions

Tenth Circuit

Anderson v. Coca-Cola Bottlers’ Ass’n, No. 21-2054-JWL, 2023 WL 6064605 (D. Kan. Sep. 18, 2023) (Judge John W. Lungstrum). A putative class of participants of the Coca-Cola Bottlers’ Association 401(k) Plan moved for final approval of class action settlement and awards of attorneys’ fees, costs, expenses, and class representative service awards in this lawsuit alleging breaches of fiduciary duties. In an order from April 28, 2023, the court preliminarily certified the class and preliminarily approved the settlement. Following that decision, notice was sent to the nearly 40,000 class members, and a final settlement approval hearing was held. In this decision the court granted plaintiffs’ motion, certified the settlement class, approved the $3.3 million settlement, and authorized attorney fee awards, costs, expense, and class representative service awards. To begin, the court certified the non-opt-out settlement class pursuant to Federal Rule of Civil Procedure 23(a) and Rule 23(b)(1)(B), reiterating its earlier positions that the class is adequately numerous, the named plaintiffs are typical of the absent class members and adequate representatives of their interests, that common issues of law and fact unite the class, and that class adjudication is practical and just. Finally, the court noted that no putative class member objected to certification of the settlement class or sought to opt out. Next, the court evaluated the settlement amount and concluded that it is fair, reasonable, and adequate, the result of informed arms-length negotiations made in good faith. “In the view of the Court, class counsel and class representatives have adequately represented the class in this litigation.” Notably, one class member did object to the settlement amount, finding it to be an unfairly low recovery. In fact, the $3.3 million settlement amount is far less than the maximum damages of $19 million, or even the maximum $6 million in damages had defendants prevailed on their offset claim. Nevertheless, the court saw the settlement amount as providing adequate relief and overruled the one objection as lacking substantive support. As a result, the settlement amount was granted final approval. Additionally, the court took no issue with the proposed allocation methods of the settlement amount, which provided for pro rata distribution based on each member’s account balance in the fund and would either automatically distribute the amounts into plan accounts or allow for members to receive a check or rollover instead. The court also stated that adequate notice was mailed to all 39,967 class members. The court then addressed fee, cost, and service awards. First, the court awarded the requested 1/3 award of the settlement fund as attorneys’ fees – a total of $1.1 million. It found that this award was reasonable and fair given the great work and many hours performed by experienced ERISA counsel and the result they achieved. The court also wrote that “such an award would represent a customary fee in a case like this one, which presented complex issues under ERISA.” Plaintiffs’ counsel were also awarded their requested $9,245.80 for reimbursement of their incurred out-of-pocket costs. Further, the court awarded $42,764.00 in expenses incurred by the settlement administrator, and $15,000 for incurred expenses paid to an independent reviewing fiduciary. Last, the court awarded total service awards for the two named plaintiffs of $15,000. It gave the named plaintiff who brought the action a $12,000 award for his time and effort, and it awarded $3,000 to the second named plaintiff who became involved only at the settlement stage. Accordingly, with this decision, this class action has come to a close.

Disability Benefit Claims

Ninth Circuit

Iravani v. Unum Life Ins. Co. of Am., No. 21-cv-09895-HSG, 2023 WL 6048785 (N.D. Cal. Sep. 15, 2023) (Judge Haywood S. Gilliam, Jr.). After nearly a decade of continuing to approve and pay long-term disability benefits to plaintiff Sharareh Iravani, defendant Unum Life Insurance Company of America terminated Ms. Iravani’s benefits and demanded payment of over $9,000 in “overpaid” benefits. Ms. Iravani applied for and first started receiving disability benefits in 2010 after pain from cervical and lumbar radiculopathy, spinal stenosis, degenerative disc disease, and chronic migraine headaches left her unable to continue working as a cosmetic beauty specialist for Saks Fifth Avenue. Following an unsuccessful administrative appeal, Ms. Iravani brought this ERISA action to challenge Unum’s termination of her benefits. The parties filed competing motions for judgment under Federal Rule of Civil Procedure 52. They agreed that de novo review applied. Giving no deference to the claim administrator’s decision, the court found that there was sufficient evidence to establish that Ms. Iravani is disabled and entitled to benefits under the terms of her policy. The court disagreed with Unum that there was convincing evidence in the medical record of improvement of Ms. Iravani’s conditions, finding, to the contrary, that Ms. Iravani’s treating providers were in agreement that she had reached maximum medical improvement “and that she nonetheless remained disabled due to her permanent restrictions,” including with regard to her “ability to sit, stand, and walk.” On the topic of Ms. Iravani’s chronic pain, the court stated that the medical record established that she complained of constant moderate to severe pain of “7 at its best and 10 at its worst,” on a scale of 0 to 10. It found these ongoing complaints of pain credible and consistently documented throughout the years. Ms. Iravani’s musculoskeletal conditions are degenerative, and the court conveyed that Unum had failed to explain how these conditions “would improve over time, particularly in light of Plaintiff’s…age (61 at the time Unum terminated her benefits.)” Finally, the court credited the opinions of Ms. Iravani’s treating physicians, many of whom had an extensive treatment history with her, over those of Unum’s reviewing doctors. Based on these findings, the court was persuaded that Ms. Iravani met her burden of proving entitlement to benefits, finding that she has been “continuously disabled since 2010,”  and that her “medical conditions prevent her from performing any gainful occupation to which she is reasonably fitted by education, training, or experience.” Therefore, the court granted Ms. Iravani’s motion for judgment and denied Unum’s cross-motion for judgment.

Turkoly v. Lincoln Nat’l Life Ins. Co., No. 3:21-cv-1019-SI, 2023 WL 6147194 (D. Or. Sep. 20, 2023) (Judge Michael H. Simon). In early 2019, plaintiff Tracey K. Turkoly stopped working in her high-paid position as Global Account manager for Docusign, Inc. Ms. Turkoly was experiencing symptoms from both autoimmune and mental-health disorders. She applied for and began receiving disability benefits. After paying long-term disability benefits for approximately 10 months, defendant Lincoln National Life Insurance Company terminated the benefits and concluded that Ms. Turkoly could continue working in her current profession. Ms. Turkoly commenced this action seeking to overturn that decision under ERISA Section 502(a)(1)(B). The parties filed cross-motions for judgment on the administrative record under de novo review. The court concluded that Ms. Turkoly proved by a preponderance of the evidence her entitlement to benefits for the first 24 months, i.e., the “own occupation” benefit period, and ordered these benefits be reinstated. It also remanded the case to Lincoln for consideration of the “any occupation” portion of her claim. In particular, the court viewed the “key” medical opinion to be “the neuropsychological evaluation from Dr. Ludolph” which was performed over four days. The results of that testing, the court concluded, “show that Turkoly would be unable to perform her managerial job. The deficits in executive functioning and memory found by Dr. Ludolph would preclude Turkoly from performing this position as performed in the national economy, as Dr. Ludolph concluded in her supplemental report.” This objective screening confirming Ms. Turkoly’s cognitive impairments was highly persuasive to the court, especially as Lincoln emphasized in its denial letter that Ms. Turkoly’s medical records contained no such results. “The denial letter made clear that the lack of objective cognitive testing was critical to Lincoln’s denial of Turkoly’s claim.” Thus, because Ms. Turkoly “obtained the evidence that Lincoln asserted was critical,” and that evidence supported a finding of entitlement to benefits, the court was convinced that Ms. Turkoly met her burden of establishing disability as defined by the plan. As a result, Ms. Turkoly’s motion for judgment was granted and Lincoln’s motion for judgment was denied.

Discovery

Sixth Circuit

Williamson v. American Mar. Officer Plans, No. 3:18-CV-00100-GNS, 2023 WL 6096939 (W.D. Ky. Sep. 17, 2023) (Magistrate Judge Regina S. Edwards). After nine years of trying, plaintiff Robert C. Williamson, as executor of decent Larry Henning’s estate, was finally successful in his claim for accidental death benefits and was paid $200,000 in benefits from insurance provider LINA. Now, Mr. Williamson argues he is entitled to make-whole relief in the form of prejudgment interest on the payment of those benefits. He has moved to conduct limited discovery on the issue of interest. Defendants LINA and American Maritime Officer Plans responded in opposition. The matter was referred to Magistrate Judge Edwards. In this order Judge Edwards denied Mr. Williamson’s discovery request. The court held that despite being referred to as “limited” by Mr. Williamson, the requests for production and interrogatories sought were overly broad and voluminous both in terms of scope and topic and “in no way limited or tailored.” Judge Edwards wrote that, “[t]he breadth of these requests would be considered unreasonable in most ordinary cases; their breadth is particularly offensive in an ERISA action.” And, as this is an ERISA action, the court focused on the Sixth Circuit’s strict standards against allowing most discovery beyond the administrative record. Allegations of bias alone, the court expressed, were insufficient to open up discovery beyond the administrative record. Furthermore, the court found Mr. Williamson’s cited caselaw off topic and distinguishable because it did not apply to his lone claim here regarding prejudgment interest. In sum, the court was not persuaded that Mr. Williamson established any sufficient justification to warrant “the sweeping discovery he has requested.”

ERISA Preemption

Sixth Circuit

BlueCross BlueShield of Tenn. v. Bettencourt, No. 1:21-CV-00271-JRG-CHS, 2023 WL 6096870 (E.D. Tenn. Sep. 18, 2023) (Judge J. Ronnie Greer). In October 2021, the New Hampshire Insurance Department issued an Order to Show Cause and Notice of Hearing to Bluecross Blueshield of Tennessee after it learned that a resident of New Hampshire was denied coverage for medically necessary fertility treatment as required by New Hampshire state insurance laws. The order alleged that BCBST violated several New Hampshire laws “when it issued health insurance to a New Hampshire resident that did not include required coverage for fertility treatments and refused to cover [the resident’s] treatments.” In response to the Show Cause Order, BCBST brought this ERISA action seeking injunctive and declaratory relief from the Show Cause Order and enforcement of legal proceedings and related penalties stemming from the denial of the fertility treatment. Throughout litigation, BCBST has maintained that this case involves a choice-of-law dispute over whether New Hampshire or Tennessee’s fertility mandates apply. It argues that it would have to violate its fiduciary duties, as well as the terms of the plan, which states that it is governed by Tennessee law, if it were required to comply with New Hampshire’s laws. The New Hampshire Insurance Department disagrees. It relied on ERISA’s Saving Clause to bolster its argument that state insurance-regulating laws are not preempted by ERISA and that it therefore remains within the state’s power to regulate insurance companies and insurance contracts. Bluecross of Tennessee previously moved for summary judgment. Its motion was denied on June 26, 2023, when the court issued an order and opinion (summarized in Your ERISA Watch’s July 12th newsletter) holding that “the choice-of-law provision under the PhyNet Plans was irrelevant, much less dispositive.” Furthermore, the court held that insurance companies cannot rely on terms of ERISA plans or their fiduciary duties under ERISA “to shield themselves from state insurance regulation.” Therefore, the court not only denied BCBST’s summary judgment motion, but it also gave notice of its intent to grant summary judgment to the New Hampshire Insurance Department and gave BCBST time to file supplemental briefing to explain why the Insurance Department is not entitled to such relief. BCBST took that opportunity and filed its supplemental briefing, to which the New Hampshire Insurance Department responded. In this order, the court found no question of fact or law remaining as to New Hampshire’s fertility treatment mandate and granted summary judgment to the New Hampshire Insurance Department on all claims arising from it. The court wrote, “[b]eyond some clever paraphrasing of the Court’s June 26 Order and subtle suggestions, BCBST has not seriously argued that New Hampshire’s fertility benefits mandate is not saved from ERISA preemption.” The court stated that it would not fashion any common-law rule mandating that an ERISA plan’s choice-of-law provision controls which state’s mandates apply to a policy, because such a ruling “would leave the States ‘powerless to alter the terms of the insurance relationship in ERISA plans,’ even when such alternations would ultimately affect the administration of the plan.” Accordingly, the court found as a matter of law that BCBST cannot shield itself from New Hampshire’s insurance laws and that the state Insurance Department is entitled to summary judgment on the claims stemming from the fertility treatment mandate. However, the court concluded that there remains a question of law as to New Hampshire’s unfair insurance practices law, and whether this law too is saved from preemption under ERISA pursuant to the test articulated in Kentucky Association of Health Plans, Inc. v. Miller. Consequently, the court ordered further briefing on this issue, and reserved ruling on the topic and the claims as they relate to that law for now.

