This week’s notable decision is Brundle v. Wilmington Tr., N.A., No. 17-1873, __F.3d__, 2019 WL 1287632 (4th Cir. Mar. 21, 2019), as amended (Mar. 22, 2019), where the Fourth Circuit Court of Appeals affirmed the district court’s findings that the ESOP trustee caused the ESOP to overpay for the corporation’s stock by $ 29,773,250. The district court awarded attorneys’ fees to the participant’s counsel under 29 U.S.C. § 1132(g)(1) in the amount of $ 1,819,631.11 and an additional $1.5 million in fees from the damages award.
On appeal, Wilmington challenged the district court’s liability and damages determinations and its award of $1.5 million in non-statutory attorneys’ fees. Brundle cross-appealed and challenged as inadequate the same portion of the attorneys’ fees award.
The court determined that the district court properly found that Wilmington failed to prove by a preponderance of the evidence that the ESOP’s purchase of Constellis was for no more than adequate consideration qualifying for the § 1108(e) affirmative defense. In addition to Wilmington’s failure to scrutinize the draft valuation of Constellis stock, Wilmington’s conduct during the transaction provided further evidence that it failed to act as a prudent fiduciary solely on behalf of the ESOP participants. Bad faith is not required to find a breach of fiduciary duty. Lastly, the court found that the ESOP’s subsequent sale of Constellis stock to ACADEMI LLC did not constitute a meaningful comparator. Considering other factors, the ACADEMI purchase suggested that the fair market value was closer to $200 million, almost $100 million less than the enterprise value implied by the ESOP transaction.
With respect to the calculation of damages, the district court precisely followed the approach of subtracting the stock’s fair market value from the inflated price paid by the ESOP. The court was not required to offset its damages calculation by the $20 million in cash that the ESOP received as a result of the ACADEMI sale.
With respect to the attorneys’ fees award, the district court did not abuse its discretion by not awarding Brundle’s counsel a total of $9.9 million in fees under the firm’s one-third contingency fee agreement with Brundle himself. 29 U.S.C. § 1132(a)(2) does not bind the ESOP to a contract or fee agreement. Though the law firm has a valid fee agreement with Brundle, it does not have a fee agreement with the ESOP.
The court rejected Defendant’s argument that any common fund award would violate ERISA’s “anti-alienation” and “exclusive benefit” provisions. Because the plan administrator did not yet possess the damages award, it could not be considered a plan asset. The court agrees “with the Second, Eighth, and Ninth Circuits that a statutory fee-shifting provision (or an award of fees under such a provision) does not, as a matter of law, automatically preclude an award under the common fund doctrine. Accordingly, the district court retained discretion to award supplemental attorneys’ fees from the common fund.” With respect to the amount of fees, the court properly weighed the law firm’s efforts on behalf of the ESOP, including the contingency risk, and the objectives from ESOP participants to determine a proper common fund award. The balancing was not “clearly wrong” so the court affirmed the district court’s fee award in full.
Attorneys and Law Firms
ARGUED: Carter Glasgow Phillips, SIDLEY AUSTIN LLP, Washington, D.C., for Appellant/Cross-Appellee Wilmington Trust, N.A. Gregory Y. Porter, BAILEY & GLASSER LLP, Washington, D.C., for Appellee/Cross-Appellant. Robin Springberg Parry, UNITED STATES DEPARTMENT OF LABOR, Washington, D.C., for Amicus Secretary of Labor. ON BRIEF: James P. McElligott, Jr., Summer L. Speight, Richmond, Virginia, Stephen W. Robinson, MCGUIRE WOODS LLP, Tysons, Virginia; Jacqueline G. Cooper, Kurt A. Johnson, SIDLEY AUSTIN LLP, Washington, D.C., for Appellant/Cross-Appellee Wilmington Trust, N.A. Edward Lee Isler, Micah E. Ticatch, ISLER DARE, P.C., Vienna, Virginia, for Appellant Constellis Group, Inc. Tillman J. Breckenridge, Ryan T. Jenny, BAILEY & GLASSER LLP, Washington, D.C., for Appellee/Cross-Appellant. J. Christian Nemeth, Chicago, Illinois, Sophia A. Luby, Washington, D.C.; Eliot T. Burriss, Erin Turley, Calli Turner, MCDERMOTT WILL & EMERY LLP, Dallas, Texas, for Amicus American Society of Appraisers. Kate S. O’Scannlain, Solicitor of Labor, G. William Scott, Associate Solicitor for Plan Benefits Security, Thomas Tso, Counsel for Appellate and Special Litigation, UNITED STATES DEPARTMENT OF LABOR, Washington, D.C., for Amicus Secretary of Labor.
