Happy Memorial Day!  Hope you all are reading today’s newsletter from the comfort of your lawn chair sipping mimosas.  No matter what you have on the agenda, please take a moment to honor and remember everyone who has died serving in the American armed forces.

Today’s notable decision is Gorbacheva v. Abbott Laboratories Extended Disability Plan, et al., No. 5:14-CV-02524-EJD, 2018 WL 2387852 (N.D. Cal. May 25, 2018), where the court grants in part Plaintiff’s motion for attorneys’ fees and denies Defendants’ request for attorneys’ fees, even though Defendants were ultimately successful on the merits of the underlying long-term disability dispute. 

In 2015, on the parties’ cross-motions for summary judgment, the court remanded Plaintiff’s claim to the plan administrator of the Abbott Laboratories Extended Disability Plan to consider a Functional Capacity Evaluation (“FCE”) and a favorable Social Security Disability Insurance award.  Plaintiff filed a motion for attorneys’ fees at that time, which the court denied without prejudice.  

On the second review, Plaintiff fared no better.  Despite submitting 869 pages of additional medical records, the FCE, and the SSDI award, the plan administrator denied Plaintiff’s claim.  The court noted that none of the medical records were from the relevant time frame.  After Plaintiff reopened the action, the court denied Plaintiff’s motion for judgment as a matter of law and granted Defendants’ motion for summary judgment because it found that the plan administrator did not abuse her discretion in denying Plaintiff’s claim for disability benefits.  The matter is currently on appeal to the Ninth Circuit Court of Appeals.

Plaintiff filed a renewed motion for attorneys’ fees seeking an award of $191,415, which breaks down to 273.45 hours at $700/hour, plus $1,201.60 in costs.  This is for time spent to incur the first order remanding the claim and the time spent preparing the instant fee motion.  Defendants filed a motion seeking $264,570.47 in attorneys’ fees and $9,758.02 in costs.

In awarding Plaintiff attorneys’ fees, the court determined that Plaintiff achieved some degree of success on the merits by obtaining an order of remand.  The court rejected Defendant’s argument that the hourly rate of $700 was excessive and that a lower rate should be applied to work performed between 2014-2016.  In addition, Plaintiff’s counsel’s hourly rate was supported by several declarations from attorneys who specialize in ERISA litigation.  Applying Hensley, the court reduced the requested amount by 10% to factor in that Plaintiff only achieved limited success.  Plaintiff had sought significant damages in the form of benefits and statutory penalties but was not awarded these and Defendants ultimately prevailed on all claims in the litigation.  

The court denied Defendants’ motion because although they unquestionably achieved some degree of success on the merits, the majority of the Hummell factors weigh against an award, including that Plaintiff did not engage in culpable or bad faith conduct, she has no ability to satisfy a fee award (she only receives SSDI and a modest pension), and an award of fees is unlikely to have any deterrent effect.  

The court awarded $172,273.50 in attorneys’ fees and all of the requested costs.  This decision is notable because attorneys’ fees are an important deterrent against procedurally improper claims decisions.  Remands to plan administrators allowing them a second bite at the apple causes unnecessary delay and uncertainty to claimants who are waiting for much needed disability income benefits.  Fingers crossed for Ms. Gorbacheva on appeal and congratulations to our friends, colleagues and fellow ERISA Watchers at the law firm of Bolt Keenley Kim, LLP for securing this fantastic fee decision.

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

Attorneys’ Fees

Ninth Circuit

Gorbacheva v. Abbott Laboratories Extended Disability Plan, et al., No. 5:14-CV-02524-EJD, 2018 WL 2387852 (N.D. Cal. May 25, 2018) (Judge Edward J. Davila).  See Notable Decision summary above.

Teutscher v. Riverside Sheriffs Association, No. 16-56830, __F.App’x__, 2018 WL 2327199 (9th Cir. May 23, 2018) (Before: WARDLAW, NGUYEN, and OWENS, Circuit Judges).  The court affirmed the district court’s denial of Plaintiff’s motion to permissively intervene against his former client in his action against the Riverside Sheriffs Association (RSA).  “When Teutscher prevailed on his ERISA claim, Woodson knew or should have known that his interest in possible attorney’s fees would not be adequately protected by the parties because Teutscher did not seek fees for Woodson’s work on the case. By the time Woodson moved to intervene against Teutscher more than three years later, post-trial motions had already been decided and appealed, and final judgment, including as to attorney’s fees, had been entered.”

