Good morning, ERISA Watchers!  There weren’t any notable circuit court decisions this past week, so we want to highlight a district court decision involving a health plan’s attempt to seek an equitable lien on personal injury settlement proceeds.  In Publix Super Markets, Inc. v. Figareau et. al., Case No. 8:19-cv-545, 2019 WL 6311160 (M.D. Fla. Nov. 25, 2019), Publix filed an ERISA action to obtain reimbursement for health benefits paid by its ERISA Plan.  Publix is the sponsor and administrator of its Group Health Benefit Plan, which provides medical expense benefits to eligible employees and dependents.  The Plan is self-funded, is not insured through commercial carrier health insurance, and includes a reimbursement provision.

Paul is a Publix employee and is enrolled in the Plan. Paul and Figareau are the parents of minor child L.P., who sustained an injury at birth. The Plan paid $88,846.39 in medical expense benefits related to her injury. Her parents retained Tejedor and the law firm Diez-Arguelles & Tejedor, P.A. (the “Attorney Defendants”) to bring a medical negligence action against the medical providers. The matter settled, and the funds were housed in a designated structured settlement account established by Paul and Figareau. There were additional funds that had been deducted from the gross settlement that either remained in the attorney Defendants’ trust account or are otherwise subject to the attorney Defendants’ possession and control. 

In its Complaint, Publix sought a constructive trust or equitable lien by agreement on the funds as reimbursement for the Plan’s payment. In Count I, Publix alleged that Defendants’ refusal to provide reimbursement in the amount paid violates the Plan and entitles Publix to seek equitable relief under § 502(a)(3) of ERISA, to enforce the Plan’s terms. Publix brings Count II under 28 U.S.C. § 2201, seeking declaratory judgment that “constru[es] the ERISA Plan and the inapplicability of the ‘make whole’ and ‘common fund’ doctrines such that Publix is entitled to first priority reimbursement of the benefits that were paid” from the settlement proceeds. 

Defendants brought a motion to dismiss Publix’s complaint. Defendants argued the court lacked subject matter jurisdiction, raising several arguments for dismissal: (1) Publix did not raise an ERISA claim for equitable relief, but a claim for monetary damages that is more properly litigated in state probate court; (2) the Attorney Defendants are not parties to the Plan and therefore the claims against them are not cognizable; (3) declaratory judgments do not constitute “equitable relief” under ERISA and are therefore unavailable under 29 U.S.C. § 1132; (4) the underlying negligence action involved a minor and therefore required supervision by a Florida court; (5) the nature of the suit created a conflict of interest for the Attorney Defendants; and (6) Publix failed to include in its Complaint a complete version of the Plan or any evidence that it paid for medical services. 

The Court held the motion to dismiss was granted in part and denied in part. First, as alleged, Publix stated a claim for equitable relief under ERISA. Second, the claims against the Attorney Defendants were cognizable because they held the settlement proceeds in trust or possess the funds. Third, even if a declaratory judgment was available in an ERISA action, the claim was duplicative and unnecessary. Fourth, ERISA provides the court exclusive jurisdiction to resolve Publix’s ERISA claim and preempted any conflicting state statutes. Fifth, there was no conflict of interest that warranted dismissal. Finally, Publix did not need to attach a complete version of the Plan and evidence of payment for medical services to state its ERISA claim.

This week’s notable decision write-up was prepared by Brent Dorian Brehm.

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

Attorneys’ Fees

Ninth Circuit

Oregon Laborers-Employers Health & Welfare Trust Fund v. Baseline Industrial Construction, Inc., et al., No. 3:19-CV-1343-IM, 2019 WL 6329336 (D. Or. Nov. 26, 2019) (Judge Karin J. Immergut).  In this action seeking unpaid contributions, the court awarded the Fund attorneys’ fees.  The court found that an award of fees is mandatory under ERISA and the Trust Agreement also provides for attorneys’ fees.  The award may also include compensation for work performed by non-attorneys.  The court awarded fees for 27.25 hours of Attorney time at the rate of $250/hour and for 12 hours of a legal assistant’s time at the rate of $90/hour.  “Although several of these tasks were prior to filing the complaint, the Ninth Circuit has explained that attorney’s fee awards under ERISA may encompass pre-litigation activities directed toward filing the lawsuit.”

