Good morning, ERISA Watchers! Piggybacking on last week’s notable decision discussion, this week’s notable decision is McIntyre v. Reliance Standard Life Insurance Company, No. CV 17-5134 (JRT/DTS), 2019 WL 2267054 (D. Minn. May 28, 2019), a case analyzing an insurer’s history of biased claims administration when it comes to determining the conflict of interest and standard of review.
At issue in McIntyre is whether the plaintiff, a nurse disabled by Charcot Marie Tooth Syndrome (“CMT”), is entitled to long-term disability benefits under the “Any Occupation” standard in the Reliance Standard disability policy. (CMT is a neurological disorder that affects peripheral nerves.) If you’re in a hurry for the happy ending, the court’s answer is YES. Let’s examine how the court got there.
On the standard of review, the court determined that Reliance Standard’s conflict of interest, procedural irregularities, and breach of fiduciary duty warranted de novo review. The court noted the significant number of cases cited in Nichols v. Reliance Standard Life Insurance Co., 2018 WL 3213618 at *8 (S.D. Miss. 2018) which documented the history of Reliance Standard’s arbitrary conduct. This comprised of “over 100 opinions in the last 21 years criticizing Reliance’s disability decisions, including over 60 opinions reversing a decision as an abuse of discretion or as arbitrary and capricious.” McIntyre, 2019 WL 2267054 at *5, quoting Nichols. (Editor’s note: As discussed last week, Nichols was recently overturned by the 5th Circuit).
The court also found that Reliance Standard taking over 204 days to decide Plaintiff’s appeal, rather than the 45 days it had under the ERISA Regulations, constituted a procedural irregularity. Though Reliance Standard could toll its 45-day decision deadline when it sought information from Plaintiff’s physicians, it could not toll the deadline while it attempted to have Plaintiff attend an independent medical examination (“IME”). Reliance Standard also based its appeal decision almost exclusively on the results of the IME, giving short shrift to considerable evidence supporting disability, including its past findings of disability.
Moreover, Reliance Standard’s claim that Plaintiff can just take breaks every thirty minutes ignores the realities of full-time work. “[T]he Court has difficulty imagining occupations that would consistently allow McIntyre to take a break every half hour.” McIntyre, 2019 WL 2267054 at *6. Taking a break every thirty minutes would reduce the actual hours worked to less than full-time, entitling McIntyre to “Any Occupation” benefits.
The court also analyzed surveillance of McIntyre and found that it was not as revealing as Reliance Standard claims. Although surveillance showed Plaintiff active outside of her home for several hours, this was not inconsistent with her self-report of activities of daily living. “In fact, the surveillance bolsters McIntyre’s claim because it showed that she 1) walked with a noticeable limp; 2) only spent a few minutes, generally less than ten, outside working on her garden and yard each day; and 3) did not leave her home after two to three p.m.” McIntyre, 2019 WL 2267054 at *7. For these reasons and a few others, the court found that McIntyre is entitled to benefits and granted her motion for summary judgment. McIntyre is represented by friend of ERISA Watch, Katherine MacKinnon of the Law Office of Katherine L. MacKinnon located in St. Paul, Minnesota.
It was otherwise a slow week for ERISA decisions, likely due to the Memorial Day holiday. Stay tuned for more next week!
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Below is a summary of this past week’s notable ERISA decisions by subject matter and jurisdiction.
Breach of Fiduciary Duty
Brende v. Reliance Standard Life Insurance Company, No. 15-CV-9711-JAR-TJJ, 2019 WL 2250142 (D. Kan. May 24, 2019) (Judge Julie A. Robinson). Plaintiff brought simultaneous claims under 29 U.S.C. § 1132(a)(1)(B) and 29 U.S.C. § 1132(a)(3). The latter seeks “other appropriate equitable relief” for alleged breaches of fiduciary duty with respect to Reliance’s administration of her long-term disability claim. The court denied Reliance’s motion to dismiss the § 1132(a)(3) claim because the alleged breaches are plausibly a separate and distinct injury from the denial of benefits and foreclosure of other appropriate equitable relief for these injuries is premature. The court declined to address Reliance’s challenges to particular remedies demanded in the Complaint and will consider them at the same time it considers whether equitable remedies under § 1132(a)(3) are appropriate.
O’Dowd v. Anthem, Inc., No. 14-CV-02787-KLM-NYW, 2019 WL 2248548 (D. Colo. May 24, 2019) (Magistrate Judge Kristen L. Mix). Plaintiff alleged violations of ERISA and state law with respect to the fee schedule that Anthem Colorado applied to out-of-network behavioral health services that resulted in increased out-of-pocket responsibility borne by Plaintiff and other putative class members. For settlement purposes only, the court finally certified the following Settlement Class pursuant to Federal Rule of Civil Procedure 23(a) and (b)(3): All Plan Members who received Out-of-Network Behavioral Health Services during the Settlement Class Period that were allowed at or below the provider’s billed charges. The court concluded that the notice provided to the Settlement Class Members constituted the best notice practicable and fully satisfied the requirements of Rule 23(e) and Due Process, where of the 19,750 Settlement Class Members identified by Defendants, the administrator was unable to locate only 5.9% of the members for mailing purposes after multiple efforts. Plaintiff’s counsel sought about 16% of the settlement fund for attorneys’ fees. The firms’ total lodestar was $698,018.00 and the agreed-upon total amount of the fee award is $60,000, which is approximately 8.6% of the lodestar. Including reimbursement of litigation costs, Plaintiff seeks about 12-22% of the total fund, which the court found to be reasonable. The court also approved an incentive award of $1,000 for Plaintiff.
