This week’s notable decision is Jones v. Aetna, Inc., Case No. 19-cv-9683 (JPO), 2020 WL 5654697 (S.D.N.Y. Sep. 23, 2020). Jones involves an issue many providers are increasingly facing with health insurance companies—silently being placed on some sort of insurance company watch list/audit list or being flagged in some way causing the providers’ claims to be substantially delayed and appeal rights infringed. When health insurance companies take these drastic actions without providing any notice to providers, providers’ insurance revenue streams come under assault and threaten the financial health and longevity of the providers’ practices. 

Here, Plaintiff Michael E. Jones, M.D., P.C., a New-York based plastic surgeon, filed a lawsuit seeking compensatory and injunctive relief on a broad range of legal theories, under various provisions of the Sherman Act, ERISA, and New York law when Aetna denied or otherwise failed to process and approve the medical claims of Aetna members Dr. Jones treated. 

Dr. Jones was not an in-network provider for these insureds. Dr. Jones alleged that his office experienced the kind of treatment other out-of-network providers have been increasingly facing in recent years alleging that Aetna, starting on January 1, 2019, began responding to Dr. Jones’  patient claims with letters stating that the claims were  “delayed, mishandled, or denied for specious or improper reasons.”  Aetna’s “most common” reason for denying Dr. Jones’ claims was Dr. Jones’ supposed failure to submit medical records in support of the claims. When Dr. Jones appealed denials of its claims, Aetna allegedly affirmed the denials or delayed rendering a decision. Aetna also reclassified appeals as “reconsiderations,” a move that Dr. Jones alleged “delayed the appeals process” and “deprived Plaintiff of its right to appeal.” In September 2019, Dr. Jones called Aetna to inquire about the processing of certain claims and was informed, for the first time, that “Plaintiff ha[d] been flagged” in January 2019 and that “all of [] Plaintiff’s claims” were being referred to Aetna’s department for investigating fraud. Dr. Jones requested information on why Aetna had flagged Plaintiff’s practice, and Aetna failed to respond to the request. 

Dr. Jones brought claims under ERISA §§ 502(a)(1), (2), and (3). Aetna challenged these claims altogether, first arguing that he failed to plead exhaustion of administrative remedies. The court held that Dr. Jones was not required to amply plead exhaustion to survive Aetna’s motion to dismiss on exhaustion grounds. The court held that Dr. Jones’ allegations about Aetna’s systematic efforts to delay claims adjudication sufficed in overcoming any failure to plead exhaustion.

Aetna challenged Dr. Jones’ § 502(a)(3) claim on the basis that it sought the same equitable relief that Dr. Jones sought under § 502(a)(1). The Court held that because Dr. Jones’ (a)(3) claim merely sought “relief to enforce the terms of the Plan/s and to clarify Plaintiff’s right to future benefits under such plans” that his § 502(a)(3) claim was duplicative of his § 502(a)(1) claim and was therefore dismissed.

Aetna also challenged Plaintiff’s § 502(a)(2) claim on the basis that it sought individual relief, rather than relief on behalf of a plan. As the Supreme Court has explained that recovery under § 502(a)(2), for a breach of ERISA fiduciary duties, “inures to the benefit of the plan.” Massachusetts Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 140 (1985). Section 502(a)(2) envisions the removal of a deficient fiduciary, not compensatory damages for beneficiaries. The court held that Dr. Jones’s § 502(a)(2) claim sought damages on his own behalf and he had taken no steps indicating that he [his practice] had “ discharged [its] duty to proceed on behalf of the plan.” Coan v. Kaufman, 457 F.3d 250, 261 (2d Cir. 2006) (suggesting that a party bringing a § 502(a)(2) claim may “make[] a good-faith effort to join other participants as parties pursuant to Rule 19”  or “comply with Rule 23 to act as a  representative of other plan participants”).

In sum, Dr. Jones’ (a)(1) claim survived and his (a)(2) and (a)(3) claims were dismissed. This outcome is a cautionary tale that health insurance companies can delay the adjudication of claims seemingly indefinitely with minimal consequence. Providers can take all necessary steps under ERISA’s claims handling regulations and still ERISA’s remedial structure imposes substantial limitations to providers seeking meaningful relief to stop insurance companies’ bad claims handling behavior—behavior that places providers’ financial health at severe risk. 

This week’s notable decision summary was prepared by Kantor & Kantor associate, Timothy J. Rozelle. Tim is thankful to focus his career on helping patients obtain health benefits for a range of health conditions and more recently has focused specifically on denials of life-saving cancer treatment. Check out his Proton Therapy Law Coalition on LinkedIn here.

