Good morning, ERISA Watchers!  It was quite the busy week for ERISA decisions, but I’m pleased to report that this week’s notable decision is a short and sweet statute of limitations decision in Foster v. Adams & Assocs., Inc., No. 18-CV-02723-JSC, __F.Supp.3d__, 2019 WL 943846 (N.D. Cal. Feb. 26, 2019).  Plaintiffs are participants and beneficiaries of the Adams and Associates Employee Stock Ownership Plan (“ESOP”).  They allege that Defendants violated their fiduciary duties under § 1106 by engaging in prohibited transactions when they sold all the stock in Adams and Associates, Inc. to the ESOP for above market value.  Plaintiffs also allege that certain defendants breached their fiduciary duties under § 1104 when they hired Alan Weissman as Trustee for the ESOP and when they failed to take any corrective action regarding his conduct related to a stock transaction.  (Click here to read more about the case allegations and Mr. Weissman’s indictment).

Considering the Ninth Circuit’s recent decision in Sulyma v. Intel Corporation Investment Policy Committee, 909 F.3d 1069 (9th Cir. 2018), Magistrate Judge Jacqueline Scott Corley found that Plaintiffs’ prohibited transaction and breach of fiduciary duty claims are not time-barred by the three-year statute of limitations in 29 U.S.C. § 1113(a)(2) (“three years after the earliest date on which the plaintiff had actual knowledge of the breach or violation”).  The court rejected Defendants’ argument that Plaintiff had actual knowledge of the underlying prohibited transaction when Defendants filed their Form 5500 with the Department of Labor.  The court explained that knowledge of the transaction is only part of the inquiry where a process-based claim under § 1104 depends also on the procedures used or not used by the fiduciary.  In addition, actual knowledge requires more than knowledge of the transaction itself; a plaintiff must have sufficient knowledge to be alerted to the particular claim.  The First Amended Complaint does not contain any allegations from which the court could infer when Plaintiffs became aware of the alleged prohibited transaction or breaches of fiduciary duty.

Plaintiffs are represented by friends of ERISA Watch, Daniel Feinberg of Feinberg Jackson Worthman & Wasow LLP, and R. Joseph Barton of Block & Leviton LLP.


In firm news, I’m pleased to share this recent CNN article on a case Kantor & Kantor is prosecuting on behalf of healthcare providers against Anthem and its Blue Cross entities.  The insurance companies are accused of paying patients directly to force the providers to join their networks and accept lower payments.  The companies have sent more than $1.3 million in payments, owed to facilities that treated people with addiction and mental health problems, directly to the patients themselves.  The article details several patients who received large sums of money, including one woman who received nearly $375,000 and never paid the healthcare provider.  “Arthur Caplan, the director of medical ethics for New York University’s School of Medicine, called the idea of insurers sending money to patients ‘insane.’” Lisa Kantor, representing Sovereign Health, “said she hopes her case shakes up the system.”

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

Breach of Fiduciary Duty

Fourth Circuit

Acosta v. Chimes District of Columbia, Inc., et al., No. CV RDB-15-3315, 2019 WL 931710 (D. Md. Feb. 26, 2019) (Judge Richard D. Bennett).  Following an 11-day bench trial, the court entered judgment in favor of the Chimes Defendants under Rule 58.  It concluded that:

“• The Chimes Defendants took reasonable measures to oversee and monitor the Plan and its service providers, and they made reasoned decisions that were consistent with that of a prudent person acting in a like capacity in similar circumstances.

• Chimes DC’s agreements with FCE and BCG were for the provision of necessary services to the Plan, for which they were paid reasonable compensation.

• The Chimes Defendants did not engage in prohibited transactions when the Chimes Foundation, which is not a party to this litigation, received charitable contributions from FCE, BCG, and their principals.

• The Plan’s fees in the aggregate were reasonable, so there is no evidence of loss to the Plan.

• Regardless whether FCE committed a fiduciary breach by its collection of commissions and fees, Chimes DC was not aware that such monies were not paid into the Plan and did not knowingly participate in any misconduct.

