Good morning, ERISA Watchers! This has been an extraordinary week to say the least. I’m currently writing this from under a “shelter-in-place” order in San Francisco. While there is a lot going on in the world, there wasn’t a lot of excitement in the courts when it came to ERISA decisions this past week. So, I chose to highlight two plaintiff-friendly decisions from district courts, one decided under de novo review and the other under the arbitrary and capricious standard.
The first case is Szabo v. Hartford Life and Accident Ins. Co., No. 18-CV-06258 (N.D. Ill. March 10, 2020). Plaintiff Szabo became disabled after he collapsed at work from syncope, orthostatic hypertension, and vertigo. He applied for long-term disability (“LTD”) benefits from Hartford, and Hartford approved and paid his claim for two years before terminating them. After an unsuccessful appeal, Szabo filed suit. In the lawsuit, the main disputes were factual. The parties agreed Plaintiff suffered from syncope. They disagreed on (1) the frequency and severity of Plaintiff’s symptoms; (2) whether and to what extent Plaintiff needed to lie down to mitigate his symptoms; and (3) whether Plaintiff’s symptoms prevented him from working a sedentary job.
After considering the evidence in the file including medical reviews (performed by Dr. Timothy Hain, neurologist; Dr. Ifeanyi Nwaneshiudo, occupational medicine specialist; and Mr. David Burke, neurologist) and evidence from the Social Security Administration that was not in the “administrative record,” the court ruled for Szabo. The five key factual findings that drove this outcome on de novo review were (1) Plaintiff suffered from neurocardiogenic syncope—a condition that made him feel faint and dizzy, and that could leave him weak for days; (2) Plaintiff experienced symptoms associated with syncope several times each week; (3) The symptoms associate with Plaintiff’s syncope were triggered unpredictably; (4) When Plaintiff felt faint or dizzy, he needed to lie down—often for hours—until his symptoms passed; and (5) Plaintiff’s unpredictable need to lie down for several hours at a time—several days each week—had prevented him from performing one or more of the essential duties of any occupation.
In Woolsey v. Aetna Life Ins. Co., No. CV-18-00578-PHX-SMB, 2020 WL 1083932 (D. Ariz. Mar. 6, 2020), Plaintiff Woolsey alleged that Aetna Life Insurance Company abused its discretion in denying his LTD claim. In concluding that Woolsey was entitled to a remand, the court provided thorough analyses of Plaintiff’s assertions of procedural irregularity throughout the claims process, finding:
- Aetna’s justification for the claim denial itself was not unreasonable, as there was a significant lack of evidentiary support for claimant’s position when he first became disabled. However, Aetna failed to fulfill its duty to effectively communicate with Plaintiff about what was necessary to perfect his appeal.
- While Aetna was not required to defer to Plaintiff’s treating physicians, it found the dismissal of the opinions of Plaintiff’s treaters irregular because “the record [was] otherwise bereft of feedback from neurological or psychiatric specialists.”
- Aetna’s reviewers did not fail to properly consider medication side effects, as they relied upon Plaintiff’s treater’s statement that “narcotic side effects were a possible concern,” (rather than asserting that such effects were actually contributing to disability) to support its conclusion.
- While it was not procedurally irregular for Aetna to abscond with a vocational review where Aetna found no functional limitations which to vocationally review, the fact that Aetna’s reviewers concluded that there were absolutely no limitations, in light of the record at hand, supported a finding of procedural irregularity.
- Aetna’s failure to consider and/or include at least one medical record during the appeal process also weighed in favor of a procedural violation, as did its failure to disclose the peer review reports during the appeal process, and its failure to explain to Plaintiff how he needed to perfect his claim.
Congratulations to Szabo’s attorneys, ERISA Watchers Mark D. DeBofsky and Matthew T. Maloney of DeBofsky, Sherman & Casciari, P.C. And, congratulations to Woolsey’s attorney, ERISA Watcher Scott E. Davis of Scott E. Davis PC.
Below is a summary of this past week’s notable ERISA decisions by subject matter and jurisdiction.
