I’m pleased to report that today’s notable decision, Ariana M. v. Humana Health Plan of Texas, Inc., No. 16-20174, __F.3d__, 2018 WL 1096980 (5th Cir. Mar. 1, 2018), is a case handled by our firm attorneys – Lisa Kantor, Peter Sessions, Elizabeth Green – and our esteemed colleagues, Jim Plummer and Amar Raval of Berg Plummer Johnson & Raval, LLP. 

Since 1991, the Fifth Circuit Court of Appeals, which presides over Texas, Mississippi, and Louisiana federal law, has administered a rule in employee benefit cases. That rule stated that federal courts were required to show deference to the factual findings of a benefit plan administrator, regardless of whether the benefit plan conferred such authority on the administrator. Pierre v. Conn. Gen. Life Ins. Co., 932 F.2d 1552 (5th Cir. 1991).

The rule was unusual because the Fifth Circuit was the only Circuit Court in the United States that had such a rule. The other circuits only show deference to the factual findings of plan administrators if the benefit plan specifically provides for such deference.  This issue is of growing importance, especially within the Fifth Circuit, where Texas recently enacted a law banning insurers’ use of delegation clauses.  Tex. Ins. Code Section 1701.062(a).

Representing a young woman whose health insurance claim had been denied, we challenged this rule. On March 1, 2018, after more than three years of litigation, the majority of the Fifth Circuit panel agreed to overrule its decision in Pierre.  Ariana M. v. Humana Health Plan of Texas, Inc., No. 16-20174, __F.3d__, 2018 WL 1096980 (5th Cir. Mar. 1, 2018).  Of the 14 appellate judges, 8 joined in the majority opinion and 6 dissented.  On the merits of Ariana M.’s claim, the majority remanded the case to the district court to apply the appropriate de novo standard of review.

This decision is not just a big win for Ariana, but a win for the millions of people in the Fifth Circuit who are covered by employee benefit plans.  Going forward, courts will look more skeptically at insurance companies who deny their claims for benefits.  

Writeup by Peter Sessions, a Kantor & Kantor attorney who represents Ariana M.

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

Breach of Fiduciary Duty

First Circuit

Scottsdale Insurance Company v. Byrne, No. CV 16-11435-FDS, 2018 WL 1122360 (D. Mass. Mar. 1, 2018) (Judge F. Dennis Saylor IV).  Pension funds invested in WARF Realty Fund I, LLC (“WARF”), and WARF mismanaged the investments and engaged in self-dealing, precipitating a law suit alleging negligence and an ERISA violation. Scottsdale declined to defend WARF on the basis of various coverage exclusions and the presiding court eventually entered a default judgment against it for approximately $5 million.  In the dispute over coverage, the court concluded that the coverage was not clearly excluded, and Scottsdale had a duty to defend.  The court denied Scottsdale’s motion for summary judgment and granted Defendants’ motion for partial summary judgment. 

Second Circuit

Sacerdote v. New York University School of Medicine, et al., No. 17-CV-8834 (KBF), 2018 WL 1054573 (S.D.N.Y. Feb. 23, 2018) (Judge Katherine B. Forrest).  “While procedurally positioned as a new case, the Amended Complaint in Sacerdote II is a blatant attempt to replead an existing action. The Court construes it as a motion for reconsideration based on new evidence and a motion for joinder. The motion to dismiss is GRANTED.”

Fourth Circuit

Acosta v. Ricardo Silva et al., No. CV JKB-15-3484, 2018 WL 1069359 (D. Md. Feb. 26, 2018) (Judge James K. Bredar).  The court granted the Secretary’s motion for summary judgment against Silva.  The court found that he breached his fiduciary duties and engaged in prohibited transactions with respect to the Maryland Association of Correctional & Security Employees Health & Welfare Plan and Maryland Association of Correctional & Security Employees Retirement Plan.  The court held in abeyance the Secretary’s motion to the extent it seeks judgment against AmeriGuard.

Eighth Circuit

Muri v. National Indemnity Company, No. 8:17-CV-178, 2018 WL 1054326 (D. Neb. Feb. 26, 2018) (Judge John M. Gerrard).  Defendant moved to dismiss the complaint alleging that it failed to prudently manage the National Indemnity Company’s Employee Retirement Savings Plan by offering “shortsighted” investment options, such as the Sequoia Fund; and failed to avoid conflicts of interest in choosing its investment options, specifically those with close relationships to its parent company––Berkshire Hathaway.  Plaintiff satisfies the “injury in fact” prong of the standing analysis since he alleges a reduction in his individual retirement account resulting from Defendant’s alleged failures.  The court found that Plaintiff’s allegations could support a finding that Defendant failed to conduct a regular review of investment options, which is sufficient to state a claim under the duty of prudence.  The court further found that the complaint plausibly demonstrates that Defendant acted in a way that benefited Berkshire Hathaway, rather than Plaintiff and other Plan Participants.  Motion to dismiss denied but the motion to strike jury trial is granted.  The Eighth Circuit has concluded that claims brought under ERISA are equitable in nature and no right to jury trial attaches to those claims.

