This week’s notable decision is a Ninth Circuit decision in the matter of Cuaresma, Jr. v. Farmers Group Disability Income Plan, et al., No. 16-16946, __F.App’x__, 2018 WL 2439529 (9th Cir. May 31, 2018).  Although it is an unpublished decision, the fact pattern is a novel one and it presents a good roadmap for how an unwary claimant can get around the strictly applied exhaustion requirement. 

In this case, Liberty Life denied Plaintiff’s claim for long-term disability (“LTD”) benefits prior to the expiration of his time to provide proof of claim and a date earlier than the date Liberty Life told him it would make a decision.  Specifically, prior to the end of the policy’s elimination period (while he was receiving short-term disability benefits), Liberty Life wrote to Plaintiff on September 19, 2014 and advised him that it would begin reviewing his LTD benefit claim.  Liberty Life gave Plaintiff until November 2, 2014 to return claim forms and submit medical records. 

However, Liberty Life denied his claim on October 30, 2014, a few days before its stated deadline.  In addition, per the policy’s terms, Plaintiff had until at least mid-to-late November to complete claim forms (proof of claim had to be given to Liberty Life no later than 30 days after the end of the 26-week elimination period).  

Rather than appeal the claim denial to Liberty Life within the 180-day deadline, Plaintiff submitted a completed application nearly one year later.  The district court granted Liberty’s motion for summary judgment on the defense that Plaintiff failed to exhaust his administrative remedies.  

The Ninth Circuit reversed the district court’s decision.  It held that genuine issues of fact remain regarding whether Liberty properly handled and denied Plaintiff’s LTD claim before the full amount of time authorized under the Policy to submit materials had expired.  Even though Plaintiff did not complete his claim submission until nearly a year after the policy deadline, the court apparently found that of no moment.  The court reversed and remanded with instructions to the district court to remand this case to Liberty Life to fully evaluate the merits of Plaintiff’s claim in compliance with the Policy.

This favorable outcome is a good example of how a procedural irregularity in the administration of a benefit claim can extend the strict deadlines that are all too often enforced against claimants.  It remains important, however, for claimants to submit appeals of denied long-term disability claims by the 180-day appeal deadline.  Most courts will enforce these deadlines against claimants even where there are procedural irregularities.  But, for fellow plaintiffs’ attorneys, if a client walks through your door after missing the appeal deadline, you might not want to be too quick to turn that case away.

There were lots of other notable decisions this past week.  Enjoy!

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

Breach of Fiduciary Duty

Fourth Circuit

TBM Consulting Group, Inc., et al. v. Lubbock National Bank, No. 5:17-CV-460-FL, 2018 WL 2448446 (E.D.N.C. May 31, 2018) (Judge Louise W. Flanagan).  In this case alleging disloyalty, imprudence, failure to comply with plan documents, and prohibited transactions in violation of ERISA, the court granted in part and denied in part Defendant’s motion to dismiss.  The court denied Defendant’s motion to dismiss Plaintiffs’ ERISA-based claims because Plaintiffs have successfully alleged statutory standing.  It granted Defendant’s motion to dismiss plaintiff TBM’s negligent misrepresentation claim on the basis of express preemption by ERISA.

Sixth Circuit

Yocum & Heather Ltd. v. Black Wolf Consulting, Inc., No. 1:17-CV-850, 2018 WL 2432741 (S.D. Ohio May 30, 2018) (Magistrate Judge Stephanie K. Bowman).  The court granted BPA’s motion to stay proceedings in this case pending resolution of Acosta, Secretary of Labor, United States Dept. of Labor v. AEU Benefits, LLC, et al., N.D. Ill. Case No. 1:17-cv-7931, where the DOL filed suit against all but one of the same defendants alleging “that the defendants improperly used the assets of the Participating Plans to pay themselves excessive fees and expenses, resulting in over $26 million in unpaid, processed claims, covering the time period of January 1, 2016 to October 2, 2017.”

