Should an employee’s disability caused by malignant melanoma be subject to a disability policy’s pre-existing condition exclusion where during an alleged “look-back” period the employee was referred to a dermatologist on suspicion of having basal-cell carcinoma? The First Circuit recently answered this question in today’s notable decision, Lavery v. Restoration Hardware Long Term Disability Benefits Plan, No. 18-1885, 2019 WL 4155038 (1st Cir. Sept. 3, 2019). In short, the answer is no.
Facts: Lavery worked for Restoration Hardware as a Construction Associate and then as a Regional Facilities Manager effective May 14, 2014. In his new position he became eligible for long-term disability (“LTD”) coverage as of June 1, 2014 under a policy insured by Aetna Life Insurance Company. The LTD Policy contains the following pre-existing condition exclusion:
Long Term Disability Coverage does not cover any disability that starts during the first 12 months of your current Long Term Disability Coverage, if it is caused or contributed to by a “pre-existing condition.”
A disease or injury is a pre-existing condition if, during the 3 months before the date you last became covered [the “look-back” period]:
• it was diagnosed or treated; or
• services were received for the disease or injury; or
• you took drugs or medicines prescribed or recommended by a physician for that condition.
On April 14, 2014, which fell during the look-back period, Lavery saw his primary care physician for a skin lesion on his back that had been present for six months. His doctor believed that it might be basal-cell carcinoma and referred him to a dermatologist. He did not provide any treatment or prescribe any medications. Then, on June 10, 2014, after the effective date of coverage, Lavery was examined by a dermatologist who decided to biopsy the lesion. Several days later the lesion was diagnosed as malignant melanoma. Lavery then stopped working due to a claim disability as of September 30, 2014.
The Aetna disability benefits manager assigned to Lavery’s claim decided that his disability was not pre-existing. This was supported by the opinion of an internal clinical consultant. But four days later, without explanation, a supervisor noted in the file that the benefits manager recommended a denial due to a pre-existing condition. Aetna denied the claim based on its determination that Lavery’s initial appointment with his primary care physician subjected his claim to the pre-existing condition exclusion.
Lavery appealed Aetna’s decision and it was assigned to another internal clinical consultant. That consultant found that the claim should not have been denied due to a pre-existing condition because “the record is clear that [Lavery] was not diagnosed or treated for the disabling condition of state iii malignant melanoma until after the biopsy. …” The benefit manager again entered an internal note favorable to Lavery noting that the Appeal Triage Determination was that the claim would be reinstated. But again, Aetna ultimately decided to uphold the denial. This time for a new reason: that Lavery received medical treatment, care, or services for the disease or injury which substantially contributed to the malignant melanoma. Aetna also changed the look-back period to April 1, 2014 through June 30, 2014 based on an amendment made by the employer regarding the coverage start date. However, this change of the look-back period was never explained to Lavery.
Aetna’s decision was an abuse of discretion. The district court determined, and the First Circuit agreed, that Aetna’s decision was an abuse of discretion. The court explained that the language of the exclusion was ambiguous. Though one could broadly construe the provision as excluding any disability for which treatment or services were provided for any symptoms which in hindsight appears to be a manifestation of the disabling sickness or injury, Aetna’s apparent conflict of interest, both structural and the way it handled Lavery’s claim, renders its determination an abuse of discretion. “Aetna’s claim file for Lavery looks very little like one would expect it to look were Aetna proceeding without regard to its own interest.”
Additionally, the court found that Aetna’s explanation that it was Lavery’s burden to show he was free from melanoma during the look-back period contradicts the plain language of the Plan and suggests that Aetna has been relying on an overly broad reading of the pre-existing condition exclusion, “or that it is behaving like a conflicted party intent on advocating for a desired result rather than a fiduciary explaining its decision.”
Whether Aetna abused its discretion does not end the inquiry, the court must determine how the plan is best read without the benefit of Aetna’s decision. The court applied contra proferentum and read the plan the same way as Aetna’s benefits manager and two clinical technicians: “Dr. Lopez did not treat melanoma, provide services for melanoma, prescribe or recommend drugs for melanoma, or diagnose Lavery’s disabling disease as melanoma.” Thus, benefits are payable.
Aetna cannot benefit from its violation of the Department of Labor Regulations. The court found that Aetna’s last-minute switch of the look-back period dates and failure to give Lavery the opportunity to respond is a clear violation of 29 C.F.R. § 2560.503-1(h)(4)(ii). The court refused to hold this against Lavery when Aetna made repeated representations that the look-back period ended June 1, 2014, not June 30, 2014. Lavery met his burden to show that he was prejudiced by Aetna’s last-minute and unchallengeable invocation of the corrected look-back period. There is no dispute that Lavery’s claim would be subject to the exclusion if Aetna’s new look-back period dates applied.
Lavery is entitled to benefits through the date of the Court’s mandate. The court found that there was ample evidence that Lavery was disabled at the time his claim was denied. Though Aetna argued that it does not have any updated or recent medical information to support Lavery’s continued disability, the court found that several factors weigh in favor of precluding Aetna from asserting their “no disability” defense as a means for a remand. Lavery’s counsel represented that Lavery’s cancer has advanced to Stage IV. Due to Aetna’s wrongful denial of benefits, which caused the lack of contemporaneous exams, it would be inequitable to vacate the district court’s order and judgment. The court remanded with instructions for the district court to extend the award of back benefits through the date of the mandate corresponding with the court’s opinion.
