Since the recent decisions on the DOL’s fiduciary rule are now old news, I want to take this Monday to highlight two district court decisions on the issue of exhausting administrative remedies.  The first is from a district court in the Second Circuit, Tuttle v. The Prudential Insurance Company of America, No. 3:17-CV-00100-VAB, 2018 WL 1245731 (D. Conn. Mar. 9, 2018). In Tuttle, the court determined that Plaintiff exhausted his administrative remedies where he appealed Prudential’s initial determination denying his long-term disability benefits but did not appeal Prudential’s subsequent decision to partially overturn its initial determination.  The second determination upheld a substantial part of Prudential’s previous decision to deny benefits.  The court agreed with Plaintiff that requiring him to appeal a second time would create “a continuous cycle of appeals from appeals.”

The second decision is from a district court in the Ninth Circuit, Gary v. Unum Life Insurance Company of America, No. 3:17-CV-01414-HZ, 2018 WL 1309991 (D. Or. Mar. 12, 2018).  In Gary, the court determined that Unum violated Plaintiff’s right to a “full and fair review” under 29 U.S.C. § 1133 and its implementing regulation, 29 C.F.R. § 2560.503-1, where Unum’s initial decision to deny her claim was based on the determination that she was not disabled during the 180-day elimination period but its final decision found that she was disabled during the elimination period and ten and one-half months beyond the elimination period, and not thereafter.  The decision letter did not give Plaintiff another opportunity to appeal and stated she could file a civil action.  The court found that depriving Plaintiff of the opportunity to appeal the new reason given by Unum in its final decision was a violation of Plaintiff’s right to a full and fair review.  The court determined that reinstatement of long-term disability benefits is not the appropriate remedy.  Instead, the appropriate remedy is to allow Plaintiff to supplement the record in this court with evidence supporting her position that she remained disabled after the date Unum found her to be no longer disabled.

These decisions are notable because they highlight the continuing balancing act necessary to ensure a full and fair review and effective access to the courts when a participant has been deprived of such review.  In Tuttle, Prudential denied Plaintiff’s long-term disability claim because it determined that there were no medically supported restrictions and limitations that would preclude him from returning to work in his regular occupation.  Prudential also concluded that he had worked in the past with the same condition and he was not in any intensity of treatment that would support his inability to work.  When it partially overturned its initial decision, Prudential found that he was disabled for just two days and not thereafter.  The reasoning was essentially the same.  Given these circumstances, it’s no wonder why the court did not find that Plaintiff was required to appeal that decision.  If forced to appeal Prudential’s second decision awarding him only two days of benefits, it might have added another year of delay before Tuttle could vindicate his rights in court.  And, there would have been little to add to his first appeal which addressed the same period of time (minus two days).

On the other hand, in Gary, Plaintiff’s initial appeal of Unum’s claim decision only addressed Unum’s determination that she had not been continuously disabled through the 180-day elimination period (or waiting period).  The appeal decision set forth new and additional rationale.  Unum found that Plaintiff was indeed disabled during the elimination period, and for more than ten months thereafter. But, what about the period after that?  Plaintiff did not have fair notice or an ability to appeal her eligibility for benefits for that period of time.  An opportunity to appeal would have given her the ability to provide Unum with additional medical and vocational evidence.  The choice should have been hers to decide whether or not the record was strong enough on that issue or whether Unum needed to consider additional evidence.

In the circumstance where an administrator only partially overturns a claim denial on appeal, administrators would be wise to offer voluntary appeal rights.  The claimant (and his or her attorney) can then decide whether they want to litigate on the record already established or whether there is new or additional information that would support the claim.  This would help eliminate disputes on whether or not a claimant has exhausted administrative remedies and a court can get to the heart of the merits.  Disclaimer:  I don’t advise plan administrators (unless it’s about something they did wrong with one of my clients’ disability claims).  This is not legal advice, but it makes a lot of sense doesn’t it?