Breach of Fiduciary Duty

Second Circuit

Kinra, et al. v. Chicago Bridge & Iron Co., et al., No. 17 CIV. 4251 (LGS), 2018 WL 2371030 (S.D.N.Y. May 24, 2018) (Judge Lorna G. Schofield).  The court granted Defendants’ motion to dismiss Plaintiff’s Complaint alleging that Defendants breached their duties to the Plans for continuing to offer the common stock of CB&I as an investment option in the Plans when Defendants knew or should have known that the price of the stock was improperly inflated.  The court determined that there is a lack of subject matter jurisdiction because the original plaintiff did not have Article III standing and that defect cannot be cured with a Rule 17 substitution of a new plaintiff.  In the alternative, the Complaint fails to state a claim for breach of the duties of prudence and loyalty.

Fourth Circuit

International Union, United Mine Workers Of America, et al., v. Consol Energy, Inc., No. CV 1:16-12506, 2018 WL 2328028 (S.D.W. Va. May 21, 2018).  In this dispute over whether CONSOL Energy, Inc., can unilaterally change the health care benefits contractually negotiated with UMWA under the 2011 National Bituminous Coal Wage Agreement, the court granted Plaintiffs’ motion to file a Second Amended Complaint to bring an ERISA claim against CONSOL and CONSOL’s Subsidiaries due to their misleading written communications sent to retiree participants.  The court determined that the proposed breach of fiduciary duty claim is not futile.  Plaintiffs’ request for declaratory relief in the form of an order declaring that Defendants may not change the retirees’ benefits without agreement from the UMWA is appropriate equitable relief under Section 502(a)(3).

Eighth Circuit

Wildman v. American Century Services, LLC, et al., No. 4:16-CV-00737-DGK, 2018 WL 2326628 (W.D. Mo. May 22, 2018) (Judge Greg Kays).  In this 401(k) plan excessive fees case, the court denied Defendants’ motion to exclude the expert report and testimony of Roger Levy, Plaintiffs’ expert witness related to the standard of care.  The court determined that he is qualified to testify on this subject and his experience provides sufficient basis for his opinions.  Further, challenges to the factual basis of his opinion go to the weight, not admissibility of his testimony.  In a separate opinion, Wildman v. Am. Century Servs., LLC, No. 4:16-CV-00737-DGK, 2018 WL 2328348 (W.D. Mo. May 22, 2018), the court also denied Defendants’ motion to exclude the expert testimony of Dr. Steve Pomerantz because is qualified to testify about the prudent investment processes and his models are aligned to the theories of breach and any dispute as to the factual basis of his opinions goes to the weight of his testimony.

Wildman v. American Century Services, LLC, et al., No. 4:16-CV-00737-DGK, 2018 WL 2326627 (W.D. Mo. May 22, 2018) (Judge Greg Kays).  The court granted in part and denied in part Defendants’ motion for summary judgment.  It held that there are disputes of material fact preventing summary judgment on Count I—Breach of Fiduciary Duty because there are material facts in dispute as to whether Defendants’ conduct met the prudent person standard and Plaintiffs have established a prima facie loss to the plan.  The court granted the motion as to the Section 1106(a)(1)(D) and (b)(1) claims (prohibitive transactions) since fees paid from mutual fund assets are not fees paid out of plan assets.  The court denied the motion as to the Section 1106(a)(1)(C) claim since the management fees could be considered an indirect service.  The court also found that PTE77-3 applies to one of Plaintiff’s Section 1106(b)(3) claims.  Lastly, on the Section 502(a)(3) claim, the court found that the traceability exception applies because Plaintiffs seek only an accounting for profits.

Ninth Circuit

Castillo v. Community Child Care Council of Santa Clara County, Inc., et al., No. 17-CV-07243-SVK, 2018 WL 2357698 (N.D. Cal. May 24, 2018).  In this case alleging various causes of action against Defendants for allegedly misleading them to converting their vested retirement balances to financially imprudent life annuity contracts, the court granted Defendants’ motion to dismiss on the basis of the statute of limitations and that plaintiff has not established any claim against the moving individual defendants.

Disability Benefit Claims

First Circuit

Weddle v. Life Insurance Company of North America, No. CV 17-12372-RGS, 2018 WL 2376323 (D. Mass. May 24, 2018) (Judge Richard G. Stearns).  The court dismissed the intentional infliction of emotional distress claim and noted that as a result there is no cognizable jury claim.

