Hello, ERISA Watchers! On this Memorial Day weekend, let’s take a moment to commemorate the men and women who made the ultimate sacrifice for their country and to reflect on the luxuries and freedoms that we enjoy today as a result.
Moving on from the solemnity, this week’s notable decision is an icy one for plan participants. In Nichols v. Reliance Standard Life Insurance Company, No. 18-60499, __F.3d__, 2019 WL 2223614 (5th Cir. May 23, 2019), the Fifth Circuit reversed a district court decision that I happily reported on July 8, 2018 (Your ERISA Watch – Court Examines Two Decades of Reliance Standard Life Insurance Company’s Abuse of Discretion in Disability Benefit Claims).
As laid out in Nichols v. Reliance Standard Life Ins. Co., 2018 WL 3213618, 2018 EB Cases 232667 (S.D. Miss. June 29, 2018), rev’d, No. 18-60499, 2019 WL 2223614 (5th Cir. May 23, 2019), Nichols became unable to work as a Hazard Analysis and Critical Control Points Coordinator at a chicken processing factory, a career she has spent her entire life doing, because circulatory system disorders including Raynaud’s disease, prevented her from being able to work in cold temperatures. Though Reliance acknowledged that Nichols could not work in cold temperatures, one of its vocational experts determined that Nichols’ occupation as it was performed in the national economy was “sanitarian,” which does not require that she be exposed to cold temperatures. Judge Carlton Reeves found that Reliance Standard Insurance Company abused its discretion in denying Nichols’ claim for long-term disability benefits. In so doing, the court laid out Reliance Standard’s “decades-long pattern of arbitrary claim denials and other misdeeds.” The court found over 100 decisions in the last 21 years criticizing Reliance’s disability decisions. Of those, 60 opinions were very critical of Reliance’s underlying claims administration. Judge Reeves awarded Nichols past benefits and ordered Reliance to pay her benefits in the future.
As true as the adage that all good things must come to an end, the Fifth Circuit reversed the grant of benefits to Nichols and rendered judgment for Reliance Standard. The court held that substantial evidence supported Reliance’s finding that work in cold areas was not a material duty of Nichol’s regular occupation of sanitarian. The court explained that its precedent does not require an administrator to consider each of a claimant’s job duties of her particular position with a particular employer to determine her regular occupation.
On the conflict of interest, the Fifth Circuit found that the district court erred in emphasizing Reliance’s structural conflict where Nichols never suggested that Reliance’s structural conflict impacted its decision to deny her LTD benefits and she did not adduce evidence that Reliance’s conflict affected its benefits decision. “The court’s extensive sua sponte review eschewed our repeated holdings that a structural conflict is not a significant factor where the claimant offers no evidence that the conflict impacted the administrator’s decision.” Read it and weep, folks.
On a drier-eyed note, check out this article by friend of ERISA Watch, Adrienne Publicover, who provides her thoughts on ERISA and mediation in her article, “Tips for Successful ERISA Mediations: Five Things to Consider as You Prepare for Your Next ERISA Benefit Mediation”
Below is a summary of this past week’s notable ERISA decisions by subject matter and jurisdiction.
Harlow v. Metro. Life Ins. Co., No. EDCV172091JGBSPX (C.D. Cal. May 23, 2019) (Judge Jesus G. Bernal). The court previously entered judgment in Plaintiff’s favor on the issue of whether she was disabled from her usual occupation of Compliance Officer and entitled to long-term disability benefits. The court granted Plaintiff’s motion for fees in part and awarded $182,650 in attorneys’ fees and $3,659.58 in costs. The court awarded the rate of $700/hour for Plaintiff’s attorneys, Michael Horrow, Scott Calvert, and Russell Petti. The court found this rate to be reasonable and reiterated that the court does not need information about how they bill their non-contingency clients since the Ninth Circuit has repeatedly held that the determination of a reasonable hourly rate is not made by reference to the rates actually charged the prevailing party. The court also rejected MetLife’s argument that the time spent preparing the fee motion was “totally unnecessary” since MetLife offered to pay 93% of the fee demand. “The Court will not hamstring plaintiffs and their attorneys into accepting compromise offers by using such offers to preclude recovery of fees incurred to vindicate a plaintiff’s entitlement to reasonable fees.”