Breach of Fiduciary Duty
Gamache v. Hogue, et al., No. 1:19-CV-21 (LAG) (M.D. Ga. Mar. 16, 2020) (Judge Leslie A. Gardner). In this suit where “Plaintiffs allege that the Board’s failure to disclose TAG’s [Technical Associates of Georgia, Inc.] change in ownership structure was designed to conceal the transactions through which ESOP fiduciaries acquired interests in TAG. . . .the Board concealed the details of the 2011 Refinancing until after Plaintiffs filed this lawsuit and still have not disclosed the ESOP’s exact ownership share in TAG, and that [fiduciaries] concealed Hogue and Thompson’s stock ownership in order to prevent ESOP participants from challenging the 2011 Refinancing,” the court denied dismissal of the four-count complaint alleging breach of fiduciary duties, failure to monitor, and prohibited transactions. In so doing, the court found that Plaintiffs plausibly alleged that (1) the 2011 Refinancing involved “assets of the plan” within the meaning of ERISA; (2) that ESOP fiduciaries dealt with ESOP assets in their own interest or for their own account, or received consideration for their own personal account from parties dealing with the ESOP in connection with transactions involving ESOP assets; (3) that ESOP fiduciaries caused the ESOP to engage in transactions that they knew or should have known constituted transfers to parties in interest of ESOP assets. On the breach claims against the ESOP Administration Committee and its members, the court found that Amgen is inapposite to this case where Plaintiffs “claim that the Committee Defendants and Urbach breached their duties of prudence by failing to consider the 2011 Refinancing’s impact on the ESOP, failing to obtain an appropriate analysis of the 2011 Refinancing, approving the 2011 Refinancing, and failing to remedy the prohibited transactions outlined in Counts I and II.” The duty to monitor claim also survives because Plaintiffs allege that the Director Defendants should have known of the terms of the 2011 Refinancing, they did not conduct a proper review of the ESOP trustees’ performance and took to steps to protect ESOP participants.
Woznicki v. Raydon Corp., et al., No. 6:18-cv-2090-Orl-78GJK (M.D. Fla. Mar. 16, 2020) (Judge Wendy W. Berger). The court adopted the R&R recommending that class certification be granted. The court rejected Defendants’ objection that Plaintiff is unduly antagonistic towards Defendants such that she would not be able to fairly and adequately represent the class. The court was not persuaded by declarations submitted by potential class members stating that they do not agree with Plaintiff’s representation of them in this litigation. “The fact that the Raydon Defendants’ employees may not like Plaintiff or agree with comments that she has made does not equate with inadequacy.” Lastly, the court overruled Defendants’ objections concerning the finding that Ms. Tatum has standing since the court found that her claims are not typical of the class and she is not a proper class representative.
Disability Benefit Claims
Gammon v. Reliance Standard Life Insurance Company, 1:18-CV-11665-DPW, __F.Supp.3d__, 2020 WL 1190926 (D. Mass. Mar. 12, 2020) (Judge Douglas P. Woodlock). Reliance Standard terminated Plaintiff’s long term disability benefits after three years because it determined that her disability was caused by or contributed to by her depression and she was not independently physically disabled. Plaintiff claimed she was disabled from a myriad of conditions including, inter alia, sciatica, migraines, fibromyalgia and depression. Under the arbitrary and capricious standard, the court found that Reliance Standard reasonably determined that Plaintiff was capable of working full time, or that her inability to work was at least partially due to depression. Reliance Standard conducted three days of surveillance showing Plaintiff running multiple errands and shopping for dresses, which Reliance Standard found contradicted her claim that she was physically disabled. In addition, Reliance relied on Plaintiff’s Social Security Disability award, which the court said was “ambiguous” and deferred to Reliance Standard’s interpretation. Reliance Standard’s interpretation was that Social Security found Plaintiff physically, but not psychologically, capable of working. The court concluded Reliance Standard’s decision was not arbitrary and capricious and was supported by a reasonable reading of the record as a whole.