Sixth Circuit

Swann v. Ryder System, Inc., et al., No. 5:17-CV-330-JMH, 2018 WL 2376558 (E.D. Ky. May 23, 2018) (Judge Joseph M. Hood).  The court determined that Liberty Life did not abuse its discretion in determining that Plaintiff’s (a truck driver) “base pay” for purposes of calculating his long-term disability benefits, do not include money for stops, down time, and mileage (the difference is thousands of dollars per month). 

Weppler v. The Hartford Financial Services Group, Inc., No. 3:17-CV-700-CRS, 2018 WL 2305710 (W.D. Ky. May 21, 2018) (Judge Charles R. Simpson III).  The court denied Plaintiff’s motion for leave to file an amended complaint to the extent she alleges claims under Section 502(a)(3) since she has not alleged any facts indicating that she suffered a separate injury distinct from the denial of benefits, or that the remedy under Section 502(a)(1)(B) would be inadequate.  The court also denied the request to amend to include a trial by jury or extra-contractual damages since they are not available under ERISA.


Sixth Circuit

Norris v. MK Holdings, Inc., No. 17-6078, __F.App’x__, 2018 WL 2324256 (6th Cir. May 22, 2018) (BEFORE: GIBBONS, BUSH, and LARSEN, Circuit Judges).  The Sixth Circuit found that the district court did not abuse its discretion in finding that Plaintiff’s actions during discovery were in violation of Federal Rules of Civil Procedure 26(a)(3), Rule 37(d), and Rule 37(b); dismissing her suit as a sanction for those violations; and precluding her proffered expert testimony.  Affirmed.

Tenth Circuit

It’s Greek To Me, Inc., d/b/a GTM Sportswear, & Hanesbrands, Inc. v. Fisher, et al., No. 17-4084-KHV, 2018 WL 2376327 (D. Kan. May 24, 2018) (Magistrate Judge K. Gary Sebelius).  In this case where Plaintiffs allege that Defendants received settlement funds against which Plaintiffs have a constructive trust and/or equitable lien, and where many documents exchanged in discovery will contain information that is sensitive and confidential, the court granted the parties’ request for an agreed protective order.

ERISA Preemption

Ninth Circuit

Sheehan v. Kaiser Foundation Health Plan, Inc., No. 18-CV-02073-JCS, 2018 WL 2376634 (N.D. Cal. May 25, 2018) (Magistrate Judge Joseph C. Spero).  Plaintiff brought state law claims against Kaiser alleging that her termination deprived her of approximately $70,000 of incentive pay for deals that she had substantially completed and that Kaiser timed the termination to occur approximately three months before the date on which her retirement benefits otherwise would have vested, causing her enormous financial loss.  The court denied Plaintiff’s motion to remand to state court because the claims are preempted by ERISA to the extent they are based on Kaiser’s intent to deprive her of benefits.  

Castillo v. Community Child Care Council of Santa Clara County, Inc., et al., No. 17-CV-07243-SVK, 2018 WL 2357698 (N.D. Cal. May 24, 2018).  In this case alleging various causes of action against Defendants for allegedly misleading them to converting their vested retirement balances to financially imprudent life annuity contracts, the court determined that Plaintiffs’ claims for breach of contract, fraud in the inducement, and conversion are preempted by ERISA.  It does not matter if the unlawful actions were “pre-plan” since all of the claims are of the type ordinarily preempted by ERISA, regardless of whether the conduct occurred before or after the inception of the ERISA plan.  Additionally, the claims depend on the existence of the ERISA plan. 

Medical Benefit Claims

Second Circuit

Walsh v. Empire Blue Cross/Blue Shield, Inc., No. 16CV3746DRHARL, 2018 WL 2324066 (E.D.N.Y. May 22, 2018) (Judge Denis R. Hurley).  The court granted Defendants’ motion for summary judgment, affirming the decision that the use of Botox Injections for the treatment of gastroparesis is investigational or experimental and not covered by the Plan.  The court also rejected Plaintiff’s argument that EHS violated Section 502(a)(3) by failing to provide the specific reason for the adverse determination and failing to give a description of any additional information to perfect the claim.