And lastly, the court found that the district court did not abuse its discretion in awarding Lavery $17,123 in prejudgment interest.
Below is a summary of this past week’s notable ERISA decisions by subject matter and jurisdiction.
Ramirez v. Liberty Life Assurance Co. of Bos., No. 3:18-CV-00012-RJC, 2019 WL 4199808 (W.D.N.C. Sept. 4, 2019) (Judge Robert J. Conrad, Jr.). The court previously found that Liberty Life abused its discretion in denying Plaintiff LTD benefits. Upon consideration of the four Quesinberry factors and the twelve Johnson/Barber factors, the court found that an award of attorneys’ fees is warranted. The court ordered Liberty Life to pay Plaintiff $80,527.70 in attorneys’ fees and $400.00 in costs. This included some reduction for vague entries and block billing. The court awarded time spent by two attorneys to prepare for and attend oral argument on the motions for summary judgment. The court found that Plaintiff’s requested hourly rates of $250 for associates and $400 for partners are within the prevailing market rates in the Western District of North Carolina.
Bell v. Pension Committee of ATH Holding Company, LLC, No. 115CV02062TWPMPB, 2019 WL 4193376 (S.D. Ind. Sept. 4, 2019) (Judge Tanya Walton Pratt). The court granted Plaintiffs’ Motion for Attorneys’ Fees, Reimbursement of Expenses and Case Contribution Awards for Named Plaintiffs. The court awarded Class Counsel its requested fee award of $7,882,545, which constitutes one-third of the monetary award of $23,650,000.00, and $513,015.32 for expenses. Including non-monetary relief and the benefit of tax deferral, the court found that the total benefit conferred on the Class exceeds $62 million dollars. The court explained that, “Class Counsel’s fee request is wholly appropriate given the extraordinary risk Class Counsel accepted in agreeing to represent the Class; the fact that Class Counsel brought this kind of case when no one else had; Class Counsel’s demonstrated willingness to devote tremendous resources for many years to the case as it has done in other cases; the substantial monetary recovery; and the additional value of the future relief included in this settlement to Plan participants.” Class Counsel spent 7,820.60 attorney hours and 1,354.20 hours of non-attorney professional time litigating this case.
Breach of Fiduciary Duty
Tracey v. Massachusetts Inst. of Tech., No. CV 16-NMG-11620, __F.Supp.3d__, 2019 WL 4192148 (D. Mass. Sept. 4, 2019) (Judge Nathaniel M. Gorton). The court denied Defendant’s motion for summary judgment with respect to Plaintiffs’ claim that MIT violated its duty of prudence for failing to monitor its defined contribution plan because neither party demonstrated as a matter of law that MIT did or did not act prudently. The court also denied summary judgment on Plaintiffs’ claim that MIT violated its duty of prudence by including specific underperforming or excessively risky funds since there is a factual dispute over whether certain kinds of funds should have been included in the Plan. Similarly, there is a genuine dispute over whether Defendants breached their duty of prudence with respect to recordkeeping fees. The court dismissed Plaintiffs’ Section 1106(a) claim, explaining that, “[p]laintiffs have proffered no evidence that the fees specific to the non-mutual fund options were unreasonable or not subject to the exception in § 1108(b)(8). Rather, their sole contention is that the subject non-mutual fund transactions contributed to the excessive administrative charges in Count II. To the extent that plaintiffs argue that defendants bear the burden of proof of a § 1108(b)(8) exception, the Court finds that MIT has met that burden by offering unrebutted expert testimony.” The court dismissed the failure to monitor claims with respect to the prohibited transaction claim but not with respect to the prudence claims.
Electrical Workers Pension Plan, Local 103 v. Herold, No. 18-CV-11037-ADB, 2019 WL 4192149 (D. Mass. Sept. 4, 2019) (Judge Allison D. Burroughs). Defendant failed to notify the Plan of his mother’s death and withdrew from her bank account the survivor pension benefits the Plan deposited for nearly five years after her death, which totaled $54,511.57. The court determined that Defendant is a fiduciary within the meaning of ERISA. He had control over the pension account after his mother died and he was responsible for making decisions about how the Plan assets were used. The court found his use of the funds to be a prohibited transaction under § 1106 and a breach of fiduciary duty under § 1104. The court granted Defendants’ motion for default judgment and awarded the Plan $13,521.39 that it claimed to be the value of “lost investment income” based on the “actual, annual rates of return the Plan received on its investments during the years in question.” The court also awarded attorneys’ fees and costs.
