Good morning, ERISA Watchers!  There were several interesting decisions this past week including those involving discovery in disability cases subject to de novo review, rescission of medical benefits for undocumented immigrants, and an equitable surcharge remedy awarded against a breaching fiduciary in the life insurance context.  For this week’s notable decision, I want to highlight the unpublished Second Circuit decision in Arkun v. Unum Group, No. 17-3354, __F.App’x__, 2019 WL 1579589 (2d Cir. Apr. 12, 2019), a matter involving a late-filed lawsuit for long-term disability benefits.  This is a good reminder for all of us to review and calendar the limitations periods in our cases.  

Plaintiff-Appellant Arkun, a former tax attorney appearing pro se, appealed the district court’s grant of summary judgment to Unum Group upon finding the action is time barred under the group disability insurance policy’s (the “Policy”) applicable statute of limitations.

The Policy provides that: “No action at law or in equity may be brought until 60 days after Covered Persons have given us Proof of Loss and have exhausted all appeals. Such action may not be brought more than 3 years after the earlier of: 1. the date we receive Proof of Loss; or 2. the end of the period within which Proof of Loss is required to be given.”

Arkun became disabled in January 1999 from mal de debarquement, a rare form of chronic fatigue.  Arkun v. Unum Grp., 2017 WL 4084050, at *1-2 (S.D.N.Y. Sept. 14, 2017).  After an initial denial, Unum ultimately found her disabled under the Policy.  Id. At *2.  On July 14, 2004, Unum notified Arkun that they no longer found her disabled.  Id.  At that time, they notified her of the Policy’s limitations period.  Arkun appealed the decision about two weeks later but did not complete her appeal until October 6, 2008, more than four years later.  On that date, Defendants began their review.  They denied the appeal six months later, March 20, 2009, and notified Arkun of her right to seek judicial review.  Arkun did not file her lawsuit until October 22, 2015.

The Second Circuit found that the district court properly reasoned that Arkun had submitted proof of loss by October 6, 2008 (the date she completed her appeal submission) and the Policy required her to seek judicial review within three years of that date.  She had to file her lawsuit by October 6, 2011 but did not.  Arkun had nearly two and a half years to file this lawsuit after the Defendants denied her appeal, which is a reasonable amount of time to bring a lawsuit.  

The court rejected Arkun’s argument that the three-year limitations period only applies to initial denials of a claim and not to subsequent determinations that a claimant is no longer disabled.  The court explained that the Policy’s plain terms do not indicate that the three-year limitations period only applies to initial denials and not subsequent denials.  Even if the court applied New York’s six-year limitations period, Arkun’s claim would still be time-barred, because this action was not filed until more than six years after the Defendants denied her appeal.

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

Attorneys’ Fees

Sixth Circuit

Michigan BAC Health Care Fund, Trustees of v. Hartley Masonry, Inc., No. 17-12260, 2019 WL 1556313 (E.D. Mich. Apr. 10, 2019) (Judge Sean F. Cox).  In this dispute over unpaid fringe benefits contributions, the court granted Plaintiffs’ request for $85,142.25 in attorneys’ fees and $5,086.73 in costs.  The rates requested for the attorneys (with 9 and 47 years of experience) were in the range of $130 to $140/hour.  The paralegal rates were in the range of $130 to $140/hour.  The Court concluded that 483.9 hours was a reasonable amount of time to devote to the prosecution of this case.

Breach of Fiduciary Duty

Fourth Circuit

Nitro Constr. Servs., Inc. v. D’Aquila, No. 2:18-CV-01510, 2019 WL 1521982 (S.D.W. Va. Apr. 8, 2019) (Judge Joseph R. Goodwin).  Plaintiff, a company that was alleged to have made late contributions to multiemployer health and welfare funds, filed a third-party complaint against the Trustees alleging a breach of fiduciary duty under § 502(a)(3) of ERISA.  The court found that this claim fails for a lack of standing because it is not pursuing its ERISA claims in a fiduciary capacity.  Nitro alleges that it suffered harm separate and apart from any injury to the plan beneficiaries.  Nitro only has standing to pursue actions under ERISA § 502(a)(3) that are related to the fiduciary responsibilities that it possesses.

