This week’s notable decision is out of the Ninth Circuit Court of Appeals in the matter of Danny P. v. Catholic Health Initiatives, No. 16-35609, __F.3d__, 2018 WL 2709733 (9th Cir. June 6, 2018).  Plaintiffs brought suit against Catholic Health Initiatives and Catholic Health Initiatives Medical Plan–Blue Cross Blue Shield (collectively “the Plan”) for denying the cost of Nicole B’s inpatient stay in Island View Residential Treatment Center, a residential mental health treatment facility.  The district court granted summary judgment in favor of the Plan.  It found that the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008, codified at 29 U.S.C. § 1185a (“Parity Act”) did not require that the Plan’s coverage for stays at licensed inpatient residential treatment facilities had to be no more restrictive than stays at skilled nursing facilities. 

On appeal, the Ninth Circuit reversed and remanded.  It explained that the Parity Act directs that benefits and treatment limitations for mental health problems shall be “no more restrictive” than those for medical and surgical problems.  In a succinct opinion, the court held that the Plan could not allow room and board costs at a skilled nursing facility where one was inpatient, while denying them at a residential treatment facility where one was inpatient.  “Were it otherwise, the lack of equity that the Parity Act was designed to repress would have become renascent.”  [To save you the Googling, renascent means “becoming active or popular again”].  

There were lots of other notable decisions, including two other published Circuit court decisions.  Check them out below!

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

Breach of Fiduciary Duty

Second Circuit

Moreno, et al. v. Deutsche Bank Americas Holding Corp., et al., No. 15 CIV. 9936 (LGS), 2018 WL 2727880 (S.D.N.Y. June 6, 2018) (Judge Lorna G. Schofield).  In this lawsuit brought by representatives of a class of beneficiaries of the Deutsche Bank Matched Savings Plan claiming mismanagement of their 401(k) plan in violation of ERISA, the court granted Defendants’ motion to dismiss with respect to Plaintiff’s prohibited transaction claims and denied with respect to Plaintiff’s breach of fiduciary duty claims.  The prohibited transaction claims are exempt under the DOL PTE 77-3.  The court rejected Defendants’ argument that Plaintiffs cannot establish “loss causation” and there is a dispute of material facts as to whether Defendants breached their duty of loyalty and duty of care.

D.C. Circuit

Sellers v. Anthem Life Ins. Co., No. CV 16-2428 (TJK), _F.Supp.3d_, 2018 WL 2727895 (D.D.C. June 6, 2018) (Judge Timothy J. Kelly).  In this lawsuit by trustees of the SMART Voluntary Short Term Disability Plan against Anthem Life Insurance Company for alleging overcharging the Plan for processing claims for benefits, the court dismissed the claims for violations of ERISA’s prohibited-transaction provisions because it is not a prohibited transaction that Anthem made money by collecting more in premiums than it paid in claims.  The court permitted the claims for breach of contract and unjust enrichment to proceed, rejecting Anthem’s argument that the claims are unripe.

Disability Benefit Claims

Sixth Circuit

Moar v. Cigna Corporation, et al., No. 2:17-CV-10142, 2018 WL 2752996 (E.D. Mich. June 8, 2018) (Judge Stephen J. Murphy, III).  The court found that the Plan clearly grants LINA and CGLIC the sole, discretionary authority to grant and deny benefits so the arbitrary and capricious standard applies.  If an insurer changes its disability determination after paying benefits for a long time there must be a reason for the change.  The denial of long term disability benefits was arbitrary and capricious where none of the reviewing doctors considered the debilitative scope of Plaintiff’s lupus.  Plaintiff sought a permanent injunction to keep Defendant from limiting her benefits in the future and a full accounting of her benefits, the court found that she is only entitled to her past-due benefits, commencement of monthly benefits and waiver of premiums, and attorneys’ fees and costs.  

Seventh Circuit

Borrousch v. Aetna Life Insurance Company, No. 3:17-CV-00126-PPS, 2018 WL 2560780 (N.D. Ind. June 4, 2018) (Judge Philip P. Simon).  In this dispute over long-term disability benefits, the court found that Aetna’s decision was not arbitrary and capricious.  The court found that Aetna’s investigation and uncovering of Plaintiff’s business information after he submitted his appeal did not deny Plaintiff a full and fair review, and he did have an opportunity to respond to the new evidence.  On Aetna’s vocational analysis, Plaintiff argued that the “median” wage data should have been used instead of the “mean” but the only evidence in support of that argument is an article that he did not submit during the appeal process so the court declined to consider it since it is outside of the administrative record.