Hatmaker v. Consolidated Nuclear Security, LLC, No. 3:15-CV-351-TAV-HBG, 2018 WL 2436808 (E.D. Tenn. May 30, 2018) (Judge Thomas A. Varlan).  The court determined that CNS is not liable for the misrepresentations about benefits of prior contractors when it took control of the pension plans in 2014.  CNS is also not required to act in conformity with the misrepresentations of the prior contractors.  The court granted Defendant’s motion for summary judgment.

Seventh Circuit

Divane v. Northwestern University, et al., No. 16 C 8157, 2018 WL 2388118 (N.D. Ill. May 25, 2018) (Judge Jorge L. Alonso).  In this lawsuit alleging a number of counts for breach of fiduciary duty related to the mix of investment options available in the two ERISA defined-contribution plans offered by Northwestern University, the court granted Defendants’ motion to dismiss and denied Plaintiffs’ motion for leave to amend the Complaint.  The fact that Plaintiffs believe index funds are a better long-term investment than the CREF Stock Account “does not a fiduciary breach make.”  The court derides Plaintiff’s theory as “paternalistic.”  Further, the court found nothing wrong with the fact that plan participants paid the record-keeper expenses via the expense ratios they paid.  The plans’ payment to TIAA-CREF and Fidelity for the transactions are not prohibited by Section 1106(a)(1)(C).

Disability Benefit Claims

Second Circuit

Spears v. Liberty Life Assurance Company of Boston, No. 3:11-CV-1807 (VLB), 2018 WL 2390136 (D. Conn. May 25, 2018) (Judge Vanessa L. Bryant).  In this dispute over long-term disability benefits, the court granted Liberty Life’s motion to dismiss Plaintiff’s § 502(a)(3), which Plaintiff brought on the basis of Liberty’s failure to timely decide her claim on remand.  The law of the case doctrine precludes Plaintiff from reasserting claims under § 502(a)(3).  The court rejected the argument that the Second Circuit’s decision in New York State Psychiatric Association v. United Health Group is intervening law that requires the court to revisit its previous dismissal of the § 502(a)(3) claim.  The court also declined to disturb its prior holding dismissing United Technologies Corporation as a party since it is not the Plan Administrator for LTD benefits and does not have discretion to award or deny LTD benefits.

Third Circuit

Vastag v. Prudential Insurance Company of America, No. CV156197KSHCLW, 2018 WL 2455921 (D.N.J. May 31, 2018) (Judge Katharine S. Hayden).  The court found that de novo review applies because the SPD, where there is discretionary language, specifically states that it is not a contract and not part of the plan, and neither the Group Contract nor the Booklet-Certificate confers discretion in legally sufficient language.   The court determined that the record contains objective medical evidence that Plaintiff suffers from a seriously debilitating disease that prevents him from performing the material duties of a reporter for the Washington Post.  The court ordered benefits to be paid for the own occupation period and remanded to Prudential for a determination under the “any gainful occupation” standard.

Fourth Circuit

Shepard v. Liberty Life Assurance Company of Boston, No. 1:17-CV-1055, 2018 WL 2422995 (E.D. Va. May 29, 2018) (Judge Claude M. Hilton).  Liberty Life paid Plaintiff 24 months of long-term disability benefits under the policy’s mental nervous limitation but Plaintiff sought additional benefits on the basis that he suffered from a variety of cognitive disorders due to brain injury.  The court found that Liberty Life did not abuse its discretion in denying further benefits.  “The claim process spanned roughly five years; involved the request and review of medical records from Plaintiff’s treating doctors; sought the review and analysis from four additional doctors; made benefit payments to Plaintiff before the investigation on the claim was complete; and notified and explained to Plaintiff Liberty’s determinations.”