Below is a summary of this past week’s notable ERISA decisions by subject matter and jurisdiction.
Attorneys’ Fees
Seventh Circuit
Alice F. v. Health Care Service Corporation, No. 17 C 3710, 2019 WL 1232901 (N.D. Ill. Mar. 18, 2019) (Judge John Z. Lee). After finding for Plaintiff on her claim for payment of eight and a half months of treatment at a residential treatment facility, the court denied her attorney’s fees. Though she has shown “some degree of success on the merits,” the court explained that Defendant’s position was substantially justified. “The question of Plaintiff’s eligibility for residential care was primarily a factual one, and there were some facts, including physicians’ opinions, pointing in Defendant’s favor. There is no evidence that Defendant intended to harass Plaintiff or that it denied benefits in bad faith.”
Breach of Fiduciary Duty
Second Circuit
Ulrich v. Soft Drink, Brewery Workers & Delivery Employees, Indus. Employees, Warehousemen, Helpers & Miscellaneous Workers, Greater New York & Vicinity, Local Union No. 812, No. 17-CV-4730 (KMK), 2019 WL 1228056 (S.D.N.Y. Mar. 15, 2019) (Judge Kenneth M. Karas). The court determined that Plaintiffs do not state claims for a breach of fiduciary duties under ERISA Section 404. The alleged improper removal of Plaintiffs as Trustees of the Health and Pension Funds was not a fiduciary act. In addition, the alleged improper renegotiating of the “BettaWay agreement” was also not a fiduciary act as the federal courts have determined that when a union is engaged in collective bargaining negotiations, the union is not bound by fiduciary duties. “The crux of Plaintiffs’ allegation is that Defendants deviated from the plan by funding treatments that were outside the plan—they did not have discretionary authority, or any authority, to do this—they were not acting in their capacity as fiduciaries of the Fund.”
Powell v. Ocwen Fin. Corp., No. 18-CV-1951 (VSB), 2019 WL 1227939 (S.D.N.Y. Mar. 15, 2019) (Judge Vernon S. Broderick). Plaintiffs allege breach of fiduciary duty and prohibited transactions claims against Defendants for their alleged misconduct with respect to the management of residential mortgages underlying two trusts in which Plaintiffs’ benefit plan invested. The court converted the motions to dismiss to motions for summary judgment and ordered limited discovery with respect to the following threshold issues: “(1) whether the underlying mortgages in the AHMI Trusts qualify as ‘plan assets’ of the UFCW Plan, pursuant to 29 CFR § 2510.3-101; and, if so, (2) whether Ocwen, as the servicer of those mortgages, qualifies as a fiduciary of the UFCW Plan, pursuant to 29 U.S.C. § 1002(21)(A).”
Fourth Circuit
Brundle v. Wilmington Tr., N.A., No. 17-1873, __F.3d__, 2019 WL 1287632 (4th Cir. Mar. 21, 2019), as amended (Mar. 22, 2019) (Before GREGORY, Chief Judge, and MOTZ and FLOYD, Circuit Judges). See Notable Decision summary above.
Tenth Circuit
Birse v. Centurylink, Inc., No. 17-CV-02872-CMA-NYW, 2019 WL 1292861 (D. Colo. Mar. 20, 2019) (Judge Christine M. Arguello). The court adopted the Report & Recommendation finding that Plaintiffs have not stated enough facts to establish a claim of fiduciary duty based on Defendant’s alleged inadequate design and monitoring of the Large Cap Fund, one of twenty-two investment options in the Dollars & Sense Plan. However, the court dismissed the claims without prejudice.
