Hello, ERISA Watchers!  Getting this out a day early so I could wish you all a Happy Passover, Easter, and Sunday!  This was another relatively slow week for ERISA decisions.  I expect it to pick back up over the next few weeks.  

This week’s notable decision is Skornick v. Principal Financial Group, et al., No. 18-CV-4324 (CS), 2019 WL 1723741 (S.D.N.Y. Apr. 18, 2019), where the court determined that a group disability benefit policy purchased through Defendant Brooklyn Public Library (“the Library”) is subject to ERISA because it does not meet ERISA’s governmental plan exemption.

Background:  Defendant Principal Financial Group insures the Library’s long-term disability plan.  Skornick worked for the Library before he allegedly incurred a disability payable under the Policy.  When Principal denied his claim for disability benefits and his eligibility for life insurance benefits, Skornick filed suit in the New York State Supreme Court in Westchester County against Defendants for fraud, breach of contract, negligence, and violation of New York General Business Law § 349.  Principal removed the case to federal court, claiming that ERISA governs Plaintiff’s claim.  Plaintiff moved to remand the case to state court on the basis that the Library’s disability plan is a “governmental plan” within the meaning of ERISA Section 3(32) and exempt from compliance with Title I.

Discussion:  The question the court addressed is whether the policy purchased by the Library (“the Plan”) is a governmental plan not covered by ERISA.  If it is not covered by ERISA, then there is no basis for federal jurisdiction and the matter should be remanded to state court.  As noted above, the court found that the governmental plan exemption does not apply.  To reach this conclusion, the court considered the six factors articulated in Rose v. Long Island R.R. Pension Plan, 828 F.2d 910 (2d Cir. 1987).

Factor One – “whether it is used for a governmental purpose and performs a governmental function.”  To answer this question, the court noted that the specific inquiry is “whether the organization does something the government would otherwise have to do, and whether it does it in a way similar to how the government would do it.”  The court concluded that the Library does not perform a governmental function.  Key considerations include:  the statute creating the Library does not expressly state that it was for the benefit of the state of New York; New York City’s charter expressly excludes the Library form its definition of agency; the Library operates as a 501(c)(3) non-profit organization; the Bard of Regents designated the Library as an “association library” instead of a “public library;” and the Library’s provision of free educational opportunities is not tantamount to performing a governmental function.

Factor Two – “whether performance of its function is on behalf of one or more states or political subdivisions.”  The court rejected Skornick’s argument that providing free educational benefits to the public is a function performed on behalf of a political subdivision.  If this were the case, then large swaths of non-profit organizations could avoid ERISA’s reach.  

Factor Three – “whether there are any private interests involved, or whether the states or political subdivisions involved have the powers and interests of an owner.”  Though the City provides funding to the Library and its employees participant in the New York State Employees’ Retirement System, that is not the same as the government having ownership of the Library.  The Library does its own hiring and firing, manages its budget, and decides what books to buy and programs to offer.

Factor Four – “whether control and supervision of the organization is vested in public authority or authorities.”  The court found that this factor tips in Plaintiff’s favor since most of the Board that runs the library consists of City officials or people appointed by City officials.  The other Board members are people on whom those officials or appointees have agreed.

Factor Five – “if express or implied statutory or other authority is necessary for the creation and/or use of such an instrumentality, and whether such authority exists.”  The court found this factor to be neutral.  The Library was created by state law.  The contract between the Library and the City acknowledged the separate corporate identity and existence of the Library.

Factor Six – “the degree of financial autonomy and the source of its operating expenses.”  Though the Library relies on significant government funds, it exercises a sufficient degree of financial autonomy to make this factor neutral.  The court found DOL Opinion 94-21A (concluding that the Carnegie Center for Literacy and Learning was an agency or instrumentality of the county government and that including the Center’s employees in the County Employees Retirement Systems would not affect CERS’s status as a governmental plan) and DOL Opinion 97-02A (concluding that the California State University, Hayward Foundation, Inc. could contract with the California Public Employees’ Retirement System to provide for the participation of its employees as members without affecting the status of CalPERS as a governmental plan) minimally persuasive as they pertain to the facts of this case.  The court also found DOL Opinion 94-03A to be inapposite.