Del Sesto v. Prospect Chartercare, LLC, et al., No. CV 18-328 WES, 2019 WL 2162083 (D.R.I. May 17, 2019) (Judge William E. Smith). For settlement purposes only, the court preliminarily certified the following class: All participants of the St. Joseph Health Services of Rhode Island Retirement Plan (“the Plan”), including (1) all surviving former employees of St. Joseph Health Services of Rhode Island Inc. who are entitled to benefits under the Plan; and all representatives and beneficiaries of deceased former employees of St. Joseph Health Services of Rhode Island Inc. who are entitled to benefits under the Plan.” The court preliminary appointed Wistow, Sheehan & Loveley, P.C. as class counsel. The proposed settlement involves a $4.5 million deposit into Plan assets in exchange for a release of claims related to Plaintiffs’ allegations of fraud and fraudulently transferred assets.
Disability Benefit Claims
Nichols v. Reliance Standard Life Insurance Company, No. 18-60499, __F.3d__, 2019 WL 2223614 (5th Cir. May 23, 2019) (Before KING, SMITH, and WILLETT, Circuit Judges). See Notable Decision summary above.
Schewitz, M.D. v. Aetna Life Insurance Company, No. 18-CV-6119, 2019 WL 2189263 (N.D. Ill. May 21, 2019) (Judge John Robert Blakey). In this dispute brought by a doctor disabled as a result of a serious eye injury, the court found in his favor on the issue of his “predisability earnings.” The Plan defines predisability earnings as “the amount of salary or wage you were receiving from an employer participating in the plan on the day before a period of disability started, calculated on a monthly basis.” Since he took disability status starting on February 4, 2015, his predisability earnings should be calculated based upon his salary as of February 3, 2015. Even though his employer had reduced his salary, his employment Agreement required it to maintain his initial salary of $322,689 through at least March 1, 2015. Thus, his benefits should be calculated based upon that amount and not the reduced amount reported by the employer.
Anyanwu v. Ascension Health, No. 4:17-CV-02722-NCC, 2019 WL 2211057 (E.D. Mo. May 22, 2019) (Judge Noelle C. Collins). The court found that Sedgwick did not abuse its discretion in relying on the independent reviewers’ conclusions in making its determination and it was under no obligation to obtain an independent medical examination. Sedgwick also reasonably relied in large part on Plaintiff’s failed neuropsychological validity tests and the inconsistency in her position about the basis of her disability. Sedgwick was not bound by the SSA’s determination of disability nor was it required to retain a vocational expert. The several independent specialists who reviewed Plaintiff’s claim were provided with her job description.
Culver v. NXP USA Inc. Long Term Disability Ins. Plan, No. CV-18-02205-PHX-DWL, 2019 WL 2206038 (D. Ariz. May 22, 2019) (Judge Dominic W. Lanza). The court granted Plaintiff’s motion to supplement the administrative record or remand to the extent it seeks a remand. Prudential had decided to deny Plaintiff’s appeal though it had not considered about 249 pages of medical records that were contained in Plaintiff’s SSA file. These were records referenced in the SSA decision that Prudential had when it decided the appeal. Prudential did not ask for these records specifically, only that Plaintiff submit everything he wanted Prudential to consider. The court found that “Montour can be fairly read as holding that, when it becomes apparent to an insurance company administering an ERISA plan that the contents of the claimant’s SSA file are necessary to assess the claim for LTD benefits, the administrator is required under 29 C.F.R. 2560.503-1 to inform the claimant of the need for these particular materials—a general reminder of the need to submit all ‘pertinent documents and information’ will not suffice.” The court found that the proper course of action was to remand to Prudential to consider the records.