Tenth Circuit

Lyn M., & David M. v. Premera Blue Cross, No. 2:17-CV-01152-BSJ, 2018 WL 2336115 (D. Utah May 23, 2018) (Judge Bruce S. Jenkins).  In this dispute over the payment under an ERISA health insurance plan for a fourteen-month stay at Eva Carlston Academy, a residential treatment center in Salt Lake County, Utah, the court granted summary judgment to Defendant.  The court determined that the governing plan documents need not be in the “administrative record” for purposes of determining the standard of review.  Even though only the SPD was in the record and it did not contain the discretionary language, the discretionary authority was set forth in the Plan.  Thus, abuse of discretion review applies.  The court determined that the insured did not satisfy the criteria for continued stay at a residential psychiatric center as of April 1, 2015.

Amy G. v. United Healthcare, No. 2:17-CV-00427-BSJ, 2018 WL 2303156 (D. Utah May 21, 2018) (Judge Bruce S. Jenkins).  The court determined that the Independent Review Organization’s external review decision affirming the denial of residential treatment center benefits is not binding but that Defendants’ denial decision was reasonable under an arbitrary and capricious standard of review.  The court granted Defendants’ motion for summary judgment.

Pension Benefit Claims

Second Circuit

Goodrich Pump & Engine Control Systems, Inc. v. International Union United Automobile Aerospace, No. 17-3737-CV, __F.App’x__, 2018 WL 2331762 (2d Cir. May 23, 2018) (Present: ROSEMARY S. POOLER, RICHARD C. WESLEY, RAYMOND J. LOHIER, JR., Circuit Judges).  The court affirmed the district court’s finding that the dispute over the calculation of the early retirement provision of the CBA is arbitrable.  Goodrich’s argument that the CBA’s arbitration clause is trumped entirely by the dispute resolution procedure in the incorporated pension plan is foreclosed by the court’s prior decisions.

Fifth Circuit

Miner v. Johns, No. 5:17-CV-0879, 2018 WL 2347095 (W.D. La. May 23, 2018) (Judge Elizabeth Erny Foote).  On appeal by the debtors challenging the denial of their proposed Chapter 13 plan, the court reversed the Bankruptcy Court’s determination that post-petition voluntary 401(k) contributions are considered disposable income.  In coming to this conclusion, the court joins other courts within the Fifth Circuit that have considered this issue and reached the same conclusion. 

Eighth Circuit

Levi v. St. Louis Teamster Brewery Workers Pension Plan, et al., No. 4:17 CV 1236 RWS, 2018 WL 2289276 (E.D. Mo. May 18, 2018) (Judge Rodney W. Sippel).  The court determined that the Plan did not abuse its discretion in determining the pension multiplier applicable to Plaintiff’s benefits.  “The Plan determined that, under Section 4.01 of the Plan, Levi’s pension multiplier was based on his Benefit Determination Date (BDD). That date, in turn, is defined in Section 1.04 of the Plan as ‘the last day of the final month in which contributions are due to the Plan on behalf of the participant pursuant to Section 11.01 of the Plan.’ Section 11.01 of the Plan provided that A-B must make contributions to the Plan ‘for each compensated day for which compensation is payable to an eligible employee.’ The Plan determined that Levi’s BDD was February 28, 2003. It reached that conclusion because the last date A-B was required to make contributions to the Plan was Levi’s last day of compensable work, February 14, 2003. The fact that Levi was ultimately terminated on March 5, 2003 was not a factor in calculating his BDD.”

Pleading Issues & Procedure

Fifth Circuit

Beggins v. CBRE Capital Markets of Texas L.P., No. CV H-17-1541, 2018 WL 2289509 (S.D. Tex. May 18, 2018) (Judge Lee H. Rosenthal).  Pursuant to Fed. R. Civ. P. 16(b), CBRE filed a motion for leave to amend after the amended-pleadings deadline expired in order to amend its answer to assert a failure to exhaust affirmative defense.  The court granted the motion and found that CBRE has shown good cause to amend under Rule 16(b) and Plaintiff will not be prejudiced by the amendment.

Ninth Circuit

Johnson v. Providence Health & Services, et al., No. C17-1779-JCC, 2018 WL 2289331 (W.D. Wash. May 18, 2018) (Judge John C. Coughenour).  In this putative class action alleging breach of fiduciary duties, Plaintiff moved to strike the following affirmative defenses: (1) lack of standing; (2) bad faith; (3) the safe harbor provision in ERISA § 404(c); failure to satisfy Federal Rule of Civil Procedure 23; and (5) a reservation of rights to assert additional defenses.  The court granted the motion in part and struck all but the ERISA Section 404(c) affirmative defense.  Plaintiff’s request to strike goes to the merits of Providence’s defense which should be determined on a motion for summary judgment.

