This week’s notable decision is Moitoso v. FMR LLC, No. CV 18-12122-WGY, __ F.Supp.3d __, 2019 WL 4980390 (D. Mass. Oct. 8, 2019), where the court concluded that any money award the ERISA plan participants might win against the alleged breaching fiduciaries would be an equitable surcharge–not legal damages–such that the Seventh Amendment does not require a jury trial in this case.  Even so, the court did grant Plaintiffs’ alternative request for an advisory jury.  The court’s conclusion is not extraordinary; indeed, most courts to have considered the right to a jury in a fiduciary breach case have concluded the same.  What’s interesting about this decision is the depth of the court’s analysis of the historical practice of jury trials and ERISA’s text in rejecting the participants’ arguments in favor of a jury trial for their claims.

The Seventh Amendment right to a jury trial guarantees a jury trial in suits at common law, which refers to legal, as opposed to equitable, claims.  In other words, whether a jury trial is required depends on whether the claims are equitable or legal in nature.  Here, Plaintiffs seek an award of losses for the defendants’ (collectively referred to as Fidelity) breach of fiduciary duties with respect to the Fidelity Retirement Savings Plan.  In granting Fidelity’s motion to strike Plaintiffs’ demand for a jury trial, the court found that:  1) chancery courts of old traditionally heard claims for breach of fiduciary duty; and 2) ERISA provides for the equitable remedy of surcharge, not the legal remedy of damages.

Citing to CIGNA Corp. v. Amara, the court explained that “ERISA fiduciary duty claims draw directly from trust law and thus fall within ‘the bailiwick of the courts of equity.’”  Plaintiffs argued that the law courts did consider fiduciary duty claims where plaintiffs asserted a right to immediate and unconditional payment, and here, Plaintiffs have an immediate and unconditional right to relief because they can withdraw funds from the Plan on demand.  The court found that the Unconditional Payment Exception does not apply to this case since that exception applies when there is a readily identifiable sum.  Plaintiffs allege that Fidelity’s breach of fiduciary duty caused the Plan’s income to diminish and do not assert that Fidelity has failed to turn over a set amount of money.  Even if Plaintiffs can withdraw their funds from the Plan, the recovery for a breach of fiduciary duty inures to the benefit of the plan as a whole.  Though that recovery may impact Plaintiffs’ individual accounts, that does not mean that Plaintiffs have a direct right to payment.

The court found that the losses under ERISA section 409(a) amount to the equitable remedy of surcharge, not damages.  The statute states:

Any person who is a fiduciary with respect to a plan who breaches any of the responsibilities, obligations, or duties imposed upon fiduciaries by this subchapter shall be personally liable to make good to such plan any losses to the plan resulting from each such breach, and to restore to such plan any profits of such fiduciary which have been made through use of assets of the plan by the fiduciary, and shall be subject to such other equitable or remedial relief as the court may deem appropriate, including removal of such fiduciary. A fiduciary may also be removed for a violation of section 1111 of this title.

Plaintiffs argued that ERISA does not give courts the authority to surcharge fiduciaries.  In support of their argument that section 409 authorizes legal damages, Plaintiffs highlight that the section: 1) employs the word “losses;” 2) uses the mandatory word “shall;” 3) makes fiduciaries “personally liable;” and 4) authorizes other equitable relief.  

The court rejected Plaintiff’s statutory arguments for missing the forest for the trees.  The court explained that the Supreme Court clarified in Amara that an award of make-whole monetary relief constitutes an equitable surcharge.  Additionally, the First Circuit has incorporated the Third Restatement of Trusts’ definition of losses into ERISA section 409(a) and that definition describes the losses remedy as a “surcharge.”  The mandatory “shall” does not convert section 409(a) losses to legal damages because Congress said that it created equitable remedies in section 409(a), the Third Restatement contemplates that courts use their discretion to excuse a breach of trust in only special circumstances, and not all courts recognized that an equity court could refuse to surcharge a breaching trustee.  The last two reasons fail for similar reasons.  A surcharge causes a defendant to become personally liable for amounts of money.  Reading section 409(a) to permit a surcharge does not “eviscerate any relevant distinction between ‘equitable’ and ‘remedial’ relief, as the Plaintiffs suggest.”  Supreme Court precedent confirms that the nature of the remedy is specific to the nature of the parties to the claim and the claim itself.  In short, the losses remedied by section 409(a) are equitable, not legal.