Oriska Insurance Company v. Avalon Gardens Rehabilitation & Health Care Center, LLC, No. 6:18-CV-1030, 2019 WL 4195267 (N.D.N.Y. Sept. 4, 2019) (Judge David N. Hurd). Plaintiff alleged that Defendants’ diverted money from the workers’ compensation trusts in violation of their fiduciary duties under ERISA. The court dismissed this claim because 29 U.S.C. § 1003(b)(3) specifically exempts from ERISA’s coverage a plan that is maintained solely for the purpose of complying with applicable workers’ compensation laws. Even if Defendants comingled ERISA plan assets, Oriska lacks statutory standing to bring their suit under § 1132(a)(3), even if they have a direct stake in the outcome of the litigation.
Reetz v. Lowe’s Companies, Inc., No. 518CV00075KDBDCK, 2019 WL 4233616 (W.D.N.C. Sept. 6, 2019) (Judge Kenneth D. Bell). The court found at the motion to dismiss stage that Plaintiff adequately plead that Lowe’s is a de facto fiduciary of the Plan, rejecting Lowe’s contention that it is not a fiduciary because it is not a named fiduciary and the plan document confers fiduciary responsibility for investment decisions to the Administrative Committee. The court found that the Complaint states a plausible case that the Lowe’s Defendants breached their duty of loyalty in selecting and retaining the Hewitt Growth Fund and that they breached their duty of prudence in their decision-making process for selecting or monitoring the Hewitt Growth Fund’s performance. The court also found that Plaintiff adequately alleged a breach of the duty to monitor fiduciaries to the extent it alleges that Lowe’s failed to monitor the Administrative Committee. The court granted the motion to dismiss this count to the extent it alleges that Lowe’s failed to monitor Aon Hewitt, since this fiduciary is explicitly appointed by the Administrative Committee, and “it stretches the bounds of the duty to monitor too far to hold Lowe’s responsible for monitoring every fiduciary employed by the Plan.” Lastly, the court found that the Complaint adequately alleges that Lowe’s failed to monitor the Administrative Committee and is liable as a co-fiduciary under 29 U.S.C. § 1105(a)(2) to the extent that any failure by Lowe’s to monitor enabled the Administrative Committee to commit a breach of its fiduciary duties.
Central Valley AG Cooperative v. Leonard, et al., No. 8:17CV379, 2019 WL 4141061 (D. Neb. Aug. 30, 2019) (Judge Laurie Smith Camp). The court determined that Central Valley’s allegations that Defendants breached their fiduciary duty to the Plan under 29 U.S.C. §§ 1109(a) and 29 U.S.C. § 1132(a)(2) fail because with the limited exception of Claims Delegate Services (“CDS”) providing referenced-based reimbursement services in 2016, the Defendants were not Plan fiduciaries nor did they become de facto fiduciaries. “Central Valley retained final, discretionary authority over all parts of Plan administration and none of the parties acted outside of its duties described in the Plan documents. Further, although CDS was a limited, named fiduciary under the 2016 Plan Document, there is no evidence that it acted contrary to Plan.” The court also determined that Central Valley’s allegations that Defendants breached their fiduciary duty under 29 U.S.C. § 1106(b) by engaging in prohibited transactions under ERISA fail because the transactions at issue, undisclosed kickbacks to Benefit Group, were not prohibited by the Plan nor affected Plan funds.
Baird v. BlackRock Institutional Tr. Co., N.A., No. 17-CV-01892-HSG, 2019 WL 4168906 (N.D. Cal. Sept. 3, 2019) (Judge Haywood Gilliam, Jr.). The court found that Plaintiffs adequately alleged that the BlackRock Defendants breached the duty of loyalty, the duty of prudence, the duty to diversify investments, by improperly favoring proprietary funds and charging and hiding excessive fees. The court denied dismissal of the prohibited transaction claims based on BlackRock’s repeated purchase of interests in proprietary funds and payment of securities lending fees from any income, and denied dismissal of the monitoring and co-fiduciary derivative claims. The court found that BlackRock Institutional Trust Company is correct that it was not a fiduciary when it negotiated its appointment and compensation, whether it was a fiduciary and breached its duties when it collected its compensation is another question. The court granted the BlackRock Defendants’ motion to dismiss the breach of fiduciary duty claim based on fraudulent concealment but denied it as to the failure to monitor the investments made for two short term investment funds.
Wilson v. Anthem Health Plans of Kentucky, Inc., No. 3:14-CV-743, 2019 WL 4169893 (W.D. Ky. Sept. 3, 2019) (Judge Rebecca Grady Jennings). In this lawsuit challenging the caps and limits under Anthem health insurance policies for insureds seeking treatment for Autism Spectrum Disorders, the court granted Plaintiff’s leave to supplement the unopposed motion for preliminary approval of a class action settlement. “[T]he Court cannot find, under 23(e)(2)(C), that the relief provided for the class is adequate. The Court cannot determine whether the $175,000 in the net settlement fund wholly or partially compensates the class because, it is unclear how much money members of the class spent on ABA treatment. Without this information, the Court cannot determine whether the net settlement fund is adequate.” The court also cannot determine whether the Settlement treats class members equitably where it’s unclear why some class members receive a pro rata share or a minimum payment of $250 and why others receive only $250.