Exhaustion of Administrative Remedies

Eleventh Circuit

Howell v. Argent Trust Co., No. 1:2022cv03959, 2023 WL 6165712 (N.D. Ga. Sep. 21, 2023) (Judge Steven D. Grimberg). Participants of The North Highland Company Employee Stock Ownership and 401(k) Plan bring this breach of fiduciary duty and prohibited transaction putative class action against trustee Argent Trust Company and individual executive officers and directors of the company. In their action plaintiffs allege that defendants reorganized the company and manipulated stock transactions, stock valuations, and tax benefits to the financial detriment of plan participants. They maintain that defendants’ “scheme diluted the Plan’s equity interests, diminished its control in the assets, and allowed the Individual Defendants (with Argent’s ‘blessing’) to further dilute the Plan’s equity stake over time.” They further claim they were not paid fair market value for the stock transactions. Before the court was plaintiffs’ motion to stay the action until 30 days after they have finished exhausting their administrative remedies. They argued that staying the case was necessary because the statute of limitations has expired on some of their claims, and they will therefore not be able to replead those claims that would become time-barred if the court dismissed the action pending administrative exhaustion. In this order the court denied the motion to stay the lawsuit pending the completion of the administrative review of plaintiffs’ claims. It agreed with defendants “that the Eleventh Circuit requires exhaustion before a plaintiff may pursue an ERISA suit…[and that] Plaintiffs have failed to state a claim because they did not (and could not) plead exhaustion.” The court went on to concur further with defendants “that Plaintiffs’ own delay does not provide a sufficient basis to stay this case.” To the court, plaintiffs failed to justify their delay in seeking relief, their failure to exhaust remedies prior to bringing suit, and their decision to wait until the last day possible to file their ERISA action. It stated that plaintiffs could not excuse the exhaustion requirement, as they did not argue either that administrative remedies would be futile or that they were “denied meaningful access to the administrative review scheme.” The court would not read case law cited by plaintiffs “as holding that, whenever a plaintiff’s claims may be barred if the federal case is dismissed pending exhaustion, then the case should be stayed. Such a reading would effectively excuse the exhaustion requirement in any case where a plaintiff unreasonably delayed in pursuing administrative remedies – contrary to the Eleventh Circuit’s strict application of the exhaustion requirement in ERISA cases.” Accordingly, the court saw “nothing inequitable about declining to stay this case simply because Plaintiffs inexplicably ran themselves up against the six-year limitations period.” As a result, plaintiffs’ motion to do so was denied and the parties were directed to inform the court whether the case should be dismissed without prejudice.

Medical Benefit Claims

Tenth Circuit

Singhisen v. Health Care Serv. Corp., No. 20-1012-SLP, 2023 WL 6048788 (W.D. Okla. Sep. 15, 2023) (Judge Scott L. Palk). In the summer of 2019 plaintiff Robert Singhisen suffered a stroke connected to a congenital heart defect. In October of that same year, Mr. Singhisen underwent heart surgery at Oklahoma Heart Hospital to repair the congenital defect. Defendant Health Care Service Corporation, the administrator and insurance provider, denied Mr. Singhisen’s claim for benefits as not medically necessary, maintaining he had no “history of cryptogenic stroke.” Two separate appeals stemmed from the denial. The first was brought by the hospital, the second was brought by a lawyer representing Mr. Singhisen. Mr. Singhisen claims that he had no knowledge of the hospital’s appeal and that he never authorized the hospital to file any appeal on his behalf. In his legal action, Mr. Singhisen seeks reversal of the denial on both procedural grounds and on the merits. He argues that defendant denied him a full and fair review of his appeal, and asserts a claim to that effect, as well as a claim for statutory penalties for failure to produce plan documents upon request. In addition, he argues that the de novo review standard should apply to his claim for recovery of benefits because of Health Care Service Corp.’s procedural defects. In response, defendant contends that only the hospital’s appeal was authorized by the plan and thus subject to ERISA’s procedural requirements. This dispute between the parties was central to defendant’s motions before the court. It moved to strike evidence outside the administrative record, including affidavits from Mr. and Mrs. Singhisen and materials from the American Stroke Association defining a “cryptogenic stroke.” In the alternative, defendant moved for leave to file a surreply. The court began with the motion to strike. First, it declined to strike affidavits Mr. Singhisen and his wife submitted attesting to the fact that the provider did not have the authority to file an appeal on Mr. Singhisen’s behalf. To the court, the affidavits did not raise any new argument but were instead a response to defendant’s argument. Moreover, the court stated that exceptional circumstances warranted the admission of the affidavits, as permitting them would be helpful in order to resolve the issue of whether the hospital’s appeal was the only authorized appeal subject to ERISA regulations. “Resolution of this issue may impact both Plaintiff’s procedural claim regarding the alleged denial of fair and full review, and Plaintiff’s substantive claim regarding the proper standard of review. Under these circumstances, the court may consider matters outside the administrative record.” As for the American Stroke Association documents, the court reserved ruling on the issue for the time being, deeming “it prudent to first obtain further briefing on the preliminary issue of the authorized (i.e., controlling) appeal.” Accordingly, briefing on this yet-to-be-resolved topic was requested and the court granted defendant’s alternative motion for surreply with instructions on what it needs to further address and discuss in its briefing.

Pleading Issues & Procedure

Second Circuit

Elkowitz v. UnitedHealthcare of N.Y., No. 17-cv-4663(DLI)(PK), 2023 WL 6140183 (E.D.N.Y. Sep. 20, 2023) (Judge Dora L. Irizarry). A professional corporation of physicians in New York sued UnitedHealthcare of New York, Inc. in 2017 under state law and ERISA for underpayments of healthcare services the doctors provided. The deadline for motions to amend the pleadings occurred on February 28, 2018. Over four years later, after discovery has taken place and settlement negotiations between the parties have stagnated, the physicians moved to amend their complaint to add new defendants, related corporate entities to United, referred to collectively as the Oxford Health Insurance defendants. The motion was referred to a Magistrate Judge, who issued a Report and Recommendation recommending the court deny the motion to amend. The Magistrate concluded that plaintiff unduly delayed filing the motion to amend and failed to show good cause pursuant to Federal Rule of Civil Procedure 16 to permit amendment over four years after the relevant deadline. Additionally, the Magistrate viewed the amendment as unduly prejudicial to UnitedHealthcare and found that it would significantly delay resolution of the already lengthy proceedings. Finally, the Report concluded that the proposed amendment was futile because it is barred by the applicable statutes of limitations, and state and federal relation-back doctrines do not apply. Plaintiff objected to the Magistrate’s Report. In this order the court overruled plaintiff’s objections, adopted the report entirely, and denied the motion to amend the complaint. The physicians argued that they had acted with sufficient diligence to establish good cause to justify amending at this juncture of the action. They also maintained that defendant would not be prejudiced, and that amendment would not greatly delay resolution of the lawsuit. Moreover, plaintiff averred that the relation-back doctrine should apply because UnitedHealthcare and Oxford Health Insurance have a shared corporate identity. Finally, plaintiff stressed that United engaged in “systematic deceptiveness” and the interests of justice would be served by including the new defendants. The court disagreed on all points. “Plaintiff’s first, second, and fourth objections are not properly raised because, in part, they raise arguments that already were addressed by the magistrate judge and, in part, present new arguments that could have been, but were not raised before the magistrate judge.” As for the application of the relation-back doctrine, the court concluded that the Magistrate had not erred as plaintiff failed to establish that the Oxford Health Insurance parties had actual notice of this action. In sum, the court held that plaintiff established no new evidence or law that the Magistrate had overlooked and presented no compelling argument to justify granting the motion to amend their complaint after so many years of ongoing litigation.

Fifth Circuit

William J. v. Blue Cross Blue Shield of Tex., No. 3:22-CV-1919-G, 2023 WL 6149126 (N.D. Tex. Sep. 19, 2023) (Judge A. Joe Fish). Plaintiff William J., individually and on behalf of his minor child, J.J. sued the Texas Instruments Incorporated Welfare Benefit Plan, his employer, Texas Instruments Incorporated, and the plan’s insurer, Blue Cross and Blue Shield of Texas, challenging the plan’s denial of coverage for medical treatment J.J. received. William J. brought claims under Sections 502(a)(1)(B) and (a)(3). Defendants moved to dismiss the complaint. On May 24, 2023, the court granted in part and denied in part defendants’ motions to dismiss. It granted the motions to dismiss the part of plaintiff’s Section 502(a)(1)(B) claim based on an alleged lack of a full and fair review and the entirety of plaintiff’ Section 502(a)(3) claim, but denied the motions to dismiss the benefits claim under 502(a)(1)(B). Defendants jointly moved to reconsider, or in the alterative, alter or amend that opinion pursuant to Federal Rules of Civil Procedure 54(b) and 59(e). Defendants’ motion was denied. The court disagreed with defendants’ argument that it made a clear error in interpreting the Supreme Court’s decision in Amara as holding that the terms of the summary plan description were not part of the plan documents. It thus declined to consider the citations to the summary plan description when determining whether plaintiffs alleged sufficient facts to state a claim for relief under Section 502(a)(1)(B). To the contrary, the court held “the Supreme Court prohibits the exact thing that the defendants in this case seek to do: make the SPD the plan itself and legally binding.” The court stressed that the Supreme Court in Amara “cautioned that if courts are able to enforce the terms of the SPD as the terms of the plan itself, plan administrators would have ‘the power to set plan terms indirectly by including them in the summary plan descriptions’… Were this court to interpret Amara in the way that the defendants encourage, this exact outcome would be likely.” Thus, the court stated that defendants cannot rely on terms to support their denial if they exist only in the SPD and are not in the plan itself. Because the motion for reconsideration was entirely dependent on this failed argument, the court denied defendants’ motion.

Provider Claims

Ninth Circuit

Douglas v. Cal. Physicians’ Service, No. CV 23-1738-MWF, 2023 WL 6038191 (C.D. Cal. Sep. 6, 2023) (Judge Michael W. Fitzgerald). Healthcare provider Dr. Raymond Douglas brings this lawsuit against California Physicians’ Service d/b/a Blue Shield of California and Bluecross and Blueshield of Minnesota seeking payment for unpaid medical bills in connection with treatment he provided to an insured patient suffering from an inflammatory autoimmune disease of the eyes. Dr. Douglas asserts that under the terms of the patient’s ERISA-governed healthcare plan, he is entitled to “100% of the Allowed Amount” for the pre-approved covered service but was underpaid hundreds of thousands of dollars for the treatment he provided. Dr. Douglas brings a claim for recovery of benefits under Section 502(a)(1)(B), as well as a claim for attorneys’ fees and costs pursuant to Section 502(g)(1). The Blue Cross defendants moved to dismiss the complaint for failure to state a claim. Their motion was granted, with leave to amend, by the court in this order. It agreed with defendants that while Dr. Douglas “alleges a specific plan term entitling [him] to ‘100% of the Allowed Amount,’ Plaintiff has not alleged sufficient facts establishing what the ‘Allowed Amount’ was and that Defendants paid less than this amount.” Without this information, the court expressed that the provider failed to state a claim for recovery of benefits. It clarified that plaintiffs in ERISA actions must “identify the provisions of the [ERISA] plan that entitle them to benefits.” The court noted that the plan clearly states that “the Allowed Amount for a Nonparticipating Provider…can be significantly less than that Nonparticipating Provider’s billed charges.” As a result, the plan language suggests that Dr. Douglas may not be entitled to the full billed amount, and the complaint does not point to any specific plan term entitling Dr. Douglas to the amount he billed, nor even necessarily to an amount higher than that already paid by defendants. Accordingly, the court found the complaint deficient as currently pled and granted the motion to dismiss but did so without prejudice. If Dr. Douglas can amend his complaint to add more detailed allegations about how defendants underpaid him, the court stated that his complaint would then cross the line from possibility to plausibility of entitlement to relief.

