Hello, ERISA Watchers!  Since Wednesday’s mid-week report, there were not any more exciting circuit court decisions.  Today, I want to highlight a preemption decision out of my backyard in California Hotels and Lodging Association v. The City of Oakland, No. 19-CV-01232-WHO, 2019 WL 2617057 (N.D. Cal. June 26, 2019).  In November 2018, Oakland voters passed Measure Z which asked:

Shall the measure amending Oakland’s Municipal Code to: (1) establish workplace protections and minimum hourly wage of $15 with benefits or $20 without benefits, increasing annually with inflation, for employees of Oakland hotels with 50 or more guest rooms; (2) authorize administrative enforcement standards for hotel and non-hotel workers; and (3) create City department to administratively enforce Oakland’s employment standards for hotel and non-hotel workers, be adopted?

After approval, Oakland added Chapter 5.93 (the “Ordinance”) to its Municipal Code.  Of relevance to this decision is Section 5.93.040, “The Wage/Benefit Provision,” which states:

A. Effective July 1, 2019, hotel employers shall pay hotel employees a wage of no less than $15.00 per hour with health benefits, not including gratuities, service charge distributions, or bonuses, or $20.00 per hour without health benefits, not including gratuities, service charge distributions, or bonuses.

B. Health benefits under this Section shall consist of the payment of the difference between the higher wage and lower wage under Section 5.93.040(A) towards the provision of hear care benefits for hotel employees and their dependents. Proof of the provision of these benefits must be kept on file by the hotel employer, if applicable.

C. The wage rates set forth in this Section shall be adjusted for inflation annually in the manner set forth in Section 5.92.020(B).

Plaintiff California Hotel & Lodging Association (“CHLA”) sought to enjoin Section 5.93.040 on the basis that it is preempted by ERISA because it only applies to hotel employers and discusses the health benefits that are provided to their employees.  As noted above, the Section requires employers to pay $20/hour without health benefits or $15/hour with health benefits valued at $5/hour.  Judge William Orrick found that preemption does not apply because the Ordinance does not obligate employers to provide health benefits.  The Ordinance does not identify any ERISA plans or act upon those plans.  Moreover, it does not mention ERISA and the employer’s obligations are not measured by reference to an ERISA plan.  The law does not impose additional administrative requirements on ERISA plans themselves.  Because CHLA cannot show that the Ordinance references or has a connection with ERISA, the court denied its motion for summary judgment.

Section 5.93.040 becomes effective today.  If you ever have occasion to visit Oakland, you can stay in the comfort of a hotel knowing the hotel workers are being better paid and/or have health benefits.  I hope that everyone enjoys the upcoming long Fourth of July weekend.  I’ll report back next week with new and exciting updates in ERISAland.

Cases to watch:  U.S. Supreme Court To Hear Case That Could Safeguard Millions Of Americans’ Retirement Benefits.  The case, Thole v. U.S. Bank, will be argued by Friend of ERISA Watch, Peter Stris of Stris & Maher LLP.  Thole is also represented by Karen Handorf and Michelle Yau, and Mary J. Bortscheller of Cohen Milstein Sellers & Toll, PLLC.  Good luck!

Firm News:  Super Lawyers Recognizes Kantor & Kantor Attorneys for 2019

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

Attorneys’ Fees

Fourth Circuit

Shepherd, Jr. v. Cmty. First Bank, Cmty., No. 8:15-CV-04337-DCC, 2019 WL 2590729 (D.S.C. June 25, 2019) (Judge Donald C. Coggins, Jr.).  In this dispute over top hat plan benefits where the court previously ruled in Plaintiff’s favor, Plaintiff filed a motion for fees seeking $561,575 in attorneys’ fees and $2,044.63 in costs.  Defendants contend Plaintiff is only entitled to $121,740 in fees and costs.  Defendants are also appealing the underlying order to the Fourth Circuit.  The court stayed Plaintiff’s motion pending the appeal.  The court denied Defendants’ motion to stay execution pending appeal without a supersedeas bond.  “Defendants have two options: (1) they can pay the past due amount of $1,198,648.90 plus applicable post-judgment interest and pay future monthly benefits; or (2) they can post a supersedeas bond in the amount of $2,000,000. This bond is necessary to protect Plaintiff’s judgment if it is affirmed on appeal by the Fourth Circuit, and is appropriate in light of Defendants’ prior financial problems, prior FDIC involvement, and the lack of significant earnings.”   