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

Attorneys’ Fees

Ninth Circuit

Brasley v. Fearless Farris Serv. Stations, Inc., No. 16-35519, __F.App’x__, 2018 WL 1280731 (9th Cir. Mar. 13, 2018) (Before: RAWLINSON, CLIFTON, and CHRISTEN, Circuit Judges).  Plaintiff achieved “some success” on the merits entitling him to attorney’s fees where his post-judgment lawsuit proceedings resulted in Defendant providing lump sum benefit payments to plan participants in order to satisfy the district court’s amended judgment in favor of the plan participants.  The court vacated the district court’s denial of attorneys’ fees and remanded the matter to the district court to apply the Hummell factors.

Rustad-Link v. Providence Health and Services & Unum Group Corporation, No. CV 16-136-M-DWM, 2018 WL 1336146 (D. Mont. Mar. 15, 2018) (Judge Donald W. Molloy).  In this case where the court previously found in favor of Plaintiff on the issue of whether Unum was permitted to offset her personal injury settlement against her long-term disability benefits (click here to read that decision), the court granted Plaintiff’s motion for an award of attorney’s fees and costs in the amount of $41,024.90.  The court also awarded prejudgment interest on her improperly withheld benefits at a rate of 1.79% compounded annually.

Breach of Fiduciary Duty

Second Circuit

Patrico v. Voya Fin., Inc., No. 16 CIV. 7070 (LGS), 2018 WL 1319028 (S.D.N.Y. Mar. 13, 2018) (Judge Lorna G. Schofield).  The court denied Plaintiff’s motion for leave to file the First Amended Complaint in this matter alleging breach of fiduciary duties and prohibited transactions related to investment advice fees.  The court explained that as a matter of law, neither Defendant was acting as a fiduciary while negotiating Voya Retirement Advisors’ fees.  Merely providing services to the Plan for a fee is insufficient to make Financial Engines an adverse party.  The FAC fails to allege sufficient facts that Nestle engaged in a prohibited transaction by paying allegedly excessive fees to VRA.

Negron v. Cigna Health and Life Insurance & Optumrx, Inc., 2018 WL 1258837 (D. Conn. Mar. 12, 2018) (Judge Warren W. Eginton).  In this putative class action alleging violations of ERISA and RICO based on Defendants’ alleged artificial inflation of prescription drug costs in violation of the terms of their health insurance policies, the court granted Defendants’ motion to dismiss in part.  The court dismissed Plaintiffs’ claim alleging violation of ERISA Section 702(b) (prohibiting a group health plan from discriminating against an individual on the basis of any health status-related factor) since Plaintiffs have not alleged that the cost-sharing provisions are not applied uniformly to all participants and beneficiaries, or that insureds with specific medical conditions have been targeted.  The court also dismissed Plaintiffs’ RICO Enterprise claim against OptumRx since Plaintiffs fail to allege a viable association-in-fact.  Plaintiffs may move forward on the remaining eight counts.

Fifth Circuit

Chamber of Commerce of United States of Am. v. United States Dep’t of Labor, No. 17-10238, 2018 WL 1325019 (5th Cir. Mar. 15, 2018) (Before STEWART, Chief Judge, and JONES and CLEMENT, Circuit Judges).  The court reversed the district court’s grant of summary judgment to the Department of Labor in this lawsuit brought by business groups against the DOL challenging the “fiduciary rule” that broadly reinterpreted the term “investment advice fiduciary.”  The Fifth Circuit held that the DOL’s expansion of the scope of its “fiduciary rule” to include a broker-dealer and insurance agents conflicted with plain text of ERISA.

Tenth Circuit

Mkt. Synergy Grp., Inc. v. United States Dep’t of Labor, No. 17-3038, 2018 WL 1279743 (10th Cir. Mar. 13, 2018) (Before LUCERO, KELLY, and MATHESON, Circuit Judges).  The court affirmed the district court’s grant of summary judgment in favor of the Department of Labor in this matter where an insurance agency brought suit against the DOL challenging its final regulatory action regarding fixed indexed annuity (FIA) sales.  The court held that the DOL’s notice of proposed rulemaking provided sufficient notice of its final rule; the DOL’s decision to treat FIAs differently than fixed rate annuities in final rule was not arbitrary or capricious; it adequately considered state regulation of FIAs in promulgating the final rule; and the DOL could reasonably have concluded that the benefits to investors from the final rule outweighed the costs to FIA industry of compliance.