Ninth Circuit

Benson v. Life Insurance Company of North America, No. 17-55253, __F.3d__, 2018 WL 2439587 (9th Cir. May 31, 2018) (Before: WARDLAW, NGUYEN, and OWENS, Circuit Judges).  The court affirmed the dismissal of Plaintiff’s complaint and amended complaint against LINA.  It held that:  (1) the district court did not abuse its discretion by considering evidence of the disability insurance policy and summary plan descriptions submitted with LINA’s motion to dismiss; (2) LINA’s limited dissemination of private medical records to a disinterested attorney is insufficient to support a negligent infliction of emotional distress claim (but not deciding whether such claim is preempted by ERISA); and (3) Plaintiff’s pre-litigation costs and attorney’s fees are unavailable as “appropriate equitable relief” under ERISA § 502(a)(3) (this sort of make-whole remedy is typically unavailable in equity to a trust beneficiary).

Cuaresma, Jr. v. Farmers Group Disability Income Plan, et al., No. 16-16946, __F.App’x__, 2018 WL 2439529 (9th Cir. May 31, 2018) (Before: W. FLETCHER and TALLMAN, Circuit Judges, and MORRIS,** District Judge).  See Notable Decision summary above.

Valencia v. Southwest Carpenters Health and Welfare Trust, No. 317CV01643CABAGS, 2018 WL 2441567 (S.D. Cal. May 31, 2018) (Judge Cathy Ann Bencivengo).  On summary judgment, the court determined that the Plan did not abuse its discretion in denying Plaintiff’s claim for long-term disability benefits on the basis that Plaintiff did not accumulate at least five Pension Credits required under the Southwest Carpenters Pension Plan.


Sixth Circuit

Johnson v. Harleysville Life Ins. Co., No. 17-10321, 2018 WL 2454986 (E.D. Mich. June 1, 2018) (Judge Sean F. Cox).  The court overruled Defendant’s objection to the Magistrate Judge’s order allowing limited discovery as to the claim of bias of University Disability Consortium and Dr. Neil Small and on the question of whether the disability policy at issue was renewed, amended, revised, etc. after June 1, 2017.

ERISA Preemption

Second Circuit

L&M Bus Corp. et al., v. Board of Education of The City School District of The City of New York, No. 18CV1902NGGSMG, 2018 WL 2390125 (E.D.N.Y. May 25, 2018) (Judge Nicholas G. Garaufis).  The court found that Section 4.5 (Employment Protection Provisions) of the bid for contracts to operate school-bus routes for children is not a state law for ERISA purposes and that the New York City Department of Education’s actions were undertaken in its capacity as a market participant, thus preventing the invalidation of Section 4.5 on ERISA preemption grounds.  Because the court concluded that the bidding process is not preempted by the NLRA or ERISA because of the market-participant exception, the Bus Companies have not established a likelihood of success on the merits.  The court denied the motion for preliminary injunction.

Third Circuit

Atlantic Shore Surgical Associates v. Horizon Blue Cross Blue Shield of New Jersey, et al., No. 17CV07534FLWDEA, 2018 WL 2441770 (D.N.J. May 31, 2018) (Judge Freda L. Wolfson).  In this dispute over reimbursement for a procedure performed on a patient insured by an ERISA plan, the court found that “Plaintiff asserts claims that are squarely within ERISA’s ambit,” and dismissed its four state common law causes of action.  The court denied as moot Plaintiff’s motion to remand since the court determined that the state law claims are expressly preempted by ERISA.

Ninth Circuit

Cave v. Delta Dental of California, No. 18-CV-01205-WHO, 2018 WL 2427788 (N.D. Cal. May 30, 2018) (Judge William H. Orrick).  Plaintiff alleges that Delta Dental acted in bad faith when it paid the claim filed by her dentist for crown replacements which she believed he recommended fraudulently.  The court dismissed Plaintiff’s claims for bad faith and violation of civil rights under HIPAA since they are preempted by ERISA.  The dispute involves insurance benefits provided through an employee benefit plan.  The court did give Plaintiff leave to amend for the limited purpose of pleading claims for breach of fiduciary duty under ERISA related to Delta’s processing of her claim and the alleged failure to provide her with the documents she requested.