On balance, the court found that three of the Rose factors favor Defendants, one favors Plaintiff, and two are neutral.  As a result, the court concluded that Defendants have established that the disability and life insurance plan Plaintiff purchased through the Library is not a “governmental plan” under 29 U.S.C. § 1002(32).  The court also found the following considerations show that its decision comports with Congress’s purpose in enacting ERISA’s governmental plan exemption:  “(1) public plans generally contain more generous vesting provisions than private plans; (2) governments may use their taxing powers to fulfill their obligations to employees, which eliminates the need for minimum funding standards and plan termination insurance; and (3) ERISA’s minimum funding and other standards might impose unacceptable costs on government entities.”

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

Attorneys’ Fees

Eighth Circuit

Snitselaar v. Unum Life Insurance Company of America & Mount Mercy University, No. 17-CV-14-LRR, 2019 WL 1675169 (N.D. Iowa Apr. 17, 2019) (Judge Linda R. Reade).  In this lawsuit seeking life insurance death benefits, the court previously affirmed Unum’s decision to deny benefits and found that Mount Mercy breached its fiduciary duty to Plaintiff and awarded her $60,000 in equitable relief.  After analyzing the Westerhaus factors, the court awarded Plaintiff only $2,063.50, 75% of her requested $8,254 in attorneys’ fees.  This is because her briefs spent few pages dealing with the breach of fiduciary duty issue and most of the pages on the claim against Unum, which was unsuccessful.  The court denied Plaintiff’s application for $300 in expenses since she did not file a form A.O. 133 within 14 days of judgment and thus waived her right to obtain costs.

Breach of Fiduciary Duty

Ninth Circuit

Terraza v. Safeway Inc., et al., No. 16-CV-03994-JST, 2019 WL 1589979 (N.D. Cal. Apr. 12, 2019) (Judge Jon S. Tigar).  The court granted in part and denied in part Safeway’s motions for summary judgment in the Terraza and Lorenz cases.  The court determined that “[t]here is a triable dispute of fact about whether the Safeway Benefit Plans Committee (‘BPC’) discharged its duty of prudence in monitoring and, in some cases, selecting assets for the Plan;” whether Safeway gained any benefit at the expense of Plan participants; and what duty the BPC had to investigate lower recordkeeping fees and whether it discharged that duty.  The court granted Safeway’s motion as to the Chesapeake and Interest Income Funds because the Second Amended Complaint does not allege that either fund was imprudently selected or retained.

Disability Benefit Claims

Third Circuit

Pampena v. PNC Financial Services Group, Inc. and Affiliates Long Term Disability Plan, No. 2:18-CV-00488, 2019 WL 1745985 (W.D. Pa. Apr. 18, 2019) (Magistrate Judge Lisa Pupo Lenihan).  The court found that the Plan’s termination of Plaintiff’s long-term disability benefits was not arbitrary and capricious where it was supported by the internal peer reviews and an occupational review, and where no treating physician appeared to support his claim of impairment beyond the benefit termination date (which fell after his doctors’ “suggested” return-to-work date).  The Plan did not need to schedule an in-person IME.  The court found that even if de novo review applied, he would find Defendant’s decision to be correct.

Eighth Circuit

Turna, M.D. v. Mayo Clinic, No. 18-CV-00547 (ECT/HB), 2019 WL 1643557 (D. Minn. Apr. 16, 2019) (Judge Eric C. Tostrud).  This is a dispute over the proper “Annual Salary” to use to calculate the plaintiff doctor’s monthly long-term disability benefits.  Plaintiff argued that his salary was closer to $400k when you looked at the shifts he was regularly scheduled to work.  Mayo, on the other hand, took the position that his basic salary for purposes of long-term disability benefits was the minimum number of hours a full-time doctor was expected to work.  The court determined that Mayo’s interpretation of the Plan’s “Amount of Benefit” term was not reasonable. The final decision relied upon an inapplicable version of the Plan (the Plan that was revised or amended after Plaintiff became disabled to arguably support Mayo’s interpretation).  But the court found that regardless of which Plan version applied, Mayo’s interpretation of “Amount of Benefit” rendered Plan language—the excluded categories of income including “bonuses, incentive pay, commissions, overtime pay, shift pay or other extra compensation”—meaningless.  The court remanded the matter to the plan administrator since the denial was based on an unreasonable interpretation of plan terms and it is not clear whether Plaintiff was denied benefits to which he was entitled.