• There was no evidence of denied benefit claims that were not afforded a proper review.”

Panel Systems, Inc. v. Selective Insurance Company of America, No. 3:18-CV-687 (DJN), 2019 WL 921458 (E.D. Va. Feb. 25, 2019) (Magistrate Judge David J. Novak).  Panel Systems alleged that Selective breached the Commercial General Liability Insurance Policy Endorsement by failing to defend and indemnify Panel Systems in the “MCV Lawsuit,” Va. Commonwealth Univ. Health Sys. Auth. v. Panel Sys., Inc., Civil No. 3:18-cv-43-REP (E.D. Va.).  The court denied Defendant’s motion for judgment on the pleadings.  It held that Panel Systems stated a plausible claim that Selective breached the Endorsement by failing to defend Panel Systems in the MCV lawsuit because the factual allegations presented a potentiality that Panel Systems committed negligent acts covered by the Endorsement and in the “administration” of the healthcare plan.  Whether the other counts of the MCV complaint fall outside of the Endorsement’s coverage provisions is irrelevant to Selective’s duty to defend.

Ninth Circuit

Wilson, et al. Fidelity Management Trust Company; et al., No. 17-55726, __F.App’x__, 2019 WL 994364 (9th Cir. Mar. 1, 2019) (Before: RAWLINSON, MELLOY, and HURWITZ, Circuit Judges).  The court affirmed the dismissal of Plaintiff’s breach of fiduciary duty claims related to the Disney Savings and Investment Plan’s investment in Valeant Pharmaceuticals.  The court explained that allegations based solely on publicly available information that a stock is excessively risky considering its price do not state a claim for breach of the ERISA duty of prudence.  The investment in Valeant was facially consistent with the Plan documents.

Disability Benefit Claims

First Circuit

Bowden v. Grp. 1 Auto., Long Term Disability Plan, No. CV 17-11605-WGY, __F.Supp.3d__, 2019 WL 917427 (D. Mass. Feb. 25, 2019) (Judge William G. Young).  On de novo review, the court found that Aetna properly weighed the medical evidence but Plaintiff’s evidence, including treating doctor findings, did not show that Plaintiff was totally disabled.  With respect to Plaintiff’s Social Security award, the court found that the Social Security Act’s criterion of attendance, persistence, and pace” is far more generous to claimants than the LTD plan’s definition of disability that provides that a claimant is not disabled if their employer can reasonably omit or modify their duties.  Here, Plaintiff failed to prove that he cannot modify his work to accommodate breaks.  And, even if Aetna considered the Social Security award in its denial letter and got the records contained in his Social Security file, Plaintiff does not show how that would have perfected his LTD claim.  Thus, he failed to show how Aetna’s process caused him prejudice.  The court denied Aetna’s motion for costs, since the first, second, and third prongs of the five-factor test counsel against an award of costs.

Third Circuit

Kelly, Jr. v. The Penn Mutual Life Insurance Company, No. 18-1162, __F.App’x__, 2019 WL 990244 (3d Cir. Feb. 28, 2019) (Before: HARDIMAN, SCIRICA, and COWEN, Circuit Judges).  The court affirmed the district court’s determination that Plaintiff could perform some occupation and therefore was not disabled under the Plan’s “any occupation” definition.  The district court did not err when it awarded Plaintiff only 24 months of “regular occupation” disability benefits and remanded the claim to Reliance since Reliance Standard never decided whether Plaintiff was entitled to any occupation benefits.  Reliance’s decision denying any occupation disability was not arbitrary and capricious where “[f]our independent doctors conducting three separate reviews of Kelly’s file have concluded Kelly is not totally disabled.”