Ninth Circuit

Clay v. AT&T Umbrella Benefit Plan No. 3, No. 217CV00749KJMGGH, 2018 WL 2564294 (E.D. Cal. June 4, 2018) (Magistrate Judge Gregory G. Hollows).  The court recommended dismissal of most of the claims brought by the pro se plaintiff related to the denial of ERISA disability benefits and violations of state and federal anti-discrimination laws.  Of note, the court stated that, “Plaintiff essentially asserts that because his claim was denied, defendant breached its fiduciary duties in every way. If this were the case, every simple denial of ERISA benefits would concomitantly be a breach of fiduciary duty. This is not the law.”

Tenth Circuit

Hodges v. Life Insurance Company of North America, No. 14-CV-00958-WYD-NYW, 2018 WL 2753077 (D. Colo. June 7, 2018) (Judge Wiley Y. Daniel).  On review the second time after remanding the matter to LINA to conduct a full and fair review as to Plaintiff’s proper classification under the policy and whether he should be properly classified as “Sales Personnel” which would entitle him to a higher benefit, the court found that LINA did not conduct a full and fair review and appeared to have taken “an advocacy position”.  The court found that Plaintiff does meet the requirements for Sales Personnel and the proper remedy is not another remand but an award of benefits, payment of past-due benefits, and classification as a Class 2 employee.


Second Circuit

Metzgar v. U.A. Plumbers and Steamfitters Local No. 22 Pension Fund, No. 13-CV-85V(F), 2018 WL 2744904 (W.D.N.Y. June 6, 2018) (Judge Leslie G. Foschio).  This case involves allegations of violations of ERISA’s anti-cutback provision, wrongful denial of pension benefits, and breach of fiduciary duty.  The court found that the fiduciary exception to the attorney-client privilege is inapplicable when the requested communication deals with matters of a plan’s design or amendment because such matters are considered as non-fiduciary in nature.  Any privilege that may have attached to certain meeting minutes and the agenda of these meetings was waived by the two letters Defendants sent to Plaintiffs and Defendants’ VCP submission to the I.R.S.  However, documents related to meetings with counsel with respect to the instant litigation after the matter was filed fall outside of the fiduciary exception and need not be produced.  The court granted and denied Plaintiffs’ motion to compel in part and dismissed as moot in part.

Seventh Circuit

Allen v. Lilly Extended Disability Plan, No. 116CV02224TWPTAB, 2018 WL 2688186 (S.D. Ind. June 4, 2018) (Judge Tanya Walton Pratt).  In this dispute over long-term disability benefits, the court denied Plaintiff’s appeal of the Magistrate Judge’s denial of her Motion to Compel finding she is not entitled to discovery because she has not overcome the arbitrary and capricious standard of review in ERISA cases in showing exceptional circumstances warranting discovery.

ERISA Preemption

Third Circuit

Advanced Orthopedics and Sports Medicine Institute v. Empire Blue Cross Blue Shield, et al., No. 17CV08697FLWLHG, 2018 WL 2758221 (D.N.J. June 7, 2018) (Judge Freda L. Wolfson).  “[B]y disputing reimbursement for a medical procedure performed on a patient insured by an ERISA plan, Plaintiff asserts quintessential ERISA claims …”  The court found Plaintiff’s lawsuit alleging several state law claims to be expressly preempted by ERISA and granted Defendants’ motion to dismiss.

Eighth Circuit

Pharm. Care Mgmt. Ass’n v. Rutledge, No. 17-1609, __F.3d__, 2018 WL 2750274 (8th Cir. June 8, 2018) (Before LOKEN, BEAM, and KELLY, Circuit Judges).  The Arkansas state legislature adopted Act 900, Arkansas Code Annotated § 17–92–507, an amendment to the state’s then-existing maximum allowable cost law, in an attempt to address the lack of independent and rural-serving pharmacies in the state.  “The Act mandates that pharmacies be reimbursed for generic drugs at a price equal to or higher than the pharmacies’ cost for the drug based on the invoice from the wholesaler.”  The Act was challenged by pharmacy benefit managers.  The court reversed the district court’s ruling that the Act is not preempted by Medicare Part D, 42 U.S.C. § 1395w–26(b)(3).  It affirmed the district court’s ruling that the statute is preempted by ERISA.

Life Insurance & AD&D Benefit Claims

Ninth Circuit

Estate of David Maurice, Jr. v. Life Insurance Company of North America, No. 516CV02610CASSPX, 2018 WL 2670647 (C.D. Cal. June 4, 2018) (Judge Christina A. Snyder).  The court found that the insured’s “below-knee amputation of his left leg is a covered loss under LINA’s Voluntary and Basic AD&D policies in the sum of $101,000.”  The court considered eight declarations as constituting part of the administrative record since LINA reviewed them as part of plaintiff’s appeal.  The court concluded that the record does not demonstrate that the insured’s diabetes was a substantial contributing factor in his 2015 amputation and that the “amputation relates back to the time of the 2008 swimming pool accident insofar as the accident set into motion-and is directly related to-the later amputation.”  