Your ERISA Watch has a skeleton crew this week, so there are fewer summaries and they are lighter on detail than usual. As always, we have included links to all of our decisions in case any of these summaries whet your appetite and you want to dive in and get more detail.

The notable decision this week comes out of the Big Apple in Chung v. Provident Life & Cas. Co., No. 21 CIV. 9344 (AKH), 2023 WL 5928529 (S.D.N.Y. Sept. 12, 2023) (Judge Alvin K. Hellerstein). The plaintiff, Edward Chung, is a 56-year-old attorney who was a partner in the mergers and acquisitions practice of the venerable white-shoe New York firm Simpson Thacher & Bartlett, LLP. Plaintiffs who are attorneys often find a sympathetic judicial ear in disability cases, and this one was no exception.

For several years, Chung suffered from pain in his neck and upper back, with numbness and tingling to his extremities. These issues steadily grew worse, and eventually Chung was forced to wind down his practice in 2018. His last day of work was December 31 of that year.

Chung was insured under two ERISA-governed long-term disability employee benefit plans. The first was the firm’s standard group plan. The second was a supplemental plan, exclusively for partners, with coverage of $20,000 per month. Both were insured by subsidiaries of the Unum group of insurance companies. Chung submitted a claim for benefits under both plans, which Unum approved.

Unum continued to pay under the group plan. However, it terminated Chung’s benefits under the supplemental plan, contending that Chung was no longer disabled under the specific terms and conditions of that plan because he was able to perform the duties of his occupation on a part-time basis. Chung appealed, but Unum upheld its decision.

Chung filed suit, and the case proceeded to a bench trial, the results of which were detailed in this order. The parties agreed that the appropriate standard of review was de novo. Under this standard, the court first resolved the question of Chung’s occupation because the policy required Chung to be disabled from his “occupation” and not his particular job. The court determined that “attorney” was the appropriate occupation, and not something more specific, such as “M&A partner at a major international law firm.”

In doing so, the court noted that the Dictionary of Occupational Titles, on which Unum relied, has not been updated since 1991. The court observed that “requirements of attorneys in the national economy have changed since 1991, particularly regarding increased reliance on computer and keyboard usage.” Thus, the court “declines to limit its view of Chung’s occupational requirements to those specified by the DOT.”

Using the occupation of “attorney,” the court determined that Chung had demonstrated by a preponderance of the evidence that he was disabled under the terms of the supplemental plan. The court found that the record showed Chung was “unable to sit at a desk or in meetings for prolonged periods or keep his neck in a static position for prolonged periods while viewing a computer screen. He also cannot type for prolonged periods. Finally, he is unable to perform the high-level cognitive demands of his occupation, including substantial document review, multitasking, and sustaining concentration and focus for extended durations. Chung cannot perform these duties even on a part-time basis.” These conclusions were “supported by Chung’s subjective reports of pain as well as objective medical evidence.”

The court rejected Unum’s arguments to the contrary. It noted that Unum’s physician only examined Chung for twelve minutes, his findings “cannot be reconciled with the findings of other examining physicians,” and his report was belied by an “IME Watchdog” that had accompanied Chung to the exam. Furthermore, Unum’s physicians only relied on radiological reports and did not review the MRI films, unlike Chung’s physicians, whose opinions the court gave “particular weight.”

As a result, the court issued judgment in favor of Chung. It awarded Chung back benefits to the date of judgment, and declared Unum liable for attorney’s fees and costs under ERISA, the amount of which will be determined at a later date.

Below is a summary of this past week’s notable ERISA decisions by subject matter and jurisdiction.

Attorneys’ Fees

Ninth Circuit

Alves v. Hewlett-Packard Comprehensive Welfare Benefits Plan, No. 22-55621, 2023 WL 5973108 (9th Cir. Sept. 14, 2023) (Before Circuit Judges M. Smith, Friedland, and Miller). This is a case brought by plaintiff Michael Alves for ERISA-governed disability benefits. The district court ruled that the claim administrator did not abuse its discretion in denying Alves’ claim for short-term and long-term benefits, and Alves appealed. The Ninth Circuit affirmed the short-term denial but remanded for further consideration of the long-term claim. The administrator denied again, and the district court upheld that decision. (Your ERISA Watch covered this ruling in its May 12, 2021 edition.) Alves filed a motion for attorney’s fees, limiting his request to those fees he incurred through his success on appeal. However, the district court denied the motion. (Your ERISA Watch covered this ruling in its July 6, 2022 edition.) In this decision, the Ninth Circuit affirmed, ruling that the district court did not abuse its discretion in denying the fee motion. The court agreed with Alves that he had achieved “some success on the merits,” making him eligible for fees, but upheld the district court’s discretionary application of the Ninth Circuit’s five-factor Hummell test in which the court considered Alves’ overall lack of success in the case.

Breach of Fiduciary Duty

First Circuit

Board of Trustees of the IUOE Local 4 Pension Fund v. Alongi, No. 21-CV-10163-FDS, 2023 WL 5984520 (D. Mass. Sept. 14, 2023) (Judge F. Dennis Saylor IV). This is an action by multiple pension funds against Gina Alongi, accusing her of breaching her fiduciary duty to those funds while she was the administrator of them. The funds essentially complain that “Alongi diverted pension-plan assets for her own benefit and the benefit of an entity unrelated to the Funds, neglected her work, and otherwise breached her duties as plan administrator.” In response, Alongi contended that she had been discriminated against and was the victim of retaliation, and filed a complaint with the Massachusetts Commission Against Discrimination. Previously, the court denied Alongi’s motion to stay the case while her discrimination complaint proceeded, and allowed her to amend her answer and assert counterclaims in exchange for dropping that complaint. The funds have now moved for partial summary judgment regarding Alongi’s liability for breach of fiduciary duty. In this order, the court denied the funds’ motion. The court ruled that there were disputed issues of fact as to whether Alongi (1) was a functional fiduciary with respect to the activities alleged by the funds, (2) was required to maintain time sheets, (3) performed work for another entity whose interests were adverse to the funds, (4) failed to work sufficient hours, (5) directed office staff to perform work adverse to the funds, and (6) took too much vacation. These disputes required fact-finding and thus the funds were not entitled to summary judgment.

Fourth Circuit

Trauernicht v. Genworth Fin. Inc., No. 3:22CV532, 2023 WL 5961651 (E.D. Va. Sept. 13, 2023) (Judge Robert E. Payne). Plaintiffs, participants in Genworth Financial, Inc.’s employee retirement and savings benefit plan, filed this class action alleging that Genworth breached its fiduciary duty under ERISA by selecting, retaining, and ratifying the selection and retention of poorly-performing investments in the plan. Genworth filed two motions to dismiss, one under Rule 12(b)(1) arguing that plaintiffs did not have standing to pursue prospective injunctive relief, and another under Rule 12(b)(6), arguing that plaintiffs failed to state a valid claim for relief. The court granted the first motion, noting that the named plaintiffs were no longer participants in the plan and thus were no longer invested in the funds at issue. As a result, prospective injunctive relief would not affect them and they could not seek such relief. Genworth had less success with its second motion on the merits, which the court denied. On plaintiffs’ claim for breach of the duty of prudence, Genworth argued broadly that it had a sufficient monitoring process and that the complaint did not adequately plead loss causation. However, the court ruled that the plaintiffs had alleged sufficient facts to show that Genworth did not properly monitor its plan and that any disputes to the contrary could not be resolved on a motion to dismiss. The court pointed out that plaintiffs were not simply alleging underperformance in general but had identified meaningful comparator benchmarks, as well as a trend of underperformance over time, and had alleged losses over $100 million. As for plaintiffs’ second claim for failure to monitor the plan’s investment committee, the court noted that “more detailed information is lacking,” but plaintiffs’ allegations were nonetheless factual, not legal, and thus survived the pleading stage.

Class Actions

Second Circuit

R.B. v. United Behavioral Health, No. 1:21-CV-553, 2023 WL 5977234 (N.D.N.Y. Sept. 14, 2023) (Judge David N. Hurd). Plaintiff R.B. is an employee of General Electric and a participant in its ERISA-governed health plan. R.B.’s son was admitted for residential mental health treatment, but defendant United Behavioral Health denied coverage for that treatment, contending that the treatment center had “service components not consistent with Guidelines and are considered unproven.” R.B. filed suit, and sought to certify a class consisting of “All persons covered under ERISA-governed health care plans, administered or insured by United Behavioral Health, whose requests for coverage for mental health and substance abuse treatment services received at a licensed residential treatment center were denied in total based on its determination that a component of such services is considered experimental, investigational, or unproven.” The court granted plaintiff’s motion in this order. The court found that R.B. had standing because he was a participant in the plan and had paid $68,417.99 to cover his son’s services. The court further ruled that R.B. satisfied Rule 23’s requirements. Specifically, there was “a single overarching issue defining this case: whether UBH’s coverage protocol, which voices all coverage obligations where a provider offers a service that defendant believes is ‘experimental, investigational or unproven’ is in parity with its coverage protocols for skilled nursing services.” The court further found that R.B.’s claims were typical of the class, that he would adequately represent the class, and that class counsel was adequately qualified and experienced. The court also ruled that the proposed class satisfied Rule 23(b)(1)’s requirements because there was a risk of inconsistent adjudications and plan provisions are required to be applied consistently with respect to similarly situated claimants. The court thus granted R.B.’s motion and certified the requested class.

Disability Benefit Claims

Sixth Circuit

Johnson v. Life Ins. Co. of N. Am., No. 2:22-CV-933, 2023 WL 5951769 (S.D. Ohio Sept. 13, 2023) (Judge Edmund A. Sargus, Jr.). Plaintiff Jeffrey Johnson filed this action against LINA, arguing that LINA unlawfully calculated the amount of his long-term disability benefits. The parties filed cross-motions for judgment, which were decided in LINA’s favor in this order. The court was “inclined to find” that the benefit plan conferred discretionary authority on LINA to make its decisions, but noted that the standard of review was not dispositive because LINA would prevail even under de novo review. The court ruled that LINA had correctly calculated Johnson’s benefits, and that Johnson’s alternative interpretation of the term “Covered Earnings” was implausible, would rewrite the plan, and lead to a windfall. The court further ruled that LINA had correctly recovered an overpayment under the plan due to Johnson’s receipt of other benefits for his disability. The court noted, however, that LINA had not given Johnson an especially informative breakdown of how the overpayment recovery had been applied to his benefits, and recommended that LINA provide such a breakdown. Otherwise, “the Court reminds LINA that it may engender liability for refusing to comply with a participant’s request for information.”