Eighth Circuit

Johnston v. Prudential Ins. Co. of Am., No. 17-3415, __F.3d__, 2019 WL 899379 (8th Cir. Feb. 25, 2019) (Before SMITH, Chief Judge, WOLLMAN and GRASZ, Circuit Judges).  “We agree with the district court that the standard of review is dispositive in this case. Johnston presented some evidence from his medical providers that he was disabled. He genuinely had a colloid cyst in his brain, and the Social Security Administration’s (“SSA’s”) reviewers found that he was ‘disabled’ under the SSA’s definition of disability. But Prudential also had evidence that Johnston was deliberately exaggerating his symptoms, making it impossible to determine whether he had cognitive deficiencies that rendered him disabled. Prudential’s examinations also occurred after the SSA’s review of Johnston’s condition, meaning that the SSA did not know about Johnston’s potential malingering.”  There is no support for the proposition that an insurer must prove the claimant is not disabled after an initial determination of disability.  Here, Prudential’s changed decision was supported by new evidence, mainly new reports that show Plaintiff was malingering.  The court affirmed the district court’s order that Prudential’s determination of benefits was not an abuse of discretion.

Phillips v. Charter Communications, Inc. Welfare Benefit Plan, No. 4:18-CV-00686-SNLJ, 2019 WL 1001553 (E.D. Mo. Feb. 28, 2019) (Judge Stephen N. Limbaugh, Jr.).  The court found that the Sedgwick has discretionary authority and that its demand for objective medical evidence to substantiate the functional limitations of a claimed disability is not a procedural irregularity warranting less deference.  Further, in seeking objective evidence, Sedgwick was not changing its final justification for denying Plaintiff’s claim.  Sedgwick did not abuse its discretion in denying short-term disability benefits where “[t]he medical records provided by plaintiff do little to show how plaintiff’s specific functional limitations would tend to prohibit her performance as a community sales specialist.”  The court also noted that several portions of the form document completed by her doctor were left blank.

Ninth Circuit

Harrison v. Metro. Life Ins. Co., Inc., No. C18-903 RSM, 2019 WL 954964 (W.D. Wash. Feb. 27, 2019) (Judge Ricardo S. Martinez).  The court found that MetLife abused its discretion when it denied short-term disability benefits to Plaintiff, who became disabled following a traumatic childbirth, because she filed her claim within 23 days rather than 15 days as required by the Plan.  The court found that Plaintiff presented significant evidence that it was not practical for her to file her claim within 15 days as she was unable to get out of bed and suffering from headaches, PTSD, and post-partum anxiety.  MetLife abused its discretion by requiring that she provide evidence of impaired cognitive functioning.  Even if she knew she had to file the claim within 15 days, which claims to not have known, the Plan did not consider when it was practical for her to do so.  Summary judgment to Plaintiff.  Claim remanded to MetLife to process the claim.

Pringle v. Standard Insurance Company, No. 3:18-CV-05025-RBL, 2019 WL 912297 (W.D. Wash. Feb. 25, 2019) (Judge Ronald B. Leighton).  Applying de novo review, the court concluded that Plaintiff carried his burden of proof that he meets the “any occupation” definition of disability under the Standard policy.  The court found that Plaintiff submitted objective medical evidence as defined in the policy and that he is not employable in any occupation.  In this case, Standard had file reviews done by Dr. Ephraim Brenman, a physiatrist, Dr. Darrin Campo, an internist, and Dr. Bradley Fancher.


Ninth Circuit

Doe v. Sun Life Assurance Co. of Canada, No. 418CV02965HSGKAW, 2019 WL 967116 (N.D. Cal. Feb. 28, 2019) (Magistrate Judge Kandis A. Westmore).  In this long-term disability dispute subject to de novo review, the court denied Plaintiff’s requests to compel responses to interrogatories seeking information pertaining to Dr. Michael Villanueva’s (clinical neuropsychologist) review of other disability insurance claims, whether claims were rejected or denied after Dr. Villanueva’s review, and his compensation from reviewing those claims.  The court agreed with Sun Life that no additional discovery should be allowed since Plaintiff did not show that an exceptional circumstance exists.  The court distinguished this case from Gonda v. Permanente Med. Grp., Inc., 300 F.R.D. 609 (N.D. Cal. 2014).

