In this week’s notable decision, Advanced Physicians, S.C. v. Connecticut General Life Insurance Company, et al., No. 3:16-CV-2355-G, 2020 WL 58698 (N.D. Tex. Jan. 3, 2020), a district court in Texas held that the fiduciary exception to the attorney-client privilege prohibits Cigna from withholding privileged documents from a medical service provider related to Cigna’s alleged wrongful denial of insurance claims under the NFL Player Insurance Plan (“Plan”).
By way of background, Advanced Physicians (“AP”) alleged that Defendant Great-West Healthcare-Cigna (“Cigna”), which has discretionary authority to make coverage decisions under the Plan, began wrongfully refusing to pay any of AP’s claims for services that it provided to retired NFL players. Advanced Physicians, S.C. v. Connecticut Gen. Life Ins. Co., 2017 WL 4868180 (N.D. Tex. Oct. 27, 2017). The court previously dismissed AP’s claim for relief under ERISA Section 502(a)(3) but permitted its claim for benefits under ERISA Section 502(a)(1)(B) to proceed. Advanced Physicians S.C. v. Connecticut Gen. Life Ins. Co., No., 2018 WL 1509120, at *3 (N.D. Tex. Mar. 27, 2018).
AP then moved to compel Cigna to produce documents that it withheld on the grounds of attorney-client privilege. On April 17, 2019, the Magistrate Judge denied AP’s motion to compel, explaining that while Plan beneficiaries assigned their claims for reimbursement under the Plan to AP, AP is not a “beneficiary” for the purpose of asserting the fiduciary exception to the attorney-client privilege under ERISA. Advanced Physicians, S.C. v. Connecticut Gen. Life Ins. Co., No. 3:16-CV-02355-G (BT), 2019 WL 1745966 (N.D. Tex. Apr. 17, 2019), order set aside in part sub nom. Advanced Physicians, S.C., v. Connecticut General Life Insurance Company, et al., No. 3:16-CV-2355-G, 2020 WL 58698 (N.D. Tex. Jan. 3, 2020). The Magistrate Judge found that AP’s assignment did not include the beneficiaries’ right to assert the attorney-client privilege or sue for breach of fiduciary duty. AP concedes that the documents are covered by the attorney-client privilege but objected to the Magistrate Judge’s holding that AP may not invoke the fiduciary exception to the attorney-client privilege.
On de novo review of the Magistrate Judge’s order, the court reversed and held that AP may assert the fiduciary exception in this case. The court explained that the Magistrate Judge’s decision was rooted in the “duty rationale” of the fiduciary exception. But, the Fifth Circuit’s application of the fiduciary exception is rooted in both the duty rationale and the client rationale. The client rationale looks at the role of the ERISA fiduciary with respect to plan administration; the analysis is based on the defendant’s status as a fiduciary. Because the attorney’s clients are the plan beneficiaries and not the plan administrator, a plan administrator cannot assert a privilege it never had to begin with.
The court concluded “that under the client rationale, Cigna, as a Plan fiduciary, may not assert the attorney-client privilege against AP with respect to communications made between Cigna and its attorneys, insofar as those communications relate to plan administration.” This is based on Cigna’s status as a Plan fiduciary and AP’s status as an assignee of the right to receive payment from the Plan. The court explained that application of the fiduciary exception based on AP’s status as an assignee comports with those cases in which the court found that the government’s assertion of the fiduciary exception was permissible in the ERISA context. In Donovan v. Fitzsimmons, 90 F.R.D. 583 (N.D. Ill. 1981), the court found that the Secretary of Labor could assert the fiduciary exception in an ERISA enforcement action. Although AP does not have the statutory right to bring an enforcement action under ERISA, “it is well settled that an ERISA plan beneficiary may assign the right to receive payments under the plan to a third party, thereby conferring third-party standing to sue to enforce that right upon the assignee.”
In this case, the Plan beneficiaries here are on the hook for whatever the Plan does not pay AP. Thus, they have a strong interest in ensuring that Cigna makes payments under the terms of the Plan. Because of this, the court found that “AP’s and the plan beneficiaries’ interests are sufficiently similar that allowing AP to rely on the fiduciary exception in this case is consistent with allowing the federal government to assert the fiduciary exception in ERISA cases.” The court concluded that Cigna cannot assert the attorney-client privilege with respect to issues of plan administration but that it could assert the privilege with respect to attorney communications dealing with defending the pending lawsuit or that did not deal with plan administration.