ERISA Preemption

Ninth Circuit

Good Samaritan Hosp. L.P. v. Multiplan, Inc., No. 22-cv-02139-AMO, 2023 WL 6036838 (N.D. Cal. Sep. 15, 2023) (Judge Araceli Martinez-Olguin). Plaintiff Good Samaritan Hospital, L.P. is an acute care hospital in California with a state-of-the-art neonatal intensive care unit (NICU). In this state law action, originally filed in California state court, the hospital alleges that defendants MultiPlan, Inc., Trustmark Health Benefits, and Altimetrik Corporation failed to honor and properly apply the terms of a Network Agreement that it entered into with MultiPlan when it became a participating in-network provider. Specifically, Good Samaritan contends that defendants have failed to properly pay for the medically necessary services it provided to an infant patient at its NICU in excess of $970,000. Good Samaritan asserted ten contract-based state law claims against defendants related to the alleged breach of the Network Agreement. Defendants removed the action to federal court on the basis of diversity jurisdiction. Good Samaritan responded by moving to remand. It argued that diversity of citizenship is lacking because it is a corporate citizen of the state of Delaware. Defendants countered that the claims are completely preempted by ERISA and the case therefore should not be remanded because the court had federal question jurisdiction. In this decision the court found both federal question and diversity jurisdiction lacking and thus granted the motion to remand. With regard to preemption, the court evaluated the complaint under the Supreme Court’s two-part Davila test. It concluded that neither prong was satisfied. First, Good Samaritan is neither a participant nor beneficiary of an ERISA plan and the court wrote that this was “not a suit evaluating a plan participant’s entitlement to benefits, and Good Samaritan could not have brought such a claim.” Consequently, the court found that Good Samaritan could not have brought a claim for benefits under ERISA Section 502(a)(1)(B). Second, the court was satisfied that an independent legal duty exists independent of the ERISA plan because the breach of contract and interference claims are based on defendants’ obligations under the Network Agreement. Thus, the state law claims did not require a court to assess whether the care provided was covered under the terms of an ERISA benefit plan. “The Network Agreement is a service contract establishing Good Samaritan’s right to payment, not an ERISA plan document that grants Defendants discretion to determine coverage.” Accordingly, the court held that the state law causes of action were not preempted by ERISA and that it does not have federal question jurisdiction over the matter. Lastly, the court agreed with Good Samaritan that it is incorporated in Delaware, meaning it is not a citizen of California as defendants argued. Therefore, the court determined that complete diversity does not exist between the parties. As a result of these findings, plaintiff’s motion was granted, and the case was remanded to California state court.

Medical Benefit Claims

Eleventh Circuit

Mendoza v. Aetna Life Ins. Co., No. 23-22237-CIV, 2023 WL 5979822 (S.D. Fla. Sept. 14, 2023) (Judge Robert N. Scola, Jr.). Plaintiff Dina Mendoza sued her health insurer, contending that it wrongfully denied coverage of $420,269 in hospital bills associated with the birth of her twin daughters. Aetna denied her claim on the ground that Mendoza’s coverage was secondary to that of her husband. Aetna filed a motion to dismiss, arguing that (1) Mendoza failed to state a claim under Rule 12(b)(6), and (2) she had failed to join an indispensable party, i.e., her husband’s insurer. The court did not reach the second argument because it ruled in Aetna’s favor on the first, agreeing that Mendoza’s benefit plan contained coordination of benefit provisions “that require consideration of the father’s insurance plan before a determination can be made regarding dependent child coverage.” This was so because the plan uses the “birthday rule,” i.e., “the plan of the parent whose birthday falls earlier in the calendar year covers dependent children of parents who are married or living together.” Mendoza did not address the birthday rule but argued that her husband’s plan was a single-person plan, and that neither she nor her children were covered under it. However, the court ruled that Mendoza’s complaint was conclusory and had not pleaded enough information about her husband’s plan to survive Aetna’s motion. The court thus dismissed the complaint, without leave to amend.

Pleading Issues & Procedure

Fourth Circuit

Deutsch v. IEC Grp., Inc., No. 3:23-CV-00436, 2023 WL 5917421 (S.D.W. Va. Sept. 11, 2023) (Magistrate Judge Cheryl A. Eifert). Plaintiff Daniel Deutsch filed this action for wrongful denial of medical benefits in state court against defendant IEC Group, also known as AmeriBen. IEC removed the case to federal court and filed a motion for more definite statement, contending that Deutsch’s complaint contained insufficient detail. The court agreed that Deutsch’s complaint was not ideal, but this was primarily because the state court had provided him with a “form complaint that left very little room for extrapolation.” Still, Deutsch’s complaint did contain the date, provider, and care, and even the claim number for his treatment. Thus, the court denied IEC’s motion. However, the court noted that federal pleadings require more factual detail. Thus, the court gave Deutsch “an opportunity to amend his complaint and include the factual basis for his claim as set forth his later filings.” 

Provider Claims

Second Circuit

Anjani Sinha Med. P.C. v. Empire HealthChoice Assur. Inc., No. 21-CV-138(RPK)(TAM), 2023 WL 5935787 (E.D.N.Y. Sept. 12, 2023) (Judge Rachel P. Kovner). Plaintiff, an orthopedist, provided medical services to a patient covered by a health plan administered by defendant Empire HealthChoice Assurance, Inc. However, of the $79,252.34 in claims submitted, Empire only reimbursed plaintiff $1,312.64. This action followed. Empire moved to dismiss, arguing that several of plaintiff’s claims are “non-existent” under ERISA and plaintiff “fails to cite to a single Plan provision entitling it to relief.” The court mostly denied Empire’s motion in this order. The court admitted that plaintiff’s complaint “is not a model of clarity.” However, it construed the claims as arising under ERISA § 1132(a)(1)(B), which were “plausibly alleged.” Specifically, plaintiff pleaded a valid assignment of benefits, adequately identified the plan provisions Empire allegedly violated, alleged the procedure at issue was a covered benefit under the plan, and alleged that it was under-reimbursed, partly because Empire paid more for the physician’s assistant than for the surgeon. The court did grant Empire’s motion as to plaintiff’s fifth claim for “failing to pay at the in-network rate” because plaintiff did not identify any plan provisions that required Empire to do so. Empire’s motion was denied in all other respects.

Northern Jersey Plastic Surgery Ctr. v. 1199SEIU Nat’l Benefit Fund, No. 22-CV-6087 (PKC), 2023 WL 5956142 (S.D.N.Y. Sept. 13, 2023) (Judge P. Kevin Castel). Plaintiff, a healthcare provider, sued the 1199SEIU National Benefit Fund, an ERISA-governed medical benefit plan, alleging that the Fund failed to reasonably compensate it for services provided to a patient who was insured by the Fund. The Fund filed a motion to dismiss, which the court granted in this order. The order is practically a treatise on how plans should defend claims by providers, as it covers numerous issues, ruling in favor of the Fund on all of them. In summary, the court found that plaintiff (1) had not exhausted the administrative remedies provided in the plan, (2) did not properly allege which provisions in the plan entitled it to the relief it requested, (3) improperly requested equitable relief, (4) lacked standing because it was not a valid assignee of the patient’s claims, (5) improperly alleged breach of fiduciary duty against the plan, which was not a fiduciary, (6) could not allege a claim for self-dealing against the plan, and (7) could not allege a claim for statutory penalties for failing to provide plan documents because the Fund was not a plan administrator, and plaintiff did not have standing to bring this claim in any event. Furthermore, (8) all of plaintiff’s seven state law claims were expressly preempted by ERISA, and (9) the Fund did not violate New York’s Women’s Health and Cancer Rights Act, and even if it had, plaintiff did not explain how that statute allowed it to recover plan benefits under ERISA. The court thus granted the Fund’s motion to dismiss as to all claims, without leave to amend.

Rose v. PSA Airlines, Inc., No. 21-2207, __ F.4th __, 2023 WL 5839282 (4th Cir. Sept. 12, 2023) (Before Circuit Judges Richardson, Quattlebaum, and Heytens)

One of the thorniest issues in ERISA litigation is what ERISA § 502(a)(3) means when it says a benefit plan beneficiary can sue for “other appropriate equitable relief.” What kind of relief counts as “equitable”? And when is it “appropriate” to award that relief? Almost 50 years after ERISA was enacted, we still do not have good answers to these questions, despite numerous Supreme Court decisions. This opinion from the Fourth Circuit grapples once again with the issue, and while two of the judges think they have it figured out, a third is not so sure.

The plaintiff, Jody Rose, was the mother of Kyree Devon Holman, who worked as a flight attendant for PSA Airlines. Kyree had medical benefit coverage through his employment with PSA. Unfortunately, at the age of 26, on Christmas Eve of 2018, he discovered he had severe myocarditis. His doctors determined that he needed a heart transplant to survive and prepared to proceed with surgery as soon as his benefit claim was approved.

However, defendants denied Kyree’s request, asserting that the treatment he sought was experimental. When Kyree asked for a reevaluation, defendants denied his claim once again, this time contending that he did not meet certain alcohol-abuse criteria – which were not actually in his benefit plan. Kyree’s doctors appealed again, stressing that Kyree would not survive without a heart transplant, but his claim was once again denied.

Kyree then submitted a request for an external expedited review, which under ERISA regulations should have been completed within 72 hours. However, defendants treated the claim as a standard, non-expedited, review instead. The completed review eventually determined that Kyree was correct, but it was too late: Kyree died before the review was completed.

Rose sued PSA Airlines and its benefit claim administrators and reviewers on behalf of Kyree’s estate, alleging claims under ERISA § 502(a)(1)(B) (for failure to pay plan benefits) and § 502(a)(3) (for equitable relief). A magistrate judge would have allowed Rose’s equitable claim to proceed, but the district court rejected the magistrate judge’s recommendation and granted defendants’ motion to dismiss the entire action. (Your ERISA Watch covered the magistrate judge’s report as its case of the week in its March 31, 2021 issue, and the judge’s rejection of the report in its September 29, 2021 issue.)

Ultimately, the district court concluded that Rose could not obtain relief under § 502(a)(1)(B) because “money was not one of the ‘benefits’ that her son was owed ‘under the terms of his plan.’” As for her § 502(a)(3) claim, the court ruled that the monetary relief she requested as equitable relief was too similar to money damages and thus was not “equitable.” Rose appealed to the Fourth Circuit.

The Fourth Circuit began by briefly discussing, and upholding, the district court’s decision regarding Rose’s (a)(1)(B) claim. The court stated that (a)(1)(B) allows a beneficiary “either ‘to recover benefits due to him under the terms of his plan’ (i.e., seek reimbursement – ‘recovery’ – of out-of-pocket expenses), or ‘to enforce his rights under the terms of the plan’ (i.e., seek an injunction).” However, “§ 502(a)(1)(B) does not authorize a plaintiff to seek the monetary cost of a benefit that was never provided.” The court admitted that while (a)(1)(B)’s choice of remedies “may leave plan beneficiaries like Kyree in a bind, we must do what the statute commands.” Thus, Rose was not entitled to relief under (a)(1)(B).

The remainder of the opinion addressed Rose’s (a)(3) claim for equitable relief. The court began by engaging in a deep-dive into the historical distinction between “legal” and “equitable” remedies. The court observed that there were once separate courts for law and equity. Courts of equity sometimes had “concurrent” jurisdiction over matters, while in other cases, where courts of law did not authorize any relief, they had “exclusive” jurisdiction. This meant that courts of equity could offer broader relief when they had exclusive jurisdiction because there was no limit placed on them by law. But, when courts of equity had concurrent jurisdiction, they were limited by legal principles.

This brought the Fourth Circuit to the question of money. The court stated that while the two types of courts “created a dividing line between themselves for claims involving money, that division, like everything in this field, is nuanced.” For example, although we typically think of legal relief as monetary relief, and equitable relief as non-monetary relief, there have traditionally been non-monetary legal remedies (such as writs of mandamus, habeas corpus, replevin, and ejectment), as well as monetary equitable remedies (such as surcharge or unjust enrichment).

However, the court noted that surcharge – “a remedy essentially equivalent to money damages” – was typically available only in exclusive jurisdiction cases, where a court of equity had more power. Unjust enrichment, on the other hand, was typically available in concurrent jurisdiction cases, but because of the overlap in jurisdiction, the remedy was “more constrained.” In order to obtain unjust enrichment, a plaintiff would have to “identify the specific property (funds) that the defendant wrongfully possessed and that rightfully belonged to the plaintiff.”

With this background in mind, the court turned to ERISA and examined several Supreme Court cases discussing equitable relief, including Mertens v. Hewitt Associates, Great-West Life & Annuity Ins. Co. v. Knudson, and Montanile v. Board of Trustees. From these cases the Fourth Circuit concluded that in order for a plaintiff to obtain relief under (a)(3), such relief had to be “typically available in equity,” i.e., the type of relief available in concurrent jurisdiction cases. Furthermore, a plaintiff seeking unjust enrichment can only obtain a monetary remedy “if she seeks specific funds that are wrongfully in the defendant’s possession and rightfully belong to her. Courts cannot award her relief that amounts to personal liability paid from the defendant’s general assets to make the plaintiff whole.”