Baird, et al. v. Blackrock Institutional Trust Company, N.A., et al., No. 17CV01892HSGKAW, 2019 WL 914127 (N.D. Cal. Feb. 25, 2019) (Magistrate Judge Kandis A. Westmore).  In this putative class action alleging breach of fiduciary duty and prohibited transactions, the court granted in part Plaintiff’s request for discovery relief concerning two request for production of documents:  RFP No. 34 seeks: “All Documents and Communications concerning the gross and net profits that BlackRock and affiliates … earns as a result of providing Securities Lending Services to the BlackRock CTIs, including but not limited to Documents and Communications concerning the costs of providing such services, if any;” and RFP No. 35 concerns profits earned related to managing cash collateral involved in securities lending transactions.  The court ordered BlackRock to meet and confer with Plaintiffs as to what responsive information exists in the “TM1 database” and what exists from other sources and to produce communications responsive to these requests after meeting and conferring with Plaintiffs regarding a narrowed search.

Baird, et al., v. Blackrock Institutional Trust Company, N.A., et al., No. 17CV01892HSGKAW, 2019 WL 985262 (N.D. Cal. Feb. 27, 2019) (Magistrate Judge Kandis A. Westmore).  In this discovery joint letter, Plaintiffs seek to strike ten individuals that BlackRock did not disclose until December 21, 2018.  The court struck the individuals at issue except for two in their capacity as Rule 30(b)(6) witnesses only.  The stricken witnesses may not supply evidence on a motion, at a hearing, or at trial.

ERISA Preemption

First Circuit

Filleti v. AOL, Inc., No. 18-CV-10529-ADB, 2019 WL 859043 (D. Mass. Feb. 22, 2019) (Judge Allison D. Burroughs).  In this case where Plaintiff seeks unpaid wages and benefits arising out of his work for AOL while allegedly misclassified as an independent contractor, the court granted AOL’s partial motion to dismiss on the basis that Plaintiff’s misclassification claim is preempted by ERISA.  The court determined that the benefit plans at issue are “employee benefit plans’ under ERISA and that the cause of action “relates to” these employee benefit plans.  Following Hampers v. W.R. Grace & Co., 202 F.3d 44 (1st Cir. 2000) and its progeny, Plaintiff’s claim is preempted because the damages must be calculated using the terms of the plans of which Plaintiff would have been a beneficiary if he had been classified as an employee.

Fifth Circuit

Low-T Physicians Serv., P.L.L.C. v. United Healthcare of Texas, Inc., No. 4:18-CV-938-A, 2019 WL 935800 (N.D. Tex. Feb. 26, 2019) (Judge John McBryde).  In this lawsuit concerning the amount of payments due under certain preferred provider agreements and settlement of certain disputes regarding the proper amount of those payments, the court granted Plaintiff’s motion to remand to state court.  “[T]he question here is not as to the right to ERISA benefits under a particular plan but on the amount of payment due under certain provider agreements. Such claims are not preempted by ERISA.”

Life Insurance & AD&D Benefit Claims

Seventh Circuit

Struve v. Electrolux Home Products, Inc. Life Insurance Plan, et. al., No. 17-CV-8158, 2019 WL 918503 (N.D. Ill. Feb. 25, 2019) (Judge Robert M. Dow, Jr.).  In this dispute over denied life insurance benefits under a plan fully-insured by Prudential Life Insurance Company, the court granted the Plan’s and the employer’s motion to dismiss them from the lawsuit alleging claims under 502(a)(1)(B) and 502(a)(3).  The court found that they are not proper defendants because they are not “obligors” since Prudential makes the claims decisions and pays the benefits.  Plaintiff also failed to allege a failure to monitor claim or breach of fiduciary duty claim against them.