Disability Benefit Claims
Sixth Circuit
Carr v. Metro. Life Ins. Co., No. 17-CV-14101, 2019 WL 1274825 (E.D. Mich. Mar. 20, 2019) (Judge Judith E. Levy). The court determined that MetLife’s ultimate decision to deny plaintiff’s LTD benefits was arbitrary and capricious because MetLife: (1) ignored and selectively reviewed evidence submitted by Plaintiff’s treating physicians; (2) relied on physician-consultants (Dr. Avron Simon and Dr. Marcus Goldman) who concluded the claimant is not credible without having examined him; and (3) relied on surveillance that did not reveal Plaintiff engaged in actions outside his claimed limitations. Plaintiff did not proffer any evidence showing that MetLife’s conflict of interest actually affected or motivated its decision to deny him LTD benefits so this is not a factor in determining whether MetLife acted arbitrarily and capriciously in denying Plaintiff’s LTD benefits. The court sought additional briefing on the appropropriate remedy, including payment of LTD benefits or remand, and attorney’s fees.
Quarles v. Hartford Life & Accident Insurance Company, No. 315CV00372CRSCHL, 2019 WL 1290891 (W.D. Ky. Mar. 20, 2019) (Judge Charles R. Simpson III). The court granted Hartford’s motion for judgment on Plaintiff’s claim for denied long-term disability benefits. “Under the terms of the Plan, Hartford had the right to request Proof of Loss throughout Quarles’s disability. Hartford exercised this right after surveillance footage discovered Quarles working at a restaurant, which he not only failed to disclose to Hartford, but also subsequently dodged and denied when Hartford specifically asked him at the in-person interview. Quarles frames the surveillance as a malicious attempt to ‘discredit’ Quarles, but a close review of the Administrative Record paints a different story.” (internal citations omitted). The court also found that Hartford substantially complied with the claims-procedure regulations in 29 C.F.R. § 2560.503-1.
Seventh Circuit
Tuhey v. Illinois Tool Works Inc.; ITW Long Term Disability Plan, No. 17 C 3313, 2019 WL 1239799 (N.D. Ill. Mar. 18, 2019) (Judge Harry D. Leinenweber). The court again dismissed Plaintiff’s breach of fiduciary duty claim with prejudice. “A plaintiff may not amend his complaint in a brief on a motion to dismiss. Since Plaintiff had not applied for LTD benefits prior to his discharge, he was not eligible to obtain LTD benefits. The long-term disability policy clearly provides that the right to LTD benefits ends at either the end of the disability or the termination of employment, whichever occurs first. Plaintiff’s termination here occurred prior to any application for LTD benefits and therefore he was not eligible.”
Hutten v. Reliastar Life Insurance Company, No. 17 C 5318, 2019 WL 1239709 (N.D. Ill. Mar. 18, 2019) (Judge Virginia M. Kendall). In this dispute over long-term disability benefits subject to de novo review, the court denied the parties’ motions for summary judgment. The court found that it must sit as a finder of fact at a bench trial to determine whether Plaintiff has dementia and disabling back pain keeping him from working as a software developer. At a bench trial the court can make credibility determinations about the medical opinions and assessments which come to diametrically opposed conclusions.
Ninth Circuit
Jantos v. The Prudential Life Insurance Company of America, No. 2:15-CV-01530-RAJ, 2019 WL 1294827 (W.D. Wash. Mar. 21, 2019) (Judge Richard A. Jones). The court remanded to Prudential Plaintiff’s claim that her “monthly earnings,” for purposes of calculating her long-term disability benefits, should include (1) a base salary; (2) “ordinary business income” as a shareholder of ECG, a subchapter S corporation, and (3) income through ECG’s Performance Incentive Program (“PIP”). “[A]pplying the doctrine of contra proferentem, the Court would interpret ambiguities in favor of the Plaintiff and conclude that Plaintiff’s ‘monthly earnings’ are not necessarily limited to her annual salary and could include, at least, the income reflected in her Schedule K-1’s.” But, the court found that the PIP income determination is more difficult because it could be considered a “bonus” which would be excluded. And, Plaintiff presents evidence on summary judgment which was not presented to or considered by Prudential. Because the Administrative Record is likely incomplete due to Prudential’s lack of investigation, the court remanded the matter to Prudential for a new factual determination of Plaintiff’s “monthly earnings” based on the evidence now before the court on summary judgment.