The Fourth Circuit admitted that the Supreme Court’s decision in Cigna Corp. v. Amara threw a wrench in this approach because it authorized “make-whole,” loss-based, monetary relief on the ground that it was “analogous to ‘surcharge,’ an ‘exclusively equitable’ remedy under the law of trusts.” However, the Fourth Circuit concluded that this part of Amara was dicta, and that Montanile, which post-dated Amara, had rejected this holding as too broad.

In short, the Fourth Circuit concluded that ERISA plaintiffs cannot seek “merely personal liability upon the defendants to pay a sum of money” under ERISA § 502(a)(3) because such a remedy is purely legal. However, “plaintiffs that seek to strip away defendant’s unjust gains might have better luck.” Such a remedy is equitable under Montanile “so long as the plaintiff can trace those unjust gains to ‘specifically identified funds that remain in the defendant’s possession or against traceable items that the defendant purchased with the funds.’”

Of course, the ultimate question in this case was whether Rose’s allegations met this test. The Fourth Circuit declined to answer, ruling that because the district court had not applied this test in the first instance, the case should be remanded so the district court could have that opportunity.

Judge Heytens penned a separate opinion, concurring in part and dissenting in part. He agreed that the district court correctly dismissed Rose’s (a)(1)(B) claim and that the (a)(3) claim should be remanded for further proceedings. However, he disagreed that plaintiffs like Rose were required to “show the fruits of a defendant’s wrongdoing are traceable to particular funds remaining in that defendant’s possession to state a claim under ERISA.” Instead, following Amara, Judge Heytens would only require a plaintiff to plead that “the defendant was a fiduciary and that any money sought represents ‘make-whole relief’ for a ‘violation of a duty imposed upon that fiduciary.’”

Judge Heytens stated that Amara was still controlling precedent, despite the majority’s criticisms of it, and noted that two prior Fourth Circuit panels had applied Amara in allowing for equitable surcharge under ERISA. Judge Heytens further argued that the majority had placed too much emphasis on Montanile, which did not expressly reject Amara and only discussed it in a footnote. Moreover, Judge Heytens contended that it was possible to reconcile Amara with Montanile because Amara involved claims against a fiduciary, whereas the claims in Montanile (and in the other Supreme Court cases cited above) were against non-fiduciaries. As a result, Judge Heytens concluded that the majority had gone too far in imposing limitations on plaintiffs like Rose.

In the end, the Supreme Court’s cases discussing ERISA § 502(a)(3) are certainly unsatisfying, and it is not surprising that the panel diverged on how to interpret them properly. The majority believes it has synthesized the proper approach based on its review of those cases and its understanding of law and equity. As the dissent points out, however, that approach runs afoul of not only Amara but prior opinions from the Fourth Circuit, and thus the majority may have overstepped its bounds. It certainly appears that more guidance will be required from the Supreme Court in order to resolve this issue.

As for the parties, even though Rose successfully obtained a reversal and remand, it is unclear whether she will be able to prevail back in district court under the Fourth Circuit’s test – or whether any of the parties will ask for rehearing on the ground that the Fourth Circuit got it wrong. As always, stay tuned to Your ERISA Watch for updates.

Below is a summary of this past week’s notable ERISA decisions by subject matter and jurisdiction.

Breach of Fiduciary Duty

Tenth Circuit

Matney v. Barrick Gold of N. Am. Inc., No. 22-4045, __ F. 4th __, 2023 WL 5731996 (10th Cir. Sep. 6, 2023) (Before Circuit Judges Tymkovich, Moritz, and Rossman). Participants of the Barrick Gold of North America, Inc. 401(k) plan brought this putative class action against the plan’s fiduciaries for breaching their duties of prudence, loyalty, and monitoring under ERISA. Specifically, the plaintiffs alleged that the fiduciaries failed to prudently operate and administer the plan which resulted in too-high investment management and recordkeeping fees. The district court dismissed plaintiffs’ complaint with prejudice. It agreed with the fiduciaries that the participants had failed to provide like-for-like comparators of the fees and funds, and that they therefore did not state viable claims. The district court also found that plaintiffs’ duty of loyalty claim was not separate or distinct from their imprudence claim. Finally, it determined that the duty to monitor claim could not proceed because it was derivative of the other fiduciary breach claims, which it found lacking. Plaintiffs appealed. The Tenth Circuit affirmed in this decision. Noting that the it had not yet considered a plaintiff’s pleading burden for breach of fiduciary duty claims under ERISA, the Tenth Circuit looked to its sister circuits for guidance. It took a particular liking to the approach of the Eighth Circuit, including its “meaningful benchmark” pleading standard. Like the Eighth Circuit, the Tenth decided that plaintiffs would need to “show that a prudent fiduciary in like circumstances would have selected a different fund based on the cost or performance of the selected fund” by providing a sound basis for comparison. What that meant, the Tenth Circuit clarified, was a showing by the plaintiff that funds had similar investment strategies, objectives, and risk profiles to the challenged plan investment options and that fees charged were for the same quality, quantity, and basket of recordkeeping services as those the plan received. Applying these newly established principles here, the Tenth Circuit agreed with the lower court that plaintiffs did not meet either standard. It concluded that their comparator funds were too dissimilar and that their comparator fee averages lacked details about the services provided. Accordingly, the Tenth Circuit found no error in the district court’s holdings that plaintiffs failed to plausibly state fiduciary breach claims, and affirmed.

Class Actions

Second Circuit

McAlister v. Metropolitan Life Ins. Co., No. 18-CV-11229 (RA), 2023 WL 5769491 (S.D.N.Y. Sept. 7, 2023) (Judge Ronnie Abrams). This is an action brought by former employees of Metropolitan Life Insurance Company who alleged that their retirement benefits were calculated improperly. Specifically, they contend that the plan allows participants to choose a single life annuity (SLA) or a joint and survivor annuity (JSA) as retirement benefit options, but that defendants calculated the JSA in a manner that was not actuarially equivalent to the SLA, in violation of ERISA. Three of the employees filed a motion to certify a class of plan participants who elected to receive their retirement benefits in the form of a JSA. Magistrate Judge Ona T. Wang issued a report and recommendation that the motion be granted. Defendants objected to the report on three grounds: (1) Judge Wang improperly concluded that she did not need to resolve defendants’ challenge to plaintiffs’ methodology at the class certification stage; (2) Judge Wang did not consider that the class “improperly excludes Plan participants who have claims for relief under Plaintiffs’ theory”; and (3) a subclass recommended by Judge Wang did not satisfy class action requirements because the subclass members had signed releases. The court responded to each argument. First, the court ruled that defendants’ methodology argument was “fundamentally a merits question, not a class certification question,” and thus could not defeat certification. The court noted that the plaintiffs had proposed a unified and consistent calculation method that applied equally to the class, and that defendants were free to challenge that method on the merits at the appropriate time. Second, the court disagreed that the class was “improperly gerrymandered” by omitting certain employees. The court noted that “neither ERISA nor Rule 23 requires the certification of a class that includes all plan participants,” and that plaintiffs’ class definition was uniform in that it included members with “the same benefit structure and had their benefits calculated using the same formula and, because of that formula, did not receive an actuarially equivalent benefit.” Finally, the court agreed that a subclass was appropriate for employees who had signed releases because the releases were virtually identical with carveouts for “any benefits or rights that vested prior to your execution of this Agreement under employee benefit plans governed by ERISA.” As a result, the court rejected defendants’ arguments, adopted Judge Wang’s conclusions, and certified the proposed class.

Fifth Circuit

Harmon v. Shell Oil Co., No. 3:20-CV-00021, 2023 WL 5758889 (S.D. Tex. Sept. 6, 2023) (Magistrate Judge Andrew M. Edison). The plaintiffs in this case are current or former employees of Shell Oil Co. and beneficiaries of Shell’s defined contribution 401(k) retirement plan. They contend that Shell, the trustees of the plan, and various Fidelity entities breached their fiduciary duties under ERISA by (1) incurring unreasonable recordkeeping fees, (2) unwisely investing plan funds, (3) incurring unreasonable managed account fees, and (4) engaging in prohibited transactions. Plaintiffs moved to certify two classes, one which included “All participants and beneficiaries of the Shell Provident Fund 401(k) Plan from January 21, 2014, through the date of judgment, excluding the Defendants,” and one which included “All participants and beneficiaries of the Shell Provident Fund 401(k) Plan who utilized the Plan’s managed account services from January 21, 2014, through the date of judgment, excluding the Defendants.” Defendants did not oppose the second class, but opposed the first on several grounds. First, defendants argued that plaintiffs did not have standing to be class representatives. The court rejected this argument, ruling that only one of the named plaintiffs was required to have standing, and plaintiffs satisfied this requirement because plaintiff David Lawrence invested in several of the relevant funds during the class period. Second, defendants argued that “the proposed class definition encompasses ‘huge blocks’ of absent class members who lack standing,” specifically participants who did not invest in “Tier III” funds or made money investing in Tier III funds. However, the court noted that the administration of Tier III funds affected the fees imposed on other tiers. Thus, “Plaintiffs have adequately alleged that those who did – and did not – invest in Tier III suffered an Article III injury as a result of the mere existence of the Tier III funds.” The court added that under Fifth Circuit precedent it was still permitted to certify a class including participants who actually had invested in Tier III funds but suffered no losses. In short, “The fact that Plaintiffs’ proposed class definition may encompass some absent class members without standing does not preclude class certification.” Having addressed the standing issues, the court then proceeded to rule that plaintiffs’ classes satisfied Rules 23(A), 23(B)(1), and 23(G). Defendants’ only objection regarding these requirements was that the proposed class was inadequate under 23(A) because it was “rife with intra-class conflict” between members who invested in different tiers. The court ruled that this argument was inaccurate and speculative, and that there was no fundamental conflict between the class members, as they all “share[d] a common goal of establishing the liability of the Shell Defendants.” The magistrate judge therefore recommended that plaintiffs’ class certification motion be granted.

Disability Benefit Claims

Fifth Circuit

Aucoin v. LifeMap Assur. Co., No. 2:22-CV-01876, 2023 WL 5836035 (W.D. La. Sept. 8, 2023) (Judge James D. Cain, Jr.). Plaintiff Claude Aucoin worked for Greenberry Industrial, LLC as a project manager, and hit his head on a piece of metal while vacuuming his truck at a car wash in 2019. In 2021, Aucoin stopped working, contending that he suffered from traumatic brain injury, headaches with migraines, mild neurocognitive disorder due to TBI, tinnitus, imbalance, emotional lability, and insomnia, which he attributed to his accident in 2019. Defendant LifeMap approved Aucoin’s claim for short-term disability benefits under Greenberry’s ERISA-governed disability benefit plan, but denied his claim for long-term benefits, concluding that he did not meet the policy’s definition of disability. Aucoin sued, and the parties filed cross-motions for judgment. In this order, the court ruled in favor of LifeMap under the de novo standard of review. The court noted that although Aucoin had the support of his doctor, his complaints of intractable headaches and tinnitus were “inconsistent within the administrative record.” The court stated that a more likely diagnosis was somatic symptom disorder, but Aucoin’s doctor had not explained why that diagnosis was disabling. The court was also troubled by Aucoin’s gaps in treatment. As a result, the court ruled that Aucoin “has not met his burden to prove by a preponderance of the evidence that he is unable to perform all the material and substantial duties of a Plant Manager,” and thus granted LifeMap’s motion for judgment, and denied Aucoin’s.