Miller v. Reliance Standard Insurance Company, No. CV 18-10028, 2020 WL 1183712 (E.D. La. Mar. 12, 2020) (Judge Greg Gerard Guidry). The court upheld the denial of Plaintiff’s long-term disability benefits on the basis that his disability was precluded by the Plan’s pre-existing condition exclusion. Here, Plaintiff worked for Lake Charles Pilots, Inc. (“LCP”) and incurred a disability on July 1, 2015. At the time LCP had short-term and long-term disability coverage through Prudential. Prudential terminated its policy with LCP on August 31, 2015. Effective September 1, 2015, Reliance Standard began insuring the company’s STD and LTD benefits. Plaintiff was released to return to work on October 23, 2015 and while “on-call” he fell down his stairs causing him to not be able to return to work as scheduled on November 4, 2015. Reliance paid his STD benefits but denied his LTD benefits on the basis that Plaintiff would have had to return to “Active Work” between September 1, 2015 and October 23, 2015 to be covered by its LTD policy. Plaintiff eventually returned to full-time work on July 27, 2016 but then went on disability again on August 11, 2016. The court found that the effective date of coverage under Reliance’s LTD policy was August 1, 2016 and his August 11th disability was subject to the pre-existing condition exclusion because it occurred within 12 months of his effective date of coverage. The court rejected Plaintiff’s argument that his time insured by Prudential must count towards the pre-existing condition look-back period under La. R.S. § 22:1006 since this applies to health benefit plans and the LTD policy does not qualify as a “health benefit plan” under this law. Additionally, the LTD policy’s “Transfer of Insurance” provision does not apply to Plaintiff because premiums were not paid for Plaintiff when Reliance began insuring the plan in September 2015 and he was not “Actively at Work” until July 2016.
Miller v. Reliance Standard Ins. Co., No. CV 18-10028, 2020 WL 1180492 (E.D. La. Mar. 6, 2020) (Judge Greg Gerard Guidry). Defendant provided the court with the administrative record (AR). Both parties moved for summary judgment and cited to documents that are not included in the AR. Plaintiff moved to supplement the AR to include the exhibits attached to Plaintiff’s motion. Defendant did not oppose the court’s consideration of some of the documents but did oppose consideration of a declaration from an insurance agent, Max McFatter, dated December 18, 2019. Defendant contends the declaration should not be considered by the court because it was prepared long after any claim ended and was not available to Defendant before the lawsuit was filed. The court held that the declaration was not available to Defendant before the lawsuit was filed and is not part of the AR. The court did permit exhibits attached to the declaration to be included in the AR because they were available to Defendant before the lawsuit was filed.
Griffin v. AT&T Umbrella Benefit Plan NO. 3, No. 18-C-1804, 2020 WL 1185286 (E.D. Wis. Mar. 12, 2020) (District Judge William Griesbach). Plaintiff Clinton Griffin filed suit regarding the denial of his claim for disability benefits under the AT&T Disability Plan. Griffin claimed that he was disabled due to depression, sleep apnea, myalgic encephalomyelitis/chronic fatigue syndrome (ME/CFS) as well as fibromyalgia. The court concluded that AT&T’s decision was not unreasonable, as Plaintiff’s disability was not supported by ample evidence. Specifically, “Griffin offered nothing more than his medical provider’s conclusory opinions about how CFS may limit his job performance. Neither Griffin nor his doctor presented any objective test results showing, for example, Griffin’s diminished ability to lift weights, climb stairs or ladders, or perform other job duties because of his CFS.” [Editor’s note: This decision highlights the importance of objective testing when assessing disability claims, including functional capacity evaluations to measure “mechanical” impairment which would impair one’s ability to sit, stand, lift, pull, etc., as well as 2-day Cardiopulmonary Exercise Testing (CPET) to detect the presence of systemic impairment in the form of impairing fatigue.]
Szabo v. Hartford Life and Accident Ins. Co., No. 18-CV-06258 (N.D. Ill. March 10, 2020) (Judge Robert W. Gettleman). See Notable Decision summary above.
Woolsey v. Aetna Life Ins. Co., No. CV-18-00578-PHX-SMB, 2020 WL 1083932 (D. Ariz. Mar. 6, 2020) (District Judge Susan Brnovich). See Notable Decision summary above.
Trustees of The Mosaic And Terrazzo Welfare, Pension, Annuity, And Vacation Funds v. Elite Terrazzo Flooring, Inc., et al., No. 18CV01471CBACLP, 2020 WL 1166616 (E.D.N.Y. Mar. 11, 2020) (Judge Carol Bagley Amon). In this action seeking to collect delinquent employer contributions, the court granted Plaintiffs’ motion for sanctions and adopted the R&R recommending that the court enter a default against Defendants if they fail to obtain new counsel who will engage in productive discovery. The court granted Defendants’ counsel’s motion to withdraw, subject to his payment of the outstanding $5,892.10 owed pursuant to the court’s order of June 4, 2019. The court also ordered counsel to pay Plaintiffs $10,270.00 in attorneys’ fees.