Below is a summary of this past week’s notable ERISA decisions by subject matter and jurisdiction.
Disability Benefit Claims
Louis v. The Hartford Life and Accident Insurance Company, No. C19-56 MJP, 2020 WL 39145 (W.D. Wash. Jan. 3, 2020) (Judge Marsha J. Pechman). Defendant denied Plaintiff’s long-term disability claim, alleging that there were no records supporting an impairment during the 90-day elimination period. The court, reviewing the determination de novo, agreed, explaining that Plaintiff failed to submit any medical evidence from the elimination period that would have supported a claim of “total disability” during that time. Further, the court noted that after-the-fact, conclusory opinions of Plaintiff’s doctors regarding his work functionality during the 90-day elimination period were uncorroborated by any objective evidence of disabling conditions during that time, and as such, unpersuasive; whether Plaintiff became disabled after the elimination period was irrelevant.
Advanced Physicians, S.C. v. Connecticut General Life Insurance Company, et al., No. 3:16-CV-2355-G, 2020 WL 58698 (N.D. Tex. Jan. 3, 2020) (Judge A. Joe Fish). See Notable Decision summary above.
Vigdorchik v. Liberty Life Assur. Co. of Boston, No. 19-cv-03891-HSG (N.D. Cal. Nov. 25, 2019) (Judge Haywood S. Gilliam, Jr.). Plaintiff filed an action claiming that Liberty Life had wrongly denied her claim for benefits under her ERISA-governed long-term disability plan. The parties agreed that the de novo standard of review applied to her claim but disagreed as to the scope of discovery. (The order did not clarify procedurally how the dispute came to the court’s attention, whether by motion or otherwise.) Specifically, Plaintiff wanted to propound interrogatories regarding the experts used by Liberty Life to deny her claim, such as how often Liberty Life used them and how much they were paid. The court reviewed the Ninth Circuit’s standard for allowing discovery in ERISA cases under de novo review as set forth in Mongeluzo v. Baxter Travenol Long Term Disability Ben. Plan, 46 F.3d 938 (9th Cir. 1995), and Opeta v. Nw. Airlines Pension Plan for Contract Employees, 484 F.3d 1211 (9th Cir. 2007). These cases hold that evidence beyond the administrative record is typically not admissible unless a party can “clearly establish that additional evidence is necessary to conduct an adequate de novo review.” The court found that Plaintiff did not satisfy her burden of showing that “exceptional circumstances” existed to justify her discovery requests. Specifically, the court found that she had not provided any specific facts to support her request, and that the inherent bias of being a retained expert is “obvious, and does not merit discovery in a de novo review case.” The court further stated that if plaintiff’s reasoning were accepted, “it would be the ‘exceptional’ case in which discovery would not be permitted.”
Surgicore of Jersey City v. Anthem Life & Disability Ins. Co., No. 19-CV-3482 (BMC), 2020 WL 32447 (E.D.N.Y. Jan. 2, 2020) (Judge Cogan). Jose Tineo received medical services from Plaintiff. He had health insurance through Defendant, and authorized Defendant to pay Plaintiff directly for services he received. Plaintiff brought this action in state court seeking reimbursement. Defendant removed the case to federal based on federal question jurisdiction because it argued the claims were preempted by ERISA. The court found that the assignment was invalid because the health insurance policy had an anti-assignment clause. “[T]o the extent plaintiff has any ERISA claims, they would arise from an assignment of benefits under a plan that contains an anti-assignment provision that prohibits this assignment. Thus, plaintiff lacks standing to bring ERISA claims, and ERISA does not preempt plaintiff’s claims. As a result, there is no federal question here, and plaintiff’s motion to remand is granted.”