Johnson v. General Electric Company, No. 18-35581, __F.App’x__, 2019 WL 2185332 (9th Cir. May 21, 2019) (Before: O’SCANNLAIN and FRIEDLAND, Circuit Judges, and PAULEY,*** District Judge). The court found that the district court did not err in concluding that Plaintiff did not establish her entitlement to additional long-term disability benefits based on the Plan terms. She was entitled to benefits calculated on her “normal-straight time annual earnings” (“NSTAE”) unless GE’s Pension Board “provide[s]” that it also includes “commissions,” “other variable compensation,” or “special or supplemental payments.” There is no evidence that the Pension Board determined that her NSTAE should include other compensation. The district court did not err by admitting extrinsic evidence—specifically, the declarations of GE and MetLife employees—because the evidence was necessary to conduct an adequate de novo review of the benefit decision. Without the evidence there were only competing assertions from the parties about Plaintiff’s earnings. The court determined that it need not reach Plaintiff’s arguments about GE and MetLife’s failure to comply with certain procedural requirements.
Wiley v. United Of Omaha Life Insurance Company, No. 5:16-CV-1936-CLS, 2019 WL 2172708 (N.D. Ala. May 20, 2019) (Judge C. Lynwood Smith, Jr.). The court determined that United of Omaha’s decision that Plaintiff was not disabled from his regular occupation as a Senior Business Systems Analyst was de novo wrong. The court found that he was not able to maintain the attention and concentration required to perform repetitive analytical tasks on a sustained basis, which were essential functions of his position. The court also found that the administrator was vested with discretion in reviewing claims but that it did not have reasonable grounds to support the denial of benefits. Though neither of plaintiff’s treating physicians responded to the letters mailed by United of Omaha asking that they agree to its contrary conclusions about Plaintiff’s abilities, the court found that their lack of response is entitled to little weight and no reason to disregard the extensive medical documentation. “Ignoring the breadth and depth of such objective evidence allows insurance companies to subvert meritorious claims by simply increasing the paperwork burden on a claimant’s physicians.” The court then went through an extensive Appendix of the Administrative Record that it created, and which outlined the facts of the case in chronological order.
O’Sullivan v. Hartford Life & Accident Ins. Co., No. 18-1250-JTM-GEB, 2019 WL 2208149 (D. Kan. May 22, 2019) (Magistrate Judge Gwynne E. Birzer). In this long-term disability dispute, the court granted Plaintiff’s motion to compel, in part. “[T]o the extent Defendant can locate any written practices, procedures, or policies evidencing its attempts to reduce any financial or non-financial biases of its vendors or physician reviewers,” the Court ordered Defendant to supplement RFP Nos. 12 and 13 (quoted below), limited to the time frame during which Plaintiff’s claim was being considered. The court permitted, with certain limitations, the discovery of employee evaluations and reviews, and Defendant’s written criteria or standards as outlined in Plaintiff’s RFP Nos. 14 and 15 (quoted below), but limited the requests to the three years in which Plaintiff’s claim was being considered (2014 – 2017), and only to those employees who were decision-makers. The employee information will be subject to a protective order. “To the extent Defendant can locate any written practices, procedures, or policies evidencing its attempts to reduce potential biases, promote accuracy, and penalize inaccurate decision-making in its claims process,” the court ordered Defendant to supplement RFP Nos. 18 and 19 (quoted below), limited to the time frame during which Plaintiff’s claim was being considered. This summary includes only the approved discovery. The court did deny Plaintiff’s motion as to other areas of discovery.
RFP No. 12: All documents reflecting attempts by Hartford to ensure that MES, PDA, Taral Sharma, MD, and Dr. Elizabeth Haglind have no financial biases that would interfere with their ability to provide accurate evaluations.
RFP No. 13: All documents reflecting attempts by Hartford to ensure that MES Peer Review Services, PDA, Taral Sharma, MD, and Dr. Elizabeth Haglind have no non-financial biases that would interfere with their ability to provide accurate evaluations.
RFP No. 14: The performance evaluations and performance reviews since January 1, 2012 for each employee of Hartford who was involved in this claim.
RFP No. 15: Defendant’s written criteria or standards for employee compensation, bonuses and awards.
RFP No. 18: Any documents that show the steps taken by Hartford to reduce potential bias and to promote accuracy in the claims process.
RFP No. 19: Any and all documents showing Hartford’s policies designed as management checks to penalize inaccurate decision-making (irrespective of whom the inaccuracy benefits).