S. Ohio Med. Ctr. v. Linne, No. 1:19-CV-477, 2020 WL 1149814 (S.D. Ohio Mar. 10, 2020) (Judge Susan J. Dlott). Defendant Linne received medical care and services from Plaintiff Southern Ohio Medical Center (“SOMC”). Linne was covered by a self-funded health care plan funded by his employer, Defendant Bulk Transit. Plaintiff SOMC brought state law claims against both defendants in state court based on the failure to pay for the services rendered. Defendants removed to federal court based on federal question jurisdiction. The Defendants asserted that the plan in question was governed by ERISA. Once the case was removed, Defendants brought a joint motion to dismiss plaintiff’s complaint because ERISA preempted the state law claims. The magistrate judge agreed that all claims should be preempted by ERISA and the complaint should be dismissed and recommended that to the Court. The Court instead said the remedy should be a motion to amend the complaint to assert the claims under ERISA.
Howard Jarvis Taxpayers Ass’n v. California Secure Choice Ret. Savings Program, No. 2:18-cv-01584-MCE-KJN, 2020 WL 1157924 (E.D. Cal. Mar. 10, 2020) (J. Morrison C. England, Jr.). The Howard Jarvis Taxpayers Association, a conservative lobbying and policy organization, brought suit against CalSavers, a state-mandated auto-enrollment retirement savings program, and the California State Treasurer, alleging that CalSavers is preempted by ERISA. CalSavers was created in 2012 in order to address the lack of retirement savings of many California citizens. Employers that do not have a retirement savings program are required to enroll in the program, which consists of a trust administered by a state-created investment board. Defendants brought a motion to dismiss, arguing that CalSavers is not preempted by ERISA. The court agreed. The court found that CalSavers is not an employee benefit plan as defined by ERISA because the trust and its board do not act directly or indirectly in the interest of an employer, and employers do not either establish or maintain the CalSavers program. Instead, employers only perform ministerial duties such as providing a list of eligible employees and remitting payroll deductions. The court further found that CalSavers does not impermissibly “relate to” an ERISA plan because it does not interfere with existing ERISA plans. The court distinguished the Supreme Court’s recent decision in Gobeille v. Liberty Mut. Ins. Co. by noting that, unlike the regulations in Gobeille, CalSavers does not impose additional reporting requirements on already existing ERISA plans. Thus, the court granted Defendants’ motion to dismiss without leave to amend.
Medical Benefit Claims
Kerry W. v. Anthem Blue Cross & Blue Shield, No. 2:19-CV-67, 2020 WL 1083631 (D. Utah Mar. 6, 2020) (Judge Dee Benson). The court considered cross motions for summary judgment in a matter involving Anthem’s denial of mental health benefits for an adolescent’s residential treatment. First, the court found that the plan language sufficiently gives Anthem deferential review. The court found the result would be the same under a de novo or abuse of discretion standard of review. Second, the court found that the denials contained no factual findings to support their conclusions. The court found that if Anthem did gather and examine relevant evidence, it made no reference to that evidence in the denials. The court found the letters lacked any analysis and few facts. The court found that Anthem’s denials “contain little more than conclusory statements such as “you no longer need 24 hour structured case.” The court deemed Anthem’s denial of coverage was arbitrary and capricious. The court found that the reviewers failed to make adequate findings or sufficiently explain the grounds for their decisions and therefore the appropriate remedy was remand to the administrator for further findings or explanation.