Life Insurance & AD&D Benefit Claims
Miller v. Darrell Miller & Roderick Miller, No. 3:17-CV-2360-L, 2019 WL 7370433 (N.D. Tex. Dec. 31, 2019) (Judge Sam A. Lindsay). In this interpleader action, decedent Daniel Miller owned an ERISA-governed life insurance policy through MetLife Financial when he passed away in November of 2016. In August of 2016, Mr. Miller’s sons submitted a beneficiary designation form naming them each as 50% beneficiaries of their father’s policy. In September of 2016, Mr. Miller’s wife, Jeanette Miller, submitted a beneficiary designation form naming herself as 100% beneficiary. In December of 2016, MetLife received competing claims under the policy. Specifically, while the Miller brothers submitted claim forms, Ms. Miller contested the Miller brothers’ claim, stating that her husband had suffered from dementia since 2014 and was unfit to sign the brothers’ beneficiary designation. After a brief investigation, MetLife interplead the funds, claiming that it could not identify which beneficiary designation was dated first. After a bench trial, the Court concluded that Mr. Miller was indeed suffering from severe dementia dating back to 2014. As such, because he could not have had the proper mental capacity to sign any designation form, the Court concluded that neither the Miller brothers nor Ms. Miller had submitted a valid beneficiary designation. In eventually finding for Ms. Miller, the court defaulted to Policy language which governed the beneficiary identification in scenarios where there is no valid beneficiary designation, which provided that the living spouse receive all proceeds.
Medical Benefit Claims
Experience Infusion Centers, LLC v. Flowers Specialty, Foodservice Sales, Inc., No. CV H-19-1721, 2020 WL 32331 (S.D. Tex. Jan. 2, 2020) (Judge Gray H. Miller). The court granted Defendant’s motion for judgment on the pleadings (which the court converted to a motion for summary judgment) on the basis that Plaintiff medical provider lacked standing to bring an ERISA medical benefits claim on behalf of the patient because the ERISA plan has an anti-assignment provision. The court rejected Plaintiff’s argument that the plan’s anti-assignment provision only applied to Blue Cross, and not Flowers, because Blue Cross was administering the plan for Flowers. Also, the anti-assignment provision applies to recovery of benefits.
New Mexico Health Connections v. United States Dep’t of Health & Human Servs., No. 18-2186, __F.3d__, 2019 WL 7343450 (10th Cir. Dec. 31, 2019) (Before Circuit Judges Lucero, Hartz, and Matheson). Plaintiff health insurer claimed the Department of Health and Human Services (HHS) violated the Patient Protection and Affordable Care Act (ACA) by calculating the “statewide average premium” to calculate charges and payments in the ACA’s risk adjustment program rather than the insurer’s own premium. Plaintiff claimed the HHS’s use of the “statewide average premium” in New Mexico from 2014 through 2018 was arbitrary and capricious. The district court agreed, finding that HHS failed to explain why it chose to use the statewide average premium. The circuit court reversed. The circuit court held that the 2017 and 2018 rules are moot. The circuit court reversed the district court’s grant of summary judgment to the insurer as to 2014, 2015 and 2016 because HHS acted reasonably in explaining why it used the statewide average premium. The circuit court provided extensive background of the ACA risk adjustment program and the HHS’s reasoning for using the statewide average premium. The circuit court found the HHS acted reasonably based on a variety of factors including reducing the impact of risk selection premiums while preserving premium differences related to other cost factors, and achieving a straightforward and predictable benchmark.
Pension Benefit Claims
Lonigro v. New England Teamsters Pension Fund, No. 19-11578-MPK, 2020 WL 30423 (D. Mass. Jan. 2, 2020) (Judge M. Page Kelley). Defendant moved to dismiss Plaintiff’s claim for early retirement benefits. Plaintiff had been out on a leave of absence for several years and needed 750 hours of service in order to commence his pension benefit. Plaintiff claimed he received permission from his employer, UPS, to return to work in order to earn the 750 hours of service, however, while en route to return to work, UPS called him to inform him he could not return to work. Plaintiff made a claim for benefits and a claim for breach of fiduciary duty alleging the Teamsters Union breached its duty of fair representation to him which caused the pension fund to breach its fiduciary duties. The Court granted Defendants motion because Plaintiff was, and admitted he was, an Inactive Vested Participant, not entitled to early retirement benefits. The claim for benefits was, therefore, denied. Plaintiff’s breach of fiduciary duty claim was likewise denied because the Plan had sufficient language granting discretion to the Trustees to interpret the Plan and determine eligibility. Using the arbitrary and capricious standard, the Court found the Trustees reasons for denying Plaintiff’s benefits were reasoned and supported.