Ford v. Freemen, et al., No. 3:18-CV-3095-B, 2019 WL 2189256 (N.D. Tex. May 21, 2019) (Judge Jane J. Boyle). Plaintiff alleges that he was the named beneficiary and common law spouse of decedent and entitled to decedent’s life insurance benefits. Bank of America informed him that he was not the beneficiary and he would have to prove common law marriage. Rather than go through the hassle, he agreed with decedent’s father that the father would file the claim with Prudential and receive the benefits and pay them to Plaintiff, which he did not. A 1996 designation naming Plaintiff as the beneficiary was later uncovered. Plaintiff sued the father, Bank of America, and the insurer, Prudential. The court found that Plaintiff’s state-law negligent-misrepresentation claim against BofA “is subject to complete preemption because his attempt to recoup the Policy proceeds based on BoA’s false and/or misleading information regarding his coverage status is encompassed within ERISA’s civil-enforcement scheme.” The court also found that the claim is subject to conflict preemption since he is an ERISA beneficiary suing to recoup life insurance proceeds he was wrongfully denied. The court gave Plaintiff permission to replead his claims under ERISA.
Bates v. Blue Shield of California, No. 818CV02225DOCKES, 2019 WL 2177641 (C.D. Cal. May 17, 2019) (Judge David O. Carter). Plaintiff brought six causes of action: (1) bad faith; (2) breach of contract / breach of the covenant of good faith and fair dealing in contract; (3) promissory fraud; (4) breach of fiduciary duty; (5) punitive and exemplary damages; and (6) attorney fees against Blue Shield on the basis that its denial of treatment at an out-of-network provider caused him to experience more medical costs due to a protracted treatment period. The court remanded the action to superior court finding that it lacks jurisdiction over the claims since they either do not state a claim for benefits or breach of fiduciary duty under ERISA or they arise under state law.
Exhaustion of Administrative Remedies
Ford v. Freemen, et al., No. 3:18-CV-3095-B, 2019 WL 2189256 (N.D. Tex. May 21, 2019) (Judge Jane J. Boyle). The facts are as noted above in the ERISA Preemption section. The court denied dismissal of Plaintiff’s claims against BofA on exhaustion grounds since Plaintiff’s claim is based on the alleged misrepresentations made by a BoA employee who told him that there was no beneficiary designation on the Policy and he relied on this information when he decided to enter an agreement with decedent’s father in lieu of making a claim for benefits with Prudential. The court found that the allegations and circumstances are sufficient to infer that an exception to exhausting administrative remedies may be appropriate in this case. With respect to Prudential’s exhaustion argument, the court found that Plaintiff’s post-lawsuit claim for benefits was not sufficient to satisfy the exhaustion requirement and he has not demonstrated futility. Plaintiff chose to stop pursuing his claim to the funds after Prudential properly advised him of his rights under the Policy based on information it had at the time.
Life Insurance & AD&D Benefit Claims
Ford v. Freemen, et al., No. 3:18-CV-3095-B, 2019 WL 2189256 (N.D. Tex. May 21, 2019) (Judge Jane J. Boyle). The facts are as noted above in the ERISA Preemption section. The court found that Prudential cannot be found liable to Plaintiff under ERISA § 502(a)(1)(B), where “Prudential told Plaintiff that he would need to contact BoA and acquire the beneficiary designation form; Plaintiff never produced the form nor was it found in Prudential’s records; and Prudential advised Plaintiff how the Policy’s proceeds would be paid out absent a designee. . . . Plaintiff chose not to pursue a claim for benefits under the Policy with Prudential, but instead entered into an agreement with Freemen where he would receive the Policy’s proceeds and then give the proceeds to Plaintiff. In Plaintiff choosing this path, Prudential did what it was required to do under the Policy—and what Plaintiff expected them to do—it paid the Policy’s proceeds to Freemen since there was no beneficiary designee and no claim by the Decedent’s spouse or children.”