Class Actions

Third Circuit

Hargrove v. Sleepy’s, LLC, No. 10-CV-O1138 (PGS), 2018 WL 1092457 (D.N.J. Feb. 28, 2018) (Judge Peter G. Sheridan).  In this action alleging a number of state law claims and an ERISA claim, the court denied class certification of a proposed class which includes employees who: (1) worked full-time making deliveries for Sleepy’s and thus were misclassified as independent contractors; (2) were subject to improper deductions; and (3) worked over 40 hours per week without being paid over-time (time-and-a-half).  The court cannot resolve all disputes regarding the definition of the class and identifying the members of the class would require specific fact-finding as to each individual.

Disability Benefit Claims

Sixth Circuit

Westfall v. Liberty Life Assurance Company of Boston, No. 4:16CV2921, 2018 WL 1122134 (N.D. Ohio Feb. 28, 2018) (Judge Benita Y. Pearson).  In this case Plaintiff worked at a WalMart distribution center and stopped working following the death of her son at the same WalMart distribution center.  “Plaintiff wrote that her son died in her workplace, she could not bring herself to go back to that site, and she did not want to speak to people who asked her so many questions.”  Liberty Life paid long-term disability benefits for just over two months and then terminated Plaintiff’s claim.  The court denied Liberty Life’s motion and remanded the case to the plan administrator to conduct a new review, taking into account her primary care physician’s identification of emotional lability as a symptom that Plaintiff suffered.  Liberty Life’s conflict of interest supports the inference that ignoring Plaintiff’s emotional lability was not an accidental omission, but a case of cherry-picking favorable facts.

Davis v. Northwestern Mutual Life Insurance Company, No. 1:15-CV-1269, 2018 WL 1069451 (W.D. Mich. Feb. 26, 2018) (Magistrate Judge Ellen S. Carmody).  On de novo review of Plaintiff’s entitlement to long term disability benefits, the court found in favor of Northwestern Mutual Life Insurance Company.  The court cited to records showing that after Plaintiff’s release from the hospital that he was not suffering the effects of any underlying disorder or pathology, was “currently clinically stable” with “no evidence of malignancy” and “no evidence of liver disease.”  The court placed little weight on a doctor’s letter where it found that the doctor attempted to rewrite and/or amend his previously authored contemporaneous treatment notes.

Tenth Circuit

Lane v. Prudential Insurance Company, No. 2:17-CV-998-DB, 2018 WL 1135550 (D. Utah Feb. 28, 2018) (Judge Dee Benson).  Prudential moved to dismiss on the basis that Plaintiff is judicially estopped from asserting her long-term disability benefits claim because she failed to disclose it as an asset in a 2016 bankruptcy proceeding.  The court determined that this case was governed by Eastman v. Union Pac. R. Co., 493 F.3d 1151 (10th Cir. 2007) (finding that debtor is judicially estopped from pursuing his personal injury action where the debtor failed to disclose the claims in his chapter 7 bankruptcy filings) and granted Defendant’s motion.

Life Insurance & AD&D Benefit Claims

Eighth Circuit

Estate of Boeckmann by & through Boeckmann v. Sprint/United Mgmt. Co., No. CV 17-2260 (PAM/SER), 2018 WL 1050404 (D. Minn. Feb. 26, 2018) (Judge Paul A. Magnuson).  Sprint argued that Plaintiff’s claim must be dismissed for lack of subject-matter jurisdiction under Fed. R. Civ. P. 12(b)(1) since the insured was not a plan participant at the time of his death, and therefore Plaintiff has no standing to bring any claims regarding the plan.  The court denied Sprint’s motion to dismiss since there is evidence establishing that the insured did not waive life-insurance coverage and Plaintiff has established standing to pursue a claim for documents under ERISA.

Medical Benefit Claims

Fifth Circuit

Ariana M. v. Humana Health Plan of Texas, Inc., No. 16-20174, __F.3d__, 2018 WL 1096980 (5th Cir. Mar. 1, 2018) (GREGG COSTA, Circuit Judge, joined by STEWART, Chief Judge, DENNIS, PRADO, SOUTHWICK, HAYNES, GRAVES, and HIGGINSON, Circuit Judges) (E. GRADY JOLLY, Circuit Judge, dissenting, joined by JONES, SMITH, CLEMENT, and ELROD, Circuit Judges. OWEN, Circuit Judge, joins only Part I.).  See notable decision summary above.

Pension Benefit Claims

Court of Federal Claims

Anchor Tank Lines, LLC v. United States, No. 15-1448C, __Fed.Cl.__, 2018 WL 1027083 (Fed. Cl. Feb. 23, 2018) (Judge Lettow).  On cross motions for summary judgment on the question whether the United States is required to indemnify Plaintiffs for certain unpaid pension and employer-benefit liabilities owed to Plaintiff-intervenor, and other pension funds, arising out of the operations of Anchor Tank Lines Corporation, the court denied the motions because genuine disputes of material fact exist as to the key issues.