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

Attorneys’ Fees

Ninth Circuit

Richardson v. IBEW Pacific Coast Pension Fund, No. C19-0772JLR, 2020 WL 5630530 (W.D. Wash. Sept. 21, 2020) (Judge James L. Robart). The court upheld IBEW’s decision to reduce Plaintiff’s monthly pension benefit but reversed IBEW’s decision to recoup its overpayment from Plaintiff. In addition, the court concluded that Plaintiff was entitled to an award of attorney’s fees and costs pursuant to 29 U.S.C. § 1132(g)(1). The court awarded $13,922 in fees and $575 in costs, representing a total reduction of $2,236 from the amount she requested. The court deemed an hourly rate of $300 per hour to be reasonable, as well as the 93.4 hours spent litigating the matter during the span of two years but deducted $36 from the fees due to three incomplete entries. The costs, however, were reduced by $2,200, which were listed as an “expense” for Plaintiff’s former attorney, and were equivalent to improper block-billing, since no explanation was provided about the other attorney’s qualifications, hourly rate, or a description of work performed.

Marshall v. Northrop Grumman Corp., et al., No. 16-CV-6794 AB (JCX), 2020 WL 5668935 (C.D. Cal. Sept. 18, 2020) (Judge Andre Birotte). After final approval of the settlement agreement in this class-action breach of fiduciary duty case, Plaintiffs filed an unopposed motion for attorney’s fees. The court awarded class counsel $4,074,600 in attorneys’ fees, $390,587 in expenses, and each Class representative an incentive award of $25,000. 

Marshall v. Northrop Grumman Corp., et al., No. 16-CV-06794-AB-JCX, 2020 WL 5668963 (C.D. Cal. Sept. 18, 2020) (Judge Andre Birotte). After preliminary approval of the class settlement in this case, the court received objections from four class members (“Objectors”) centered around the language of the release being too broad. The court held a Fairness Hearing and denied the motion to approve the settlement agreement for the reasons given by the objectors. The parties amended the settlement agreement, and it was approved by the court. Counsel for the Objectors filed this motion for attorney’s fees. The court granted the motion, finding that counsel for the Objectors “conferred substantial benefit to the Class” and awarded reasonable fees of $48,900.

Class Actions

Seventh Circuit

Briscoe v. Health Care Services Corporation and Blue Cross Blue Shield of Illinois, No. 16-cv-10, 2020 WL 5702146 (N.D. IL Sept. 24, 2020) (Judge Robert Blakey). Plaintiffs filed a “renewed” motion for class certification for two classes divided by ERISA and non-ERISA plans made up of individuals who received treatment for comprehensive lactation support services (“CLS”). Defendants either denied the claims or imposed cost sharing, because treatment was received from out-of-network providers and/or the providers did not use the correct billing code.  Plaintiffs’ sought declaratory and injunctive relief. Defendants opposed on the grounds of standing, commonality and ascertainability. As to standing, the court held that Plaintiffs could not seek prospective injunctive relief, because there was no “real and immediate threat of future injury” as the injuries remained in the past. The court did find that Plaintiffs had standing to seek a retrospective injunction in the form of a reprocessing of claims order because an injury in fact was alleged. As to commonality, the court noted that it exists if the common contention “is capable of classwide resolution—which means that determination of its truth or falsity will resolve an issue that is central to the validity of each of the claims in one stroke.” Plaintiffs relied on a uniform written policy only and did not focus on whether defendants applied the written policy in a uniform way. Defendants argued that there was not a uniform policy and presented evidence that roughly 30% of the CLS claims were paid without cost sharing. The court found that Plaintiffs did not provide “significant proof” of a uniform, system-wide policy. As to ascertainability, Plaintiffs asserted that the class could be identified through billing codes. The court noted that the ACA does not require insurers to adopt any specific set of billing codes and, in an earlier ruling, the court excluded testimony from Plaintiffs’ experts who failed to provide a definitive universe of CLS codes. The court determined that reliance on billing codes does not show the existence of an objective reliable criteria to ascertain class members. Plaintiffs’ motion was denied.