Tenth Circuit

Hartford Life and Accident Company v. Jones-Atchison, No. CIV-17-654-D, 2018 WL 2708755 (W.D. Okla. June 5, 2018) (Judge Timothy D. Degiusti).  In this interpleader action following Hartford’s discharge from the proceedings, Applicants who claim that the insured was the biological father of their children moved to intervene in the proceedings pursuant to FRCP 24.  The court granted the motion because the application is timely (they had no notice until a few days before filing their motion), they would be prejudiced by a denial of their motion, they have asserted an interest in the life insurance proceeds at issue in this case, and no current party adequately protects their interests.

Medical Benefit Claims

Sixth Circuit

Fletcher v. Honeywell Int’l, Inc., No. 17-3277, __F.3d__, 2018 WL 2749940 (6th Cir. June 8, 2018) (Before: CLAY, GIBBONS, and BUSH, Circuit Judges).  The Sixth Circuit reversed the district court’s decision holding that the relevant CBAs were ambiguous and relied on extrinsic evidence for its conclusion that the parties intended retiree healthcare benefits to vest for life.  The court held that the CBAs are unambiguous.  The fact that the CBAs expressly provide lifetime healthcare for surviving spouses and dependents but not for the retirees themselves shows that the they knew how to provide vested benefits and chose not to for retirees.  Because the language is unambiguous, extrinsic evidence can no longer be considered.

Ninth Circuit

Danny P. v. Catholic Health Initiatives, No. 16-35609, __F.3d__, 2018 WL 2709733 (9th Cir. June 6, 2018) (Before: Sidney R. Thomas, Chief Judge, Ferdinand F. Fernandez, Circuit Judge, and David A. Ezra, District Judge).  See Notable Decision summary above.

A.H. by & through G.H. & L.C., v. Microsoft Corporation Welfare Plan & Microsoft Corporation, et al., No. C17-1889-JCC, 2018 WL 2684387 (W.D. Wash. June 5, 2018) (Judge John C. Coughenour). In this putative class action alleging that Defendants’ denial of the costs of attending Wingate was improper on the terms of the Plan and represented a breach of Defendants’ fiduciary duties, the court granted Defendants’ motion to dismiss.  The court concluded that Wingate was an eligible provider as that term is used in the wilderness program exclusion.  However, for Plaintiffs’ claim that the denial violates the Parity Act, the court found that Plaintiff has not plausibly alleged facts demonstrating the exclusion at issue represents a treatment limitation on mental health or substance use disorder benefits that is more restrictive than medical/surgical benefits.  In addition, the “ACA’s anti-discrimination provision does not require a health plan to provide coverage for any treatment just because it is rendered by a state-licensed provider.”  Lastly, with respect to Plaintiff’s ERISA Section 502(a)(2) claim, the court found that Plaintiff does have standing to seek injunctive and declaratory relief but that Plaintiff’s request for non-monetary equitable relief does not save the breach of fiduciary duty claim where Plaintiff does not allege losses to the Plan as a whole.

Pension Benefit Claims

Second Circuit

Everard Liverpool v. New York City District Council of Carpenters Pension Fund, No. 17-CV-4272 (PKC), 2018 WL 2561025 (S.D.N.Y. June 4, 2018) (Judge P. Kevin Castel).  The Fund denied the pro se plaintiff’s application for disability pension benefits because he had not worked as a covered employee for more than six years and lost all Vesting Credits under the pension plan.  The court determined that because Plaintiff did not appeal the plan administrator’s initial denial of benefits to the Fund’s trustees, he did not satisfy ERISA’s administrative exhaustion requirement.  On the merits, the court concluded that the Fund’s denial of his benefits was not arbitrary and capricious. 

Plan Status

Tenth Circuit

Baumgardner v. Patrick S. Cannon & Western Refractory Construction, Inc., No. 17-CV-2727-WJM-NYW, 2018 WL 2722453 (D. Colo. June 6, 2018) (Judge William J. Martinez).  On a motion to dismiss, the court determined that Plaintiff has plausibly alleged that the Phantom Stock Unit Agreement falls outside of ERISA (without concluding that it is exempted from ERISA as a matter of law).  Factors that “points strongly” toward something other than deferred compensation includes that the Agreement’s primary focus is in-service bonus compensation and it includes a noncompete covenant.

Pleading Issues & Procedure

Second Circuit

Gramercy Wrecking and Environmental Contracttors v. Trucking Employees of North Jersey Welfare Fund, Inc. & Teamsters Local 560, No. 17-CV-7101 (BMC), 2018 WL 2709202 (E.D.N.Y. June 5, 2018) (Judge Brian M. Cogan).  On the threshold issue of whether the Job Site Agreement, by its reference to a Collective Bargaining Agreement containing an arbitration clause, incorporates that arbitration clause so that the issue of whether petitioner has withdrawal liability is for an arbitrator to decide, the court held that the arbitration clause controls.  Since respondents have invoked it, the court dismissed the action without prejudice to the parties’ seeking resolution of the issue of withdrawal liability before an arbitrator.