Breach of Fiduciary Duty

Third Circuit

Elliot v. EQT Corp. & EQT Corp. Severance Pay Plan, 2019 WL 6329664 (W.D. Pa. Nov. 26, 2019) (Judge Yvette Kane). In this dispute over severance plan benefits, Plaintiff’s claim for severance benefits was denied as  a result of a clause forbidding benefit payments to those employees “whose termination of employment is the result of . . . a voluntary resignation or retirement by such Participant.” While Plaintiff did indeed leave employment at EQT, he only did after the company agreed to “package him out” if he was not given the opportunity to become CFO at EQT mainstream. Defendants moved for Summary Judgement on the ERISA 502(a)(1)(B) benefits claim as well as a breach of fiduciary duty claim under 502(a)(3)(B). The court rejected Defendant’s motion under 502(a)(1)(B) on procedural grounds. Specifically, the court concluded that because Defendants had not yet provided the administrative record to the court, the Court lacked “a [proper foundation for adjudicating this claim at the summary judgment stage.” In granting summary judgement to Defendants on the 502(a)(3)(B) claim, the Court concluded that Plaintiff already had an adequate remedy in Section 502(a)(1)(B), which negated the need to pursue relief through Section 502(a)(3)(B). 

Tenth Circuit

Ramos v. Banner Health, No. 15-CV-2556-WJM-NRN, 2019 WL 6327718 (D. Colo. Nov. 26, 2019)(Judge William Martinez) Plaintiffs brought this class-action against fiduciaries of the employer-sponsored 401(k) plan for breaching their fiduciary duties to plan members by failing to seek competitive pricing for recordkeeping and administrative services for the 401(k) plan. Both parties sought to exclude testimony from the other parties’ experts as unreliable under FRCP 702. Although there were weaknesses in both experts’ methodology and analysis, the court determined that the testimony was admissible and the weaknesses should be attacked at trial through cross-examination.

Disability Benefit Claims

Sixth Circuit

Pridy, et al. v. Duke Energy Corporation, No. 3:19-CV-00468, 2019 WL 6329659 (M.D. Tenn. Nov. 26, 2019) (Judge Aleta A. Trauger). Plaintiffs filed suit on behalf of themselves and others similarly situated alleging, inter alia, violation of ERISA § 502 by wrongfully denying them accrued sick and disability leave benefits in the 2018 CBA, which were owed to them based on prior CBAs. Plaintiffs began working for Nashville Gas Company, which was acquired and became Piedmont Natural Gas Company, and in 2016, Plaintiffs claimed that Defendant acquired and became successor to Piedmont Gas. Defendant claimed that it was not a proper party in its motion to dismiss, and that the 2018 CBA was between the union and Piedmont Gas. The court granted Defendant’s motion to dismiss with leave to amend because the original entity (Piedmont Gas) was not completely taken over by Defendant and continued to operate separately as a subsidiary, there was no successor liability.

Ninth Circuit

Garretson v. Met. Life Ins. Co., 17-cv-07052-JD, 2019 WL 63400170 (N.D. Cal. Nov. 27, 2019) (Judge James Donato). The court granted Plaintiff’s motion for judgment because it found that Plaintiff carried his burden of proving, by a preponderance of the evidence, that he continued to be disabled under his LTD policy after his benefits were terminated by MetLife. It found there to be detailed and persuasive evidence in the record that Plaintiff suffers from near-constant, very severe pain and that he had established that, at minimum, he is not capable of sitting for more than four hours. Because the Ninth Circuit has upheld the ‘commonsense conclusion…that an employee who cannot sit for more than four hours in an eight-hour workday cannot perform ‘sedentary’ work that requires ‘sitting most of the time’ Plaintiff is thus not able to perform his own occupation, any of the other sedentary occupations identified by MetLife, or any other, like occupations.