Class Actions

Third Circuit

Huffman v. The Prudential Insurance Company of America, No. 2:10-CV-05135, __F.3d__, 2018 WL 1281901 (E.D. Pa. Mar. 12, 2018) (Judge Joseph F. Leeson).  This matter involves fiduciary breach claims against Prudential for its use of retained asset accounts called “Alliance Accounts” to pay life insurance benefits.  Prudential filed a petition under Federal Rule of Civil Procedure 23(f) to the United States Court of Appeals for the Third Circuit seeking interlocutory review of the court’s decision to certify the class.  In this decision, the court denied Prudential’s motion to stay further proceedings pending the Third Circuit’s decision.  The court also denied as not yet ripe Prudential’s motion in limine to preclude the testimony of Plaintiffs’ expert at trial.

Seventh Circuit

Bhattacharya v. Capgemini North America, Inc., et al., No. 16 C 7950, 2018 WL 1316721 (N.D. Ill. Mar. 14, 2018) (Judge Matthew F. Kennelly).  In this action asserting four claims arising from Defendants’ alleged failure to comply with ERISA and COBRA requirements related to group health plans and continuation coverage, the court granted class certification as to all counts except for the claim that Defendants failed to provide Plaintiffs with a SPD within 90 days after the date they became plan participants.  The court certified, pursuant to Rule 23(b)(3), the following subclasses:

Subclass one: All current and former Indian national employees who elected coverage under defendants’ group health plan, together with their spouses, from August 8, 2014 to the date of judgment in this action, who were not provided written notice of their COBRA rights at the time of commencement of coverage under the plan; and

Subclass two: All current and former Indian national employees who elected coverage under defendants’ group health plan, together with their spouses and other covered dependents and who were not provided notice of COBRA continuation coverage upon loss of coverage under Capgemini FS’s group health plan as a result of a “transfer” from Capgemini FS to Capgemini India from August 8, 2014 to the date of judgment in this action.

Disability Benefit Claims

Second Circuit

Tuttle v. The Prudential Insurance Company of America, No. 3:17-CV-00100-VAB, 2018 WL 1245731 (D. Conn. Mar. 9, 2018) (Judge Victor A. Bolden).  See notable decision above.  In addition, the court declined to find at this stage that Plaintiff’s lawsuit is barred by judicial estoppel on the basis that he failed to disclose his LTD claim against Prudential to the bankruptcy court.  On the current record, the court cannot determine whether Plaintiff demonstrated bad faith or took steps to inform his bankruptcy attorney of the benefits claim.  The court stated that Prudential may renew its estoppel claim at summary judgment, after the completion of discovery.

Fourth Circuit

Price v. Unum Life Insurance Company of America, et al., No. GJH-16-2037, 2018 WL 1352965 (D. Md. Mar. 14, 2018) (Judge George J. Hazel).  Unum denied Plaintiff’s claim for long term disability benefits, finding that despite his pain complaints, the evidence did not support that he was limited from performing the material and substantial duties of his regular occupation.  On the standard of review, the court determined that the amended regulations do not require courts to review claim determinations made after the regulatory deadline de novo where there is a grant of discretionary authority in the plan and where there has been “substantial compliance” with the ERISA framework.  The court determined that Unum did not abuse its discretion because its claims process was reasonable, its decision was supported by the record, and it discounted the treating provider opinions on the basis of identified inconsistencies in the record.  Unum did not abuse its discretion by assessing Plaintiff’s ability to work as defined by the generic responsibilities and demands of a Program Specialist.  The court rejected Plaintiff’s implication of Unum’s alleged “sordid history” that its medical reviewers were motivated by a desire to deny claims.