Disability Benefit Claims

Ninth Circuit

Haddad v. SMG Long Term Disability Plan, No. 16-CV-01700-WHO, 2020 WL 5642372 (E.D. Cal. Sept. 22, 2020) (Judge William H. Orrick). Plaintiff brought this action in 2017 for disability benefits under an employee benefit plan governed by ERISA. The district court originally ruled that Plaintiff was not entitled to benefits because his condition was excluded by the plan’s pre-existing condition provision. The Ninth Circuit reversed in 2019, holding that the plan’s insurer did not meet its burden of proving that Plaintiff’s disability was “substantially caused or contributed to” by his condition. On remand, the insurer approved Plaintiff’s disability claim, but withheld certain amounts based on offset provisions in the plan. Plaintiff disagreed with these offsets and contended that the insurer incorrectly calculated his earnings. After briefing, the district court ruled that Defendants were entitled to offset from Plaintiff’s benefits amounts he received as part of a settlement he reached with his employer in another case. That settlement arose from an injury Plaintiff received while working, and compensated him for “lost income,” and thus was deductible under the offset provision. The district court further ruled that the case would be stayed while Plaintiff pursued an administrative appeal regarding the calculation of his earnings, as that issue had not yet been exhausted.

Tenth Circuit

Jennifer L. v. United of Omaha Life Ins. Co., No. 2:18-CV-00848-DAO, 2020 WL 5659483 (D. Utah Sept. 23, 2020) (Magistrate Judge Daphne A. Oberg). Under the abuse of discretion standard of review, the court granted summary judgment for United of Omaha and against Jennifer L.—who claimed disability based on a traumatic brain injury. Initially, the court rejected claimant’s argument that the three-paragraph section conferring discretion dictated de novo review because the closing paragraph stated a “court will review Your…entitlement to benefits”. The court also gave no weight to United of Omaha’s conflict of interest, largely because United had used “independent” medical evaluators in its claim investigation. Turning to the merits of the case, the court found substantial evidence supported the denial of benefits. “The findings are supported by multiple independent reviewers’ conclusions that the results of Ms. L.’s testing and records do not support a mental or physical impairment; her daily functioning and recreational activities that are inconsistent with her self-reported symptoms; her return to work, in some capacity, for more than a year after the accident; the nature of her treatment given her self-reported symptoms; and the typical expectation that brain injuries gradually improve over time.”


Seventh Circuit

Riverstone Grp., Inc. v. Midwest Operating Engineers Fringe Benefit Funds, No. 419CV04039SLDJEH, 2020 WL 5633843 (C.D. Ill. Sept. 21, 2020) (Magistrate Judge Jonathan E. Hawley). In this declaratory relief action, Riverstone Group seeks an order from the court confirming that it does not have to pay benefits into the defendant Funds for “permanent replacements” hired in the face of a strike. Riverstone filed a motion for protective order to stop the Funds from deposing senior executives about the status of the workers’ employment. The court held that there was insufficient evidence that the executives had personal knowledge of the issues where the executives provided affidavits disavowing any such knowledge.

Tenth Circuit

Phillips, et al. v. Boilermaker-Blacksmith National Pension Trust, et al., No. 19-2402-DDC-KGG, 2020 WL 5642341 (D. Kan. Sept. 22, 2020) (Magistrate Judge Kenneth G. Gale). In this putative class action alleging violations of breach of fiduciary duty, prohibited transactions, and anti-alienation rules, the court denied Plaintiffs’ Motion to Compel the Defendants to apply certain search terms to electronically stored information in responding to discovery requests because they fail to relate the requested search terms to their Rule 34 Requests for Production. “The issue of whether a Rule 34 Request for Production could be composed solely of search terms without a plain-language description of the information being sought is not before the Court. However, this is dubious. . . . The absence of a plain-language description of the ‘big picture’ deprives the parties and the Court of the lines needed to ‘connect the dots’ represented by the search terms.”

ERISA Preemption

Fifth Circuit

Fannaly, III v. Lei, Inc., No. 20-1940, 2020 WL 5640887 (E.D. LA Sept. 22, 2020) (Judge Mary Ann Vial Lemmon). Plaintiff filed a motion to remand on the ground that a phantom stock appreciation plan (“PSAP”) was not governed by ERISA. Plaintiff was recruited to return to his former employer with the understanding that bonus compensation and participation in a PSAP were the primary component of his annual compensation. Approximately 10 years later, Plaintiff resigned and was then subsequently terminated from his employment and Defendant refused to pay the amounts due under the PSAP. Plaintiff filed suit in state court for unpaid wages and breach of contract. Defendant removed asserting that Plaintiff’s claim was one for benefits under 502(a)(1)(B) of ERISA. The court granted Plaintiff’s motion to remand for two reasons. First, the PSAP did not involve an ongoing administrative scheme and ceased to exist upon the termination of his employment. The calculation of amounts due was fixed, straightforward and did not require discretion. No payments had been made to Plaintiff as the payments were due upon termination and he was the only participant in the PSAP. Second, a reasonable person could not ascertain procedures for receiving benefits as there were no procedures for claims or appeals and the PSAP did not reference ERISA. Defendant attempted to create procedures after the fact, but the court found that Defendant could not retroactively establish claim procedures.