Fifth Circuit

Advanced Physicians, S.C v. Connecticut General Life Insurance Company, et al., No. 3:16-CV-02355-G (BT), 2019 WL 1745966 (N.D. Tex. Apr. 17, 2019) (Magistrate Judge Rebecca Rutherford).  The court denied the provider’s motion to compel documents protected by the attorney-client privilege.  “While Plan beneficiaries assigned their claims for reimbursement under the Plan to Advanced, Advanced is not a ‘beneficiary’ for the purpose of asserting the fiduciary exception to the attorney-client privilege under ERISA. Specifically, the Court finds that the assignment does not assign to Advanced the beneficiaries’ right to assert the attorney-client privilege or sue for breach of fiduciary duty.”

Eighth Circuit

Lapidus v. Life Insurance Company of North America, No. 4:18CV01291 JCH, 2019 WL 1696188 (E.D. Mo. Apr. 17, 2019) (Judge Jean C. Hamilton).  In this dispute over long-term disability benefits subject to de novo review, the court granted Plaintiff’s motion to compel a Rule 30(b)(6) deposition on the topic of “LINA’s determination that Plaintiff was disabled and eligible for LTD benefits, as expressed in Defendant LINA’s letter dated August 18, 2016, and the facts on which the determination was based.”  This is based on Plaintiff’s allegation that the administrative record does not provide documentation regarding the initial decision to approve Plaintiff’s benefits.  The court denied a deposition on LINA’s subsequent determinations that Plaintiff was disabled and not eligible for LTD benefits and then not disabled and not eligible for LTD benefits since there are no allegations of procedural irregularity or deficiency of the administrative record about these benefit determinations. 

Pension Benefit Claims

Third Circuit

Dowman v. Chubb Corp., et al., No. 316CV8129PGSLHG, 2019 WL 1587084 (D.N.J. Apr. 11, 2019) (Judge Peter G. Sheridan).  Plaintiffs in this case allege that in the 1990s they were employees of Bellemead and/or Chubb and are entitled to benefits under the Chubb Pension Plan.  The court denied Chubb’s motion to strike Plaintiff’s submission of two documents outside of the administrative record.  Though judicial review is ordinarily limited to the record available to the plan administrator, “the Denial on Appeal was based on a revised rationale, and consideration of the relevance of the Plaintiff’s Additional Documents should be addressed in determining whether the Committee acted arbitrarily if it did not have a complete record.”  The court granted the motion for summary judgment in favor of Chubb, Bellemead, and Halifax because no defendant other than the Committee had discretion to administer benefits under the Plans.  Plaintiffs were not provided the opportunity to appeal the specific issue explained in the final denial that the definition of “service provided” would be the criteria upon which the Committee would rest its decision.  This contravenes the provisions of ERISA requiring the Committee to provide adequate notice of the reasons for the denial and affording the participant an opportunity for a full and fair review.  The court granted Plaintiffs’ motion for partial summary judgment in part, finding that the Committee’s decision was arbitrary and capricious and remand to the Committee is the appropriate remedy.  

Fifth Circuit

Miletello v. R M R Mech., Inc., No. 18-30942, __F.3d__, 2019 WL 1613543 (5th Cir. Apr. 16, 2019) (Before BARKSDALE, SOUTHWICK, and HAYNES, Circuit Judges).  The court determined that Sandra, the plan participant’s ex-wife, timely obtained a QDRO, where the state court entered a judgment of partition incorporating the terms of the Divorce Settlement into the divorce decree on October 28, 2015, two days after the participant’s death, and the state court entered a QDRO pursuant to the divorce settlement on January 18, 2017.  It was amended on August 1, 2017 to have retroactive effect and be a nunc pro tunc order effective the day the Divorce Settlement was executed.  The QDRO can be effective even if it post-dates the death of the participant.  The court affirmed the district court’s judgment awarding $500,000 of the 401(k) funds to Sandra.

Plan Status

Second Circuit

Skornick v. Principal Financial Group, et al., No. 18-CV-4324 (CS), 2019 WL 1723741 (S.D.N.Y. Apr. 18, 2019) (Judge Cathy Seibel).  See Notable Decision summary above.