Retirees of Goodyear Tire & Rubber Co. Employee Healthcare Trust Committee v. Steely, No. 5:19-CV-1893, 2019 WL 7372321 (N.D. Ohio Dec. 31, 2019) (Judge Sara Lioi). Plaintiff in this case is a Trust Committee established by a settlement agreement from earlier litigation between Goodyear and its employee retirees. Pursuant to the settlement agreement, the Trust Committee was authorized to establish a benefit plan, the purpose of which was “to fund health care benefits for eligible retirees of the Goodyear Tire & Rubber Company.” In this action, the primary defendant, Steely, was a plan participant who suffered personal injuries in a golf cart accident and received medical benefits from the plan. Steely settled with a third party to compensate her for her injuries, but according to the Trust Committee, did not fully repay the plan as required by the plan’s reimbursement provisions. The Trust Committee sued Steely and her attorney under ERISA to enforce the terms of the plan. In response, Defendants did not challenge the application of the plan’s reimbursement provisions. Instead, they filed a motion to dismiss for lack of subject matter jurisdiction, arguing that the Trust Committee could not allege claims for relief under ERISA because the plan did not satisfy ERISA’s definitional requirements. Specifically, defendants argued that the plan could only be an ERISA plan if it was established or maintained by an employer or “employee organization.” Defendants further argued that the Trust Committee, which established the plan, did not satisfy the Department of Labor’s definition of “employee organization” because no employees participated in the Trust Committee and membership in the Committee was not conditioned on employment status. The Trust Committee responded that the plan was intended to be governed by ERISA, that it complied with IRS regulations, and that all the plan participants were former employees who were covered by the original ERISA-governed Goodyear benefit plan. The court agreed with Defendants. The court found that regardless of how the plan was created, or who the plan participants were, the plan still needed to satisfy ERISA’s criteria for plan formation. Because the plan was established by the Trust Committee, and because membership on the Trust Committee was not conditioned on employment status, the Trust Committee did not qualify as an “employee organization” under ERISA. As a result, the plan was not an ERISA-governed plan, the Trust Committee was not permitted to seek relief under ERISA, and the court dismissed the action for lack of subject matter jurisdiction.
Pleading Issues & Procedure
Dupont Wright, et al. v. Elton Corp., et al., No. 17-286-JFB, 2019 WL 7293694 (D. Del. Dec. 27, 2019) (Judge Joseph F. Bataillon). This is an action for declaratory and injunctive relief involving an employee benefit trust, allegedly governed by ERISA. The court previously decided that the Mary Chichester duPont Trust was governed by ERISA. Defendants asked the court to certify the case for interlocutory appeal on the issue of the existence of the trust and whether the trust was governed by ERISA. The request was denied because the existence of the trust seemed clear, Plaintiffs had additional claims intertwined with the legal issue decided by the court, this was not an exceptional case, the delay was not justified, and the Third Circuit would likely have to hear and decide this case more than once if an interlocutory appeal was allowed.
Brass v. SPX Corp, 3:14-cv-00656-RJC-DSC, 2019 WL 7373785 (W.D.N.C. Dec. 31, 2019) (Robert J. Conrad). Plaintiff filed this lawsuit to enforce the health benefits provisions of two court-approved settlement agreements. One of Plaintiff’s two actions was under ERISA. The Court, after an analysis of standing in ERISA matters, concluded that because a union is neither a participant or a beneficiary, it lacks standing to file suit under ERISA.
Severance Benefit Claims
Cotten v. Altice USA, Inc., No. 19-CV-01534 (RJD (ST), 2020 WL 32433 (E.D.N.Y. Jan. 2, 2020) (Judge Raymond J. Dearie). Plaintiffs, two former employees of Altice USA, Inc., brought claims for severance benefits alleging breach of contract and promissory estoppel under state law as well as ERISA claims. Defendants moved to dismiss the claims arguing the state law claims are preempted by ERISA, Plaintiffs lack standing on the ERISA claims, failure to exhaust administrative remedies and that Plaintiffs’ 502(a)(3) claims are duplicative of other claims. Plaintiffs’ claims rest on Altice’s policy to provide severance benefits to employees who are terminated without cause or explanation. Defendants removed the case to federal court and in doing so filed a declaration with an attachment of the Cablevision Severance Pay Plan. Defendants argue the Cablevision Plan is the plan that governs the Altice policy. Plaintiffs counter that they were never provided the Cablevision Plan document and were not Cablevision employees. Due to the uncertainty of which plan governs the dispute, the Court denied Defendants motion in its entirety. On the preemption issue, the Court explained where there is a factual dispute of an enforceable ERISA plan, Plaintiffs may plead in the alternative. On the issue of standing, the Court likewise found given the dispute as to which plan governs the severance benefits, it cannot determine whether Plaintiffs have standing at this point. The Court found the same explanation applies for the exhaustion argument since a determination of the administrative appeals process would be premature without knowing which plan governs. Finally, as to the ERISA Section 502(a)(3) claim, the Court deferred a ruling on whether Count V is duplicative pending limited discovery and further briefing on the issue.