Disability Benefit Claims
McIntyre v. Reliance Standard Life Insurance Company, No. CV 17-5134 (JRT/DTS), 2019 WL 2267054 (D. Minn. May 28, 2019) (Judge John R. Tunheim). See Notable Decision summary above.
Keys v. Bert Bell/Pete Rozelle NFL Player Retirement Plan, No. 8:18-CV-2098-T-36JSS, 2019 WL 2269893 (M.D. Fla. May 28, 2019) (Judge Charlene Edwards Honeywell). Defendants moved to dismiss two of Plaintiff’s three counts for benefits all brought under ERISA Section 502(a)(1)(B) on the basis that they do not exist under this provision. The first Count seeks a declaration of rights that Plaintiff does not owe an overpayment because he did not provide false information. The court did not dismiss this count because it found that the application of the overpayment provision is potentially a distinct issue from whether he is entitled to benefits during a period which Defendants deny his eligibility. The court did dismiss the third Count which seeks retention of benefits paid based on estoppel. The court stated that it was unclear whether Plaintiff “may set forth a cognizable claim for equitable estoppel based upon silence under ERISA,” but Plaintiff’s claim does not set forth the necessary elements, including no allegation that his reliance was intended or reasonably anticipated by Defendants.
Brainbuilders, LLC v. Optum, Inc., et al., No. CV 18-638, 2019 WL 2315389 (D.N.J. May 31, 2019) (Judge John Michael Vazquez). Plaintiff, an out-of-network healthcare provider that offers services to children with autism related disorders and their parents, alleges that Optum, a company that provides consulting services to insurance plans, administrators, and/or healthcare providers, and other defendants, are engaged in a scheme to target its patients in an attempt to induce the patients to switch to in-network providers. Optum argued that the claims are preempted by ERISA because Plaintiff could have brought its conspiracy and unjust enrichment claims under ERISA Section 502(a) pursuant to an assignment of benefits from its patients. The court disagreed because Plaintiff does not allege that it had a valid assignment from any of its patients. It could not have brought the action under Section 502(a) because it does not have standing to do so. Thus, there is no complete preemption. Additionally, Plaintiff is not seeking to recover benefits under an ERISA plan or enforce its rights under a plan.
White v. Aetna Life Insurance Company, No. 3:19-CV-114-CRS, 2019 WL 2288447 (W.D. Ky. May 29, 2019) (Charles R. Simpson III). The court agreed with the parties that Plaintiff’s state-law breach of contract claim for denied long-term disability benefits is preempted by ERISA. Rather than dismiss the claim, the court will treat it as an ERISA claim under 29 U.S.C. § 1132(a)(1)(B). The court did strike Plaintiff’s jury demand since she’s not entitled to a jury under 29 U.S.C § 1132, citing to Bair v. Gen. Motors Corp., 895 F.2d 1094, 1096–97 (6th Cir. 1990) (affirming district court’s strike of plaintiff’s demand for a jury in an action seeking benefits under ERISA).
Life Insurance & AD&D Benefit Claims
Watson v. Allianz Life Insurance Company of North America, No. 18-CV-13859, 2019 WL 2297153 (E.D. Mich. May 30, 2019) (Judge Paul D. Borman). Plaintiffs, decedent’s daughters, challenge the payment of decedent’s life insurance benefits to his girlfriend. The court granted Allianz’s motion to dismiss because even though it is the named Plan Administrator, it delegated to Hartford full discretion to determine eligibility for benefits. But, Plaintiffs may not re-file suit against Hartford unless they have exhausted their administrative remedies under the Plan since they have not demonstrated futility.
Renal Care Grp. Indiana, LLC v. City of Fort Wayne, No. 1:17-CV-65-HAB, 2019 WL 2300626 (N.D. Ind. May 29, 2019) (Judge Holly A. Brady). In this dispute involving an alleged breach of the Medicare Secondary Payer Act, the court noted that the City of Fort Wayne Employee Benefits Plan is exempted from the requirements of ERISA as a government plan under 29 U.S.C. § 1003(b)(1). “This is true despite the Summary Plan Description’s repeated references to ERISA, as government plans cannot ‘opt-in’ to ERISA regulation.”