Luu v. First Unum Life Ins. Co., No. SACV1800970JVSJDEX, 2019 WL 1306261 (C.D. Cal. Mar. 15, 2019) (Judge James V. Selna). In this long-term disability dispute subject to de novo review, the court granted, in part, Plaintiff’s motion to augment the administrative record. Plaintiff sought to include a few documents that he attempted to have First Unum consider two years after the final decision, but which First Unum declined to do. First, the court determined that First Unum has not shown that it was prejudiced by the late submission. Second, First Unum did not comply with the notice requirements of the regulations because it did not include in the denial letter a description of the information or materials necessary to perfect the claim along with an accompanying explanation of why those materials are necessary. Under Abatie, the court may include evidence outside of the administrative record to remedy First Unum’s procedural violation of ERISA. It was not a procedural violation for First Unum to fail to disclose a reviewing doctor’s report prior to when the final decision was made because Plaintiff did not make a request for it. The court declined to admit a consultation report that Plaintiff could have submitted prior to the final determination. The court did admit a post-final denial FCE and a June 2016 report to the administrative record because their omission is tainted by the procedural irregularity. The court declined to admit a post-final denial rebuttal to the First Unum medical reviewer’s report because Plaintiff did not request the medical reviewer’s report before the final decision. Thus, the omission of the rebuttal is not due to the procedural irregularities of the notice.
Tenth Circuit
Kouzmanoff v. Unum Life Ins. Co. of Am., No. 17-CV-0721-RM-STV, 2019 WL 1228066 (D. Colo. Mar. 15, 2019) (Judge Raymond P. Moore). The court determined that Thomson Reuters self-funded Short-Term Disability (STD) Policy is not an ERISA plan but also does not provide for “wages or compensation” under the Colorado Wage Act. On de novo review of Plaintiff’s claim for Long-Term Disability (LTD) Policy benefits, the court found “that Kouzmanoff has failed overcome his hurdle to show—by a preponderance of the evidence—either that (1) that he had any occupational limitations at all or that (2) his diabetes is the cause of any would-be limitation.”
Eleventh Circuit
Lord v. American Gen. Life Ins. Co. of Delaware, No. 4:17-CV-167, 2019 WL 1244725 (S.D. Ga. Mar. 18, 2019) (Judge R. Stan Baker). The court determined that Defendant’s decision to deny Plaintiff continued long term disability benefits was not arbitrary and capricious where two functional capacity evaluations found Plaintiff capable of working at some capacity, her doctor’s medical reports did not support her disability from any gainful occupation, Defendant’s clinical nurse case manager and vocational rehabilitation counselors independently concluded that Plaintiff could perform sedentary or light work, and a peer review report by concluded that Plaintiff’s condition, and her medication, did not require further workplace restrictions.
ERISA Preemption
Fifth Circuit
Reasoner v. Kelley, et al., No. 1:18-CV-1121-RP, 2019 WL 1236375 (W.D. Tex. Mar. 18, 2019) (Judge Robert Pitman). Plaintiff filed his original petition in state court alleging that the Claimants brought about the change in beneficiary designation of his late wife’s life insurance policy through tortious interference with a contract, defamation, and using undue influence on his wife who lacked the capacity to make the change. The court found that it has federal question jurisdiction over this case under ERISA. The probate exception to federal jurisdiction does not apply since the life insurance policy proceeds are not assets of the wife’s estate and her estate is not a beneficiary of the life insurance policy. The court denied Plaintiff’s motion to remand to state court.
Exhaustion of Administrative Remedies
Sixth Circuit
Quarles v. Hartford Life & Accident Insurance Company, No. 315CV00372CRSCHL, 2019 WL 1290891 (W.D. Ky. Mar. 20, 2019) (Judge Charles R. Simpson III). The court granted Hartford’s motion for judgment on Plaintiff’s Waiver of Premium (WOP) benefits claim under the Supplemental Life and AD&D coverages due to Plaintiff’s failure to exhaust his administrative remedies by not appealing Hartford’s written denial of benefits.