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

Breach of Fiduciary Duty

Second Circuit

Patterson v. Morgan Stanley, No. 16-CV-6568 (RJS), 2019 WL 4934834 (S.D.N.Y. Oct. 7, 2019) (Judge Richard J. Sullivan).  The court granted Defendants’ motion to dismiss the Second Amended Complaint which alleged several breach of fiduciary duty claims, prohibited transaction claims, and failure to monitor claims with respect to the Morgan Stanley 401(k) Retirement Plan.  The court found that Plaintiffs lack standing as to the Non-Selected Funds because they cannot establish a constitutional injury-in-fact based on the funds’ poor performance.  The court also found that their SAC fails to state a claim under ERISA as to the Selected Funds.  “Contrary to Plaintiffs’ claims, ERISA does not require clairvoyance on the part of plan fiduciaries, nor does it countenance opportunistic Monday-morning quarter-backing on the part of lawyers and plan participants who, with the benefit of hindsight, have zeroed in on the underperformance of certain investment options.”

Ninth Circuit

International Masonry Training and Education Foundation, et al., v. Hawaii Masons’ Training Fund, et al., No. CV 19-00206 JMS-KJM, 2019 WL 5088740 (D. Haw. Oct. 10, 2019) (Judge J. Michael Seabright).  The court found that Plaintiffs sufficiently plead that Defendants, an apprenticeship and training fund (“Fund”) and its trustees, are functional fiduciaries of the Plaintiff International Masonry Training and Education Foundation, where Plaintiffs allege that Defendants retained employer contributions to the Defendant Fund and did not forward them to the Foundation as required by the collective bargaining agreement.  There was no dispute that the contributions were plan assets.  The court rejected Defendants’ argument that they cannot be fiduciaries of the Foundation because they are fiduciaries of the Fund.  “Contrary to Defendants’ assertion that being a fiduciary of one fund absolves them from liability to the other fund, such situation may signal a more precarious situation for said ‘dual-fiduciary’ who must now carefully juggle loyalties to multiple masters without breaching their duties as to each fund.”

Class Actions

First Circuit

Del Sesto v. Prospect CharterCARE, LLC, et al., No. CV 18-328 WES, 2019 WL 5067200 (D.R.I. Oct. 9, 2019) (Judge William E. Smith).  In this case where Plaintiffs alleged that the St. Joseph Health Services of Rhode Island Retirement Plan is “grossly underfunded” because the Plan’s sponsor did not make required contributions for many years, the court granted final approval of the settlement reached between the Receiver and the Settling Defendants over the objections of the Non-Settling Defendants.  The court found that the settlement was the product of arm’s length bargaining, and was fair, adequate, and reasonable.  The court overruled the objections revolving around a major legal question in the case – whether ERISA applied to the Plan or whether it was an exempt church plan.  The court declined to rule on whether the Settlement Statute was preempted by ERISA or was unconstitutional. The court appointed Wistow, Sheehan & Lovely, P.C. as class counsel.

Seventh Circuit

Carlson, et al. v. Northrop Grumman Corporation, et al., No. 13-CV-02635, 2019 WL 5101502 (N.D. Ill. Oct. 11, 2019) (Judge Andrea R. Wood). This action arose out of the denial of severance benefits under the Defendant Plan after Plaintiffs’ layoffs from Defendant’s Northrop Grumman’s subsidiary. Plaintiffs moved for class certification. The court granted Plaintiffs’ motion and certified the class for Count I, a claim for benefits due and clarification of rights under the Plan pursuant to 29 U.S.C. § 1132(a)(1)(B), because this claim was essentially a contract remedy, protecting contractually defined benefits. Insofar as typicality, the court explained that unnamed class members do not always have to exhaust their plan remedies as a condition to membership in the Class. The commonality and numerosity elements were also satisfied because the claim was based on Defendants’ conduct common to the entire class, in that benefits were ultimately denied. The adequacy element was satisfied because the named Plaintiffs are part of the amended class and have the same interests and suffered the same injury as the other class members by being denied their benefits. The court appointed as co-lead class counsel Michael Bartolic of [Law Offices of Michael Bartolic] and R. Joseph Barton of Block and Leviton LLP. The court denied certification of the Class under the 29 U.S.C. § 1140 claim (Count II) due to issues of typicality and numerosity, because the named Plaintiffs sought high severance pay which was not typical to the entire class. The court also declined to certify a class with respect to Count III seeking equitable reformation of the Plan because Plaintiffs’ claims would have likely differed from those of the proposed class members who did not work for Northrop at the time of the alleged change in the administration of the Plan. 