Morris, et al. v. Moon Ridge Foods, LLC, et al., No. 18-CV-03219-SRB, 2019 WL 4197605 (W.D. Mo. Sept. 4, 2019) (Judge Stephen R. Bough). In this case alleging a WARN Act violation and seeking back pay and benefits under ERISA, the court granted Plaintiff’s motion to certify the class, which was stipulated to by Defendants. The class is defined as: All former employees who worked at or reported to the facility located at 5305 Highway H Pleasant Hope, MO 65725 (the “Facility”) until they were laid off, furloughed and/or terminated, without cause on their part, on or about January 11, 2018, within thirty (30) days before that date or in the sixty (60) days thereafter, as part of, or as the reasonably expected consequence of, the mass layoff and/or plant closing occurring on or about January 11 and 12, 2018, and who do not file a timely request to opt-out of the class (“Class”).
Foster v. Adams & Assocs., Inc., No. 18-CV-02723-JSC, 2019 WL 4168957 (N.D. Cal. Sept. 3, 2019) (Magistrate Judge Jacqueline Scott Corley). Plaintiffs allege Defendants breached their fiduciary duties to the Adams and Associates ESOP plan participants by participating in prohibited transactions and failing to make required disclosures. Specifically, Plaintiffs allege that Defendants knew and failed to disclose that the ESOP Trustee, Alan Weissman, was a felon who was later incarcerated for stealing from other ESOPs. The court concluded that class certification is proper under Rule 23(b)(1) and 23(b)(2) and certified a class of: “all participants in the Adams and Associates ESOP from October 25, 2012 or any time thereafter who vested under the terms of the ESOP and their beneficiaries.” The court appointed Feinberg, Jackson, Worthman & Wasow LLP and Block & Leviton LLP as Co-Lead Counsel for the Class.
Disability Benefit Claims
Lavery v. Restoration Hardware Long Term Disability Benefits Plan, No. 18-1885, 2019 WL 4155038 (1st Cir. Sept. 3, 2019) (Before Lynch, Circuit Judge, Souter,* Associate Justice, and Kayatta, Circuit Judge). See Notable Decision summary.
Aliff v. Prudential Insurance Company of America, No. CV 5:19-013-DCR, 2019 WL 4197211 (E.D. Ky. Sept. 4, 2019) (Judge Danny C. Reeves). In this long-term disability case subject to abuse of discretion review, the court granted Plaintiff’s motion to compel discovery responses to Plaintiff’s requests going to Prudential’s conflict or bias. This includes information about “compensation arrangements between the plan administrator and third-party vendors, contractual connections, annual financial payments and statistical data about the number of claims sent to the same reviewers and the number of denials resulting therefrom.” It also includes “information related to any incentives to deny claims that Prudential has offered the reviewers, as well as statistical information regarding the third-party vendors’ denial of claims.” The court rejected Prudential’s argument that its verified statement that it separates financial and claims decisions is a basis to deny the discovery. Though Prudential claims that it does not make decisions regarding performance based on claim outcomes, “plaintiff is not required to take Prudential at its word with respect these issues.”
Medefesser v. Metropolitan Life Insurance Company, 6:18-cv-41-MK (D. Or. Sept. 5, 2019) (Magistrate Judge Mustafa T. Kasubhai). Applying de novo review, the court issued a report and recommendation overturning MetLife’s denial of any occupation disability benefits, finding that it was more likely than not that Plaintiff was still disabled and could not perform a sedentary job. The court made the following notable findings: (1) though no special deference is given to a treating physician’s conclusions, a court may evaluate and give appropriate weight to a treating physician if it finds their opinions reliable and probative; (2) the treating doctor here was in the best position to assess Plaintiff’s credibility of the reports of pain multiple impairments; (3) the IME doctor took an untenable position by calling for objective evidence for fibromyalgia in order to assign restrictions to the condition; and (4) the cardiopulmonary exercise test (CPET), which is endorsed to be the “gold standard” for measuring functional capacity, supports Plaintiff’s disability. The court directed MetLife to pay LTD benefits for the maximum benefit duration absent a showing of improvement in her medical condition that a reasonable physician would conclude that Plaintiff could engage in any occupation.
Cruz, M.D. v. Lovelace Health System, Inc., No. 1:18-CV-974-RB-SCY, 2019 WL 4168656 (D.N.M. Sept. 3, 2019) (Judge Robert C. Brack). The court found that Plaintiff sufficiently pled exhaustion of administrative remedies where he alleged that he attempted to appeal the denial, but Reliance did not respond to Plaintiff’s request to appeal. The court also found that Plaintiff sufficiently pled his ERISA benefit claim against his employer, Lovelace, since he makes various allegations concerning Lovelace’s actions in relation to his benefits. The court dismissed Plaintiff’s state law claims against both Reliance and Lovelace without prejudice as they are either preempted by ERISA or fail to state a plausible claim for relief.