Briggs v. National Union Fire Insurance Company of Pittsburgh, PA, No. 18-1828, __F.App’x__, 2019 WL 2234596 (6th Cir. May 23, 2019) (Before: Suhrheinrich, Bush, and Readler, Circuit Judges). Plaintiff brought several claims against Defendants related to the denial of AD&D benefits under the “aerial navigation exclusion” for her son who died in a private plane crash. She claimed that the Benefits Guide provided materially inaccurate information because it says if “you or a family member suffers an injury or dies as a result of an accident, the Plan will pay … benefits.” The court found that the Benefit Guide’s unambiguous language that it is not an official plan document or summary plan description would lead no reasonable employee to interpret it as a document containing all material terms, conditions, and exclusions. The district court properly dismissed the Section 502(a)(3) claims against the IPG Defendants. There is no basis for equitable reformation since there is no allegation that Defendants led the insured to think anything different about his coverage. An award of benefits is not the proper remedy for failing to provide an employee with a summary plan description.
Medical Benefit Claims
Fisher v. Harvard Pilgrim Health Care of New England, Inc., No. CV 17-11232-FDS, __F.Supp.3d__, 2019 WL 2193494 (D. Mass. May 21, 2019) (Judge Saylor). In this case brought by a plan beneficiary against the plan administrator for denial of payment for partial hospitalization for bulimia nervosa as not medically necessary, the court granted Defendant’s motion for summary judgment. The court found that the standard of review was de novo because the HMO healthcare plan did not clearly grant discretionary authority to the plan administrator where the plan stated that the administrator would use clinical review criteria to evaluate whether services or procedures were medically necessary. The court found that the administrator did commit a procedural error by not setting forth reference to specific plan provisions on which the determination was based but the court found that the beneficiary had not been prejudiced because she did not show how a correct notice would have made a difference. The court concluded that Plaintiff did not demonstrate that she was entitled to coverage. Even though she was still experiencing eating disorder issues and her GAF score showed serious impairments, she did not show why she could not be treated through a comprehensive outpatient program in lieu of partial hospitalization.
Pension Benefit Claims
Balli v. Plumbers, Pipe Fitters & MES Local Union No. 392 Pension Fund, No. 1:18-CV-00816, 2019 WL 2233347 (S.D. Ohio May 23, 2019) (Judge Michael R. Barrett). The court found that the Estate has no claim for a Death Benefit where the decedent was not an Active Participant at the time of his death nor was he retired. In addition, the Estate filed this lawsuit too late as the Plan requires any lawsuit to be filed within 90 days of the decision on appeal. Lastly, because the Pension Plan is a defined benefit plan to which the decedent could not have legally contributed, the Estate has no claim against the Pension Plan pursuant to 29 U.S.C. § 1132(a)(3) to enforce a purported violation of 29 U.S.C. § 1053(a)(1). The court dismissed the complaint in its entirety.
Helms v. Metro. Life Ins. Co. (In re O’Malley), No. 13-10864, __B.R.__, 2019 WL 2236787 (Bankr. N.D. Ill. May 23, 2019) (Bankruptcy Judge Janet S. Baer). “[T]he Court holds that ERISA and § 409A of the Internal Revenue Code (and related Treasury regulations) do not restrict the Trustee’s avoidance and recovery power, but the nature and extent of the property rights of the bankruptcy estate are limited by the provisions of the [MetLife] Auxiliary [Pension] Plan.”
Pleading Issues & Procedure
Bryant v. Hasbro, Inc., No. 8:18-CV-1336-T-36CPT, 2019 WL 2211053 (M.D. Fla. May 22, 2019) (Judge Charlene Edwards Honeywell). The court granted Hasbro, Inc.’s Dispositive Motion to Dismiss Plaintiff’s Amended Complaint because Plaintiff did not allege facts sufficient to establish a prima facie case of personal jurisdiction over Hasbro. Because Plaintiff does not state any valid claim under ERISA against Hasbro, ERISA’s nationwide service of process provision is inapplicable and cannot serve as a basis for an alternate personal jurisdiction analysis under the Fifth Amendment in lieu of the Fourteenth Amendment.
East Coast Advanced Plastic Surgery v. Aetna Inc., et al., No. CV 18-9429, 2019 WL 2223942 (D.N.J. May 23, 2019) (Judge John Michael Vazquez). The court found the out-of-network provider’s state law claims to be preempted by ERISA based on the language of the preauthorization letter that requires reference to the patient’s plan to decide any of Plaintiff’s state law claims. The provider lacks standing to bring ERISA claims against Defendant due to the anti-assignment clause.