Clark, et al. v. Duke University, et al., No. 1:16-CV-1044, 2019 WL 2579201 (M.D.N.C. June 24, 2019) (Judge Catherine C. Eagles).  As part of a class action settlement involving Duke University’s retirement plan, the court approved Class Counsel’s request for attorney’s fees, reimbursement of expenses, and compensation for the class representatives from a common fund created from the settlement.  The court found the fee request of $3,550,000 (1/3 of the monetary recovery) is reasonable considering the work done by Class Counsel.  Additionally, the lodestar cross-check shows that Class Counsel expended $1 million more in time than would be compensated for by the one-third fee.  The court also awarded expenses of $822,212, 80% of which were expenses related to Plaintiffs’ expert witnesses.  Lastly, the court awarded $25,000 contribution awards to the named plaintiffs.

Ninth Circuit

Dmuchowsky v. Sky Chefs, Inc., No. 18-CV-01559-HGS (DMR), 2019 WL 2612715 (N.D. Cal. June 26, 2019) (Magistrate Judge Donna M. Ryu). The court amended its prior report and recommendation awarding attorneys’ fees and costs totaling $107,414.22 to Kantor & Kantor. See Dmuchowsky v. Sky Chefs, Inc., 2019 WL 1934480 (N.D. Cal. May 1, 2019).  After issuance of the R&R, Plaintiff filed a notice of errata stating the court’s approximation of when an associate had joined Plaintiff’s firm was erroneous.  Plaintiff provided an accurate start date. Thereafter, Defendant filed objections under FRCP 72 and LR 72-2 asking the court to reduce the associate’s hourly rate to $250 based on the accurate start date.  Defendant cited several ERISA trust contribution cases in support of that rate. The court reevaluated the associate’s reasonable hourly rate, rejected reliance on ERISA trust cases in evaluating hourly rates in ERISA “merits” cases, and adjusted the rate from $400 to $375 to reflect the accurate start date. Under the modified ruling, the court’s recommendation was an award totaling $106,901.72.  

Breach of Fiduciary Duty

Seventh Circuit

Bator v. The Board of Trustees of The Inter- Local Pension Fund of the Graphic Commc’ns Conference of the Int’l Bhd. of Teamsters, No. 18 CV 01770, 2019 WL 2616988 (N.D. Ill. June 26, 2019) (Judge John J. Tharp, Jr.).  The court determined that the plaintiffs have Article III standing because they have plausibly alleged an injury-in-fact—risk of denied benefits—that is traceable to the defendants’ alleged failure to enforce contribution levels, and that a favorable judicial opinion would redress that injury by requiring Defendants to supplement Fund contribution levels.  However, Plaintiffs failed to allege that the Trustees breached a fiduciary duty or that the Union acted in a fiduciary capacity when it permitted union members to contribute to the Fund at different levels, or not at all.

Class Actions

Fourth Circuit

Clark, et al. v. Duke University, et al., No. 1:16-CV-1044, 2019 WL 2588029 (M.D.N.C. June 24, 2019) (Judge Catherine C. Eagles).  The court finally approved the settlement of two consolidated ERISA class actions.  No class member filed an objection and the court found that the settlement meets the requirements of Rule 23 and is fair, reasonable, and adequate.  The settlement provides for a gross settlement amount of $10,650,000.  After deduction for fees, expenses, and incentive payments, the remaining $6.1 million, less administrative expenses and a contingency award, will be distributed to class members in amounts proportional to their average quarterly retirement plan balance during the class period.