Withdrawal Liability & Unpaid Contributions
Mandarini v. Accurate Engineered Concrete, Inc., No. CV 17-11123-LTS, 2019 WL 7373091 (D. Mass. Dec. 31, 2019) (Judge J. Sorokin). Plaintiffs are multi-employer employee benefit plans who seek unpaid plan contributions from Defendants. Defendants are Accurate and Engineered, two companies owned by the same person, had the same employees, did the same type of work, and used the same equipment. Defendants argued the two companies were separate entities and it was not obligated to pay contributions to Plaintiffs for work performed by Engineered. The Court found Defendants constituted a single employer and granted Plaintiffs’ motion for summary judgment on employer liability.
Nat’l Ret. Fund on Behalf of Legacy Plan of Nat’l Ret. Fund v. Metz Culinary Mgmt., Inc., No. 17-1211-CV, __F.3d__, 2020 WL 20524 (2d Cir. Jan. 2, 2020) (Before Circuit Judges Winter, Livingston, and Chin). National Retirement Fund brought this action against a contributing employer to modify or vacate an arbitration award. The United States District Court for the Southern District of New York, Valerie E. Caproni, J., 2017 WL 1157156, vacated the award. Contributing employer Metz Culinary Management appealed. The Court of Appeals vacated and remanded the case, holding that interest rate assumptions for withdrawal liability purposes under Multiemployer Pension Plan Amendments Act (MPPAA) had to be determined as of last day of year preceding employer’s withdrawal from multiemployer pension plan.
Trustees of Pavers & Rd. Builders Dist. Council Welfare, Pension, Annuity, & Apprenticeship, & Skill Improvement & Safety Funds v. Intercounty Paving Assocs. of New York, LLC, No. 19-CV-4322 (BMC), 2020 WL 32466 (E.D.N.Y. Jan. 2, 2020) (Judge Cogan). This is an action brought by a union benefits fund for unpaid contributions against a participating employer. Before the Court are Plaintiff’s motion for a default judgment and Defendant’s cross-motion to vacate the clerk’s entry of default against it and to accept its untimely answer. The collective bargaining agreement between the parties required Defendant to make monthly contributions to Plaintiff as part of its obligations to union employees, and to file written reports showing on a monthly basis the number of union employees. Plaintiff alleged that Defendant missed two payments and brought suit under ERISA. Defendant failed to timely answer the complaint. Plaintiff sought and was awarded an entry of default judgment. When Defendant finally did respond, it did not oppose the motion for default judgment. The Court entered an order requiring Defendant to show cause as to why the answer should not be stricken as untimely and in light of the entry of default. Defendant responded to that order by moving to vacate the entry of default and for acceptance of its untimely answer. In its analysis, the Court found that Plaintiff had submitted charts calculating its damages and all of the underlying documents to support that calculation and an additional, more detailed chart showing how it arrived at each of these elements of damages, and it had specifically tied out each element of damages to the underlying agreements at the most detailed level. The Court also reviewed Plaintiff’s claimed amount in attorneys’ fees and costs, and found them to be quite moderate and reasonable. The Court found that Defendant had no substantial response to Plaintiff’s calculations and that Defendant had done nothing to refute plaintiff’s prima facie case of damages. Accordingly, the Court denied Defendant’s motion to vacate the entry of default and struck its late answer. The Court granted Plaintiff’s motion for a default judgment and directed the Clerk is directed to enter judgment in favor of Plaintiff and against Defendant in the amount of $149,902.30.
Iron Workers St. Louis District Council Pension Trust, et al. v. Edwards Steel, Inc., et al., No. 4:19-CV-02377-AGF, 2019 WL 7372255 (E.D. Mo. Dec. 31, 2019) (Judge Audrey G. Fleissig). In this matter seeking delinquent fringe benefit contributions, the court granted Plaintiffs’ motion for default judgment in part. The court found Defendant Edwards Steel, Inc. liable in the amount of $29,891.69, and Defendant Edwards Steel, Inc. and Christopher Edwards, jointly and severally, liable in the amount of $300,160.10.
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