Sixth Circuit

Card v. Principal Life Ins. Co., No. 5:15-139-KKC, 2023 WL 5706202 (E.D. Ky. Sep. 5, 2023) (Judge Karen K. Caldwell). Since May 17, 2015, plaintiff Susan Card has been seeking short-term disability benefits, long-term disability benefits, and life insurance coverage in the courts pursuant to ERISA. Defendant Principal Life Insurance Company is the insurer and administrator of the disability policy provided by Ms. Card’s former employer. Principal has been denying benefits to Ms. Card, a licensed nurse suffering from blood and bone marrow cancer, for nearly ten years. This case has a long procedural history, one which is unlikely to end even after this latest decision. The following is a brief overview of the case’s history. In 2018, the court granted summary judgment in favor of Principal. It found that arbitrary and capricious review applied and concluded that the denial was not an abuse of discretion as it was supported by substantial evidence. Ms. Card appealed, and the Sixth Circuit reversed the court’s summary judgment order. It determined that Principal’s denial was arbitrary and capricious because, among other things, it did not provide explanations for why it disagreed with Ms. Card’s treating physicians’ opinions, it failed to consider the physical requirements of nursing, and it disregarded Ms. Card’s subjective complaints of pain. The court of appeals remanded to Principal to reevaluate her claim in light of and consistent with its ruling. (That decision was the case of the week in Your ERISA Watch’s November 6, 2019 edition.) Following the Sixth Circuit’s remand order, the parties differed over whether Ms. Card was required to provide Principal with more documents or whether Principal could evaluate only the material it had up until that point. Regardless of who was correct, Principal did not issue a ruling during the 45-day window permitted by ERISA claims handling regulations. Left without an answer, Ms. Card moved to reopen her case. In addition, she filed a separate motion to recover attorneys’ fees under Section 502(g)(1) for the success she achieved in her appeal to the Sixth Circuit. Both motions were then denied by the district court. It found that it lacked jurisdiction to consider the motions because the Sixth Circuit had remanded the matter directly to Principal. Ms. Card appealed for a second time. On appeal, the Sixth Circuit vacated the district court’s order. It held that district courts retain jurisdiction over ERISA benefit cases while administrators reassess benefit decisions on remand. The district court then reconsidered Ms. Card’s motions and on October 27, 2022, granted them both. (A summary of that decision is included in Your ERISA Watch’s November 2, 2022 newsletter.) This brings us to the present day, where Principal has moved pursuant to Rule 59(e) to alter and amend that order, and Ms. Card has moved for judgment reversing Principal’s denials of her claims. The court began its decision with Principal’s reconsideration motion. As a preliminary matter, the court held that Principal’s motion was timely, finding that it was not required to file its motion on the Friday after Thanksgiving, because this day is considered a legal holiday in the state of Kentucky. As for the merits of the motions, the court disagreed with Principal’s objections. Principal, the court held, knew both that it was supposed to start its review on remand, and that the Department of Labor’s 45-day deadline applied to determinations on remand. Thus, the court denied the motion to alter and amend its order. The court then determined which standard of review applies. Ultimately, it agreed with Principal that the 2002 version of the Department of Labor’s guideline for failure to issue timely claims decision applied because Ms. Card filed her claim for benefits before the 2018 version was in effect. Accordingly, the court reviewed the denials under the arbitrary and capricious review standard. At this point, the court finally discussed the grounds for Principal’s denials. Because Principal only had medical information from Ms. Card through January 1, 2015, the court split its review of Principal’s benefit denials before and after that date. The court began with the claims through January 1, 2015. With regard to these claims, it found that Principal’s denials were an abuse of discretion, as it failed to meaningfully rectify the problems that the Sixth Circuit already deemed to be arbitrary and capricious. “Due to the failure of Principal’s remand review to comport with the Sixth Circuit’s directives, the court finds that its subsequent denial was arbitrary and capricious to the extent that the determination denied Card’s LTD and LCDD claims through January 1, 2015. The Court grants judgment in favor of Card as to those claims.” Nevertheless, the court reached a different conclusion with regard to the claims beyond January 1, 2015. It held that Ms. Card was required to provide satisfactory proof of her disability and her failure to provide the information Principal requested meant that she failed to meet her burden to prove entitlement to benefits. By not fulfilling this duty, the court stated that “Principal reasonably denied her claims beyond January 1, 2015.” Ms. Card’s motion for judgment was thus denied for benefits covering the period beyond that time. Finally, the decision ended with the court determining the appropriate remedy for the pre-2015 benefits. Remarkably, rather than award Ms. Card these benefits, the court gave Principal a whole new bite at the apple, and remanded to it for the umpteenth time. Because of this, Ms. Card still does not have a benefit payment for denials that have been twice overturned as unreasonable. One wonders whether the Sixth Circuit will see this case a third time.

Higgins v. The Lincoln Elec. Co., No. 5:22-cv-88-BJB, 2023 WL 5672846 (W.D. Ky. Sep. 1, 2023) (Judge Benjamin Beaton). In July 2017, plaintiff Jerry Higgins received a benefit statement from his then employer, defendant The Lincoln Electric Company, informing him that he was covered for $92,260.80 in annual disability benefits under the company’s ERISA-governed long-term disability employee benefit plan insured by MetLife. However, when Mr. Higgins applied for and then began receiving long-term disability benefits he was informed that he would only receive $60,000 in benefits per year. Mr. Higgins attempted to receive the larger benefit amount he was allegedly promised, but his attempts proved fruitless. Accordingly, he commenced this action against both MetLife and Lincoln hoping to do just that, alleging ERISA violations for material misstatement/estoppel, breach, statutory damages for documents not provided upon request, a claim under 502(c) for failure to respond to his claim for benefits in a timely manner, and a claim for attorneys’ fees. The court previously granted MetLife’s motion to dismiss the claims against it. Now, Lincoln has moved for the same relief pursuant to Federal Rule of Civil Procedure 12(b)(6). The court granted the motion. It held that Mr. Higgins’ claims failed because the terms of the plan provide only for the maximum benefit amount that he is receiving, and the misstatement Lincoln made in the Benefit Election Form it sent to him does not alter the terms of the plan or entitlement him to benefits in that amount. “Higgins hasn’t pointed to anything indicating that Lincoln tried to trick him or that Higgins relied to his detriment on the July mailing.” Failure to honor the Benefit Election Form, the court held, “does not breach the plan agreement.” The court emphasized repeatedly that terms of the plan clearly allow for only $60,000 in annual disability benefits and that Mr. Higgins therefore should have been aware of the true facts. Thus, the court concluded that reliance on the inaccurate benefit statement was neither reasonable nor justified. Moreover, the court viewed Mr. Higgins’ assertion that he might have bought more coverage had he known that the higher amount was inaccurate as conclusory and “purely speculative.” With regard to the claim for failure to provide documents upon request, the court stressed that Mr. Higgins requested the administrative record, not plan documents, and “only a failure to provide plan documents triggers statutory penalties under § 1132(c).” The court also held that Mr. Higgins was not entitled to damages under Section 502(c) based on Lincoln’s alleged violation of claims handling regulations that require plan administrators to provide claimants with notifications of adverse benefit determinations, the specific reasons for the adverse decision, and additional material necessary to perfect the claim on appeal. The court wrote that these subsections “implement 29 U.S.C. § 1133, not § 1132,” and violations of Section 1133 by the plan administrator do not “impose liability on the plan administrator pursuant to section 1132(c), because duties of the ‘plan’ as stated in section 1133 are not duties of the ‘plan administrator’ as articulated in section 1132(c).” Finally, the court rejected Mr. Higgins’ request for a jury trial, finding no right to a jury trial, as well as his derivative claim for attorneys’ fees. Thus, all of the claims against Lincoln were dismissed, and this decision terminated the case.

Ninth Circuit

Chacko v. AT&T Umbrella Benefit Plan No. 3, No. 2:19-CV-01837-DAD-DB, __ F. Supp. 3d __, 2023 WL 5806455 (E.D. Cal. Sept. 7, 2023) (Judge Dale A. Drozd). This long-running action for ERISA-governed long-term disability benefits, which has been the subject of multiple discovery orders, was finally decided on the merits in this published decision. Plaintiff Ruby Chacko was a software engineer who began working for AT&T in 1997. Twenty years later, Ms. Chacko began experiencing “severe pain/ache in her eyes, neck, shoulders, and both arms, as well as blurred vision.” She stopped working on October 30, 2017. AT&T’s disability claim administrator, Sedgwick Claims Management Services, Inc., approved Ms. Chacko’s claim for short-term disability benefits. Ms. Chacko continued to treat with her physicians, reporting worsening pain which was corroborated by physical exam findings. Because her symptoms persisted, she submitted a claim for long-term disability benefits, which Sedgwick initially approved. However, Sedgwick terminated those benefits just three months later, contending that the medical evidence did not support ongoing disability. Sedgwick denied Ms. Chacko’s appeal, and this action followed seeking payment of benefits under ERISA Section 1132(a)(1)(B). Following discovery, the parties filed cross-motions for summary judgment. At the outset, the court addressed the issue of whether the record should be expanded to admit the file from Ms. Chacko’s workers compensation claim. The court agreed with Ms. Chacko that the evidence should be admitted because Sedgwick also administered her workers compensation claim, had the file in its possession, and relied on that file in denying her disability claim. Next, the court agreed with the parties that the abuse of discretion standard of review applied because the plan conferred discretionary authority on Sedgwick to determine benefit eligibility. This meant that the court was required to consider what level of deference it should give Sedgwick in evaluating its denial. The court rejected Ms. Chacko’s argument that Sedgwick had a conflict of interest, but agreed that the track record of Sedgwick’s reviewing physician, Dr. Howard Grattan, “suggests that Dr. Grattan harbored a bias in favor of the Plan” which “warrants a low-to-moderate level of skepticism.” The court also agreed that Sedgwick’s review was plagued with procedural problems, including (a) failing to consider the physical requirements of Ms. Chacko’s job, including “the significant need to use a keyboard,” (b) relying on transferrable skill assessments that failed to consider keyboard/mousing limitations, even though Sedgwick previously approved Ms. Chacko’s claim based on similar limitations, and (c) failing to request Ms. Chacko’s Social Security file or “engage in a meaningful review of the rationale underlying the SSA’s approval of plaintiff’s SSDI benefits claim.” Based on its conflict of interest and procedural error review, the court determined that it would apply “a moderate level of skepticism in evaluating whether there was an abuse of discretion in the denial of plaintiff’s LTD benefits claim.” Under this framework, the court proceeded to determine if Sedgwick abused its discretion in denying Ms. Chacko’s benefit claim, and concluded that it did. In particular, the court found that Sedgwick did not adequately consider Ms. Chacko’s job description and did not acknowledge that her position was computer-based when it denied her claim. Instead, Sedgwick simply considered whether Ms. Chacko could do “sedentary” work. Furthermore, the court found that Sedgwick’s denial letter contained inaccurate and misleading facts, Dr. Grattan’s “pure paper report” was inadequate, and Sedgwick “did not properly consider the SSA’s approval of plaintiff’s SSDI benefits claim.” For these reasons, the court concluded that “the Plan abused its discretion when it terminated plaintiff’s LTD benefits and denied her appeal.” It thus granted Ms. Chacko’s summary judgment motion, denied the plan’s, and ordered that benefits be paid through the date of judgment. (Ms. Chacko was represented by Michelle Roberts of Roberts Disability Law PC and Glenn Kantor and Zoya Yarnykh of Kantor & Kantor LLP.)

ERISA Preemption

First Circuit

In re Fresenius GranuFlo/NautraLyte Dialysate Prod. Liab. Litig., No. 13-2428, __ F. Supp. 3d __, 2023 WL 5810004 (D. Mass. Sept. 7, 2023) (Judge Nathaniel M. Gorton). This was originally an action filed by the State of Louisiana in Louisiana state court against Fresenius Medical Care Holdings alleging that Fresenius engaged in unfair and deceptive practices in the sale of its dialysis treatment products. Why, you may ask, is this in the federal District of Massachusetts and what on earth does this have to do with ERISA? Well, shortly before trial in state court, Blue Cross Blue Shield of Louisiana intervened, seeking to recover payments it made to Fresenius on behalf of members of its health plans for treatment using Fresenius’ drugs. Fresenius immediately removed the case to federal court, at which time it was reassigned to Judge Gorton in Massachusetts as part of ongoing multi-district litigation against Fresenius. Fresenius’ removal was based on the contention that BCBS’ state law claims were preempted by ERISA. In this order, the court rejected this argument and granted plaintiffs’ motion to remand the case back to Louisiana state court. The court observed that because BCBS was a plan fiduciary, it could technically bring a claim for equitable relief under ERISA § 1132(a)(3). However, the court held that “the claims in this case are not of the kind that § 1132(a)(3) was designed to address, and, therefore, are not within the realm of ERISA enforcement claims meant to be completely preempted.” The court ruled that the tort laws invoked by plaintiffs had “only a tangential connection to ERISA” and thus Fresenius’ argument failed the first prong of the Supreme Court’s preemption test in Aetna Health Inc. v. Davila. In short, “just because BCBS is an ERISA fiduciary does not render this an ERISA dispute.” The court declined to award fees and costs to plaintiffs, however, noting that ERISA’s preemption provision is “extremely broad” and Fresenius “made a colorable argument as to why this dispute should fall into that category.”