Disability Benefit Claims

Fourth Circuit

Sizemore v. Northwestern Mutual Life Insurance Company, et al., No. 2:17-CV-00789, 2019 WL 2619293 (S.D.W. Va. June 26, 2019) (Judge Thomas E. Johnston).  The court found that Defendant did not abuse its discretion when it found that Plaintiff was no longer disabled when he began full-time employment as an attorney in state government.  Even though Plaintiff was making less than 80% of his prior salary as an attorney in private practice, Defendant reasonably determined that his reduction in come was not caused by any medical condition.  The court also determined that Plaintiff was not entitled to a second appeal on the basis that Defendant concluded for the first time in the decision on his appeal that he did not qualify for partial disability benefits.  The court explained that the plan and the regulations anticipate only a single review of the ultimate decision to terminate or deny benefits.

Eighth Circuit

Powers-Taylor v. Ascension Health, Inc., No. 4:18-CV-117 NAB, 2019 WL 2579578 (E.D. Mo. June 24, 2019) (Magistrate Judge Nannette A. Baker).  The court found that Sedgwick did not abuse its discretion in deny Plaintiff’s claim for long-term disability benefits under the “Any Occupation” standard of disability.  Sedgwick relied on a TSA prepared by Genex that identified multiple jobs that Plaintiff could perform given her experience, education, and physical limitations.  After Plaintiff submitted her appeal, four “independent physician advisors” reviewed her records and concluded that she was not disabled.  They cited little objective evidence of impairment, “leaving Plaintiff’s subjective complaints as evidence of her ailments.”


Ninth Circuit

Renowden v. Prudential Ins. Co. of Am., et al., No. CV-18-03047-PHX-JJT, 2019 WL 2646618 (D. Ariz. June 26, 2019) (Judge John J. Tuchi).  The court granted Plaintiff’s motion to vacate the scheduling order which contemplated a “traditional ERISA case” where additional discovery is not required outside of the Administrative Record.  The parties agree that the benefits decision should be reviewed under de novo review.  Plaintiff seeks discovery due to Defendant’s structural conflict of interest and the financially conflicted doctors who evaluated Plaintiff’s life insurance waiver of premium claim.  The court found that this discovery is appropriate under Opeta v. Nw Airlines Pension Plan for Contract Emps., 383 F.3d 1211 (9th Cir. 2007).  “While the Court acknowledges that evidence of the relationship that typically gives rise to a structural conflict is indeed present in the administrative record, the Court remains unconvinced that the record alone will help it understand the ‘influence of any conflict of interest.’  . . .  Thus, the Court needs to examine evidence that will either help prove or disprove the pervasiveness of the alleged conflict.” 

ERISA Preemption

Ninth Circuit

California Hotels and Lodging Association v. The City of Oakland, No. 19-CV-01232-WHO, 2019 WL 2617057 (N.D. Cal. June 26, 2019) (Judge William H. Orrick).  See Notable Decision summary.

Medical Benefit Claims

Eighth Circuit

Little v. PreferredOne Ins. Co., No. CV 19-1363(DSD/HB), 2019 WL 2591166 (D. Minn. June 25, 2019) (Judge David S. Doty).  The court denied Plaintiff’s motion for a preliminary injunction seeking advanced insurance coverage approval for a liver transplant procedure for his unresectable liver cancer.  The court agreed with Defendant that Plaintiff is not entitled to a preliminary injunction because he is unlikely to succeed on the merits of his ERISA claim.  The court found that Defendant has not abused its discretion under ERISA in denying the request for prior authorization because there is a lack of peer-reviewed medical literature demonstrating the safety and effectiveness of the procedure, the procedure is investigative under the Plan, and Plaintiff’s doctors are not specific as to how long they predict Plaintiff would survive post-surgery.