Eighth Circuit

Metro. Life Ins. Co. v. Harris, No. 4:19-CV-02396-SNLJ, 2020 WL 5642293 (E.D. Mo. Sept. 22, 2020) (Judge Stephen Limbaugh). MetLife filed an interpleader action when the sons of the deceased disputed the validity of the deceased’s ex-wife’s beneficiary designation, as they had divorced by the date of death. Defendant ex-wife sued MetLife for negligence. MetLife moved to dismiss this cause of action, arguing that any wrongdoing resulting from this dispute was preempted by ERISA. The court agreed, finding that her claim should have been brought under ERISA. 

Ninth Circuit

Javier v. Kaiser Found. Health Plan Inc., No. 20-CV-00725-JD, 2020 WL 5630020 (N.D. Cal. Sept. 21, 2020) (Judge James Donato). Plaintiff participated in her employer’s pension plan. When she elected a lump sum distribution, Kaiser withheld several thousand in taxes. Plaintiff asked Kaiser to reverse the transaction, which it denied. Plaintiff filed suit in Superior Court for Breach of Contract. Defendant removed and moved to dismiss the breach of contract claim as preempted under ERISA. The court agreed, finding no exception to ERISA’s regulatory scheme, as Plaintiff’s claim could have been brought under ERISA Section 502(a) and Kaiser’s actions did not implicate any “other independent legal duty.”

Medical Benefit Claims

Ninth Circuit

Howard v. Blue Cross Blue Shield of Arizona, No. 19-16554, __F.App’x__, 2020 WL 5627107 (9th Cir. Sept. 21, 2020) (Before Circuit Judges Mary M. Schroeder, William A. Fletcher, Danielle J. Hunsaker). Plaintiff appeals the district court’s order granting summary judgment to Blue Cross. Howard seeks reimbursement of medical expenses denied by Blue Cross. The court found an abuse of discretion standard applied to the benefits review and that under such review, the court cannot conclude that Blue Cross’s finding was clearly erroneous. The court found Blue Cross reasonably relied on medical studies that showed no net benefit over other courses of treatment. The district court also did not abuse its discretion in denying Howard’s requests for additional discovery.

Eleventh Circuit

Lee v. Blue Cross Blue Shield of Alabama, No. 2:19-CV-01895-JHE, 2020 WL 5658897 (N.D. Ala. Sept. 23, 2020) (Judge John H. England, III). Plaintiff seeks medical benefits for medications to treat chronic migraines and declaratory judgment for such treatment. Defendant filed a motion to dismiss and Plaintiff filed a motion for judgment on the record. The court dismissed the benefits claim because Plaintiff admittedly incurred no damages for Blue Cross’s failure to cover the treatment because she received a promotional offer from the medication’s manufacturer. Plaintiff abandoned a pre-certification adverse benefits determination. Defendant claims the court cannot review Plaintiff’s declaratory relief claim absent an adverse benefit determination other than the one Plaintiff has abandoned. Plaintiff argues futility of exhaustion of the claim. The court found Plaintiff did not offer “clear and positive” indicia of futility. The court granted the motion to dismiss with prejudice and denied as moot the motion for judgment on the administrative record.

Pleading Issues & Procedure

Ninth Circuit

Colorescience, Inc. v. Stephen Bouche, Eric D. Nielson, & The Nielsen Law Firm, P.C., No. 20CV595-GPC(AGS), 2020 WL 5747312 (S.D. Cal. Sept. 25, 2020) (Judge Gonzalo P. Curiel). Plaintiff Colorscience Inc. sued to enforce a subrogation lien under an ERISA provision against Stephen Bouche and his attorney to retain his claim on any settlement proceedings obtained in a state court matter in Texas, and filed a temporary restraining order against them to ensure they did not dissipate the funds. He also filed a motion to intervene in the Texas litigation, removed it to federal court, and sought to consolidate the two actions. Where the two cases involved the same facts, parties and legal issues, the court granted the motion. The court also transferred the interpleaded amount in the Texas case to the consolidated action in the federal district court in California.