Life Insurance & AD&D Benefit Claims

Ninth Circuit

Dindinger v. Hartford Life & Accident Ins. Co., No. CV-22-00508-TUC-EJM, 2023 WL 5723401 (D. Ariz. Sep. 5, 2023) (Magistrate Judge Eric J. Markovich). Decedent Jacob Dindinger was shot and killed while on assignment working as an EMT in an ambulance. After Mr. Dindinger’s death, his family members applied for life insurance benefits under his ERISA-governed policy insured by defendant Hartford Life & Accident Insurance Company. Hartford denied their claim and this action followed. In this motion the plaintiffs moved to preclude Hartford from introducing new positions and documents before the court to defend its denial. The court agreed with plaintiffs that it is well-established law “that a plan administrator undermines ERISA and its implementing regulations when it presents a new rationale to the district court that was not presented to the claimant as a specific reason for denying benefits during the administrative process.” Moreover, the court concurred that Hartford was attempting to do just that. It found that Hartford was trying to add a new justification about whether Mr. Dindinger died while working at his regular place of business or while taking a “trip.” The court held that Hartford did not explicitly provide this ground for denying the claim during the administrative process and that plaintiffs should not have to guess at “the reason that they believe Defendant is relying upon.” In further support of this finding, the court stressed that plaintiffs’ counsel gave Hartford “the opportunity to clarify its position, and it declined the invitation. Now that the administrative process has ended and litigation begun, Defendant cannot now assert this post hoc rationale as a basis for denying Plaintiffs’ claim.” Thus, plaintiffs’ motion to preclude Hartford from adding new arguments before the court was granted. As for their request to preclude documents from the administrative record that were not provided to them prior to litigation, the court allowed the inclusion of only one of these documents – a hazard rider – which was reproduced “almost in its entirety” in the denial letter. It decided that inclusion of this additional page would not prejudice plaintiffs. Hartford agreed to withdraw the other documents. The remaining pages of claims notes were therefore precluded by the court.

Eleventh Circuit

Zaharopoulos v. Taylor, No. 5:22-CV-348 (MTT), 2023 WL 5751480 (M.D. Ga. Sept. 6, 2023) (Judge Marc T. Treadwell). This case involves ERISA-governed life insurance benefits. The decedent, Dominique Bowers, was survived by two sons, one of which renounced any claim to the benefits because he allegedly caused her death. This left two potential beneficiaries: her other son, Nasir Taylor, and her fiancé, Nicholas Zaharopoulos. The plan provides an order of preference for payment, listing “spouse or domestic partner” first, followed by children. Zaharopoulos contended that he was a “domestic partner” for the purposes of the plan, and filed a claim for benefits with the plan’s insurer, MetLife. Taylor also submitted a claim. Zaharopoulos initiated litigation, after which MetLife interpleaded the life insurance funds and was dismissed from the action. The competing beneficiaries then cross-moved for summary judgment. In this order, the court ruled in favor of Taylor. The court noted that the plan allows two methods for proving a domestic partnership. The insured employee can either “(1) register the domestic partnership with a government agency or (2) demonstrate a ‘mutually dependent relationship so that each has an insurable interest in the life of the other.’” The second option requires the employee to submit a “domestic partner declaration” to the plan. It was undisputed that there was no government-registered domestic partnership, and Bowers had not submitted a declaration to the plan administrator. As a result, the court ruled that because Zaharopoulos could not satisfy either condition, he was not Bowers’ domestic partner for the purposes of the plan and was not a beneficiary. Thus, the court concluded that Taylor was entitled to the life insurance proceeds and granted his motion for summary judgment, denying Zaharopoulos’.

Medical Benefit Claims

Sixth Circuit

Failali v. East Coast Performance LLC, No. 5:22-cv-2038, 2023 WL 5671937 (N.D. Ohio Sep. 1, 2023) (Judge Sara Lioi). Husband and wife Ismail Failali and Soukaina Moussa brought this ERISA action against Mr. Failali’s former employer, East Coast Performance LLC, asserting a claim for breach of fiduciary duty seeking to redress harm the family suffered as a result of inaccurate information the company provided to them regarding their health insurance plan. The complaint alleges that when Mr. Failali resigned from his position in early May 2022, he was told in writing by the owner of the company that his health insurance coverage would remain in effect through the end of the month. Relying on this representation, the family did not obtain alternative health coverage for the month of May. And, as it would turn out, the family needed their health insurance that month. On May 22, Ms. Moussa had a medical emergency and received care at a hospital. Plaintiffs were billed $9,567.41. Once billed, they realized that East Coast Performance had actually terminated their health insurance coverage on May 8. The family attempted to have the plan and its insurer cover the hospital bill, but thus far have received no contact or response to their letters of inquiry. Accordingly, they commenced this lawsuit under ERISA Section 1104(a)(1) for breach of the duty of providing accurate and truthful benefit disclosures and plan coverage, claiming defendant failed in this regard causing them an injury in the form of the hospital costs, for which they are entitled to relief. To date, East Coast Performance has failed to move or otherwise respond to plaintiffs’ complaint. On February 27, 2023, the clerk entered default against defendant and a copy of the entry was mailed to it. Still, East Coast Performance did not respond in any way. As a result, plaintiffs have now moved pursuant to Federal Rule of Civil Procedure 55(b)(2) for default judgment. Their motion was granted in this order. “Taking as true the undisputed factual allegations in the complaint, the law entitles plaintiffs to a judgment of liability against defendant East Coast Performance LLC on plaintiffs’ claim under ERISA that defendant breached its fiduciary duty to plaintiffs.” The court addressed the appropriate awards of monetary damages, attorney’s fees, and court costs. First, it awarded plaintiffs recovery in the amount of their hospital charges. The court was satisfied that plaintiffs proved their entitlement to this recovery as they attached their hospital bills to their motion which backed up their claims of monetary harm. Next, the court awarded plaintiffs’ counsel his requested fee award of $2,762.50, finding an award appropriate under Section 502(g) given their success. Plaintiffs’ attorney has close to 30 years of experience practicing law. The court thus considered his requested hourly rate of $325 reasonable and in line with the market rate. Moreover, the court found the 8.5 hours of billed work “reasonable under the circumstances.” Finally, the court awarded $402 in costs to plaintiffs to recover their filing fee. Accordingly, plaintiffs’ motion for default judgment was granted and the couple was awarded $12,731.91 in total damages.

Pleading Issues & Procedure

Third Circuit

Cockerill v. Corteva, Inc., No. 21-3966, 2023 WL 5672833 (E.D. Pa. Sep. 1, 2023) (Judge Michael Morris Baylson). In this putative class action a group of DuPont workers allege that their early retirement benefits under their ERISA-governed plan were reduced following the DuPont-Corteva spin off. In anticipation of class certification, defendants filed two motions – a motion to reconsider the court’s order accepting plaintiffs’ filing of their second amended complaint and a motion to dismiss the operative complaint – in an attempt to defeat this lawsuit. Both motions were denied by the court in this order. The decision began with the court taking its “significant responsibilities” under ERISA seriously, writing that if the allegations in the complaint prove true “ERISA is the proper remedial statute,” and the court has the authority “to award broad equitable remedies.” Finding that plaintiffs pled facts that allowed it to infer that defendants are liable for the alleged conduct, the court declined to “intervene to disrupt the progression of this case or halt it altogether.” Broadly, the court found many of defendants’ arguments redundant to those they previously raised, which it had already rejected in a ruling from last August. The court declined to reconsider its order permitting the amended complaint. It stated that defendants exaggerated the burden that permitting the complaint created for them, and that no clear error of law nor manifest injustice flowed from allowing plaintiffs to file their amended complaint. As for the motion to dismiss, the court viewed the new arguments that defendants raised in their motion as “fail[ing] to move the needle.” First, it was satisfied that the new named plaintiff suffered the same concrete injury as the others– reduced early retirement benefits – and that he therefore had constitutional standing. Next, it held that discovery is necessary in order to determine whether fraudulent concealment and/or futility excuse plaintiffs’ failure to exhaust administrative remedies prior to filing this action. Additionally, the court declined to conclude as a matter of law that the named plaintiffs are not eligible for optional benefits. “That, too, would be premature. What the parties are essentially disputing here is the proper interpretation of the language of the plan and the scope of its coverage.” Therefore, the court would not resolve this dispute at the motion to dismiss stage. Finally, the court did not take up the issue of ERISA preemption of the state law promissory estoppel claim. Once again, the court stressed that this topic was premature, and that further discovery is necessary before it can be resolved properly. For these reasons, both of defendants’ motions were denied and this action will proceed. (Plaintiffs are represented in this matter by Kantor & Kantor attorneys Sue Meter, Jaclyn Conover, and Your ERISA Watch co-editor Elizabeth Hopkins, as well as Edward Stone of Stone Law PC, and Nina Wasow and Dan Feinberg of Feinberg Jackson Worthman & Wasow LLP.)

Fourth Circuit

Davis v. Old Dominion Freight Line, Inc., No. 1:22CV990, 2023 WL 5751524 (M.D.N.C. Sept. 6, 2023) (Judge Thomas D. Schroeder). Plaintiff Harvey Davis brought this putative class action on behalf of the 401(k) retirement plan of his employer, Old Dominion Freight Lines, alleging that Old Dominion breached its fiduciary duties under ERISA in managing the plan. Specifically, Davis contended that Old Dominion pursued highly-priced and poorly performing share classes, and offered actively managed funds that charged more in fees and underperformed other funds. He also alleged that Old Dominion incurred excessive recordkeeping and administrative costs. Davis brought two claims for relief: one for breach of the fiduciary duty of prudence, and one for failure to adequately monitor other fiduciaries. Old Dominion moved to dismiss, arguing that the court lacked subject matter jurisdiction and that Davis failed to state an adequate claim. The court did not reach the second issue because it agreed with Old Dominion on the first issue, ruling that Davis lacked standing to bring his claims. The court noted that participants in defined contribution plans, like the one at issue here, are often permitted to bring suits on behalf of the plan. However, the court stressed that in order to do so, a participant must demonstrate that he has personally “suffered an injury that could be redressed by the court” in order to have standing. The court found that Davis could not do so because he had not invested in any of the challenged funds, and thus was unable to show that the alleged fiduciary breach negatively affected any of his accounts. Thus, the court granted Old Dominion’s motion to dismiss, without prejudice.