Damiano v. Institute For In Vitro Sciences, et al., No. CV PX-16-920, 2018 WL 1301027 (D. Md. Mar. 13, 2018) (Judge Paula Xinis).  On Plaintiff’s breach of fiduciary duty claim against her former employer, IIVS, the court rejected Defendant’s argument that judicial estoppel prevents Plaintiff from arguing that she was disabled and unable to work when she sought and received unemployment insurance benefits.  The court noted that Plaintiff applied for unemployment benefits prior to her brain surgery which rendered her disabled and Defendant does not argue that Plaintiff made a differing representation to a court during a prior judicial proceeding.  Plaintiff was not required to exhaust her administrative remedies for her breach of fiduciary duty claim.  Although Plaintiff generated sufficient evidence from which a factfinder could determine that IIVS’s representations about her benefit coverage were material, she cannot show that she was harmed by the misrepresentations.  Summary judgment granted to IIVS.

Seventh Circuit

Daniliauskas v. Reliance Standard Life Insurance Company, No. 1:16-CV-9278, 2018 WL 1336051 (N.D. Ill. Mar. 14, 2018) (Judge Charles R. Norgle).  On de novo review, the court found that Plaintiff suffers from a myriad of neurological and psychological deficiencies but concluded that his limitations in problem solving, self-motivation, and analytical skills are not so severe as to impair him from performing an essential element of his job as a pension administrator or any other occupation commensurate with his skills and education.  The court concluded that Plaintiff has not satisfied his burden of proving disability by a preponderance of the evidence and is not entitled to disability benefits under the Reliance Standard policy.

Ninth Circuit

Dimry v. The Bert Bell/Pete Rozelle NFL Player Retirement Plan, et al., No. 16-CV-01413-JD, 2018 WL 1258147 (N.D. Cal. Mar. 12, 2018) (Judge James Donato).  The court determined that the Retirement Board of the Bert Bell/Pete Rozelle NFL Player Retirement Plan did not properly exercise its discretion in denying Plaintiff total and permanent disability benefits under the Plan and ERISA.  The court noted that the orthopedist the Plan retained to examine Plaintiff received a substantial amount of money from the Plan in the one-year time period around the time that the doctor evaluated Plaintiff.  The court determined that this fact raises a fair inference of a financial conflict that adds skepticism to the standard of review.  The court also found that the Plan had an unreasonable bias in favor of Plan-selected physicians.  It stated, “It is true, as the Plan notes, that the Board owed no special deference to the opinions of Dimry’s treating physicians. It was also entitled to treat a single medical opinion as sufficient to adjudicate Dimry’s claim.  But it was not entitled to decide a benefits claim by mere default to a Plan-selected physician. That is the abandonment of discretion, not the exercise of it.” (internal citations omitted).

Gary v. Unum Life Insurance Company of America, No. 3:17-CV-01414-HZ, 2018 WL 1309991 (D. Or. Mar. 12, 2018) (Judge Marco A. Hernandez).  See notable decision summary above.

Eleventh Circuit

Mathis v. CSX Corporation Short Term Disability Plan, No. 3:16-CV-1386-J-32PDB, 2018 WL 1326876 (M.D. Fla. Mar. 15, 2018) (Magistrate Judge Patricia D. Barksdale).  The court overruled Plaintiff’s objections to the Magistrate Judge’s report and recommendation to uphold MetLife’s denial of long-term disability benefits.  “On this record, MetLife could have awarded benefits for the disputed period. However, Mathis has not demonstrated that MetLife’s denial of benefits was arbitrary and capricious. . . . Though this is a close case, the Court cannot find that MetLife acted arbitrarily and capriciously.”


Sixth Circuit

Alekna v. The AT&T Service, Inc., et al., No. 5:17-CV-400, 2018 WL 1251767 (N.D. Ohio Mar. 12, 2018) (Judge Sara Lioi).  In this long-term disability dispute, the court determined that Plaintiff has not provided any facts showing that she has a colorable procedural or bias claim entitling her to discovery in this ERISA case.  The court “will not permit Alekna to embark on a fishing expedition armed exclusively with rank speculation supported only by the fact that Sedgwick does not offer its services free of charge. To allow discovery in such circumstances would require discovery in all ERISA cases, transforming the exception into the rule, and decimating case law underscoring the limited nature of ERISA discovery.”  The court denied Plaintiff’s motion for discovery.