ERISA Preemption

Third Circuit

North Jersey Brain & Spine Center v. United Healthcare Insurance Co., et al., No. 18-15631, 2019 WL 6317390 (D.N.J. Nov. 25, 2019) (Judge Lena Dunn Wettre).  Out-of-network provider, Plaintiff North Jersey Brain & Spine Center (“NJBSC”), filed a motion to remand its action, originally filed in New Jersey state court and removed to federal court by Defendants United Healthcare Insurance Company (UHIC) and several other insurer/plan defendants, that asserts state law claims for breach of implied contract, breach of the covenant of good faith and fair dealing, unjust enrichment, quantum meruit, promissory estoppel, negligent misrepresentation, tortious interference with economic advantage and New Jersey statutory claims. In analyzing whether Plaintiff’s state law claims were preempted by ERISA the court applied the two-prong Pascack test to determine whether (1) the plaintiff (NJBSC) could have brought the claim under ERISA § 502(a) and (2) no other independent legal duty supported plaintiff’s claim. The court needed only to apply prong (1) to hold that NJBSC, as an out-of-network provider, could not make a colorable claim for benefits under ERISA § 502(a). Defendants could not establish for any of the 27 patient claims at issue that NJBSC had derivative ERISA standing under a valid assignment of benefits. Additionally, the court observed that NJBSC brought its state law claims under independent agreements, duties and obligations flowing from direct interactions with UHIC outside the scope of ERISA. Therefore, the court granted Plaintiff’s motion to remand back to state court. 

Ninth Circuit

Southwest Regional Council of Carpenters v. McCarron, No. 19-55154, __F.App’x__, 2019 WL 6357941 (9th Cir. Nov. 27, 2019) (Before: THOMAS, Chief Judge, and TROTT and SILVERMAN, Circuit Judges).  The court affirmed the district court’s conclusion that McCarron’s third-party claims under California law against DeCarlo & Shanley were preempted under ERISA’s express preemption provision, 29 U.S.C. § 1144(a). “McCarron’s state-law claims were premised on the law firm’s advice that he, as a trustee of Southwest Carpenters Training Fund, an ERISA trust fund, and an officer of SWRCC, should cause SWRCC to repay a lease overcharge because the lease was a prohibited transaction under ERISA. Accordingly, the state-law claims bore on an ERISA-regulated relationship and therefore were preempted.”  The court vacated and remanded the decision in part so that the district court can provide reasons for its denial of costs to McCarron as a prevailing party against SWRCC on SWRCC’s LMRDA claim under Fed. R. Civ. P. 54(d)(1).

Exhaustion of Administrative Remedies

Ninth Circuit

Myers v. Wells Fargo Securities, LLC et al., No. 19-5245, 2019 WL 6329629 (C.D. Cal. Nov. 25, 2019) (Judge Michael W. Fitzgerald).  Plaintiff Austin Myers brought a state court action seeking declaratory and injunctive relief, wages and attorneys’ fees resulting from unwanted deferrals of Myers’ compensation under a Wells Fargo & Company (WFS) Deferred Compensation (top-hat) Plan arising from Myers’ promotion to a salaried position in February 2019.  Under the Plan, Myers irrevocably elected to have his draw and commission for 2019 when effective, March 1, 2019, his compensation due to promotion changed a new salaried pay structure that made his current deferral election financially prohibitive. Myers was able to obtain a restraining order enjoining WFS from deferring his 2019 compensation pursuant to the Plan. The Court considered WFS’ motion for summary judgment as to Myers’ four claims holding in pertinent part that it was unclear without further discovery whether WFS was required to give notice to Myers of an exhaustion requirement under the Plan and whether Myers even needed to his exhaust administrative remedies under the Plan when he was not challenging the denial of a benefit claim. Without further discovery, the Court cannot say whether Myers had to exhaust his administrative rights particularly when he did not know about the claims procedure appeal process. 