RE: Chughtai v. Metro. Life Ins. Co., No. PWG-19-CV-848, 2019 WL 4199036 (D. Md. Sept. 5, 2019) (Judge Paul W. Grimm). This case involves a denied claim for disability benefits. The court issued this informal Order of the Court to memorialize the conference call regarding Plaintiff’s request for discovery. The court found that Plaintiff met her burden of establishing that the administrative record does not provide enough evidence to address whether MetLife’s decision was affected by its conflict of interest. Plaintiff may issue interrogatories concerning the following: (1) hourly compensation and total compensation for Dr. Goldman and Dr. Schroeder between 2011 and 2016; (2) total number of disability claims Metropolitan Life Insurance Company (“MetLife”) processed under that plan during that same period; (3) breakdown of each of the two doctors’ recommendations during that period (how many recommended denials and how many recommended payments); and (4) breakdown of MetLife’s decisions in response to those recommendations (how many times did MetLife deny after a recommended denial, and how many times did it pay after a recommended payment).
Gilmour v. Aetna Health, Inc., No. SA-17-CV-00510-FB, 2019 WL 4144325 (W.D. Tex. Aug. 30, 2019) (Magistrate Judge Elizabeth S. Chestney). The Court issued a protective order preventing Mr. Helms, former CEO of the Victory hospitals that filed for Chapter 11 bankruptcy and whose trustee has filed this lawsuit against Aetna to recover allegedly underpaid claims, from attending the scheduled depositions of former management-level employees of Victory. The court also ordered Mr. Wynne, Mr. Helms’ criminal-defense attorney, to not attend any deposition unless he represents a party or has been formally retained to represent the deponent. The court explained that, “[c]ourts have recognized that where a party alleges fraud, there is good cause to exclude others who may have knowledge of or involvement in the alleged fraud from each other’s depositions because there is a risk of influence, collusion, or intimidation.”
Sobertec LLC v. UnitedHealth Grp., Inc., et al., No. SACV191206JVSMRWX, 2019 WL 4201081 (C.D. Cal. Sept. 5, 2019) (Judge James V. Selna). Plaintiffs, who are operators of addiction treatment facilities, brought state law claims against Defendants for unpaid services provided to Defendant’s insureds. The court granted Plaintiffs’ motion to remand upon finding that the claims are not preempted by ERISA. Plaintiffs argued that their claims are not preempted because they not predicated on any patient-assignment, and they are based on an insurer’s direct representations and course of conduct with respect to the provider, such that they involve duties independent of ERISA. The court sided with Plaintiffs, explaining that the mere fact that Plaintiffs could have sued Defendants under ERISA Section 502(a)(1)(B) does not automatically mean that they could not bring suit based on some other legal obligation. The court found that there is no federal question jurisdiction based on the negligence claim since the allegations of misconduct arise under California law, not ERISA. Lastly, Plaintiffs’ UCL claim does not provide a basis for federal question jurisdiction since Plaintiffs have not shown they have UCL standing for an ERISA-based claim since they do not bring suit as assignees.
Eagle Air Med Corp. v. Sentinel Air Med. All., LLC, No. 2:16-CV-00176-TC-EJF, 2019 WL 4140918 (D. Utah Aug. 30, 2019) (Judge Tena Campbell). Plaintiff, an air-ambulance company, brought state law claims of defamation, false light, and tortious interference with economic relations against Defendants, who provide information for health insurance companies and benefit plan administrators to determine how much to reimburse air ambulances for their services. The court determined that “[t]he actionable statements in this case—Sentinel’s profit margin calculations and its suggestion of self-referral—are only incidentally related to ERISA plans. A jury can resolve the defamation and tortious interference claims without reference to the terms of the plans, and without affecting ‘relations among the principal ERISA entities—the employer, the plan, the plan fiduciaries, and the beneficiaries.’”
Exhaustion of Administrative Remedies
White v. Anthem Life Ins. Co., No. 18-CV-01941-HSG, 2019 WL 4194338 (N.D. Cal. Sept. 4, 2019) (Judge Haywood S. Gilliam, Jr.). In this dispute over long-term disability benefits, the court granted Anthem’s motion for summary judgment since the Plan Guidelines required that Plaintiff exhaust her administrative remedies before filing suit and that she failed to do so. Plaintiff did not submit a written appeal of the denial of her claim within 180 days. The court found that a letter from her attorney asking for information and stating that the letter was “not a full statement of her appeal” cannot constitute an appeal. The court also rejected Plaintiff’s argument that the denial letter was legally deficient which excused her need to exhaust. To the contrary, the court determined that the denial letter provided Plaintiff with meaningful notification of its adverse benefit determination.
Life Insurance & AD&D Benefit Claims
Engle v. Land O’Lakes, Inc., No. 18-2821, 2019 WL 4145078 (8th Cir. Sept. 3, 2019) (Before SMITH, Chief Judge, ARNOLD and KELLY, Circuit Judges). The court was tasked with deciding whether Unum reasonably interpreted the life insurance and accidental-death plans as allowing it to pay a decedent’s domestic partner in the absence of a designated beneficiary. The district court sided with the decedent’s estate. The Eighth Circuit sided with Unum. It determined that Unum’s decision that the plan participant’s domestic partner was his “spouse,” and thus entitled to benefits under the Plans, was not unreasonable. The Plans expressly gave Unum authority to determine eligibility for benefits and amount of any benefits, to resolve factual disputes, and to interpret and enforce plan provisions. The Plans specified that “spouse” was eligible for benefits and that “‘[s]pouse’ wherever used includes domestic partner.” The court did note that “if we had the authority to interpret the plans instead of Unum, we might well interpret them as the district court did.”