Daniel R. v. UMR, No. 2:19-CV-00069, 2020 WL 1188144 (D. Utah Mar. 12, 2020) (Judge Robert J. Shelby). UMR sought to dismiss Plaintiffs’ breach of fiduciary duty cause of action of the complaint because UMR is a third party administrator and therefore Plaintiffs cannot seek recovery of benefits. The court found that Plaintiffs seek not only unpaid benefits but any other relief deemed just by the court. The court found that caselaw holds that a third party claims administrator could be a proper defendant if the plaintiff is seeking relief that could be directly enforced against the claims administrator. Regarding the Parity Act claim cause of action, the court found that Plaintiffs allege “just enough for the court to infer Defendants applied the Plan in a manner that violates the Parity Act.” The court found Plaintiffs adequately allege the patient’s residential treatment is analogous to skilled nursing or rehabilitation facility. The court also found that Plaintiffs adequately allege that Defendants applied acute treatment limitations to evaluate the patient’s sub-acute treatment. Therefore, the court denied UMR’s motion to dismiss.
Kaplan, DDS, MD v. BCBS Florida, Inc., No. 19-81162, 2020 WL 1083361 (S.D. Fla. Mar. 11, 2020) (Judge Rodney Smith). Plaintiff brought a motion for remand in an action alleging that Plaintiff provided emergency medical services to a patient, R.G., who was insured by Defendant’s commercial insurance health plan, and Defendant paid Plaintiff at rates below both. Plaintiff’s claims rely heavily on Florida statutes that attempt to impose requirements that insurers pay for services at fair market value. The court, applying the Davila test, held that because Plaintiff did not have a valid assignment, due to unambiguous anti-assignment language in the subject Plan, Plaintiff could not bring an action under ERISA § 502(a)(1) therefore the Davila test could not be met. Plaintiff’s motion to remand was granted in part and denied in part with a request for sanctions against Defendant for removal of the case denied.
Alberth v. Southern Lakes Plumbing & Heating, Inc., No. 19-CV-62, 2020 WL 1082775 (E.D. Wis. Mar. 6, 2020) (Magistrate Judge Nancy Joseph). Plaintiff, a former employee of defendant Southern Lakes, sued Southern Lakes and its owner for failing to provide information about an employee life insurance program and failing to pay benefits under that program. Plaintiff alleged that under the program he was supposed to receive the cash value of the life insurance policy taken out for him by Southern Lakes upon his departure from the company. Southern Lakes refused to pay any benefits and did not provide all the documents requested by Plaintiff. Plaintiff sued and brought a motion for summary judgment. The court granted the motion in part and denied it in part. Southern Lakes contended that the life insurance program was not offered to every employee, was “ad hoc,” and therefore did not constitute an ERISA plan. However, the court found that the benefit program met the Seventh Circuit’s test for the existence of a plan because the program had a “continuing administrative scheme” and “reasonably ascertainable terms.” The court also found that Southern Lakes had violated ERISA’s disclosure rules by not providing information to Plaintiff about the plan, but deferred ruling on the amount of the statutory penalty until after trial. As to the merits of Plaintiff’s claim for benefits, the court found that there were disputed issues of material fact with regard to the terms of the plan, including whether it had a cash payout option and whether Plaintiff was entitled to that payout. As a result, the court denied Plaintiff’s summary judgment motion on this ground.
Statute of Limitations
Reches v. Morgan Stanley & Co., LLC, 19-547, __F.App’x__, 2020 WL 1189663 (2nd Cir. Mar. 12, 2020) After five motions for reconsideration of the district court’s dismissal of his ERISA claims as untimely, Appellant appealed to the Second Circuit. In a short summary opinion, the Second Circuit found the district court did not abuse its discretion and Appellant provided no compelling reason to overturn the district court’s decision. The decision to dismiss the case was affirmed.
Gamache v. Hogue, et al., No. 1:19-CV-21 (LAG) (M.D. Ga. Mar. 16, 2020) (Judge Leslie A. Gardner). The court determined that Plaintiffs’ Amended Complaint alleging breaches of fiduciary duty and prohibited transactions with respect to an ESOP should not be dismissed as untimely under ERISA’s statute of repose because Plaintiffs have satisfied the heightened pleading standard for alleging fraud and concealment. The claims based on allegations of breaches due to omissions or failure to remedy are also timely since the complaint was filed within three years of Plaintiffs discovery of the breaches and current defendant trustees could still take appropriate action.