Kim Smith v. I.A.T.S.E. Local 16 Pension Plan, No. 19-cv-03573, 2019 WL 6327554 (N.D. Cal. Nov. 26, 2019) (Magistrate Judge Donna M. Ryu). In this case Plaintiff brought claims under ERISA §§ 501(a)(1)(B) and 502(a)(3) for violation of ERISA’s anti-cutback provision for amending the plan to broaden the definition of “prohibited employment” for suspension of benefits. Defendants moved to dismiss Plaintiff’s claims for failure to exhaust administrative remedies. The court denied Defendant’s request to dismiss the 502(a)(3) claim because, under Ninth Circuit precedent, exhaustion is not required to bring an (a)(3) claim. The court also denied Defendant’s request to dismiss the (a)(1)(B) claim. The Plan language, which is controlling over the language of the summary plan description, contained a permissive claim filing requirement rather than a mandatory one. The court declined to dismiss for failure to exhaust where the Plan does not require it.

Life Insurance & AD&D Benefit Claims

Fifth Circuit

Koch v. Metropolitan life ins. Co., 2019 WL 6329383 (N.D. Tex. Nov. 26, 2019) (Judge Reed C. O’Connor). In this dispute regarding denied life insurance benefits, defendant Metropolitan Life Insurance Company filed a motion for Summary Judgement. While the Court concluded that Summary Judgement was not the appropriate vehicle to resolve this dispute, and in turn denied the motion, the Court still affirmed MetLife’s denial of benefits upon utilization of the “appropriate vehicle” to resolve this ERISA dispute; an independent de novo review of the record to determine whether plaintiff is entitled to benefits under the Plan. Following the Ninth Circuit’s decision in Kearney v. Standard Ins. Co., the court concluded that Summary Judgement was inappropriate because the trier of fact is required to make credibility determinations of the evidence located within the record; because disputes of material fact still existed, summary judgement was inappropriate. In coming to the conclusion that Plaintiff had not proven by a preponderance of the evidence that an accidental injury (rather than medical condition) was the direct and sole cause of her husband’s death, it found that in light of the conflicting evidence about the cause of death, Plaintiff could not “point to a single piece of evidence in the administrative record that proves the fall was the sole cause. At most, she can prove that some evidence suggests potential causation between [the deceased’s] fall and his subsequent death. Accordingly, [plaintiff] has not carried the burden of establishing that [the deceased’s] fall was the direct and sole cause of his death.”

Medical Benefit Claims

Seventh Circuit

Aviation West v. Health and Welfare Plan for Employees of Anjinmoto USA, No. 18-CV-7431, 2019 WL 6327228 (N.D. Ill. Nov. 26, 2019)(Judge Rebecca R. Pallmeyer).  A patient suffered a severe traumatic brain injury in a motorcycle accident. After several weeks in the hospital, his doctors transferred him by air ambulance to a second hospital several states away with a specific rehabilitation program for serious brain injuries. Plaintiff Aviation West was the air ambulance service that transported the patient. Cigna, the claims administrator for the patient’s employer-sponsored health plan, denied the Aviation West’s claim for transportation services because (1) non-emergency ambulance services needed preauthorization under the terms of the plan, and (2) the transport was not medically necessary because the second hospital was not the closest facility that could provide rehabilitation treatment (no alternative facility was identified). The court found that the Plan language required Participating Providers to seek preauthorization for certain services – but since Aviation West was not a Participating Provider, the preauthorization requirement did not apply. Further, Cigna’s denial of the claim as not medically necessary was arbitrary and capricious because no closer facility was identified.

Pension Benefit Claims

Second Circuit

Smith v. New York Child Support Process Center, et al., No. 19-CV-9266 (CM), 2019 WL 6312178 (S.D.N.Y. Nov. 25, 2019) (Judge Colleen McMahon).  The court rejected the pro se plaintiff’s argument that the funds in his Thrift Savings Plan (TSP) retirement account cannot be garnished under ERISA.  The court explained that “[i]n most circumstances, funds held in a federal TSP account are statutorily protected against assignment or attachment. There are, however, exceptions to these protections, and an obligation to pay child support is one of them.”  The court held that Defendants “cannot be held liable for any payments from Plaintiff’s TSP account, made pursuant to legal process, to pay his child support obligation.”