Seventh Circuit

Lysengen v. Argent Trust Co., No. 20-1177, 2023 WL 5806203 (C.D. Ill. Sept. 7, 2023) (Judge Michael M. Mihm). This case has spawned multiple orders, which Your ERISA Watch has diligently covered since 2020 (order denying motion to dismiss, order denying another motion to dismiss, order denying motion for class certification, order denying motion for summary judgment). The case involves Morton Buildings, Inc.’s employee stock ownership plan. Plaintiff Jackie Lysengen, a Morton employee, brought this suit alleging that the ESOP overpaid for the stock it purchased, asserting that the stock price rose suspiciously one month before the ESOP transaction and then plummeted drastically following the transaction, indicating it was overpriced. She amended her complaint to include as defendants the Estate of Virginia Miller, the Estate of Henry A. Getz, and the Getz Family Partnership, suing them for equitable relief under ERISA Section 502(a)(3) and alleging that these non-fiduciary shareholder defendants had constructive knowledge of the wrongdoing in the ESOP transaction. This order addressed whether plaintiff could bring her claims against these defendants in a representative capacity under Section 502(a)(3), and whether those claims survived summary judgment. The court ruled in plaintiff’s favor on the first issue, rejecting defendants’ argument that Section 502(a)(3) claims can only be brought in an individual capacity. The court noted that Section 502(a)(3) “admits of no limit” on possible defendants, including non-fiduciaries, and broadly provides for “redressing violations of any provision for ERISA, provided that such relief is ‘equitable.’” However, even though plaintiff was authorized to bring a Section 502(a)(3) claim, the court ruled that the relief she sought was not recoverable under equity. Plaintiff sought “disgorgement of any profits, accounting for profits, surcharge, having a constructive trust placed on any proceeds received…having the transactions rescinded, requiring all or part of the consideration to be restored to the Plan, or to be subject to other appropriate equitable relief.” The court found that plaintiff did not “ultimately identify any traceable funds, accounts, stock, or proceeds” in the possession of the shareholder defendants, as required by Supreme Court precedent in order to be eligible for equitable relief. Furthermore, the court stated that what plaintiff “ultimately seeks is a declaratory judgment that determines the amount of liability the Shareholder Defendants owe on account of the alleged overpayment of stock,” which is “akin to a monetary judgment that constitutes legal relief, not equitable relief.” As a result, the court granted the shareholder defendants’ motion for summary judgment, and denied plaintiff’s. Plaintiff’s claims against Argent Trust “remain pending before the Court.”

Ninth Circuit

Miguel v. Salesforce.com, Inc., No. 20-CV-01753-MMC, 2023 WL 5836802 (N.D. Cal. Sept. 8, 2023) (Judge Maxine M. Chesney). The plaintiffs in this case are former Salesforce employees who participated in Salesforce’s 401(k) defined contribution retirement plan. They allege that the defendants breached their fiduciary duties to the plan and its participants in violation of ERISA. In 2021, the district court granted defendants’ motion to dismiss, and plaintiffs appealed. The Ninth Circuit agreed with the district court that “plaintiffs have not plausibly alleged that defendants breached the duty of prudence by failing to adequately consider passively managed mutual fund alternatives to the actively managed funds offered by the [P]lan.” However, the Ninth Circuit also found that “plaintiffs have stated a plausible claim that defendants imprudently failed to select lower-cost share classes or collective investment trusts with substantially identical underlying assets.” Thus, the Ninth Circuit reversed and remanded. (Your ERISA Watch covered this decision in its April 13, 2022 issue.) On remand, the plaintiffs moved to amend their complaint to add “allegations in support of [their] imprudent investment claims.” Specifically, plaintiffs wanted to include allegations about defendants’ heavy reliance on the advice of Bridgebay, which used deficient data. The district court noted that the deadline for amending pleadings had passed, and found that the new allegations were based on facts that plaintiffs previously had in their possession, and thus they were not diligent in amending their complaint. Furthermore, the district court stated that the Ninth Circuit had already found that plaintiffs had adequately alleged a claim for breach of the duty of prudence. Thus, “Plaintiffs essentially seek to bolster their claim for breach of the duty of prudence by belatedly proffering allegations that do not alter the substance of their claim. Such circumstances do not constitute good cause for amendment under Rule 16.” As a result, the court denied plaintiffs’ motion to amend their complaint.

D.C. Circuit

Holland v. Cardem Ins. Co., No. CV 19-02362 (TSC), 2023 WL 5846673 (D.D.C. Sept. 11, 2023) (Judge Tanya S. Chutkan). The trustees of the United Mine Workers of America 1974 Pension Plan brought this action against Cardem Insurance Company, seeking to recover nearly $934 million in pension funds allegedly due to it pursuant to ERISA. Cardem was once a subsidiary of Walter Energy, a U.S.-based company, but now it is a Bermudan company with its principal place of business in Bermuda. As a result, Cardem filed a motion to dismiss, arguing that the court did not have personal jurisdiction over it. A magistrate judge agreed, and plaintiffs objected. In this order the court overruled plaintiffs’ objections and granted Cardem’s motion to dismiss. The court noted that Cardem received reinsurance proceeds from non-U.S. entities and insured properties in the United Kingdom and Bermuda, which undercut plaintiffs’ argument that Cardem’s contacts were concentrated in the U.S. Plaintiffs also tried to draw connections between Cardem and U.S.-based Walter Energy, but the court ruled that agency tests do not control the personal jurisdiction analysis. Cardem’s financial support from Walter Energy was also insufficient to establish jurisdiction. In sum, the court, citing Supreme Court precedent, stated, “It would be ‘an exceptional case’ if a corporation is ‘at home’ in a forum ‘other than its formal place of incorporation and principal place of business.” This case was not such an exception, so the court dismissed the action.

Provider Claims

Fifth Circuit

Lone Star 24 HR ER Facility, LLC v. Blue Cross Blue Shield of Tex., No. SA-22-CV-01090-JKP, 2023 WL 5729947 (W.D. Tex. Sep. 5, 2023) (Judge Jason Pulliam). A privately-held emergency care facility, plaintiff Lone Star 24 Hour ER Facility, on behalf of itself and 882 patients, has sued Blue Cross Blue Shield of Texas for violating Texas’ insurance laws which require health insurance providers to reimburse out-of-network emergency service providers for “at a minimum, at the usual and customary charge for the service.” Lone Star alleges that Blue Cross has grossly underpaid it for services it provided. It maintains that the reimbursement rates paid by Blue Cross “are less than a Medicare allowable, less than in-network rates for hospital ERs for the same services, and far less than FAIR Health data that is utilized and was adopted by the Texas Department of Insurance as a benchmark to determine appropriate payment for emergency care providers.” In its complaint, Lone Star asserts state law causes of action for breach of contract, bad faith insurance practices, and negligent misrepresentation. In addition, Lone Star asserts a cause of action under ERISA for recovery of benefits. Blue Cross moved to dismiss for lack of subject matter jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(1) and for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6). Its motion was granted in part and denied in part. To begin, the court considered Blue Cross’ jurisdictional challenge. The court determined that it lacked jurisdiction to adjudicate any of the claims brought by the 882 individual unnamed plaintiffs, holding that these plaintiffs could not proceed anonymously under their initials because there was no reason they would be required to disclose personal health or medical information during this litigation. Therefore, the court considered the remainder of the motion to dismiss solely with respect to Lone Star. The court accepted as true the complaint’s assertions that Lone Star was assigned benefits by all of its patients. This, the court stated, was “sufficient to withstand [Blue Cross’s] facial attack to the Court’s subject matter jurisdiction based upon lack of standing to sue for ERISA benefits under plans.” As a result, the court denied defendant’s motion to dismiss the ERISA claim for lack of derivative standing. It also “admonishe[d]” Blue Cross “for continually asserting this unsuccessful argument for dismissal,” and cautioned it against raising the same argument in future and pending ERISA healthcare cases brought by providers. Blue Cross’ jurisdictional challenges to Lone Star’s state law claims were likewise denied. The court then proceeded to analyze Blue Cross’ motion to dismiss for failure to state a claim. Regarding the ERISA claim, the court found that Lone Star had plausibly pled sufficient details regarding a right to greater benefits and thus stated a viable cause of action. Once again, the court reprimanded Blue Cross “for continually asserting” in the courts that plaintiffs need to provide specific plan terms. Instead, the court stated that this position improperly raises the pleading burden. Blue Cross was warned “to carefully consider any future assertion in any pending or new case, as it could be determined to be frivolous given the numerous historical renunciations.” Finally, the court denied Blue Cross’ motion to dismiss the state law causes of action for failure to state a claim under Rule 12(b)(6). It also found that the issue of ERISA preemption was premature at this juncture.

Seventh Circuit

Advanced Phys. Med. of Yorkville v. Cigna Health & Life Ins. Co., No. 22-CV-02982, 2023 WL 5830791 (N.D. Ill. Sept. 8, 2023) (Judge John F. Kness). Advanced Physical Medicine of Yorkville, a chiropractic practice, brought this action under ERISA against the employer of one of its patients and Cigna, the claim administrator for the employer’s medical benefit plan, alleging that they failed to pay benefits for treatment incurred by the patient. It also sued for statutory penalties because plan documents were not provided upon request. Both defendants filed a motion to dismiss, arguing that plaintiff did not have a valid assignment of its patient’s right to sue due to the benefit plan’s anti-assignment clause. Cigna also argued separately that it was an improper defendant. The court noted that the only plan document in front of it was the summary plan description, and that the SPD contained provisions which conflicted on the anti-assignment issue. One provision purported to bar such assignments, while another stated that “you” had the right to sue under ERISA and defined “you” as “the Covered Member, and also…a representative or provider designated by you to act on your behalf.” The court ruled that it could not resolve this ambiguity at the pleading stage and thus denied defendants’ motion on this ground. All was not lost for Cigna, however, as the court agreed it was an improper defendant. The SPD stated that the plan was self-funded by the employer, which was financially responsible for paying any benefits. Cigna “does not insure or guarantee” the benefits and thus could not be sued for those benefits. Furthermore, plaintiff’s claim for statutory penalties also could not be brought against Cigna because ERISA provides that such claims can only be brought against plan administrators, not claim administrators. Thus, plaintiff’s claims against Cigna were dismissed with prejudice, but its claims will continue against the employer.

Severance Benefit Claims

Eleventh Circuit

Rhode v. CSX Transp., Inc., No. 22-10909, __ F. App’x __, 2023 WL 5846296 (11th Cir. Sept. 11, 2023) (Before Circuit Judges Wilson, Grant, and Brasher). Bryan Rhode, a former executive at CSX, filed this action under ERISA contending that CSX unlawfully denied his claim for severance pay and benefits under the company’s Executive Severance Plan. The district court ruled for CSX, finding that CSX reasonably denied Rhode’s claim, Rhode received a full and fair review of his claim, and Rhode did not show that any conflict of interest tainted CSX’s decision. On appeal, Rhode contended that he did not voluntarily resign, and was in fact involuntarily terminated. He also argued that he did not receive a full and fair review because the plan administrator did not review his emails, files, and calendar entries or interview his colleagues in order to ascertain whether he in fact intended to resign from CSX. The Eleventh Circuit did not dig into these issues, simply holding that after “careful consideration of the record and the parties’ briefs, and with the benefit of oral argument, we find no reversible error in the district court’s judgment.” The judgment was thus affirmed.

Statute of Limitations

Ninth Circuit

Zink v. St. Luke’s Health System, Ltd., No. 1:22-CV-00359-AKB, 2023 WL 5748158 (D. Idaho Sept. 6, 2023) (Judge Amanda K. Brailsford). Husband and wife Adam and Lauren Zink brought this action against Adam’s employer, St. Luke’s Health System, and SelectHealth, the administrator of St. Luke’s employee health benefit plan. Their claim arose out of a 2019 motorcycle crash suffered by Adam, which resulted in severe injuries. SelectHealth denied the claim, asserting that it was barred by the plan’s exclusion for “services to treat conditions that are related to illegal activities,” which allegedly applied to Adam’s injuries because his blood alcohol level was above the legal limit at the time of his crash. After the Zinks brought suit, defendants moved to dismiss several of the Zinks’ claims. The Zinks conceded on most of these arguments, leaving only one claim: Adam’s claim for denial of benefits under ERISA § 1132(a)(1)(B). Defendants argued that this claim was time-barred because the plan has a two-year limitation on filing suit, and Adam filed his complaint more than two years after SelectHealth’s final denial. Adam admitted to this chronology, but argued that the limitation period was unenforceable due to inadequate notice because SelectHealth did not include the time limit in its denial letters. In this order, the court sided with Adam. The court noted that although the Ninth Circuit had not ruled directly on the issue, three other circuit courts – the First, Third, and Sixth – had all concluded that ERISA regulations require administrators to include a plan-imposed time limit for judicial review in their denial letters. The court agreed with these decisions, and distinguished other contrary district court rulings on the ground that those rulings preceded the cited circuit court decisions and thus were less persuasive. Thus, the court granted defendants’ motion as to the conceded claims, but denied it as to Adam’s claim for benefits, finding it timely.