Medical Benefit Claims

Sixth Circuit

Cooper, et al. v. Honeywell International, Inc., No. 1:16-CV-471, 2019 WL 912123 (W.D. Mich. Feb. 21, 2019) (Judge Janet T. Neff).  The court granted Honeywell’s motion to dismiss the complaint seeking continuation of retiree healthcare benefits.  Following the Sixth Circuit’s decision in Cooper v. Honeywell Int’l, Inc., 884 F.3d 612, 622 (6th Cir. 2018), “Honeywell … properly interprets the retiree healthcare benefit provision to include an expiration.”  Id.  The court also determined that Plaintiff’s estoppel claim fails because the law of the case is that the 2011 CBA unambiguously did not vest retiree healthcare benefits.  

Pension Benefit Claims

Sixth Circuit

Dye v. Formica Corp. Employee Ret. Plan, No. 1:18-CV-155, 2019 WL 859224 (S.D. Ohio Feb. 22, 2019) (Judge Timothy S. Black).  Widow and Estate of deceased participant is not entitled to a lump sum payment under the terms of the Plan because it expressly states that only an individual “who is a Participant and is receiving an annuity form of payment as of the Final Distribution Date” is entitled to continue the payment of his benefits via a lump sum payment.  Here, the participant passed away while not receiving an annuity form of payment.  Plaintiffs’ allegation of procedural violations does not entitle Plaintiffs to the lump sum remedy that they seek.  “The rule in the Sixth Circuit remains that a plaintiff cannot pursue a claim for breach of fiduciary duty when the injury upon which the claim is premised is the denial of benefits.”

Pleading Issues & Procedure

Seventh Circuit

Struve v. Electrolux Home Products, Inc. Life Insurance Plan, et. al., No. 17-CV-8158, 2019 WL 918503 (N.D. Ill. Feb. 25, 2019) (Judge Robert M. Dow, Jr.).  The court granted Plaintiff’s motion to strike certain affirmative defenses.  Failure to state a claim is not an affirmative defense.  The Twombly and Iqbal pleading standard applies to the pleading of affirmative defenses.  These defenses are not affirmative defenses and are stricken:  “Prudential’s fourth defense (that Plaintiff seeks benefits to which he is not entitled under the plan) and fifth defense (that Plaintiff is not entitled to the benefits sought under the terms, conditions, limitations, and exclusions of the plan).”  The court also struck Plaintiff’s catchall affirmative defense which states “Prudential reserves the right to amend its answer and to assert any additional affirmative and other defenses as may become available or apparent at a future date.”  It adds unnecessary clutter to a case.  Prudential can seek to amend under Rule 15 if it later discovers facts it did not know at the time of pleading. 

Provider Claims

Second Circuit

LI Neuroscience Specialists v. Blue Cross Blue Shield of Fla., No. 17CV7515JFBSIL, __F.Supp.3d__, 2019 WL 912120 (E.D.N.Y. Feb. 25, 2019) (Judge Joseph F. Bianco).  “[T]he Court dismisses the Complaint because the Court finds that the unambiguous anti-assignment provision in the Plan document nullified any purported assignment of the patient’s benefits to plaintiff and because plaintiff does not seek equitable relief such that a claim for breach of fiduciary duty under ERISA would be proper. However, because plaintiff asserted at oral argument that it is considering pursuing an alternative standing argument using a power of attorney theory, the Court will conduct a status conference to determine whether plaintiff wishes to seek leave to re-plead in light of the Court’s decision.”

Third Circuit

Comprehensive Spine Care, P.A. v. Oxford Health Insurance, Inc., No. CV 18-10036 (JLL), 2019 WL 928421 (D.N.J. Feb. 26, 2019) (Judge Jose L. Linares).  The court denied Defendants’ motion for reconsideration of the court’s earlier decision finding that the provider’s claims for breach of contract, promissory estoppel, and account stated are not preempted by ERISA. The thrust of Defendants’ motion is allegedly newly discovered evidence of a letter Defendants sent Plaintiff which states that Defendants’ payment of claims will be determined based on, inter alia, the terms of Patient’s ERISA benefits plan.  The court found that this evidence was available previously and Defendants have not demonstrated that the letter is appropriate for the Court’s consideration on a motion for reconsideration.