Ninth Circuit

By Referral Only, Inc., v. Travelers Property Casualty Company of America, No. 18CV1695-MMA (JLB), 2019 WL 1559145 (S.D. Cal. Apr. 10, 2019) (Judge Michael M. Anello).  The plaintiff employer sued its liability carrier for failing to defend it in a breach of fiduciary duty lawsuit brought by Plaintiff’s former employee’s Trust related to life insurance coverage (see McBean case described more fully below under Life Insurance).  The court found that the Trust alleged conduct which arose out of Plaintiff’s alleged breach of fiduciary duties imposed upon it by ERISA.  The Policy here clearly and unambiguously precludes coverage for such losses and there is no duty to defend.  Because Defendant did not breach the contract by failing to defend Plaintiff in the McBean lawsuit, Plaintiff’s claim for breach of the implied duty of good faith and fair dealing necessarily fails. 

D.C. Circuit

Abraha, et al. v. Colonial Parking, Inc., et al., No. CV 16-680 (CKK), 2019 WL 1506005 (D.D.C. Apr. 5, 2019) (Judge Colleen Kollar-Kotelly).  The court granted Plaintiffs’ motion for leave to file an amended complaint which substantially expanded allegations regarding two original claims in what are now “Count One Relating to Excessive Fees” and “Count Three Relating to the Dependent Coverage,” and four new claims that arise from the same breaches of fiduciary duty:  a payroll tax claim, an interest earnings claim, an ACEC Plan surplus claim, and a Forge Plan surplus claim. 

Class Actions

Third Circuit

Huffman v. The Prudential Insurance Company of America, No. 2:10-CV-05135, 2019 WL 1499475 (E.D. Pa. Apr. 5, 2019) (Judge Joseph F. Leeson, Jr.).  In this dispute over the legality of retained asset accounts to pay life insurance benefits, the court granted final approval of the class action settlement.  The settlement includes a $9,000,000 settlement fund, from which $3,000,000 in attorneys’ fees, $67,763 in expenses, and $5,000 to each Class Representative in incentive awards will be deducted.  The average payment to Class Members is approximately $1,000.  The court entered Final Judgment and Order of Dismissal.

Disability Benefit Claims

Second Circuit

Khan v. Provident Life & Accident Ins. Co., No. 115CV00811MATLGF, 2019 WL 1506953 (W.D.N.Y. Apr. 5, 2019) (Judge Michael A. Telesca).  Following the Magistrate Judge’s R&R that the parties’ motions for summary judgment/motion for judgment pursuant to Rule 52 be denied, the district court issued this order concluding that the parties have effectively stipulated to the Court conducting a bench trial based solely on their submissions, in which the court will make findings of fact and conclusions of law.  The court noted that the Federal Rules of Civil Procedure do not contemplate judgment on the administrative record but that the Second Circuit has explained that it may be appropriate for the district court to treat such a motion as essentially a bench trial on the papers with the district court acting as the finder of fact.

Sixth Circuit

Deroo v. Unum Life Insurance Company of America, No. 18-CV-11216, 2019 WL 1552482 (E.D. Mich. Apr. 10, 2019) (Judge Bernard A. Friedman).  On de novo review, the court found Plaintiff continued to meet the policy’s “any gainful occupation” definition of disability since because the record did not contain any credible evidence that there are any nursing jobs that could accommodate Plaintiff’s physical impairments.  “Even assuming the Nurse Triage and Medical Claims Review Nurse positions exist and that plaintiff is educated and trained to perform them, and assuming further that plaintiff’s daily use of hydrocodone is not disqualifying (as vocational consultant Fuller indicates), the Court would still find based on the great weight of the evidence that plaintiff cannot perform these jobs because of her need to elevate her left leg to waist or heart level frequently and at will.”

Eighth Circuit

Reyes v. USAble Life, No. 2:18-CV-02075, 2019 WL 1549430 (W.D. Ark. Apr. 9, 2019) (Judge P.K. Holmes, III).  The court found that USAble’s failure to identify and consider the material duties of Plaintiff’s occupation that Plaintiff was deprived a full and fair review of her claim.  USAble failed to follow the definition of “disability” as written in the policy. The court found the appropriate remedy is a remand to the plan administrator with instructions to reopen the administrative record.  The court awarded Plaintiff attorneys’ fees.