Pension Benefit Claims

Third Circuit

McCullough v. UCFW Local 152 Retail Meat Pension Fund, No. CV 17-6578 (NLH/KMW), 2019 WL 2635970 (D.N.J. June 27, 2019) (Judge Noel L. Hillman).  “The central issue in this case is the interpretation of the [Disability Retirement Pension (“DRP”)] provisions of the Plan and the procedures of the SSA as they relate to a finding of disability, [Social Security Disability Benefits], and a ‘period of trial work.’”  Plaintiff became disabled as of January 2013 and was awarded SSDB benefits on April 17, 2013.  She returned to work on August 13, 2013, continued to receive SSDB during the period of trial work, and then retired on April 21, 2014.  Defendant Plan denied her DRP benefits because she had returned to work and did not receive a separate disability award from SSA.  The court found that there was no abuse of discretion in the Plan terminating her DRP during her period of trial work.  However, the court found that Plaintiff was entitled to SSDB within twenty-four months of her last day of work as required by the Plan.  Further, Plaintiff has been continuously disabled per the SSA since June 2013 and has been receiving SSDB.  Plaintiff was not required to show a new disability award by the SSA.

Eighth Circuit

Smith v. U.S. Bancorp, the Employee Benefits Comm., No. CV 18-3405 (PAM/KMM), 2019 WL 2644204 (D. Minn. June 27, 2019) (Judge Paul A. Magnuson).  The court denied Defendants’ motion to dismiss this lawsuit alleging that Plaintiffs’ early retirement benefits are not the actuarial equivalent of their normal retirement benefit in violation of ERISA.  The court determined that Plaintiffs have alleged a plausible claim that the “Early Commencement Factor” fails to provide the participants with an actuarily equivalent benefit in violation of 29 U.S.C. § 1054(c)(3). Because Plaintiffs have alleged facts demonstrating the benefits they receive are insufficient, they have also stated a plausible claim for improper forfeiture of accrued benefits in violation of 29 U.S.C. § 1053(a).  The court also found that Plaintiffs alleged a sufficient “failure to monitor” claim.  Lastly, on Defendants’ timeliness challenge, the court found that that there are no facts on the face of the complaint which raise concerns that the limitations period has run, there are factual disputes regarding whether the limitations period in the Plan applies to Plaintiff’s claims, and there is a dispute as to when the limitations period began to run.

Pleading Issues & Procedure

Ninth Circuit

Castillo, et al. v. Community Child Care Council of Santa Clara County, Inc., et al., No. 17-CV-07243-BLF, 2019 WL 2644234 (N.D. Cal. June 27, 2019) (Judge ).  The court agreed with Plaintiffs that Defendant LSW, who insures life annuity contracts purchased by Defendant Community Child Care Council of Santa Clara County, Inc. (“4Cs”), is a necessary party under FRCP 19 with respect to Plaintiffs’ request to rescind or void the annuities contracts. “The Ninth Circuit has made clear that in suits to rescind or void a contract, parties to the contract are necessary parties under FRCP 19.”  But, LSW is not a necessary party with respect to Plaintiffs’ requests for return of fees and commissions or enjoinder of receipt of future money from 4Cs.  For this reason, Logan, who served as LSW’s agent and representative and performed many services for 4Cs on behalf of LSW, is not properly joined under FRCP 19.  Neither LSW nor Logan are properly joined with respect to relief that does not include voiding the annuities contracts.

Provider Claims

Second Circuit

Jeffrey Farkas, M.D., LLC v. Cigna Health & Life Ins. Co., No. 18-CV-05232, __F.Supp.3d__, 2019 WL 2635724 (E.D.N.Y. June 27, 2019) (Judge Jack B. Weinstein).  The court found that it was not an abuse of discretion to deny Plaintiffs’ claim for reimbursement under the insurance plan’s provision providing non-network doctors 100% reimbursement for “Emergency Room” services.  The plan here makes a distinction between “Emergency Room” services and inpatient hospital care.  The court also dismissed Plaintiffs’ 29 U.S.C. § 1132(a)(3) claim because it seeks payment for the same unreimbursed medical expenses sought in the underpayment of benefits claim brought under § 1132(a)(1)(B).