Disability Benefit Claims

Seventh Circuit

Meyer v. Group Long Term Disability Plan For Employees of Edward D. Jones & Co., L.P., No. 16-CV-01282-JES-JEH, 2019 WL 5068650 (C.D. Ill. Oct. 9, 2019) (Judge James E. Shadid).  Hartford’s decision to deny Plaintiff’s “physical” disability claim, which she based on her fibromyalgia diagnosis, was not an abuse of discretion.  The court found that this was not a case where Hartford demanded laboratory data to confirm Plaintiff’s diagnosis of fibromyalgia, which is not available for this diagnosis.  Rather, this is a case where Hartford reasonably questioned the conclusion of Plaintiff’s treating physicians.  Hartford made many unsuccessful attempts to get clarification from Plaintiff’s treating doctors.  It reasonably relied on the opinion of its independent medical reviewer, Dr. Aayar, who was board certified in occupational medicine.

D.C. Circuit

Keister v. AARP Benefits Committee, et al., No. 1:18-CV-2385 (KBJ), 2019 WL 4934710 (D.D.C. Oct. 7, 2019) (Judge Ketanji Brown Jackson).  The court issued a Memorandum Opinion explaining its grant of Defendants’ motions for summary judgment which challenged Plaintiff’s right to pursue his disability benefits considering a separation agreement that he signed.  The court concluded that by signing the separation agreement, Plaintiff waived his right to bring the claim for long-term disability benefits.  In coming to this conclusion, the court found that Defendant AARP is an entity subject to the release and entitled to invoke the release in these proceedings, that the “General Release” did not need to specifically mention ERISA claims in order to include them, and that ERISA claims are not among the release’s specific exceptions.  Because the release terms are not ambiguous, the court cannot consider extrinsic evidence.  The court also found that there is no evidence that AARP representatives fraudulently misrepresented Plaintiff’s ability to maintain his LTD benefits.  


Tenth Circuit

Parks v. Metropolitan Life Insurance Company, No. 19-CV-1115-EFM-TJJ, 2019 WL 5067208 (D. Kan. Oct. 9, 2019) (Magistrate Judge Teresa J. James).  This case involves a dispute over the payment of AD&D benefits where Plaintiff’s accidental injury occurred on September 16, 2015, Plaintiff’s loss (amputation of his right hand) occurred on April 14, 2017, and MetLife denied the claim because the “covered loss” occurred more than twelve months after the date of injury.  The court denied Plaintiff’s motion for discovery seeking Plan documents in effect in 2015 and 2017 since MetLife produced a 2011 Plan Document, which it represents governs the dispute, as well as a Plan Document that became effective on January 1, 2016.  The court also denied Plaintiff’s request for further information to understand how and why MetLife would determine the date of accident and date of loss as the same date in deciding the claim.  Since Plaintiff did not file a reply brief, the court accepted MetLife’s representation that it has produced all documents Plaintiff requested and provided answers to Plaintiff’s questions.

Eleventh Circuit

Keys v. Bert Bell/Pete Rozelle NFL Player Retirement Plan, 2019 WL 5080572 (M.D. Fla. Oct. 10, 2019) (Magistrate Judge Julie S. Sneed).  In this action where Defendants filed a counterclaim under ERISA Section 502(a)(3) for alleged overpaid benefits, Defendants sought to compel Plaintiff’s response to discovery requests focused on the amount of overpayments Plaintiff received from the plans and whether Plaintiff has any assets traceable to the overpayments.  The court granted the motion, in part.  Since Defendants issued subpoenas directly to Plaintiff’s banks, the court denied the motion to compel seeking the same records from Plaintiff.  Plaintiff does not have to respond to requests where he previously produced records that contain responsive information to those requests.  The court did order that Plaintiff and his wife must appear for a deposition.

ERISA Preemption

Second Circuit

Long Island Thoracic Surgery, P.C., et al. v. Building Service 32BJ Health Fund, No. 17-CV-163(SJF)(AYS), 2019 WL 5060495 (E.D.N.Y. Oct. 9, 2019) (Judge Sandra J. Feuerstein). Defendants objected to the Magistrate Judge’s recommendation denying their motion for summary judgment, dismissing Plaintiffs’ state law claims because they are preempted by ERISA, and declining to exercise supplemental jurisdiction over those claims. The court adopted the Magistrate’s recommendations, which correctly determined that Plaintiffs’ claims involve the amount of payment, and as such, do not present a colorable claim under ERISA. 