Medical Benefit Claims
Emami v. Cigna Health and Life Insurance Company, No. 17-9226 (SDW) (LDW), 2019 WL 4187700 (D.N.J. Sept. 3, 2019) (Judge Susan D. Wigenton). The court dismissed two providers’ claims for failing to exhaust administrative remedies. With respect to the medical necessity determination, the court found that the policy is clear that Cigna will only cover single level lumbar fusion as medically necessary for the treatment of spinal stenosis when there is an associated anterolisthesis, and all of the listed criteria are met. Cigna denied the claim because there was no radiographic evidence of a grade 1 spondylolisthesis or segmental instability or a grade 2 or higher spondylolisthesis. There was also no confirmation that the patient was a non-smoker or would stop using tobacco for at least six weeks prior to surgery.
Gillar v. Blue Cross/Blue Shield of S.C., No. CV 3:17-2128, 2019 WL 4141639 (M.D. Pa. Aug. 30, 2019) (Judge Malachy E. Mannion). “In this case, the plaintiff was found unconscious, laying face down in the middle of a road with a crashed ATV approximately 100 yards away. Upon being life-flighted to Danville, the plaintiff’s blood alcohol content was noted by trauma transport to be 130 milligrams per deciliter.” The court concluded that the evidence in the record substantially supports Blue Cross’s finding that Plaintiff was legally intoxicated at the time of the accident which invoked the intoxication exclusion in the Plan. Under this exclusion, Blue Cross does not have to pay for medical services, supplies, charges, or losses resulting from a member being legally intoxicated. The court determined that the Plan does not limit the exclusion to injuries that have resulted solely from intoxication; it applies to injuries that are a result of intoxication.
Shore v. The Charlotte-Mecklenburg Hospital Authority, No. 1:18-CV-00961, 2019 WL 4141059 (M.D.N.C. Aug. 30, 2019) (Judge Thomas D. Schroeder). In this putative class action alleging ERISA violations against the Charlotte-Mecklenburg Hospital Authority and the Atrium Health Retirement Committee (collectively the “Authority”), among other defendants, the court found that the Authority is a “political subdivision” and that its plans are therefore “governmental plans” exempt from ERISA coverage. The court found that the Authority satisfies the first Hawkins prong because it was created by the state of North Carolina through a delegation of its authority under the Hospital Authority Act. It satisfies the second Hawkins prong because the Authority is administered by officials who are responsible to public officials. Because the plans are governmental plans, the court granted the Authority’s motion to dismiss.
Gray v. Reliance Standard Life Ins. Co., No. 218CV01551JADBNW, 2019 WL 4168728 (D. Nev. Sept. 3, 2019) (Judge Jennifer A. Dorsey). The parties dispute the application of pension benefit offsets under a long-term disability insurance policy issued by the Reliance Standard Life Insurance Company to the Los Angeles Police Protective League (LAPPL). The court granted Reliance’s motion to dismiss the state law claims on the basis of federal law preemption since Plaintiff has not shown that LAPPL is a governmental entity or that the plan is subject to ERISA’s safe harbor provision, 29 C.F.R. § 2510.3-1(j). A plan offered by an organization representing employees of a government agency may be “established or maintained” by the government, but only if the plan itself is the product of collective bargaining. The court granted Plaintiff leave to amend if he can plausibly allege that the plan was the product of collective bargaining.
Pleading Issues & Procedure
Baird v. BlackRock Institutional Tr. Co., N.A., No. 17-CV-01892-HSG, 2019 WL 4168906 (N.D. Cal. Sept. 3, 2019) (Judge Haywood S. Gilliam, Jr.). The court granted the parties’ motion to seal the collective trust investments (CTI) Plan, which is not in the public record and contains sensitive information about the governance, administration, and operation of the BlackRock CTIs, as well as portions of Plaintiffs’ response to deposition testimony and documents referencing the Investment Committee’s confidential actions and deliberations, and Mercer’s consulting advice. The court found sufficiently compelling reasons to seal because the information contains “confidential business and financial information relating to the operations of BlackRock.”
Berman, et al. v. Microchip Technology Incorporated, et al., No. 17-CV-01864-HSG, 2019 WL 4168970 (N.D. Cal. Sept. 3, 2019) (Judge Haywood S. Gilliam, Jr.). The court previously concluded that Plaintiffs were entitled to severance benefits under ERISA § 502(a)(1)(B) and the parties stipulated to the severance benefit amounts which totaled $629,061.36. For Defendants’ breach of fiduciary duty, Plaintiffs seek a 10% per annum equitable surcharge on top of the stipulated amounts. Alternatively, they seek prejudgment interest at 10% as a make-whole remedy. The court denied Plaintiffs’ request for an equitable surcharge because they did not provide any evidence of the harm they suffered. It rejected the “sweeping proposition” that the time value of money alone warrants their requested surcharge. “To the extent Plaintiffs nevertheless ask the Court to exercise its discretion in this case, the Court declines to award an equitable surcharge based on a series of suppositions: first, that Plaintiffs would have invested their severance benefits; and second, that the stock market performance, or Defendant’s stock performance, is an adequate proxy for the return that Plaintiffs would have received had they invested those funds.” The court also determined that Plaintiffs did not provide evidence warranting a departure from the prejudgment interest rate prescribed in 28 U.S.C. § 1961.