Eighth Circuit

Christoff v. Unum Life Ins. Co. of Am., No. 017CV03512DWFKMM, 2018 WL 1327112 (D. Minn. Mar. 15, 2018) (Magistrate Judge Katherine Menendez).  The court found that the fiduciary exception to the attorney-client privilege applies in cases such as this where an insurer acts as a fiduciary of an ERISA plan. The court also found that communications between a claims analyst and in-house counsel, which took place before the final benefits determination, is subject to the fiduciary exception and must be produced.  The claims analyst sought input from counsel as to whether Unum had to provide information to Plaintiff as his attorney had alleged.  The court found that this is a matter of plan administration, not a communication on a non-fiduciary matter.

ERISA Preemption

Second Circuit

Salzberg, M.D. v. Aetna Insurance Company, et al., No. 17 CV 7909 (VB), 2018 WL 1275776 (S.D.N.Y. Mar. 12, 2018) (Judge Vincent L. Briccetti).  Plaintiff, a healthcare provider, asserted claims for breach of contract, promissory estoppel, account stated, and fraudulent inducement against Aetna for unpaid medical services.  Aetna removed the case.  The court denied the provider’s motion to remand the matter to state court since some of the claims implicate coverage and benefit determinations as set forth by the terms of the ERISA benefit plan, and can be construed as colorable claims for benefits under Section 502(a)(1)(B).  The court agreed to exercise supplemental jurisdiction over Plaintiff’s state law claims that are not preempted by ERISA.

Ninth Circuit

Wolford v. Wolford, No. C17-1673 TSZ, 2018 WL 1336200 (W.D. Wash. Mar. 15, 2018) (Judge Thomas S. Zilly).  The pro se plaintiff alleged claims against the Western Conference of Teamsters Pension Trust Fund of negligent calculation and preparation of contract for the division of retirement benefits, unjust enrichment, and money due and owing, and sought nunc pro tunc revision of the QDRO.  The court found that even if Plaintiff’s state law claims are cognizable, they are preempted by ERISA.  In addition, Plaintiff failed to exhaust administrative remedies.

Exhaustion of Administrative Remedies

Third Circuit

Erhart v. Plasterers Local 8 Annuity Fund, No. CV 17-3016 (RBK/JS), 2018 WL 1251631 (D.N.J. Mar. 12, 2018) (Judge Robert B. Kugler).  Plaintiffs sought a distribution from the Plan, which a plan participant may receive if no contributions are made for twelve months.  The court declined to consider the “ERISA claims presented in this case because Plaintiffs failed to exhaust—or even formally pursue—the remedies admittedly available under the plan.”  Plaintiffs filed suit after Defendant failed to provide one of them with the forms necessary to request a distribution when he requested the forms over the phone.

Pension Benefit Claims

Second Circuit

Cooper v. People’s United Bank, N.A., No. 2:17-CV-76-JMC, 2018 WL 1357919 (D. Vt. Mar. 15, 2018) (Magistrate Judge John M. Conroy).  In this action seeking pension benefits, the court granted Defendant’s motion for summary judgment because Plaintiff failed to exhaust her administrative remedies, and further administrative review would not have been futile, and Plaintiff’s common law claims are preempted by ERISA.

Plan Status

First Circuit

Gordon Simmons & Siegelinde Simmons v. Serv. Credit Union, No. 17-CV-159-PB, 2018 WL 1251628 (D.N.H. Mar. 12, 2018) (Judge Paul Barbadoro).  The court determined that Plaintiff’s employer’s agreement to provide him with post-retirement medical coverage established an ERISA plan.  The agreement plainly requires an employer to provide benefits on a regular and long-term basis because SCU agreed to provide Plaintiff and his spouse with continuous medical coverage for the rest of their lives.  The agreement also sufficiently identifies the benefits provided, the beneficiaries of the agreement, the source of financing, and the procedures for claiming benefits (all procedures required by the insurer who contracts to provide the coverage).  The agreement contains an ongoing administrative scheme because it requires Defendant to have an administrative structure, composed of either its own employees or employees of its chosen insurer, to determine eligibility, alternative “comparable” coverage, and whether a claim should be paid.  