Seventh Circuit

Advanced Physicians, S.C. v. National Football League, No. 19 CV 2959, 2019 WL 5085335 (N.D. Ill. Oct. 10, 2019) (Judge Manish S. Shah).  Plaintiff alleges that it treated over 200 former NFL players and that the NFL directed Cigna to deny all its claims under the NFL Player Insurance Plan as work-related because Plaintiff was performing diagnostic tests the players were using as evidence of a disability under NFL’s disability plan.  The court found that Plaintiff’s tortious interference claim against Defendant is preempted by ERISA.  The players assigned their rights under the plan to Plaintiff so it qualifies as a beneficiary that can bring a lawsuit under ERISA Section 502(a)(1).  Additionally, the interference claim requires an assessment of whether the plan covered the claims.

Ninth Circuit

Sanjiv Goel M.D., Inc., v. Cigna Healthcare of California, Inc., et al., No. 19-CV-03356-DSF (PLAx), 2019 WL 5063123 (C.D. Cal. Oct. 9, 2019) (Judge Dale S. Fischer). Defendants removed Plaintiff’s lawsuit to federal court based on diversity. Plaintiff moved for remand. The court granted Plaintiff’s motion because diversity jurisdiction did not exist at the time of removal. Furthermore, Plaintiff’s statutory claims were not completely preempted by ERISA because they were based on a California statute which imposed an independent coverage requirement mandating that health plans reimburse providers for emergency services and was independent of the specific rights established by benefit plans. Similarly, Plaintiff’s claims for breach of contract were not preempted because they were not based on an obligation under an ERISA plan, but rather on oral representations and implied contracts, and the state law relied upon does not apply only to ERISA plans.

Exhaustion of Administrative Remedies

Seventh Circuit

Meyer v. Group Long Term Disability Plan For Employees of Edward D. Jones & Co., L.P., No. 16-CV-01282-JES-JEH, 2019 WL 5068650 (C.D. Ill. Oct. 9, 2019) (Judge James E. Shadid).  Hartford informed Plaintiff she did not meet the policy definition of disability due to a physical condition and she could either perfect her claim by providing specific documents to the claim analyst or by submitting an appeal.  She chose to perfect her claim.  Hartford issued a second denial and instructed her to appeal.  She did not appeal, and instead, filed suit.  The court found that Plaintiff did not exhaust administrative remedies since she only perfected her claim and did not appeal.  The court found notable that she did not include a clear statement of why she disagreed with Hartford’s determination or even use the word “appeal.”  But, the court also found that even if she did properly exhaust her administrative remedies, Hartford’s determination was not arbitrary and capricious.  

Medical Benefit Claims

Tenth Circuit

Tony M. v. United Healthcare Insurance Company, No. 2:19-CV-00165, 2019 WL 5066806 (D. Utah Oct. 9, 2019) (Judge Dee Benson).  In this dispute over residential rehabilitation benefits that Plaintiff Tony M. paid for his son, A.M., the court denied Defendants’ motion to dismiss but stayed the proceedings since Plaintiffs belong to the class action certified in Wit v. United Behavioral Health, 3:14-cv-2346-JCS (N.D. Cal. May 21, 2014):  “Any member of a health benefit plan governed by ERISA whose request for coverage of residential treatment services for a mental illness or substance abuse disorder was denied by United, in whole or in part, on or after May 22, 2011, based upon United’s Level of Care Guidelines or United’s Coverage Determination Guidelines.”  The court found that Tony M. has statutory and constitutional standing to pursue the claims under 29 U.S.C. § 1132.  Under the terms of the plan he has a right to have medically necessary procedures for his beneficiaries covered.  He paid for the cost of the treatment and as the legal guardian has a legal and moral obligation to pay for A.M.’s treatment.  “Tony has therefore alleged a concrete, particularized injury to himself that is fairly traceable to United’s failure to cover A.’s treatment.”