Eleventh Circuit

Chamblin v. VIAS (One Exch. Co.), No. 2:18-CV-0725-UJB-VEH, 2018 WL 2329803 (N.D. Ala. May 23, 2018) (Judge Virginia Emerson Hopkins).  In this dispute over employee welfare benefit plan benefits, the court denied the pro se plaintiff’s motion to remand to state court and for preliminary injunction against Defendant advancing the case until it is heard by the court.  The court determined that Defendant’s removal to this court was substantively proper and timely.  It also determined that Plaintiff has not carried his burden of clearly establishing a right to preliminary injunctive relief, and the injunctive relief he seeks is beyond what the court has the power to award.

Provider Claims

Third Circuit

University Spine Center v. Anthem Blue Cross Blue Shield, No. CV 18-01103, 2018 WL 2357756 (D.N.J. May 24, 2018) (Judge William J. Martini).  The court granted Defendant’s motion to dismiss Plaintiff’s Complaint seeking payment of benefits and a claim for breach of fiduciary duty.  The court found that Plaintiff’s patient could not assign his right to receive reimbursement to Plaintiff or anyone else.  The Third Circuit has found that the anti-assignment clause is valid and enforceable.  Plaintiff lacks standing to bring its claims.

University Spine Center v. United Healthcare, No. CV1710978ESSCM, 2018 WL 2332204 (D.N.J. May 23, 2018) (Judge Esther Salas).  The court granted Defendant’s motion to dismiss Plaintiff’s Complaint based on the existence of a valid and enforceable anti-assignment provision in the ERISA-governed plan.

Ninth Circuit

Salinas Valley Mem’l Healthcare Sys. v. Envirotech Molded Prod., Inc., No. 17-CV-03887-LHK, 2018 WL 2298676 (N.D. Cal. May 21, 2018) (Judge Lucy H. Koh).  The court granted Defendant’s motion to dismiss the complaint against Defendant ELAP Services, LLC because ELAP’s interpretation of the terms of the Plan does not conflict with the Plan’s MOOP Provision or its definition of reasonable and customary.  ELAP is not a proper defendant on Plaintiff’s claim that the allowable claim limits was inadequately disclosed in the SPD.  No factual allegations suggest that ELAP was involved in any way with the formation or preparation of the SPD.


Third Circuit

Continental Airlines, Inc. 401(K) Savings Plan v. Almodovar-Roman, et al., No. CV 16-5766, 2018 WL 2357754 (D.N.J. May 24, 2018) (Judge Madeline Cox Arleo).  In this case where Plaintiff alleges that “(1) the $149,071.89 erroneously placed into Almodovar-Roman’s 401(k), which was later disbursed to her in the amount of $122,077.33, is specifically identifiable property; (2) the property belongs in ‘good conscience’ to the Plan because it was mistakenly rolled over from another Plan participant’s fund; and (3) the property is either entirely or partially in Almodovar-Roman’s possession,” the court denied the motion for default judgment.  “By seeking equitable relief, Plaintiff can only request the imposition of an equitable lien over a specific account, identifiable to and in the possession of Almodovar-Roman. By failing to demonstrate where the funds are even located, it would be impossible for the Court to ensure that the requested judgment in the amount of $122,077.23 is not a legal remedy against Almodovar-Roman’s general assets, rather than an equitable lien over property that belongs in ‘good conscience’ to the Defendants.” 

Statutory Penalties

Fourth Circuit

Davis v. Soc. Sec. Admin., No. CV PX-17-1356, 2018 WL 2321122 (D. Md. May 22, 2018) (Judge Paula Xinis).  Plaintiff brought a claim under 29 U.S.C. § 1132(c)(1) against Defendant for allegedly violating the disclosure requirements of ERISA by failing to respond to his request for information about survivor’s benefits. The court dismissed the claim because the SSA’s benefits are not subject to ERISA.  Specifically, they are not established or maintained by an employer or employee organization for the benefit of an employer’s employees.  Since SSA benefits are not covered by ERISA, the civil penalty provision does not apply to the requested information that is the subject of Plaintiff’s Amended Complaint. 

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