Ninth Circuit

Beverly Oaks Physicians Surgical Ctr., LLC v. Blue Cross Blue Shield of Illinois, No. CV 18-3866-RSWL-JPR, 2019 WL 954780 (C.D. Cal. Feb. 27, 2019) (Judge Ronald S.W. Lew).  The court found that the relevant Summary Plan Descriptions are unambiguous and enforceable as Plan terms with respect to the assignability of benefits.  For the plans for which there are only SPDs, the court found that the anti-assignment provisions govern.  For the Teamsters plan, the court cannot hold at this stage that the anti-assignment provision is valid and unambiguous in light of a plan document referenced by the SPD which Plaintiff may obtain and use to support one final amendment of the complaint.

Statute of Limitations

Ninth Circuit

Foster v. Adams & Assocs., Inc., No. 18-CV-02723-JSC, __F.Supp.3d__, 2019 WL 943846 (N.D. Cal. Feb. 26, 2019) (Magistrate Judge Jacqueline Scott Corley).  See Notable Decision summary above.


Ninth Circuit

Devaux-Spitzley v. Prudential Insurance Company of America, No. 18-CV-04436-JST, 2019 WL 935137 (N.D. Cal. Feb. 26, 2019) (Judge Jon S. Tigar).  In this lawsuit seeking long-term disability benefits, the court granted Prudential’s motion to transfer venue to the Southern District of Ohio.  The court afforded minimal deference to Plaintiff’s choice of forum because nothing about Plaintiff’s medical treatment or the administration of her claim has any connection to the Northern District.  The only connection to the district is that her counsel is located here.  The court found the convenience of the parties’ factor to be neutral since it did not credit Plaintiff’s statement that she was unable to find a lawyer in Ohio.  The convenience of the witnesses and ease of access to the evidence factor slightly favors transfers since none of the potential witnesses involved are in the Northern District of CA and the administrative record was not created or compiled in this district.  Both forums are familiar with the applicable law.  Ohio has a greater local interest in the controversy since Plaintiff resides there.  Although the dockets of the Northern District of CA are more congested than those of Ohio, the court found this factor neutral.

Withdrawal Liability & Unpaid Contributions

Second Circuit

Local 363 United Elec. Workers of Am. v. Ampak Elec. Servs., Inc., No. 18-CV-01912, 2019 WL 919548 (E.D.N.Y. Feb. 25, 2019) (Judge I. Leo Glasser).  “Petitioners’ motion for default judgment confirming the Award is GRANTED and Respondent is required to pay damages in the amount of $2,615.10, which represents the Award in addition to the filing and process server fees incurred by Petitioner in bringing this action.”

Seventh Circuit

Teamsters & Employers Welfare Tr. of Illinois v. Gwillim Trucking, Inc., No. 14-CV-03386, 2019 WL 959594 (C.D. Ill. Feb. 27, 2019) (Judge Sue E. Myerscough).  The court granted judgment in favor of Plaintiff and against TKNG Transportation, Inc. in the amount of $24,138.60 on Count II, $219,989 on Count III, $28,144.70 for attorney’s fees, and $788.44 in costs.  The court found that TKNG had notice of the judgment before an interest was transferred to TKNG and there was substantial continuity in the operation of the business.

Ninth Circuit

Boards of Trustees of Seattle Area Plumbing & Pipefitting Indus. Health & Welfare Tr. v. Optimal Facility Sols., LLC, No. 2:18-CV-00443-RAJ, 2019 WL 858775 (W.D. Wash. Feb. 22, 2019) (Judge Richard A. Jones).  “[T]he Court GRANTS in part and DENIES in part Plaintiffs’ Motion for Summary Judgment. Plaintiffs are awarded $22,829.73 in unpaid contributions, $3,119.22 in liquidated damages, and $2,272.04 in audit costs. The Court also awards interest and attorney’s fees for both the 2017 unpaid contributions and the 2017 delinquent contributions.”