Pension Benefit Claims

Third Circuit

Waters v. Wells Fargo & Co. Cash Balance Plan, et al., No. CV1816832MASTJB, 2019 WL 5079575 (D.N.J. Oct. 10, 2019) (Judge Michael A. Shipp).  The court dismissed Plaintiff’s claim alleging Defendant failed to report and disclose a material modification of the Plan in violation of 29 U.S.C. §§ 1022(a) and 1024(b)(1) because the Third Circuit previously held that substantive remedies are generally not available for violations of ERISA’s reporting and disclosure requirements except where the plaintiff can demonstrate the presence of extraordinary circumstances and there are no such circumstances here.  Because Plaintiff did not allege extraordinary circumstances, the court also dismissed Plaintiff’s claim alleging that Defendants are equitably estopped from applying an amended plan provision.  Plaintiff also did not plead reasonable and detrimental reliance.

Sixth Circuit

Mulvey, Sr. v. United Mine Workers of America Health and Retirement Fund, No. 2:19-CV-2400, 2019 WL 4958110 (S.D. Ohio Oct. 8, 2019) (Judge George C. Smith).  Plaintiff, a pension plan participant, sought reversion of pension benefits payable to his ex-wife following her death.  The court found that the QDRO in place was a separate interest QDRO.  The court explained that a separate interest QDRO “divides the actual pension into two different pensions, one for the plan participant and one for the alternate payee, before the participant begins collecting benefits and allows both the participant and the alternate payee to each elect a form of benefits for their respective separate shares.”  If the court were to permit a reversion, it would result in the plan paying increased benefits which is prohibited by the QDRO and ERISA.  Plaintiff cannot seek reversion of his ex-wife’s benefits since her death was after the benefit commencement date. 

Pleading Issues & Procedure

First Circuit

Moitoso v. FMR LLC, No. CV 18-12122-WGY, __F.Supp.3d__, 2019 WL 4980390 (D. Mass. Oct. 8, 2019) (Judge William G. Young).  See Notable Decision summary above.

Sixth Circuit

Mulvey, Sr. v. United Mine Workers of America Health and Retirement Fund, No. 2:19-CV-2400, 2019 WL 4958110 (S.D. Ohio Oct. 8, 2019) (Judge George C. Smith).  In this dispute where the pro se plaintiff challenges the effect of a QDRO on his pension benefits, the court denied his motion for a jury trial since his claims are equitable in nature and not eligible for a jury trial.

Retaliation Claims

Sixth Circuit

Rider v. Bluegrass Oxygen, Inc., No. CV 5:18-456-DCR, 2019 WL 4934187 (E.D. Ky. Oct. 7, 2019) (Judge Danny C. Reeves).  The court dismissed Plaintiff’s ERISA § 510 claim because he did not produce evidence to demonstrate that there is a genuine issue of material fact regarding whether BGO interfered with his health benefits in violation of ERISA.  Plaintiff and his daughter were covered by BGO’s health plan for four years before his termination and were covered under COBRA for an additional 18 months after his termination.

Withdrawal Liability & Unpaid Contributions

Second Circuit

Building Service 32BJ Health Fund v. Nutrition Management Services Company, No. 18-2449-CV, __F.App’x__, 2019 WL 5076362 (2d Cir. Oct. 10, 2019) (PRESENT: José A. Cabranes, Reena Raggi, Christopher F. Droney, Circuit Judges).  The court vacated and remanded the judgment of the district court for a redetermination of damages and the award of attorney’s fees.

Trustees of The Local 813 Insurance Trust Fund v. All County Funeral Service, Inc., No. 18CV737ENVRER, 2019 WL 5087097 (E.D.N.Y. Oct. 10, 2019) (Judge Eric N. Vitaliano).  The court adopted the R&R and entered judgment on default.  The court denied Plaintiffs’ demand for damages, interest, costs and attorneys’ fees without prejudice to renewal after proper submissions and after inquest.

Third Circuit

Trustees of the United Food and Commercial Workers Union Local 312 Benefit Fund v. Meg Tackle Imports, Inc., No. CV1811715MASDEA, 2019 WL 5064196 (D.N.J. Oct. 9, 2019) (Judge Michael A. Shipp).  The court denied Plaintiff’s motion for default judgment because they did not account for the discrepancy between the addresses. “Here, the Court finds that the issue of service on an unnamed, out-of-state Jane Doe on behalf of the corporation is not straightforward. Rather, the Court finds good cause to require Plaintiffs to submit a legal brief in support of their Motion. As the issue of service is a threshold issue, the Court does not reach other potential issues with Plaintiffs’ Motion.”