Third Circuit

Sleep Tight Diagnostic Center, LLC v. Aetna Inc., No. CV1803556FLWDEA, 2019 WL 2710793 (D.N.J. June 28, 2019) (Judge Freda L. Wolfson).  Plaintiff brought suit seeking recovery of insurance benefits for twenty-five patients for whom it provided sleep study services.  With respect to Plaintiff’s common law causes of action concerning the nineteen ERISA governed Plans, the court found that they are expressly preempted by ERISA.  Plaintiff lacks standing to pursue benefits under thirteen of the Plans that contain anti-assignment provisions.  Of the five insureds whose Plans are not governed by ERISA and the three of those insureds whose Plans do not contain an anti-assignment provision, the court declined to exercise supplemental jurisdiction over the state law claims of the three insureds.  Claims for eight insureds remain.  The court found that this action lacks a relationship to New Jersey and directed Plaintiff to show cause why its claims as to the remaining insureds should not be dismissed on forum non-conveniens grounds.

Retaliation Claims

Eleventh Circuit

Williams v. Walmart Stores East, LP, No. 1:18-CV-874-WKW, 2019 WL 2606898 (M.D. Ala. June 25, 2019) (Judge W. Keith Watkins).  The court found that Plaintiff alleged a plausible § 510 violation where he alleges that he worked for Walmart for nearly 20 years with no disciplinary record, due to his grandfathered-in status he only needed to work 28 hours a week to get benefits, and he was terminated allegedly for violating a workplace safety rule two months shy of his eligibility to receive greater vested benefits.  The court found the temporal correlation makes it plausible that there is a causal relationship.  But the court dismissed the complaint because Plaintiff did not exhaust his available administrative remedies before filing suit.

Subrogation/Reimbursement Claims

Third Circuit

Minerley v. Aetna, Inc., No. CV 13-1377 (NLH/KMW), 2019 WL 2635991 (D.N.J. June 27, 2019) (Judge Noel L. Hillman).  In this case challenging the interpretation of an insurance policy and the right of an insurer to get reimbursed medical costs it paid when the insured receives an award from a third-party tortfeasor, the court denied Plaintiff’s motion for reconsideration and granted Defendants’ motion for summary judgment.  The court determined that the alleged violations of ERISA’s disclosure regulations by the plan administrator do not warrant reconsideration of the dismissal of the claims against Defendants.  “Because Defendants were not the plan administrators here, the Court cannot find a violation of the disclosure regulations allows imposition of liability against Defendants under ERISA.”  The court did find that it was mistaken that 29 C.F.R. § 2590.715-2719 was effective January 1, 2017, but that it was harmless error because Plaintiff received benefits under an ERISA plan with a plan year that both predated the final approval of the regulation and the effective date.  The court found that Defendants did not breach their fiduciary duty to Plaintiff by enforcing the Aetna policy.

Eleventh Circuit

Publix Super Market, Inc., v. Figareau, No. 8:19-CV-545-T-27AEP, 2019 WL 2635747 (M.D. Fla. June 27, 2019) (Judge James D. Whittemore).  The court granted Plaintiff’s motion for preliminary injunction.  It found that the Magistrate Judge correctly determined that (1) Plaintiff’s plan is an ERISA plan; (2) the Plan documents provide that an equitable lien attached as soon as a settlement was reached; (3) Defendants’ pursuit of an order in the probate action to reduce the ERISA governed lien constitutes sufficient irreparable harm entitling Plaintiff to a temporary injunction; (4) Plaintiff can maintain a cause of action against Defendants and the law firm under Section 502(a)(3); and (5) the Florida Probate court lacks jurisdiction to decide Plaintiff’s ERISA claim, which is collateral to the state court settlement.

Withdrawal Liability & Unpaid Contributions

Seventh Circuit

Operating Engineers Local 139 Health Benefit Fund v. Finndrill, Inc., No. 18-CV-1702-PP, 2019 WL 2603906 (E.D. Wis. June 25, 2019) (Judge Pamela Pepper).  “The court FINDS that the defendant owes the plaintiffs: $69,533.22 for contributions, $20,034.04 for delinquent payment assessments and $6,048.97 for interest. In addition, the court APPROVES an award of $2,235.25 in attorneys’ fees and costs. The amount of unpaid contributions, interest, liquidated damages, and attorney’s fees totals $97,851.48, plus post judgment interest.”

Your ERISA Watch authored by Michelle L. Roberts, Esq., Partner