Life Insurance & AD&D Benefit Claims

Eleventh Circuit

Metropolitan Life Insurance Company v. Burroughs Jackson, et al., No. 1:16-CV-0411-CG-M, 2018 WL 2452183 (S.D. Ala. May 31, 2018) (Judge Callie V.S. Granade).  The court granted Jackson’s motion for summary judgment because all parties agree that the MetLife records show that Jackson was the named beneficiary of the policy regardless of the method used to change the beneficiary, and because the Burrells are unable to demonstrate that the change in beneficiary was fraudulently procured.

Medical Benefit Claims

Third Circuit

Whitford v. Horizon Blue Cross Blue Shield of New Jersey, No. 17-CV-2637(PGS)(LHG), 2018 WL 2422020 (D.N.J. May 29, 2018) (Judge Peter G. Sheridan).  The court determined that BCBS’s denial of payment for an internal joint stabilizer in elbow reconstruction surgery on the basis of it being experimental or investigational is not arbitrary and capricious.  The proposed procedure lacks sufficient peer-reviewed literature to support its use and this was confirmed by two independent doctors who reviewed the claim.

Pension Benefit Claims

Second Circuit

New York City District Council Of Carpenters Pension Fund, et al., v. Forde, et al., No. 11CIV5474LAPGWGLEADC, 2018 WL 2455437 (S.D.N.Y. June 1, 2018) (Judge Gabriel W. Gorenstein).  The Fund denied Defendants’ pension benefit claim on the basis that their acts of fraud as breaching fiduciaries caused losses to the Plan that far exceed the amount of restitution ordered and that the Fund could offset the pension benefits.  The court determined that, barring any other defenses, the Funds may offset the pension and retirement benefits against any amount Defendants are required to pay in a judgment issued in this case.

Plan Status

Ninth Circuit

Miller v. Olsen, No. 16-35717, __F.App’x__, 2018 WL 2439547 (9th Cir. May 31, 2018) (Before: McKEOWN and PAEZ, Circuit Judges, and LASNIK, District Judge).  The court affirmed the district court’s decision finding that the Euterpe Employee Equity Growth Plan (“EGP”) was not a defined contribution plan subject to ERISA.  The primary purpose of the Plan is not to provide retirement benefits, but rather to encourage longevity and increased compensation.  Participation in the Plan was at the discretion of the Board of Directors.  In addition, participants could retire shares early, thus no “systematic deferral” of redemption until retirement or termination.

Pleading Issues & Procedure

Sixth Circuit

Young v. WH Administrators, Inc., No. 117CV02829STAEGB, 2018 WL 2392556 (W.D. Tenn. May 25, 2018) (Judge S. Thomas Anderson).  Defendant’s filed a motion to stay these putative class action proceedings in light of the filing of a second lawsuit against Defendant by the United States Department of Labor raising facts substantially similar to those in this suit. The court denied the motion because it “is not persuaded that either the fact that Defendant must participate in two lawsuits or that judicial efforts may be duplicated to some extent outweighs the potential prejudice to Plaintiff if this action is stayed.”  

Provider Claims

Third Circuit

University Spine Center v. Aetna, Inc., No. CV178161CCCCLW, 2018 WL 2441764 (D.N.J. May 31, 2018) (Judge Claire C. Cecchi).  The court granted Defendant’s motion to dismiss because the anti-assignment clause prohibits the assignment of benefits and is enforceable, Plaintiff has not shown that public policy concerns render the anti-assignment clause inapplicable, and Plaintiff has not shown Defendant waived the anti-assignment clause.