Life Insurance & AD&D Benefit Claims
Fifth Circuit
Van Eaton v. The Prudential Life Insurance Company of America, No. 1:18-CV-882-RP, 2019 WL 1253568 (W.D. Tex. Mar. 18, 2019) (Judge Robert Pitman). In this case where the court must determine whether the ERISA-regulated life insurance policy is the property of Defendant (ex-wife of Decedent) or the Decedent’s estate, the court denied Plaintiff’s motion to remand. The probate exception to federal jurisdiction does not apply because the life insurance proceeds are not within the custody of a state court. The court had granted Prudential’s interpleader relief for the funds to be deposited in the Court Registry, so they are in federal custody. The court can exercise jurisdiction to determine the parties’ rights to the benefits.
Sixth Circuit
Guinn v. Gen. Motors, LLC, No. 18-3522, __F.App’x__, 2019 WL 1281217 (6th Cir. Mar. 19, 2019) (BEFORE: CLAY, COOK, and LARSEN, Circuit Judges). The court reversed the district court’s decision and found that the plan participant strictly complied with the Plan’s requirements to change her beneficiary from her ex-husband to her nephew. Here, the participant attempted to change the beneficiary using the form designated by MetLife, but she mistakenly completed the trust section of the form. MetLife wrote to the participant to inform her that it was unable to process her request and the record does not show that she responded to MetLife’s letter before she died. The court found that the phrase “on a form approved by [MetLife]” only required that the participant enter the required information on a form that MetLife selected for that purpose. Rejecting the form because the participant inadvertently added additional information to the form would be to impose additional requirements that are not present in the Group Certificate.
Medical Benefit Claims
Seventh Circuit
Alice F. v. Health Care Service Corporation, No. 17 C 3710, 2019 WL 1232901 (N.D. Ill. Mar. 18, 2019) (Judge John Z. Lee). The court found in favor of Defendant on its denial of payment for treatment at Second Nature since it does not meet the requirements for coverage under the Plan as a Residential Treatment Center (RTC), and the Plan’s definition of RTCs does not violate the Parity Act. The court found in favor of Plaintiff on the claim for payment at Vista RTC since her treatment there was “medically necessary” under the Plan. Plaintiff “met her burden to prove that her needs could not have been managed at a lower level of care, and that she met the Milliman Care Guidelines for residential care . . .” The court ordered the parties to meet and confer regarding the amount of back payments owed.
Eighth Circuit
Pacheco v. Honeywell Int’l Inc., No. 18-1006, __F.3d__, 2019 WL 1290328 (8th Cir. Mar. 21, 2019) (Before LOKEN, MELLOY, and ERICKSON, Circuit Judges). The court reversed the district court’s final preliminary injunction against Honeywell’s termination of early retiree benefits. The court determined that the Supreme Court’s decision in CNH Indus. N.V. v. Reese, 138 S.Ct. 761, 200 L.Ed.2d 1 (2018) is controlling and that the retirees’ healthcare benefits are not vested as a matter of law. The court concluded that the language of the relevant CBAs unambiguously reflected the parties’ intent to adopt non-vested retiree healthcare benefits. Extrinsic evidence of representations that Honeywell and its staff made regarding the benefits may not be considered.
Ninth Circuit
Dennis H. v. California Physicians’ Service dba Blue Shield of California, No. C 18-06708 WHA, 2019 WL 1301757 (N.D. Cal. Mar. 21, 2019) (Judge William Alsup). The court denied Defendant’s motion to dismiss this lawsuit seeking payment for a child’s medical care at a residential mental health facility. The court found that a lack of preauthorization does not foreclose recovery under the plan since what is determinative is whether the service is covered and medically necessary. Thus, Plaintiffs have sufficiently brought their first claim for relief under 29 U.S.C. § 1132(a)(1)(B). With respect to Plaintiff’s claim for equitable relief under 29 U.S.C. § 1132(a)(3) for violation of the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008, codified at 29 U.S.C. § 1185a, the court found that this claim can proceed simultaneously so long as there is no double recovery. If Plaintiff prevailed on both claims, any equitable restitution would be reduced by any recovery under the § 1132(a)(1)(B) claim.