Ninth Circuit

Lehr v. Perri, No. 2:17-CV-1188 WBS AC, 2019 WL 1556672 (E.D. Cal. Apr. 10, 2019) (Judge William B. Shubb).  Colleen Lehr embezzled over one million dollars from Perri Electric and its Profit Sharing Plans.  As part of Colleen’s bankruptcy, the bankruptcy trustee sent a check in the amount of $326,846 to Perri Electric, which the company used for its own business expenses and paying legal fees related to the adversarial proceedings.  None of the money went to the company’s Profit Sharing Plans, in which Colleen was a participant.  Colleen later sent Defendants a request for information about the Profit Sharing Plans, to which Defendants did not respond and which prompted the present lawsuit.  On the issue of standing, Colleen asserted that her claim to benefits, and thus her standing, revested upon the $326k payment.  The issue was whether Defendants had any obligation to remit the payment from Colleen’s bankruptcy estate to the Profit Sharing Plans.  The court found that the money was made payable to the company and could be used to cover business expenses.  The court also found that Defendants did not breach a fiduciary duty in refusing to remit Colleen’s payment to the Profit Sharing Plans.  Because the money Colleen owes the Plan exceeds any money the plan may owe her, she has no colorable claim to benefits and cannot bring a claim as a participant in the plan against the Defendants for the breach of fiduciary duty.


Ninth Circuit

Shaikh v. Aetna Life Insurance Company, No. 18CV04394MMCTSH, 2019 WL 1571876 (N.D. Cal. Apr. 11, 2019) (Magistrate Judge Thomas S. Hixson).  In a long-term disability dispute subject to de novo review, the court denied Plaintiff’s motion to compel Aetna to provide responses to discovery requests aimed at determining the financial bias and independence of its reviewing physician, Dr. Timothy Craven. “Even if it is true that Craven worked for Aetna a lot, and therefore they have paid him a lot, that sounds like the routine case, not the exceptional one.  And the threshold allegations that Craven’s medical opinion is contrary to the weight of the administrative record is something ERISA plaintiffs often allege.  It’s not exceptional either. Permitting the requested discovery in this case is inconsistent with the limitations [Opeta v. Northwest Airlines Pension Plan for Contract Emps., 484 F.3d 1211, 1217 (9th Cir. 2007)] contemplates on extra-record evidence in de novo cases.”  The court also explained that if, as Plaintiff alleges, Dr. Craven’s opinion is inconsistent with the medical evidence, the reason for his opinion “is neither here nor there” because the court can just disregard the opinion on de novo review.

ERISA Preemption

Third Circuit

Screen Actors Guild – Am. Fed’n of Television & Radio Artists, AFL-CIO v. Sheridan Broad. Networks, No. CV 18-455, 2019 WL 1505866 (W.D. Pa. Apr. 5, 2019) (Magistrate Judge Maureen P. Kelly).  Defendant contended that ERISA preempts SAG – AFTRA’s Pennsylvania Wage Payment and Collection Law (“WPCL”) claims.  The court noted that Defendants have conceded liability and have waived all substantive defenses.  Even though SAG – AFTRA seeks severance pay and other limited benefits, the claims do not implicate ERISA because there is no separate and ongoing administrative scheme.  “Here, SAG – AFTRA seeks to recover unpaid wages, severance payments, and expense reimbursements. The sums were rendered payable through the Award of Arbitration and consent to entry of judgment as to all Defendants. No further administrative tasks are imposed upon any Defendant-Employer and as such, an ERISA benefit plan is not implicated.”

Life Insurance & AD&D Benefit Claims

Fifth Circuit

McKenzie v. McKenzie, No. SA-17-CA-232-HJB, 2019 WL 1546961 (W.D. Tex. Apr. 9, 2019) (Magistrate Judge Henry J. Bemporad).  In this interpleader action initiated by Dearborn National Life Insurance Company, the court found that the life insurance proceeds go to the decedent’s spouse and not his daughter since the designation of his daughter was only noted on an electronic spreadsheet maintained by a third-party enroller which was not accepted by Dearborn as a valid beneficiary designation.  There was no completed designation form or spousal waiver to name a beneficiary other than the spouse.  The court found that Dearborn’s requirement of a designation form and a signed spousal consent form is protected under the “substantial compliance” rule.