Pleading Issues & Procedure

Eighth Circuit

Fletcher v. Shade Tree Serv. Co., No. 4:18-CV-2041-SPM, 2019 WL 1643434 (E.D. Mo. Apr. 16, 2019) (Magistrate Judge Shirley Padmore Mensah).  Plaintiff brought a declaratory judgment action seeking clarification regarding who is primarily liable to pay the current and future medical expenses for accidental injuries sustained in the course and scope of Plaintiff’s employ, and to find that Defendant’s ERISA plan (a non-party to this lawsuit) provides coverage secondary to the Workers’ Compensation provider.   The court found that this case is not ripe.  There is no violation of ERISA or the terms of an ERISA plan.  Plaintiff has yet to prevail in his Workers’ Compensation action and there is a high likelihood there will never be a controversy for the court to decide.

Severance Benefit Claims

Fifth Circuit

Gonzales v. ConocoPhillips Company, et al, No. 4:17-CV-2374, 2019 WL 1586749 (S.D. Tex. Apr. 11, 2019) (Judge Kenneth M. Hoyt).  Plaintiff had engaged in several instances of criminal conduct which led to his incarceration and inability to get a “work visa” so that he could continue to be employed in Australia.  As a result, Defendant terminated his employment.  The Court held that the Plan Administrator did not abuse his discretion by denying the plaintiff’s claim for severance benefits, where the administrative record showed Plaintiff was terminated for cause, which was a disqualifying event.  He also did not submit his claim for more than a year after his employment terminated.  There is no evidence that the Plan Administrator acted in bad faith or did anything to prevent Plaintiff from filing his claim.

Statute of Limitations

Seventh Circuit

Harris v. Cent. States Pension Fund, No. 1:18-CV-284-TLS, 2019 WL 1639742 (N.D. Ind. Apr. 15, 2019) (Judge Theresa L. Springmann).  The court found the pro se plaintiff’s complaint to be time-barred where Defendant informed Plaintiff in writing in September 2004 that “no benefits would be payable to you from this Fund” due to the lack of a QDRO but Plaintiff did not file her lawsuit alleging breach of fiduciary duty until September 2011.

Withdrawal Liability & Unpaid Contributions

Second Circuit

Trustees of The National Retirement Fund v. Fireservice Management LLC, et al., No. 17-CV-4003 (CS), 2019 WL 1745740 (S.D.N.Y. Apr. 17, 2019) (Judge Cathy Seibel).  The court granted Plaintiffs’ motion for summary judgment as to Fireservice Management, LCC and denied as to Smeltzer Enterprises Inc.  The court denied Proposed Intervenors’ motion to intervene and denied their motion for summary judgment.

Gramercy Wrecking & Envtl. Contractors v. Trucking Employees of N. Jersey Welfare Fund, Inc., No. 18-2001-CV, 2019 WL 1715949 (2d Cir. Apr. 16, 2019) (Present: Katzmann, Droney, Sullivan, Circuit Judges).  In this dispute over whether Petitioner has withdrawal liability to the Fund, the court concluded that Petitioner is required to pursue its claims against the Union before an arbitrator and affirmed the decision of the district court.

Durso v. Al-Saleh Grocery Corp., No. 18-CV-02008(CS)(PED), 2019 WL 1594240 (S.D.N.Y. Apr. 15, 2019) (Magistrate Judge Paul E. Davison).  In this matter seeking withdrawal liability for which the court had entered default judgment, the Magistrate Judge submitted a report and recommendation that the court “award plaintiffs damages in the amount of $193,181.15, plus $100.32 per day from October 16, 2018 through the date judgment is entered.”

Kane v. Nat’l Farm Wholesale Fruit & Vegetable Corp., No. 17-CV-9487 (VSB), 2019 WL 1585101 (S.D.N.Y. Apr. 12, 2019) (Judge Vernon S. Broderick).  The court granted Plaintiffs’ motion to confirm the June 21, 2018 Arbitration Award of Arbitrator La Manna dismissing the arbitration proceedings since it was not procured through fraud or dishonesty or any other improper means.  The case is now restored to the court’s active docket.

Seventh Circuit

Building Trades United Pension Trust Fund v. Prostar Surfaces, Inc., No. 19-CV-105-JPS, 2019 WL 1746354 (E.D. Wis. Apr. 18, 2019) (Judge J.P. Stadtmueller).  The court granted Plaintiffs’ motion for default judgment and awarded $9,630.81in unpaid contributions, interest, and liquidated damages owed to the fund for the period of January 1, 2018 through June 30, 2018; $846.00 in attorneys’ fees; and $400 in costs.