Pension Benefit Claims
Second Circuit
Wisconsin Province of The Society of Jesus v. Cassem, No. 3:17-CV-01477 (VLB), 2019 WL 1243074 (D. Conn. Mar. 18, 2019) (Judge Vanessa L. Bryant). In this case where Province brings claims against Defendants concerning two retirement TIAA-CREF accounts held by the late Rev. Cassem, claiming that Fr. Cassem could not designate a beneficiary apart from Province due to his vows of perpetual poverty, chastity and obedience, the court found the vows are not enforceable under federal common law. ERISA also preempts Province’s action for declaratory judgment based on state contract law. This holding does not violate the Religious Freedom Restoration Act. With respect to ERISA’s anti-alienation provision, the court found that Province “does not plead sufficient facts for the Court to determine whether the Accounts are qualified ‘pension plans’ or whether they are exempted under 26 U.S.C. § 1051.”
Friedland v. UBS AG, No. 16 CIV. 687 (VMS), 2019 WL 1232084 (E.D.N.Y. Mar. 14, 2019) (Magistrate Judge Vera M. Scanlon). The court granted summary judgment in favor of Defendant and against the pro se plaintiff. The court found that the Plan permits a participant to receive his or her accrued benefits in the form of a single life annuity commencing at normal retirement age, or, “in lieu” of that form of payment, the alternative Level Income Age 62 Option form of payment. A participant cannot receive benefits under both options and the private settlement agreements between Plaintiff and Defendant are not formal Plan amendments nor did they intend to change Plaintiff’s elected form of pension payment. The agreements were to settle claims Plaintiff raised with respect to the notice of the merger of the Dillon Read Plan into the UBS Plan.
Sixth Circuit
Trustees of Carpenters Pension Tr. Fund – Detroit & Vicinity v. Estate of Meadows, No. 17-12822, 2019 WL 1255485 (E.D. Mich. Mar. 19, 2019) (Judge Laurie J. Michelson). The court denied Plaintiff’s motion for default judgment as moot. In other litigation between the Estate and the decedent’s ex-wife over survivor benefits paid to her, the state trial court ordered the Trustees to directly deposit the survivor benefits into the Estate’s attorney’s IOLTA account. The Michigan Court of Appeals found that the trial court’s orders directing the ex-wife’s pension proceeds be paid to the estate’s counsel’s trust account violated ERISA’s anti-alienation provision. Thus, the order the Trustees want to declare void or preempted will be vacated once the Court of Appeals remands the case to trial court. This also makes the ERISA preemption question moot.
Plan Status
Ninth Circuit
Mostajo v. Nationwide Mutual Insurance Company, No. 2:17-CV-00350-JAM-AC, 2019 WL 1298990 (E.D. Cal. Mar. 21, 2019) (Judge John A. Mendez). The court denied Defendant’s motion for reconsideration of its prior holding that the Your Time Program is an ERISA-exempt “payroll practice.” Defendant contends that the holding is in error because the benefits funds are for a time deposited in and held in the Trust before moving back to the Main Funding Account and then to the employees. The court found that the vacation benefits funds move directly from the Main Funding Account to the employees, not directly from the Trust to the employees, so Nationwide pays the vacation benefits from its general assets.
Provider Claims
Second Circuit
Long Island Neurological Associates, P.C. v. Highmark Blue Shield & Reed Smith LLP, No. 218CV81DRHAYS, 2019 WL 1284263 (E.D.N.Y. Mar. 20, 2019) (Judge Denis R. Hurley). In this dispute over under-reimbursement for surgical services, the court denied Defendants’ motion to dismiss. The court found that the Administrative Service Agreement (“ASA”) is not an ERISA document and is not binding on the Patient. Thus, the anti-assignment provision contained only in the ASA does not prohibit the patient from assigning her rights under the Plan.