Pleading Issues & Procedure

Second Circuit

Masino v. Persico Contracting & Trucking, Inc., et al., No. 11CV4596ERKST, 2018 WL 1135473 (E.D.N.Y. Feb. 28, 2018) (Judge Edward R. Korman).  The parties previously entered into a settlement agreement to resolve two earlier suits over delinquent contributions under the CBA.  The court determined that the present matter involves a claim for breach of a contract (settlement agreement) and no federal statute makes that connection (if it constitutionally could) the basis for federal-court jurisdiction over the contract dispute.  Thus, there is no basis for the court to exercise ancillary jurisdiction over Plaintiffs’ claims.

Provider Claims

Second Circuit

Montefiore Medical Center v. Local 272 Welfare Fund, No. 17-1303-CV, __F.App’x__, 2018 WL 1081219 (2d Cir. Feb. 28, 2018) (Present: Debra Ann Livingston, Guido Calabresi, Circuit Judges, Edgardo Ramos, District Judge).  The court affirmed the district court’s grant of summary judgment to the medical center.  The dispute centered on the interpretation of plan language regarding payment of out-of-network services, specifically, “the maximum amount the Plan would have paid an in-network provider for the same service.”  The Second Circuit agreed that the Plan’s language is unambiguous and mandates that the Fund determine the rates it pays all of its in-network providers for a certain service and then select the maximum rate among the various in-network provider rates.

Third Circuit

The Valley Hospital, Inc., v. Hudson View Care & Rehabilitation Center & Hudson View Care Rehabilitation Center Health Plan, No. CV 17-558, 2018 WL 1128621 (D.N.J. Mar. 1, 2018) (Judge Madeline Cox Arleo).  On the provider’s motion for default judgment, the court determined that the complaint sufficiently pleads that Defendants were obligated to pay the provider’s bill out benefits under the Hudson Plan, and that Plaintiff acquired the right to sue Defendants for those benefits under 29 U.S.C. § 1132(a) for failure to make payments.  The court granted the motion for default judgment and entered judgment against Defendants for $59,688.22.

Ninth Circuit

Hopkin v. Blue Cross Of Idaho Health Service, Inc., No. 4:17-CV-00300-EJL, 2018 WL 1123864 (D. Idaho Mar. 1, 2018) (Judge Edward J. Lodge).  In this matter where the provider alleged that Defendant wrongfully denied claims retroactively after unilaterally determining they were not covered and sought repayment through recoupment by withholding payment on wholly unrelated clams it recognizes as valid, the court determined that Plaintiff does not have authority to bring these claims as he does not have derivative statutory standing as the plan participants’ personal representative and he is not a beneficiary or fiduciary within the meaning of ERISA. The court granted Defendant’s motion to dismiss.

Statutory Penalties

Third Circuit

Abdelmassih v. Mitra QSR KNE LLC et al., No. CV 16-4941, 2018 WL 1083857 (E.D. Pa. Feb. 28, 2018) (Judge Gene E.K. Pratter).  The owners of the corporation cannot be held personally liable for any failures by the corporation to notify Plaintiff of his COBRA rights since they are not listed as the plan administrators.

Subrogation/Reimbursement Claims

Eighth Circuit

MBI Energy Servs., v. Hoch, No. 1:16-CV-329, 2018 WL 1095547 (D.N.D. Feb. 28, 2018) (Judge Daniel L. Hovland).  Where a self-funded health benefit plan sued a participant and his personal injury law firm for reimbursement of medical expenses it paid on behalf of the participant, “[t]he Court concludes that, despite its label, the SPD is a plan document and there is no conflict between it and the [Administrative Service Agreement]. The Plan’s reimbursement provision creates an equitable lien on Hoch’s recovery, and thus MBI is entitled to the Disputed Funds as a fiduciary of the Plan.”

Tenth Circuit

Anderson v. University of Utah, No. 2:17-CV-950 TS, 2018 WL 1115148 (D. Utah Feb. 26, 2018) (Judge Ted Stewart).  The court dismissed Plaintiffs’ Complaint without prejudice because it found that the matter was not ripe for declaratory judgment.  Here, the plan participant, Mixon, was injured in a car accident involving Headley.  Mixon was treated by Defendant University of Utah.  Plaintiffs, the named Trustee-Fiduciaries of a self-funded employee welfare benefit plan, paid all of the covered claims submitted by Defendant.  Farmers Insurance agreed to pay Mixon $100,000 in insurance policy limits to settle Mixon’s claims against Headley.  Plaintiffs and Defendant both claim first rights to the $100,000.  Mixon alleged that the agreement with Farmers is only an oral agreement and he has not signed any settlement documents.  The court found that it cannot make a finding that Mixon is or is not bound by the alleged settlement agreement so the issue is not fit for review.  It is less clear whether the issue of Plaintiffs’ ability to bring suit or settle on behalf of Mixon is ripe but the court declined to exercise its jurisdiction over the matter.

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