Ninth Circuit

Myers v. Wells Fargo Securities, LLC et al., No. 19-5245, 2019 WL 6329629 (C.D. Cal. Nov. 25, 2019) (Judge Michael W. Fitzgerald), wherein the Court held that Myers’ claims for declaratory and injunctive relief as to deferred compensation benefits were moot but Myers would be allowed to amend his complaint to sufficiently allege how potential impending tax consequences of his 2018-19 deferral election impacted these claims.  Additionally, the court also found that Myers’ claims are governed by an ERISA top-hat plan thus allowing Myers to amend his complaint to properly allege an ERISA claim. 

Pleading Issues & Procedure

Third Circuit

William Erhart v. Plasterers Local 8 Annuity Fund, No. 19-6812 (RBK/AMD), 2019 WL 6318310 (D.N.J. Nov. 26, 2019) (Judge Robert B. Kugler). Defendants moved a second time for partial dismissal of the case after its first motion for failure to exhaust administrative remedies. Having cured the exhaustion defect, Plaintiffs, a purported class, refiled their complaint alleging a benefits claim, prohibited transaction, breach of fiduciary duty and an ERISA 510 violation. Plaintiffs are terminated employees who were members of the Operative Plasterers’ and Cement Masons, Local 8. They then became members of Baruffi and Bricklayers and Allied Craftworkers, Local 5. The complaint alleges a prohibited transaction for charging a $40 administrative fee. Plaintiffs argued the fee was a prohibited transaction because it is unreasonable on its face. Plaintiffs next allege Defendants breached their fiduciary duty by failing to follow the terms of the plan document, for retaliating against Plaintiffs by charging the $40 administrative fee, and refusing to provide benefits and disbursements from the Fund. Finally, Plaintiffs alleged Defendants retaliated against them for being members of a competing union. The Court dismissed all three claims finding the prohibited transaction was a mere recital of the elements of a claim, the breach of fiduciary duty claim did not have sufficient facts of how Defendants failed to follow the terms of the Plan, and the ERISA § 510 claim failed because, at least in the Third Circuit, there is a requirement to show an employer-employee relationship which, here, no longer exists. 

Fourth Circuit

Metropolitan Life Insurance Company v. Smith-Howell, No. 1:18-CV-00164-MR, 2019 WL 6337681 (W.D.N.C. Nov. 26, 2019) (Judge Martin Reidinger).  In this interpleader action where the court previously granted default judgment to MetLife, the court granted Defendant Smith-Howell’s motion to set aside the default judgment and respond to MetLife’s Amended Complaint.  While Defendant’s explanation that she thought “the issue to be settled” does not provide grounds for setting aside the default judgment under Rule 60(b)(1), the court found that she demonstrated that the default judgment should be set aside in the interest of justice. Defendant “has presented a forecast of evidence that would establish a meritorious claim to the funds in dispute here.”  Further, she acted within a reasonable time after learning of the default judgment to hire counsel to file the present motion.  The court found that Defendant Flack will not be prejudiced because he received a copy of the motion, he is not a beneficiary under the default judgment, and he can litigation the matter on the merits if he so desires.    