Pleading Issues & Procedure
AK v. Behavioral Health Systems, Inc., No. 3:18-CV-01238, __F.Supp.3d__, 2019 WL 2265137 (M.D. Tenn. May 28, 2019) (Judge Waverly D. Crenshaw, Jr.). In this dispute over the payment of residential treatment for a minor’s eating disorder brought under ERISA and the MHPAEA, the court denied the Plan’s motion to dismiss. The court agreed with Plaintiffs that the proper vehicle for resolving the dispute would be adjudicating a Motion for Judgment on the Administrative Record, especially where the parties are not in agreement as to the relevant plan documents. The court found that Plaintiffs did not concede anything in failing to respond to Defendant’s arguments about class-wide relief, discovery, and Section 1132 penalties since the Complaint does not purport to be a class action or allege a claim for penalties and there is no pending discovery dispute.
Wilcox v. Georgetown Univ., No. CV 18-422 (RMC), 2019 WL 2289631 (D.D.C. May 29, 2019) (Judge Rosemary M. Collyer). The court determined that its January 8, 2019 Order dismissing the Complaint and the action was final and appealable where the accompanying docket entry stated: “This case is closed.” The Order did not have to state that it was “final and appealable” for it to be so. Rule 15(a) does not apply to Plaintiff’s request to file an amended complaint because it was filed two days late. The court determined that Plaintiffs have not met the requirements under Rule 59(e) or Rule 60(b) for vacating a judgment or order. The court denied Plaintiff’s motion seeking leave to file an amended complaint.
Brende v. Reliance Standard Life Insurance Company, No. 15-CV-9711-JAR-TJJ, 2019 WL 2250142 (D. Kan. May 24, 2019) (Judge Julie A. Robinson). In this dispute over long-term disability benefits, the court declined dismissal of Plaintiff’s claim for “Statutory and Regulatory Noncompliance,” finding that she “plausibly pled that Reliance failed to strictly adhere to multiple statutory and regulatory requirements in the claims process, including failing to disclose certain descriptions, documents, and information.” See 29 C.F.R. § 2560.503-1(l)(2)(i). The court rejected Reliance’s argument that ERISA does not provide this cause of action and that it is redundant to the harms alleged in her claim for benefits and breach of fiduciary duty. However, the court did dismiss Plaintiff’s claim seeking a penalty under 29 U.S.C. § 1132(c) for this noncompliance since under the plain language of the statute, a plan insurer, such as Reliance, is not liable for the penalty.
Withdrawal Liability & Unpaid Contributions
Trustees of the Local 813 Insurance Trust Fund v. Personal Touch Funeral Service, Inc., No. 18-CV-6535 (NG)(VMS), 2019 WL 2295775 (E.D.N.Y. May 30, 2019) (Judge Nina Gershon). “Plaintiffs’ motion for a default judgment is granted. The Clerk of Court is directed to enter a judgment in which defendant is ordered to submit to an audit [for the time period from October 1, 2016 to March 31, 2018] within 30 days of the entry of judgment and in which plaintiffs are awarded $2,400 in attorney’s fees and $400 in costs.”
New Jersey Building Laborers’ Statewide Pension Fund and Trustees Thereof v. River Drive Companies, LLC, No. CV 17-9047, 2019 WL 2315388 (D.N.J. May 31, 2019) (Judge Madeline Cox Arleo). The court granted Plaintiff’s Amended Motion for a Default Judgment and granted Plaintiff “$522,494.75 as to Count II of its Complaint, of which $377,960 represents principal unpaid withdrawal liability, $68,032.80 of interest due under the Agreement, liquidated damages of 20% of the principal at $75,592, attorney’s fees of $550 and costs of $359.95.”
In re: K & D Indus. Servs. Holding Co., Inc., et al., No. 19-43823, 2019 WL 2281618 (Bankr. E.D. Mich. May 28, 2019) (Bankruptcy Judge Philip J. Shefferly). The court denied the Pension Fund’s motion to stay the judgment while it appeals the court’s overruling of its objection that the sales under § 363(b) of the Bankruptcy Code be made free and clear of any potential liability to the Pension Fund. The four factors to consider for granting a stay militate in favor of denying the motion.
Cent. States, Se. & Sw. Areas Pension Fund v. N. Indiana Trucking, LLC, No. 18 C 6707, 2019 WL 2287803 (N.D. Ill. May 29, 2019) (Judge Ronald A. Guzman). In this dispute over $3 million of withdrawal liability, the court granted the Pension Fund’s motion for summary judgment and ordered the Pension Fund to file a proposed draft judgment order within 7 days of the date of entry of this order.
Board of Trustees of The Pipe Fitters’ Retirement Fund, Local 597, et al. v. Commercial Cooling and Heating, Inc., et al., No. 13 C 7731, 2019 WL 2269959 (N.D. Ill. May 28, 2019) (Magistrate Judge Jeffrey Cole). The court found that Defendants’ attorney attempted to perpetrate a fraud on the court by falsely claiming that Defendants had attempted to file an Answer on August 15 (before the motion for default judgment was filed) but that some glitch in the CM/ECF system thwarted the effort. The court ordered Defendants’ attorney to pay sanctions of $31,408.60 in Plaintiffs’ attorneys’ fees and costs plus their fees for drafting a reply brief related to bringing this fraud to light. The court also granted Plaintiff’s motion for default judgment against the Defendants, jointly and severally, in the amount of $2,546,219.92.