Pleading Issues & Procedure

Sixth Circuit

Tennessee Tractor, LLC v. WH Administrators, Inc., No. 117CV02829STAEGB, 2018 WL 1277751 (W.D. Tenn. Mar. 12, 2018) (Judge S. Thomas Anderson).  Plaintiffs are a company and its employee who brings claims against Defendant related to its management of the company’s self-funded health plan.  The company brought state-law claims against Defendant and the employee brought class-action claims against Defendant under ERISA.  The court determined that the employer’s claims are subject to an arbitration agreement with Defendant, but the employee’s ERISA claims are not subject to the arbitration agreement.  The court ordered the company to submit its claims to arbitration.   

Ninth Circuit

Bommarito v. Nw. Mut. Life Ins. Co., No. CV 2:15-1187 WBS DB, 2018 WL 1256713 (E.D. Cal. Mar. 12, 2018) (Judge William B. Shubb).  Following Defendant’s filing of a Motion for Summary Judgment and Motion for the Application of ERISA, Plaintiff moved to disqualify Defendant’s law firm, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., on the ground that the law firm’s former employee had a conflict of interest.  Specifically, Ogletree hired as a practice assistant an employee who had previously worked for Plaintiff’s counsel, and who worked on this particular matter.  The court denied Plaintiff’s motion to disqualify since it found that the employee did not have, and will not have, any involvement in this matter, and that she did not disclose any confidential information related to the case to anybody at Ogletree.  The court also denied Plaintiff’s motion to strike the pending summary judgment motion.

Provider Claims

Third Circuit

Shah v. Blue Cross Blue Shield of Texas, 2018 WL 1293164 (D.N.J. Mar. 13, 2018) (Judge Renee Marie Bumb).  The court declined dismissal of the provider’s ERISA Section 502(a)(1)(B) claim against Defendant Health Care Service Corporation.  HCSC argued it is merely the claims administrator and not a proper defendant under Section 502.  The court disagreed.  It found that Plaintiff sufficiently alleged that HCSC was the entity responsible for the decision not to fully reimburse him.  Defendant may renew its challenge at the summary judgment stage.  The court declined to dismiss Plaintiff’s breach of fiduciary duty claim since he may plead alternative causes of action under Section 502(a)(1)(B) and 502(a)(3).  The court found that neither ERISA Section 102 nor 29 C.F.R. 2520.102–2 provides a cognizable cause of action so it dismissed the claims based on the violation of these provisions with prejudice.

Eleventh Circuit

Lee Memorial Health System v. Blue Cross and Blue Shield of Florida, Inc., et al., No. 2:16-CV-738-FTM-29CM, 2018 WL 1242241 (M.D. Fla. Mar. 9, 2018) (Judge John E. Steele).  Although the Plaintiff provider asserts derivative standing as the assignee of its patient, a Plan participant, the court determined that such an assignment is ineffectual because of the plan’s unambiguous anti-assignment provision.  The court dismissed the lawsuit for lack of standing.

Statutory Penalties

Eleventh Circuit

Tupper v. Rossman Realty Grp., Inc., No. 216CV361FTM29MRM, 2018 WL 1255009 (M.D. Fla. Mar. 12, 2018) (Judge John E. Steele).  Where Defendant admitted to failing to send a timely notice of COBRA coverage, the court found that the undisputed material facts support liability under 29 U.S.C. Section 1132(c)(1), and that no legal basis precludes consideration and imposition of a daily penalty. The court rejected Defendant’s argument that civil penalties cannot be imposed as a matter of law because Plaintiff has not suffered any damages or prejudice and Defendant acted in good faith.  The court denied Defendant’s motion for summary judgment.


Third Circuit

University Spine Center v. 1199SEIU National Benefit Fund, No. CV 17-8743 (JLL), 2018 WL 1327109 (D.N.J. Mar. 15, 2018) (Judge Jose L. Linares).  The court held that the Plan’s Forum Selection Clause is enforceable.  Even in the absence of the Clause, the Plaintiff medical provider has not demonstrated an overriding reason for this action to proceed in New Jersey.  The court dismissed the case upon improper venue, but without prejudice to reinstitute the claims in the appropriate venue (i.e., a federal court in New York city).

Your ERISA Watch authored by Michelle L. Roberts, Esq., Partner