Tenth Circuit

John R., et al v. United Behavioral Health, et al., No. 2:18-CV-35-TC, 2019 WL 6255085 (D. Utah Nov. 22, 2019) (Judge Tena Campbell). The court considered whether both parents had statutory standing to recover benefits due under the ERISA plan for their son’s mental health treatment. The court found that although the son, Charlie, was a minor at the time of treatment, he is now an adult beneficiary who may assert his own rights under the Plan. The court found that the father, John, as plan participant also has constitutional standing because he incurred the costs for his son’s treatment. The court granted Defendants’ motion to dismiss Plaintiffs’ Mental Health Parity and Addiction Equity Act of 2008 (“Parity Act”) claim because it did not meet minimum pleading requirements. The court found Plaintiffs’ Parity Act claim is not viable because Plaintiffs do not allege “plausible disparity between the coverage he received and coverage the Plan offers in the medical/surgical context.” The court found Plaintiffs also did not provide allegations to support the conclusion that UBH applied processes which resulted in disparate benefits, even though the plan as written does not contradict the Parity Act. The court rejected Plaintiffs’ suggestion that they needed discovery to flesh out the Parity Act violation because it was “essentially asking for leave to conduct a fishing expedition.” The court found the question of medical necessity is properly addressed under the ERISA claim.

Retaliation Claims

Second Circuit

Buczakowski v. Crouse Health Hospital, Inc., et al., No. 5:18-CV-330 (LEK/ML), 2019 WL 6330206 (N.D.N.Y. Nov. 26, 2019) (Judge Lawrence E. Kahn). Plaintiff filed suit alleging discrimination and retaliation against Defendants based on age and medical disability. One of her claims involved violation of ERISA. The court dismissed Plaintiff’s complaint with the exception of her state law claim, holding, inter alia, that to succeed on an ERISA retaliation claim, Plaintiff must demonstrate that Defendants specifically intended to interfere with benefits. In this case, Plaintiff’s conclusory allegations (e.g. that Defendants refused to provide her with equal coverage that she had prior to her termination) did not show that her loss of benefits was more than a mere consequence of termination of her employment.

Statutory Penalties

Fifth Circuit

Randolph v. E. Baton Rouge Par. Sch. Bd., 15-654-SDD-EWD, 2019 WL 6255489 (M.D. La. Nov. 22, 2019) (Judge Shelly D. Dick). On remand from the Fifth Circuit, the court denied  Defendant’s motion for summary judgment, finding that genuinely disputed material facts exist regarding Plaintiff’s COBRA claim such that summary judgment is not proper.  Specifically, the court found that there was a genuine dispute as to whether Defendant sent timely notice and whether any purported delayed notice caused prejudice to Plaintiff.

Subrogation/Reimbursement Claims

Eleventh Circuit

Publix Super Markets, Inc. v. Figareau et. al., Case No. 8:19-cv-545, 2019 WL 6311160 (M.D. Fla. Nov. 25, 2019) (Judge James D. Wittemore). See Notable Decision summary.

Withdrawal Liability & Unpaid Contributions

First Circuit

ILA PRSSA Pension Fund v. ILA Local 1740, ALF-CIO, No. CV 18-1598 (FAB), __F.Supp.3d__, 2019 WL 6358288 (D.P.R. Nov. 27, 2019) (Judge Francisco Besosa).  In this dispute over withdrawal liability, the court determined that Local 1575 is an “employer” pursuant to ERISA and the MPPAA but that there are genuine issues of material fact concerning the transfer of union assets and the Merger Agreement between Local 1575 and Local 1740 precluding summary judgment and determination of what liabilities, if any, transferred to Local 1740.

Ninth Circuit

Oregon Laborers-Employers Health & Welfare Trust Fund v. Baseline Industrial Construction, Inc., et al., No. 3:19-CV-1343-IM, 2019 WL 6329336 (D. Or. Nov. 26, 2019) (Judge Karin J. Immergut).  In this dispute over unpaid contributions, the court granted default judgment against Defendant Baseline, but it found that the Eitel factors do not support entering default judgment against Defendant Aldridge. The court found that the the complaint does not demonstrate the merits of a claim for unpaid obligations against Aldridge and there are no allegations that would entitle Plaintiffs to pierce the corporate veil of Defendant Baseline and impose personal liability upon Defendant Aldridge.

Your ERISA Watch is made possible by the collaboration of the following Kantor & Kantor attorneys:  Brent Dorian BrehmBeth Davis, Sarah DemersElizabeth GreenAndrew Kantor, Susan Meter, Michelle RobertsTim Rozelle, Peter Sessions, and Zoya Yarnykh.