Withdrawal Liability & Unpaid Contributions
Trustees of The New York City District Council of Carpenters Pension Fund v. Clear It Out Contracting LLC, No. 19-CV-1188 (VSB), 2019 WL 2171233, (S.D.N.Y. May 20, 2019) (Judge Vernon S. Broderick). “Petitioners’ motion is GRANTED. The Award is confirmed, and the Clerk of Court is directed to enter judgment in favor of Petitioners and against Respondent in the amount of $231,156.38, plus interest from the date of the Award through the date of judgment at a rate of 5.75%. Petitioners are further awarded attorneys’ fees in the amount of $1,017.00, costs in the amount of $75.00, and post-judgment interest in accordance with 28 U.S.C. § 1961(a).”
In re K & D Indus. Servs. Holding Co., Inc., No. 19-43823, __B.R.__, 2019 WL 2158771 (Bankr. E.D. Mich. May 16, 2019) (Bankruptcy Judge Phillip J. Shefferlym). The court considered several issues including whether public policy of ERISA to protect pension plans by means of withdrawal liability outweigh the public policy of the Bankruptcy Code to permit free and clear sales to maximize the value of assets for the benefit of a debtor’s creditors. The court explained that “§ 363(f) [of the Bankruptcy Code] provides express statutory authority for the Debtors to sell the assets described in the Sale Motion to CCI free and clear of any interests in such assets. The statute does not direct a bankruptcy court to weigh competing congressional policies in determining whether or not to approve a sale free and clear. Nor is the statute limited to application only when a bankruptcy court finds that no other non-bankruptcy congressional policy is affected. The Court is not persuaded that the legitimate public policy of the MPPAA requires the Court to deny the Sale Motion under § 363(f).”
Trustees of The Chicago Regional Council of Carpenters Pension Fund, et al., v. Celtic Floor Covering, Inc., No. 15-CV-7523, 2019 WL 2208351 (N.D. Ill. May 22, 2019) (Judge Robert M. Dow, Jr.). The court denied Plaintiffs’ motion for summary judgment and set for trial the following two genuine issues of material fact: “(1) whether Defendant made any contributions to other related funds that were not reflected in the Plaintiffs’ audit, and (2) whether Plaintiffs are owed contributions for the one disputed employee.”
Trustees of the Southern California IBEW-NECA Pension Plan v. Liebeck, No. 17-56188, __F.App’x__, 2019 WL 2245934 (9th Cir. May 24, 2019) (Before: Tashima and Paez, Circuit Judges, and Alsup, District Judge). The court held that: (1) the district court did not err in allowing Trustees to proceed with their suit against Steelman despite the automatic stay arising from Action’s bankruptcy proceeding; (2) the district court’s summary judgment ruling did not rely on the improper resolution of a disputed issue of fact about ownership of the Washington Property at the time of Action’s withdrawal; (3) the district court failed to apply the correct standard when determining whether that leasing operation was under “common control” with Action; and (4) even if Steelman did “control” the Bypass Trust, the district court erred in concluding that such control would make Steelman personally liable for the withdrawal liability.
Bd. of Trustees of Teamsters Local 631 Sec. Fund for S. Nevada v. ABC Expo Servs., LLC, No. 219CV00164JADGWF, 2019 WL 2178613 (D. Nev. May 20, 2019) (Judge Jennifer A. Dorsey). The court granted the motion for default judgment against Defendant ABC Expo Services, LLC for delinquent employee-benefit contributions of $14,771, liquidated damages of $6,298, interest of $6,298, audit fees of $2,660, and attorney’s fees and costs of $9,624, minus a previous recovery of $9,342, for a total of $30,309.
Trustees of Plumbers & Pipefitters Union Local 525 Health & Welfare Tr. & Plan v. Now Servs. of Nevada, LLC, No. 217CV01734JADCWH, 2019 WL 2178611 (D. Nev. May 20, 2019) (Judge Jennifer A. Dorsey). The court granted the motion for default judgment against Defendant Now Services of Nevada, LLC in favor of the Trust Funds for the Sotelo Air Judgment amount ($249,560) plus the Trust Funds’ attorney’s fees ($21,792) for a total of $271,352.