Alberth v. Southern Lakes Plumbing & Heating, Inc., No. 19-CV-62, 2020 WL 1082775 (E.D. Wis. Mar. 6, 2020) (Mag. J. Nancy Joseph). Plaintiff, a former employee of defendant Southern Lakes, sued Southern Lakes and its owner for failing to provide information about an employee life insurance program and failing to pay benefits under that program. Plaintiff alleged that under the program he was supposed to receive the cash value of the life insurance policy taken out for him by Southern Lakes upon his departure from the company. Southern Lakes refused to pay any benefits and did not provide all of the documents requested by plaintiff. Plaintiff sued and brought a motion for summary judgment. The court granted the motion in part and denied it in part. Southern Lakes contended that the life insurance program was not offered to every employee, was “ad hoc,” and therefore did not constitute an ERISA plan. However, the court found that the benefit program met the Seventh Circuit’s test for the existence of a plan because the program had a “continuing administrative scheme” and “reasonably ascertainable terms.” The court also found that Southern Lakes had violated ERISA’s disclosure rules by not providing information to plaintiff about the plan, but deferred ruling on the amount of the statutory penalty until after trial. As to the merits of plaintiff’s claim for benefits, the court found that there were disputed issues of material fact with regard to the terms of the plan, including whether it had a cash payout option and whether plaintiff was entitled to that payout. As a result, the court denied plaintiff’s summary judgment motion on this ground.
Withdrawal Liability & Unpaid Contributions
Trustees Of The New York City Council Of Carpenters Pension Fund, Welfare Fund, Annuity Fund, And Apprenticeship, Journeyman Retraining, Educational And Industry Fund, et al. v. GSR Concrete Tov, LLC, No. 19-CV-07453 (JGK), 2020 WL 1189502 (S.D.N.Y. Mar. 12, 2020) (Judge John G. Koeltl). “The Clerk of Court is directed to enter judgment granting the petition to confirm the arbitration award dated June 26, 2019 in the amount of $3,813.90, plus interest from the date of the arbitration award, accrued at an annual rate of 7.5% until the date of judgment. The Clerk is also directed to enter judgment in favor of the petitioners and against the respondent in the amount of $1,207.00 in attorney’s fees and $75.00 in costs. Post-judgment interest on the entire amount of the judgment will accrue from the date of this judgment at the rate provided by 28 U.S.C. § 1961(a).”
Trustees of the No. 142 Teamsters Union Pension Fund v. Actin, Inc., No. 2:19-CV-183-TLS-JEM, 2020 WL 1164433 (N.D. Ind. Mar. 11, 2020) (Judge Theresa L. Springmann). The court granted Plaintiffs’ Amended Motion for Default Judgment in the total amount of $50,727.94 against Defendant Actin, Inc., and in the total amount of $102,746.92 against Defendant Actin Contracting Limited Liability Company.
The Board of Trustees, et al. v. James Island Plastering, Inc., No. 19-CV-02921-EMC, 2020 WL 1156903 (N.D. Cal. Mar. 10, 2020) (Judge Edward M. Chen). The court granted the Board’s motion for default judgment, finding that it has a limited right to an audit so the Board may ensure that contributions are being properly made. The court also granted the Board’s request for attorney’s fees and costs.
Board of Trustees of The Employee Painters’ Trust et al. v. D. Ciulla Flooring LLC et al., No. C19-1479 MJP, 2020 WL 1151334 (W.D. Wash. Mar. 10, 2020) (Judge Marsha J. Pechman). The court granted Plaintiffs default judgment and ordered Defendants jointly and severally liable for the total amount of $19,486.90, consisting of delinquent fringe benefits, interest, liquidated damages and attorney’s fees.
Carpenters Southwest Administrative Corporation v. Towne Construction Inc., No. 217CV00232ODWEX, 2020 WL 1140439 (C.D. Cal. Mar. 9, 2020) (Judge Otis D. Wright, II). The court granted Plaintiffs’ motion for default judgment and awarded $503,885.97 in missed contribution payments, $496,309.39 in liquidated damages, $182,222.47 in prejudgment interest, and $27,348.36 in attorney’s fees.
Your ERISA Watch is made possible by the collaboration of the following Kantor & Kantor attorneys: Brent Dorian Brehm, Beth Davis, Sarah Demers, Elizabeth Green, Andrew Kantor, Monica Lienke, Susan Meter, Michelle Roberts, Tim Rozelle, Peter Sessions, and Zoya Yarnykh.