Fifth Circuit
Encompass Office Sols., Inc. v. Louisiana Health Serv. & Indem. Co., No. 17-10736, __F.3d__, 2019 WL 1250487 (5th Cir. Mar. 19, 2019) (Before JONES, BARKSDALE, and WILLETT, Circuit Judges). The court found that the district court properly decided that BCBSLA waived the anti-assignment provisions because it made payments to, and communicated with, Encompass on at least some claims. The court rejected BCBSLA’s argument that only a jury could have decided the waiver issue. “It is well known that ERISA claims are the statutory cousins of equitable actions and so are tried to the court.” The court also did not disturb the district court’s determination that the plans’ 15-month limitations provisions are unenforceable across the board because BCBSLA never gave notice of them to Encompass. “In sum, BCBSLA abused its discretion by arbitrarily denying Encompass’s claims for covered services, as shown by its inconsistent treatment of similar providers.”
Tenth Circuit
IHC Health Service, Inc. v. Central States, Southeast and Southwest Areas Health and Welfare Fund, No. 217CV01327JNPBCW, 2019 WL 1227932 (D. Utah Mar. 15, 2019) (Judge Jill N. Parrish). The court denied in part and granted in part Defendants’ motion to dismiss. It denied Central States motion to dismiss the Amended Complaint but granted the motion to dismiss the claim for penalties under 29 U.S.C. § 1132(c)(1). The court explained, “Section 11.09 clearly entitles K.N. to benefits based upon a ‘Reasonable and Customary charge’ that must be calculated as provided in Section 11.09. IHC has alleged that Central States did not calculate the reasonable and customary charge in the manner required by the plan or, at a minimum, has failed to demonstrate that it complied with the Plan. Although IHC is precluded by the court’s prior order from asserting a claim for penalties for failure to provide the information required by ERISA, the fact that Central States has not provided the calculations or the records behind the calculation could nevertheless constitute a violation of the Plan, which must comply with ERISA. In short, IHC has successfully stated a claim for relief.”
Retaliation Claims
Second Circuit
Ulrich v. Soft Drink, Brewery Workers & Delivery Employees, Indus. Employees, Warehousemen, Helpers & Miscellaneous Workers, Greater New York & Vicinity, Local Union No. 812, No. 17-CV-4730 (KMK), 2019 WL 1228056 (S.D.N.Y. Mar. 15, 2019) (Judge Kenneth M. Karas). Plaintiff Ulrich alleged that he was removed as Trustee of the Pension Fund specifically to interfere, prevent and chill him from protecting his pension rights. He also alleged that he was suspended as a Health Fund trustee after reporting to the other trustees and Health Fund’s counsel that certain individuals caused the Health Fund to assume costs for medical treatments that they or their relatives received that were not covered by the Plan. The court determined that Plaintiff failed to allege a prima facie case for retaliation under Section 510. He does not allege that he will not receive pension benefits from the Pension Fund, nor does he allege that he was entitled to benefits under the plan that has been or will be denied in the future. In addition, he fails to allege a Section 510 whistleblower claim because his voluntary unsolicited internal complaints are not protected activity. Similarly, Plaintiff DeBellis also does not allege a Section 510 claim because he was terminated for his association with Ulrich and not to prevent him from receiving plan benefits.
Statute of Limitations
Second Circuit
Abdul-Aziz v. Nat’l Basketball Ass’n Players’ Pension Plan, No. 17-CV-8901 (VSB), 2019 WL 1284591 (S.D.N.Y. Mar. 20, 2019) (Judge Vernon S. Broderick). The court found Plaintiff’s claim for retirement benefits to be time-barred under New York’s six-year statute of limitations for breach of contract, which both parties agree governs Plaintiff’s claims. The court agreed with Defendant that the limitations period began accruing by the date Plaintiff stopped receiving benefit payments from the Plan. The repeated written warnings throughout the 1990s, followed by the complete cessation of benefit payments on July 31, 2001, served as clear repudiation by the Plan of any claim by Plaintiff to additional benefits.