Ninth Circuit

McBean v. United of Omaha Life Insurance Company, No. 18CV166-MMA (JLB), 2019 WL 1508456 (S.D. Cal. Apr. 5, 2019) (Judge Michael M. Anello).  Plaintiff, Trustee of the Living Trust that was beneficiary to the decedent’s life insurance policies, brought a 29 U.S.C. § 1132(a)(1)(B) claim against United of Omaha on the basis that it waived the eligibility requirements of the life policies by accepting premiums without investigating the decedent’s eligibility, or alternatively, that United and the employer breached their fiduciary duties and should be surcharged in the total amount of the life insurance policies under 29 U.S.C. § 1132(a)(3).  The court granted in part and denied in part Plaintiff’s motion for summary judgment and granted United’s cross-motion for summary judgment.  The court found that United did not waive the “active employment” eligibility requirements since under the terms of the plan, no coverage existed at the time of decedent’s death and the court cannot rewrite the terms of the policies to continue coverage for ineligible employees by paying premiums.  The court also found that United did not waive the 31-day written notice requirement to extend decedent’s coverage under the policies by simply retaining premiums to which United admits was in error.  The court rejected Plaintiff’s breach of fiduciary duty claim against United, finding that it had no duty to train or supervise the employer.  With respect to the employer, the court found that it was acting as a fiduciary when it represented to decent that continued payment of premiums would maintain coverage.  The employer made a material misrepresentation when its managing Director told her family that she continued to maintain her life insurance coverage.  The misrepresentation caused decedent to lose the opportunity to convert or port her coverage.  The court declined to find United derivatively liable for the employer’s misrepresentations.  The court found that Plaintiff has demonstrated actual harm from the employer’s breach of fiduciary duty and granted Plaintiff’s summary judgment through the doctrine of equitable surcharge. 

Pleading Issues & Procedure

Eighth Circuit

Peterson, D.C. v. UnitedHealth Grp. Inc., et al., No. CV 14-2101 (PJS/BRT), 2019 WL 1578750 (D. Minn. Apr. 12, 2019) (Magistrate Judge Becky R. Thorson).  Plaintiffs moved to file Second Amended Complaints and Defendants opposed the addition of a claim for fiduciary breach under ERISA § 1132(a)(2) in the Peterson matter.  The court denied Plaintiffs’ motion because Plaintiffs knew about the basis for this cause of action and unduly delayed in bringing it.  Defendants would be prejudiced by permitting Plaintiffs to add the allegations now.

Tenth Circuit

Ramos, et al. v. Banner Health, et al., No. 15-CV-2556-WJM-NRN, 2019 WL 1558069 (D. Colo. Apr. 10, 2019) (Judge William J. Martínez).  In this lawsuit where Plaintiffs claim that Defendants breached their fiduciary duties under ERISA by providing imprudent investment options and allowing the Plan to pay excessive administrative and recordkeeping fees, the court granted Defendants’ motion to strike Plaintiffs’ jury demand.  The court found that the claims and remedies sought are equitable in nature and Plaintiffs’ do not have a right to a jury trial under the Seventh Amendment.

Provider Claims

Eighth Circuit

McKennan v. Meadowvale Dairy Employee Benefit Plan & Meadowvale Dairy, LLC, No. C18-4010-LTS, 2019 WL 1579722 (N.D. Iowa Apr. 12, 2019) (Judge Leonard T. Strand).  The self-funded plan rescinded coverage for its plan participant, who was receiving expensive treatment for Guillain-Barre Syndrome, after finding out he was an undocumented immigrant who provided a false Social Security number to obtain benefits.  The court considered the stop-loss insurance policies for the limited purpose of determining the proper standard of review.  “The close relationship between those who issued the adverse benefits decision in this case, combined with the fact that the second-level review was clearly not de novo, raise an inference that the conflict of interest affected the decision-making process.”  The court again found that the provider has standing.  The Assignment was properly executed.  The court rejected the argument that the “cause of action” the participant conveyed never accrued because he died before his claim was exhausted.  The court found that the unclean hands doctrine does not bar recovery in this case, in part, because applying the doctrine in cases like this would be contrary to public policy requiring employers to not violate employment law as to undocumented workers. The court reversed the decision of the plan administrator rescinding coverage and ordered Defendants to pay the benefits wrongfully denied under the terms of the Plan, in the sum of $760,713.45, plus interest.

Ninth Circuit

Davita, Inc., et al. v. Amy’s Kitchen, Inc., et al., No. 18-CV-06975-JST, 2019 WL 1509186 (N.D. Cal. Apr. 5, 2019) (Judge Jon S. Tigar).  Plaintiffs are dialysis treatment providers who brought ERISA, MSPA, and state law claims against the defendant health plan for eliminating network coverage for dialysis treatment.  The plan was amended to include a “Dialysis Benefit Preservation Program” carving out dialysis treatment from the Plan’s in-network/out-of-network approach.  With respect to the ERISA claims, the court determined that the non-participant healthcare provider does not have statutory standing to bring ERISA claims against the health plan.  The court found the scope of the assignment from Plaintiff’s patient to be limited to the right to claims for payment of benefits and not for asserting claims for illegal plan terms and breach of fiduciary duty under 29 U.S.C. § 1132(a)(3). Lastly, the court found that Plaintiff lacks Article III standing to bring the ERISA claim for benefits since its patient has not suffered an injury-in-fact.  The patient continued to receive dialysis treatment after the health plan was amended.