The Plastic Surgery Center, P.A. v. Cigna Health and Life Insurance Company, et al., No. CV172055FLWDEA, 2018 WL 2441768 (D.N.J. May 31, 2018) (Judge Freda L. Wolfson).  Defendants moved to dismiss on the basis that Plaintiff has failed to state a claim for breach of contract, negligent misrepresentation, violation of § 502(c)(1) of ERISA, and violation of § 502(a)(3) of ERISA.  The court found “that Plaintiff’s allegations are sufficient to sustain a claim for breach of contract: Plaintiff asserts that contracts exist between itself and Multiplan and Multiplan and Cigna, which contracts require Cigna to pay Plaintiff at the Multiplan Rate, and that Cigna breached its contractual obligation by failing to pay Plaintiff as such, resulting in financial harm to Plaintiff.”  The court dismissed the negligent misrepresentation claim because the economic loss doctrine applies there are no allegations that Plaintiff suffered economic loss.  The court dismissed the penalties claims because Cigna cannot be held liable as the de facto plan administrator and it dismissed the equitable relief claim because Plaintiff does not have standing and also because the claim seeks duplicative relief.

Eighth Circuit

Air Evac EMS Inc. v. USAble Mutual Insurance Co., No. 4:16-CV-00266 BSM, 2018 WL 2422314 (E.D. Ark. May 29, 2018) (Judge Brian S. Miller).  In this lawsuit by Air Evac challenging Blue Cross’s reimbursement practices for services provided after 2010, following the enactment of the Patient Protection and Affordable Care Act (“ACA”), under ERISA, multiple federal and state insurance regulations, the Arkansas Deceptive Trade Practices Act (“ADTPA”), and Arkansas common law, the court granted Blue Cross’s motion to dismiss in its entirety. The court determined that Evac lacks standing to sue for equitable relief under ERISA and that Blue Cross’s conduct falls within the ADTPA’s safe harbor provision. Air Evac has not alleged the existence of an implied contract between the parties and Blue Cross was not unjustly enriched. 

Ninth Circuit

Salinas Valley Mem’l Healthcare Sys. v. Monterey Peninsula Horticulture, Inc., No. 5:17-CV-07076-HRL, 2018 WL 2445349 (N.D. Cal. May 31, 2018) (Magistrate Judge Howard Lloyd).  The court determined that the Hospital’s theory as to why it must be paid a “reasonable and customary” rate far above 140% of Medicare is not supported by a reasonable interpretation of the plan.  The court declined to broadly construe Spinedex as generally conferring standing upon providers, like the Hospital, to enforce ERISA’s disclosure requirements in derivative suits for payment of benefits.  The court dismissed the claims based on ERISA’s disclosure rules and regulations.  The court declined to dismiss Plaintiff’s claim based on the ACA’s MOOP (maximum out-of-pocket) provisions.


Eleventh Circuit

Stewart v. Hartford Life & Accident Insurance Company, No. 2:17-CV-01423-KOB, 2018 WL 2431344 (N.D. Ala. May 30, 2018) (Judge Karon Owen Bowdre).  In this dispute over long-term disability benefits, the court dismissed Count Two seeking damages for breach of fiduciary duty because “ERISA does not permit a plaintiff to seek equitable relief if the allegations supporting the claim for equitable relief would also support a claim for recovery of benefits.”

Statutory Penalties

Tenth Circuit

Violetta v. Steven Bros. Sports Mgmt, LLC, No. 16-1193-JTM, 2018 WL 2445177 (D. Kan. May 31, 2018) (Judge J. Thomas Marten).  The court denied Plaintiff’s claims for civil penalties based on improper notice under ERISA and COBRA because of the relatively brief nature of the delay, the absence of bad faith, and the extremely limited evidence of actual prejudice to Plaintiff.  But, the court granted judgment in Plaintiff’s favor as to his actual damages for lack of notice against the plan administrator.  The court authorized an award of reasonable attorneys’ fees for work expended on obtaining the required notices.

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