Tenth Circuit

Miles v. Unified School District No. 500, et al., No. 17-2685-DDC-TJJ, 2018 WL 2722498 (D. Kan. June 6, 2018) (Judge Daniel D. Crabtree).  In this case Plaintiff filed claims under the FMLA, ADA, and ERISA.  Defendants filed a motion to enforce settlement based on a settlement agreement the parties supposedly agreed to before plaintiff filed the case.  The court denied the motion and explained that “neither party claimed that the Federal Rules of Civil Procedure, a statute in the United States Code, or any provision in the Constitution authorizes enforcement.  The court concludes, as it did in [Kokkonen v. Guardian Life Insurance Co. of America, 511 U.S. 375 (1994)], that it cannot use its inherent power to enforce the Settlement Agreement because failing to enforce it would not invoke or affect the court’s authority in any way.” 

Provider Claims

Fifth Circuit

Houston Home Dialysis, LP v. Blue Cross & Blue Shield of Texas, et al., No. CV H-17-2095, 2018 WL 2562692 (S.D. Tex. June 4, 2018) (Judge Lee H. Rosenthal).  The court dismissed with prejudice the ERISA causes of action for breach of fiduciary duty under § 502(a)(3) (duplicative of benefits claim) and the § 502(c) claim (rejecting the de facto administrator claim).  The court did not dismiss the claim for benefits under § 502(a) of ERISA and failure to provide the full and fair review ERISA requires.  The court dismissed without prejudice and with leave to amend the ERISA cause of action for violations of the ERISA claim procedures and state-law claims on the basis of ERISA preemption: breach of contract; promissory estoppel; quantum meruit; negligent misrepresentation; failure to provide prompt payment under the Texas Insurance Code, § 1301; failure to provide prompt payment under § 542 of the Code; violation of § 1301.056 of the Code for paying discounted rates without Houston Home Dialysis’s consent; and unfair claim-settlement practices under § 541.003 of the Code.

Tenth Circuit

IHC Health Services, Inc. v. Intermountain United Food and Commercial Workers and Food Industry Health Fund, No. 2:16-CV-01157-EJF, 2018 WL 2709213 (D. Utah June 5, 2018) (Judge Evelyn J. Furse).  The court found in favor of the Fund and held that IHC fails to meet its burden on summary judgment with respect to its first cause of action for recovery of plan benefits:  arbitrary and capricious standard of review applies, Plaintiff relies on the wrong plan documents, and fails to show that Defendant calculated the UCR in an unreasonable manner.  The court reserved judgment on the document penalties claim pending clarification regarding the administrator.


Fourth Circuit

Pender v. Bank Of America Corporation, et al., No. 17-1485, __F.App’x__, 2018 WL 2714683 (4th Cir. June 5, 2018) (Before KEENAN, WYNN, and FLOYD, Circuit Judges).  On this case’s second round at the Fourth Circuit and on Plaintiffs’ claim seeking an equitable accounting for any profits accruing to the Bank resulting from its unlawful transfer of the balances of Plaintiffs’ 401(k) Plan accounts into the general account of the Bank’s Pension Plan, the court affirmed the district court’s judgement in favor of Bank of America.  The Bank argued that “the Pension Plan’s investment strategy for the unlawfully transferred funds, which was developed and implemented by the Bank’s trained asset managers, performed far worse than Plaintiffs’ investment strategies, as reflected in their 401(k) account investment allocations. Because Plaintiffs’ investment allocations outperformed the Bank’s investment strategy—and the Pension Plan was responsible for making up any shortfall between the performances of the Bank’s investment strategy and Plaintiffs’ allocations—the Bank maintains that it did not profit from the transfers.” 

Subrogation/Reimbursement Claims

Second Circuit

Cognetta v. Bonavita, No. 17CV3065ARRRML, 2018 WL 2744708 (E.D.N.Y. June 7, 2018) (Judge Allyne R. Ross).  In this case where Plaintiffs seek a declaratory judgment that the Plan has an equitable lien or constructive trust in the amount that Defendants might recover in a negligence action currently pending against third parties, the court granted Plaintiffs’ motion for summary judgment.  It determined that ERISA preempts the application of New York General Obligation Law § 5-335 to the Plan because the Plan is self-funded and that the request for a declaratory judgment constitutes “appropriate equitable relief” under ERISA § 502(a)(3).  The court also determined that Plaintiffs’ action is not premature and a declaratory judgment is appropriate.