Statute of Limitations

Second Circuit

Arkun v. Unum Group, No. 17-3354, __F.App’x__, 2019 WL 1579589 (2d Cir. Apr. 12, 2019) (Present: Walker, Jr., Calabresi, Livingston, Circuit Judges).  See Notable Decision summary above.

Fifth Circuit

Vizinat v. Unum Life Insurance Company of America, No. 6:14-CV-00953, 2019 WL 1548653 (W.D. La. Apr. 9, 2019) (Judge Terry A. Doughty).  Plaintiff challenged Unum’s application of offsets in calculating and paying his monthly long-term disability benefits.  The court agreed with Unum that Plaintiff’s lawsuit is untimely.  The court noted that the Fifth Circuit has not established a clear rule when there is an allegation that benefits have been miscalculated or underpaid.  Without deciding what rule the Fifth Circuit would apply, the court found that “it is clear that, no later than July 2003, that Unum had reached a final decision on the calculation of Vizinat’s benefits and had rejected or clearly repudiated his calculation. Thus, his claim accrued no later than that date.”  The court rejected Plaintiff’s argument that his cause of action never accrued because each improper payment is a continuing breach of contract. The Policy provides that the contractual three-year limitations period began to run from the time proof of loss is required.  At the latest, he had until July 2006 to file suit, and he failed to do so. 

Withdrawal Liability & Unpaid Contributions

Second Circuit

Trustees of The New York City District Council of Carpenters Pension Fund v. Galway Development Corp., No. 19 CIV. 278 (PAE), 2019 WL 1567713 (S.D.N.Y. Apr. 10, 2019) (Judge Paul A. Engelmayer).  “[T]he Court confirms the Award in favor of petitioners and issues judgment in the amount of $7,895.72 plus post-judgment interest pursuant to 28 U.S.C. § 1961(a).”

Trustees of The Northeast Carpenters Health, Pension, Annuity, Apprenticeship v. Sabre Tile Corp., No. 218CV02773ADSSIL, 2019 WL 1573192 (E.D.N.Y. Apr. 8, 2019) (Judge Arthur D. Spatt).  The court affirmed the arbitration award finding that Respondent was in violation of the terms of the CBA.  Respondent must pay the Funds the sum of $69,697.91, consisting of a principal deficiency of $58,596, interest of $662.51, liquidated damages of $8,789.40, attorneys’ fees of $900, and the arbitrator’s fee of $750 pursuant to the Agreement.

Annuity, Welfare & Apprenticeship Skill Improvement & Safety Funds of the Int’l Union of Operating Engineers Local 15, L 5A, L 5C & 15D, AFL-CIO by Callahan v. Professional Pavers Corp., No. 18-CV-5697 (BMC), 2019 WL 1507937 (E.D.N.Y. Apr. 5, 2019) (Judge Brian M. Cogan).  In this action alleging that Defendant “failed to remit an approximate amount of $100,000 in fringe benefit contributions, supplemental union dues, and political action committee payments as required by the CBA, potentially by underreporting the number of its employees and the hours and wages paid to its employees,” the court granted Plaintiffs’ motion for default judgment and awarded attorneys’ fees.

Sixth Circuit

Michigan BAC Health Care Fund, Trustees of v. Hartley Masonry, Inc., No. 17-12260, 2019 WL 1556313 (E.D. Mich. Apr. 10, 2019) (Judge Sean F. Cox).  The court found Defendants liable for $243,034.56 in unpaid fringe benefits contributions, interest, and audit costs; and liable for $90,228.98 in attorney’s fees and costs.

Ninth Circuit

Marine Carpenters Pension Fund v. Puglia Marine, LLC, No. 3:18-CV-05809 RBL, 2019 WL 1556243 (W.D. Wash. Apr. 10, 2019) (Judge Ronald B. Leighton).  “The Funds’ Motion for Partial Summary Judgment and an Order to Pay the amount of $1,034,184 [Dkt. #33] is GRANTED. The Court also grants the following declaratory relief: the Control Group is legally obligated to provide future quarterly interim withdrawal liability payments to the Funds, beginning April 8, 2019, and continuing each 90 days thereafter, until all quarterly payments are made, this matter is resolved through arbitration by way of an arbitration award, or through motions before the Court, whichever comes first.”