Tenth Circuit

Denise M. v. Cigna Health & Life Ins. Co., No. 2:19-CV-764-JNP-DAO, 2020 WL 5732321 (D. Utah Sept. 24, 2020) (Judge Jill N. Parrish). Plaintiff filed this action on behalf of her daughter, a minor, who suffers from mental health disorders and whose claims for benefits under Plaintiff’s ERISA-governed employee medical benefit plan were denied by defendant Cigna. One of Plaintiff’s claims sought relief under the federal mental health parity act. Cigna moved to dismiss this claim, but the district court denied Cigna’s motion. The court found that Plaintiff had sufficiently identified analogous medical and surgical treatment that was covered by Cigna, and sufficiently pleaded that the licensing requirements Cigna imposed on the facility at issue exceeded the licensing requirements of the analogous treatment. The court further ruled that Plaintiff’s parity act claim was not duplicative of her other claims because it sought an alternative theory of liability. The court noted that Plaintiff ultimately might not be able to recover under her parity act claim because she might receive “adequate relief” under her primary claim for unlawful denial of benefits, but reserved that decision for a later stage of the litigation.

Eleventh Circuit

United Ass’n of Journeymen & Apprentices of Plumbing & Pipe Fitting Indus. of United States & Canada , AFL-CIO, Local 188 Pension Fund v. Johnson Controls, Inc., No. 4:18-CV-182, 2020 WL 5648135 (S.D. Ga. Sept. 22, 2020) (Judge R. Stan Baker). Plaintiffs filed this action pursuant to Sections 502 and 515 of ERISA and Section 301 of the Labor Management Relations Act (“LMRA”), seeking to recover unpaid benefit contributions, penalties and interest, and attorneys’ fees from Defendant. Presently before the court is Defendant’s Motion for Summary Judgment. However, prior to addressing that Motion, the court must satisfy itself that it has jurisdiction to hear this matter. A district court has subject matter jurisdiction over an ERISA claim where a plaintiff plausibly alleges that he is a participant, beneficiary, or fiduciary under Section 502, but the law is not clear as to the jurisdictional status of an ERISA claim where, as here, the complaint is devoid of any allegations to that effect. There is also a split between the courts as to whether unions and plans can bring a lawsuit under ERISA. Therefore, the court ordered the parties to file supplemental briefs addressing the following matters: (1) whether the court has subject matter jurisdiction to rule on Defendant’s Motion; (2) whether Plaintiffs may assert their ERISA claim; and (3) the appropriate course of action to remedy any jurisdictional or pleading defects. Plaintiffs must also specify which of them is asserting which claims, whether they intend to pursue their claim for injunctive relief, and what claims, if any, they assert under the LMRA.

Provider Claims

Second Circuit

Jones v. Aetna, Inc., Case No. 19-cv-9683 (JPO), 2020 WL 5654697 (S.D.N.Y. Sep. 23, 2020) (Judge J. Paul Oetken). See Notable Decision summary above.

Statutory Penalties

Tenth Circuit

IHC Health Services v. Eureka Casino Hotel Health Plan, No. 2:19-CV-721-JNP-DBP, 2020 WL 5732217 (D. Utah Sept. 24, 2020) (Judge Jill N. Parrish). IHC, a healthcare provider, sued to recover statutory penalties for failure to provide plan documents. The court dismissed this claim because IHC lacked standing. After recognizing healthcare providers may be able to bring suits for benefits if those claims were assigned to them by beneficiaries, the court noted that was not necessarily true for the right to enforce other statutory provisions of ERISA. However, the court did not need to rule on this issue because it found the assignment IHC held did not assign to it the right to recover damages for the failure to provide plan documents. 

Withdrawal Liability & Unpaid Contributions

Seventh Circuit

Construction Works Pension Trust Fund Lake County and Vicinity v. CRI Construction Services, Inc., No. 2:20-CV-25-PPS-JEM, 2020 WL 5627452 (N.D. Ind. Sept. 21, 2020) (Judge Philip P. Simon). “Plaintiff Construction Workers Pension Trust Fund Lake County and Vicinity’s Motion for Default Judgment [DE 9] is GRANTED. Defendant CRI Construction Services, Inc., is ORDERED to pay Plaintiff $2,450.08 in damages and $5,275.00 in attorneys’ fees, for a total of $7,725.08.”

Eighth Circuit

Scalia v. Kilen Boe et al., No. 19-CV-0868 (WMW/LIB), 2020 WL 5641059 (D. Minn. Sept. 22, 2020) (Judge Wilhelmina M. Wright). The court granted the Secretary’s motion for entry of default judgment and ordered Defendants to pay $24,973.52 to the Minn-Dak Asphalt, Inc. 401(k), health, dental and life insurance plans. 

Your ERISA Watch is made possible by the collaboration of the following Kantor & Kantor attorneys:  Brent Dorian Brehm, Sarah DemersElizabeth GreenAndrew Kantor, Anna Martin, Michelle RobertsTim Rozelle, Peter Sessions, Stacy Tucker, and Zoya Yarnykh.