Statute of Limitations
McElwaney v. Becker, No. 16-CV-6578L, __F.Supp.3d__, 2019 WL 4183720 (W.D.N.Y. Sept. 4, 2019) (Judge David G. Larimer). The court found that the Second Circuit’s decision in Testa v. Baker is controlling and that Plaintiff’s lawsuit challenging the “phantom account offset” is time-barred. The court explained that “Plaintiff was put on notice in 1998 of the existence and operation of the phantom account. Her alleged failure to learn of the Frommert case or other litigation involving the phantom account until years later cannot be laid at defendants’ doorstep. Plaintiff’s suggestion that defendants had a duty to inform plan participants of court rulings adverse to defendants is not supported by the law.” The court granted Defendants’ motion to dismiss.
Sternberg v. MetLife Insurance Company, No. CV H-19-1665, 2019 WL 4142875 (S.D. Tex. Aug. 30, 2019) (Judge Sim Lake). The court granted MetLife’s motion to dismiss on the basis that Plaintiff’s lawsuit is time-barred by the contractual limitations period in the disability policy. Here, Plaintiff became disabled on September 10, 2013, MetLife issued its final determination of Plaintiff’s claim on June 5, 2015, and Plaintiff filed her complaint on May 1, 2019. The Plan provides that legal action may be brought 60 days after the date Proof is filed and ends 3 years after the date such Proof is required. The Plan requires that Proof be submitted to MetLife “not later than 90 days after the date of loss.” The court agreed with MetLife that latest possible date Proof could be required under the Plan was 90 days after the conclusion of the 180-day Elimination Period and that the lawsuit had to be filed by June 9, 2017. Even if the 3 years ran from June 5, 2015, Plaintiff’s lawsuit is still untimely. The court rejected Plaintiff’s invocation of the equitable principles of fraudulent concealment and equitable estoppel since MetLife was not obligated to provide her with information about the Plan nor is there evidence that it attempted to conceal information from her. Further, MetLife’s denial letter stated that the Plan may limit the period of time she may have to file a lawsuit.
Baird v. BlackRock Institutional Tr. Co., N.A., No. 17-CV-01892-HSG, 2019 WL 4168906 (N.D. Cal. Sept. 3, 2019) (Judge Haywood S. Gilliam, Jr.). The Court agreed with Plaintiffs that although the decision to invest in allegedly risky securities occurred more than six years before suit was filed, the fact that those securities were held until 2012 made it such that the six-year limitation period did not start to run until then. The alleged wrongful conduct was a breach of the duty to continuously monitor the short-term investment funds, so the date of the violation is the date when BTC sold those securities in 2012, since the failure to remove these securities continued until then. The court concluded that the claims are not time-barred under § 1113(1).
Crossey v. Pennsylvania State Education Association Pension Plan, et al., No. CV 19-1468, 2019 WL 4187480 (E.D. Pa. Sept. 4, 2019) (Magistrate Judge Jacob P. Hart). Plaintiff brought suit against Defendants for taking action to recover an alleged overpayment of pension benefits. The court granted Defendants’ motion to dismiss in part. The court dismissed the claim for benefits since under the language of the Plan, the initial calculation of benefits was erroneous. The court did not dismiss the second count under Section 502(a)(1)(B) challenging the Plan’s offsetting of the overpayment against his future benefits and charging interest. The court found that “a Board’s wrong application of, or a failure to apply, equitable principles before exercising recoupment of Plan overpayments and assessing interest could constitute the abuse of discretion necessary to support a claim for benefits under 29 USC § 1132(a)(1)(B). I am influenced by the observation in Johnson that principles of trust law compel an ERISA trustee to balance the impact of an overpayment upon the beneficiaries as a whole against its impact against the individual from whom it seeks to recover overpayments.” The court found that Plaintiff did not state a claim for equitable estoppel because he has not shown the required reliance. Nor did Plaintiff state a claim for reformation because there is no evidence of fraud, mutual mistake, or undue advantage any mistake on his part.
Unum Group v. Baker, No. 2:17-CV-01210-DBP, 2019 WL 4221048 (D. Utah Sept. 5, 2019) (Magistrate Judge Dustin B. Pead). The court determined that Unum is entitled to reimbursement of long-term disability benefits paid to the pro se plaintiff. The LTD plan expressly permits the offset of SSDI benefits and third-party settlement payments. It is undisputed that Plaintiff received SSDI and a third-party settlement of $1,100,000.00. Plaintiff does not deny that he has possession and control of these funds. Since Plaintiff claims he was taxed on the money, the court will hold a hearing regarding the amount owing from Plaintiff to Unum and any offsets that could be appropriate.