Hugee v. U.A.W. Local 259 Pension Fund, No. 17CV2491MKBRER, 2019 WL 1253197 (E.D.N.Y. Mar. 19, 2019) (Judge Margo K. Brodie). Applying New York’s six-year limitations period for contract actions to Plaintiff’s claim for pension benefits, the court found that Plaintiff’s lawsuit is time-barred. The limitations period began accruing when he first received a letter from the Pension Fund informing him he was ineligible to receive pension benefits. This was more than seven years before he filed suit.
Seventh Circuit
I.B. of T. Union Local No. 710 Pension Fund v. Flynn, et al., No. 17-CV-05532, 2019 WL 1281991 (N.D. Ill. Mar. 20, 2019) (Judge John J. Tharp, Jr.). The Fund alleges that “the Former Trustees breached their fiduciary duties by 1) constructing the office building to benefit interested parties without obtaining an accurate and up-to-date assessment of the recession’s effects on the project in violation of § 1104 (Count I) and 2) using Fund assets to design and lavishly furnish the building to benefit interested parties (here, Flynn and Sweeney, whose Local 710 offices were in the building) in violation of § 1106(a) (Count II).” The court found Count I to be time-barred since it was filed more than six years after the date the trustees could have re-assessed the prudence of going forward with the construction project. The court declined to dismiss Count II based on being time-barred at this stage since the allegations of the cover-up of the furniture transaction are more closely related to potential fraud and concealment.
Statutory Penalties
Seventh Circuit
Tuhey v. Illinois Tool Works Inc.; ITW Long Term Disability Plan, No. 17 C 3313, 2019 WL 1239799 (N.D. Ill. Mar. 18, 2019) (Judge Harry D. Leinenweber). The court declined to dismiss the document penalties claim where Plaintiff made the request for plan documents from ITW’s attorney and he furnished a summary plan description (SPD) for the long-term disability plan no longer in effect. The court found that requesting the plan document from the attorney is no different than requesting the information from the plan administrator itself since the attorney is an agent of the plan administrator.
Withdrawal Liability & Unpaid Contributions
Second Circuit
Trustees of the Local 138, 138A & 138B Int’l Union of Operating Engineers Welfare Fund v. Early Bird Sweeping Contractors, Inc., No. 16CV01066ADSAYS, 2019 WL 1262747 (E.D.N.Y. Mar. 19, 2019) (Judge Arthur D. Spatt). The court granted default judgment against the Defendant. Defendant submit to an audit of its books and payroll records for the period of July 1, 2013 to June 30, 2015. Plaintiffs are awarded attorney’s fees in the amount of $5,550.50 and costs and disbursements in the amount of $1,060.00.
Riverbay Corp. v. Serv. Employees Int’l Union Local 32BJ, No. 18-CV-4660 (RA), 2019 WL 1244568 (S.D.N.Y. Mar. 18, 2019) (Judge Ronnie Abrams). “Riverbay’s petition to vacate is DENIED and 32BJ’s cross-petition to confirm is GRANTED. The Clerk of Court is directed to enter judgment in the amount of $252,927.19, plus (1) pre-judgment interest on the unpaid principal owed ($157,185.41) calculated at a rate of 9% per annum from April 16, 2018 through the date of judgment in this action and (2) post-judgment interest at the statutory rate.”
Sixth Circuit
Trustees of Operating Engineers Local 324 Pension Fund v. Bourdow Contracting, Inc., No. 18-1491, __F.3d__, 2019 WL 1290197 (6th Cir. Mar. 21, 2019) (Before: CLAY, COOK, and LARSEN, Circuit Judges). The court affirmed the district court’s grant of summary judgment to Plaintiff on its claim for withdrawal liability on the grounds that Defendant is the alter ego of Bourdow Trucking. The court assumed that the alter-ego test of the NLRA applies to Plaintiff’s ERISA claim. “In sum, six of the factors weigh in favor of Plaintiff—business purpose, operations, customers, supervision, ownership, and intent to evade labor obligations—and two of the factors weigh in favor of Defendant—management and equipment. And there is no reason that the two factors in favor of Defendant would outweigh the six factors in favor of Plaintiff. Accordingly, the district court correctly determined that Defendant is ‘merely a disguised continuance’ of Trucking.”