Withdrawal Liability & Unpaid Contributions
Trustees of The Northeast Carpenters Health, Pension, Annuity, Apprenticeship, & Labor Management Cooperation Funds v. Cali Enterprises, Inc., et al., No. 217CV02387ADSARL, 2019 WL 4193466 (E.D.N.Y. Sept. 4, 2019) (Judge Arthur D. Spatt). “The Court denies the Plaintiffs’ motion for default judgment. The Plaintiffs are hereby directed to show cause, in writing through a memorandum to be submitted by October 4, 2019, why the Court should not dismiss this case for lack of subject matter jurisdiction.”
Finkel v. Little Silver Electric, Inc., No. 18CV5436ENVJO, 2019 WL 4156920 (E.D.N.Y. Aug. 30, 2019) (Judge Eric N. Vitaliano). “The arbitral award is confirmed against Little Silver, and judgment shall be entered in the total amount of $35,057.32 (consisting of the arbitral award of $31,227.31 in unpaid contributions, liquidated damages, pre-arbitral interest and arbitral legal fees and costs; $2262.51 in pre-judgment interest; $1167.50 in attorney’s fees; and $400 in costs).”
Trustees of The Refrigeration, Air Conditioning & Service Division (UA-NJ) Pension Fund v. Map Refrigeration, Inc., No. CV181061MASTJB, 2019 WL 4143006 (D.N.J. Aug. 31, 2019) (Judge Michael A. Shipp). The court granted Plaintiffs’ motion for default judgment and found that Plaintiffs have demonstrated entitlement to relief in the form of the increase in the bond amount from $21,000 to $40,000, $824 in attorneys’ fees, and $540.63 in costs.
Iron Workers District Council of Southern Ohio v. ALW Construction LLC, et al., No. 3:18-CV-114, 2019 WL 4170211 (S.D. Ohio Sept. 3, 2019) (Judge Walter H. Rice). The court granted Plaintiffs’ Motion for Default Judgment against Defendants ALW in its entirety. The court awarded $105,776.75 in unpaid fringe benefit contributions, interest, and liquidated damages, and $3,893.75 in attorneys’ fees and costs.
Boards of Trustees of Ohio Laborers’ Fringe Benefits Programs v. Freisthler Paving, Inc., No. 2:18-CV-1463, 2019 WL 4142682 (S.D. Ohio Aug. 30, 2019) (Judge Algenon L. Marbley). The court granted in part and denied in part Plaintiffs’ Motion for Default Judgment. “This Court AWARDS against Defendant, Freisthler Paving, Inc., $15,630.90 in liquidated damages and interest and $2,380 in attorney fees, as well as interest from the time of judgment at the rate of one percent per month.”
Masonry Industry Trust Administration, Inc. v. LeProwse Construction, Inc., No. 3:17-CV-1266-SI, 2019 WL 4237755 (D. Or. Sept. 6, 2019) (Judge Michael H. Simon). The court granted Plaintiffs’ motion for default judgment. “For violations from January 1, 2013 to August 31, 2018, Defendant is ordered to pay: (1) $108,265.58 for unpaid contributions; (2) $9,015.80 in liquidated damages; (3) $76,116.58 in interest calculated through July 20, 2019, which continues to accrue at a rate of $34.82 per day until paid; and (4) Plaintiff’s reasonable attorney’s fees, expenses, and costs.”
Operating Engineers’ Health And Welfare Trust Fund For Northern California, et al. v. Vortex Marine Construction Inc., No. 17-CV-03614-KAW, 2019 WL 4194328 (N.D. Cal. Sept. 4, 2019) (Magistrate Judge Kandis A. Westmore). The court granted in part and denied in part Plaintiffs’ motion for summary judgment, finding that Plaintiffs have established their entitlement to interest in the amount of $5,066.24. “As there are material disputes of fact as to the remaining amounts of interest and all liquidated damages, as well as attorney’s fees and costs, these amounts are reserved for trial.”
Board of Trustees of The Northern California Plasterers Health and Welfare Trust Fund, et al. v. Hinds Bros. Company, Inc., No. 3:15-CV-02387-JD, 2019 WL 4168908 (N.D. Cal. Sept. 3, 2019) (Judge James Donato). The court granted Plaintiff’s motion for partial summary judgment, concluding that Plaintiffs are entitled to liquidated damages for contributions that were paid, but in an untimely manner, by Defendant prior to the filing of the original complaint in May 2015.
Alegion, Inc. v. Central States, Southeast And Southwest Areas Pension Fund, No. 2:19-CV-00218-ALB, 2019 WL 4145525 (M.D. Ala. Aug. 30, 2019) (Judge Andrew L. Brasher). The court affirmed the Bankruptcy Court’s order overruling Appellant’s objection to Appellee’s proof of claim. Alegion waived its due process argument by failing to raise it in the Bankruptcy Court. Even if it was not waived, the Bankruptcy Court did not violate Alegion’s due process rights. Any error in the Bankruptcy Court’s procedures was harmless. “There is no dispute that Alegion failed to initiate arbitration as required by the statute, and for that reason, the Bankruptcy Court was correct to allow the Fund’s claim.”
Your ERISA Watch authored by Michelle L. Roberts, Esq., Partner