In this week’s notable decision, Doe v. Express Scripts, Inc., No. 18-346, __F.App’x__, 2020 WL 7133860 (2d Cir. Dec. 7, 2020), the Second Circuit Court of Appeals further defines what it means to be an ERISA fiduciary. In short, a health benefits company that enters a pharmacy benefits manager (“PBM”) agreement involving a decision to sell a corporate asset is not acting in a fiduciary capacity. And a PBM is not acting in a fiduciary capacity when it sets prices for prescription drugs pursuant to the terms of a contract.    

In this case, Plaintiffs appeal a district court order dismissing their putative consolidated class actions against Anthem Inc. (a health benefits company that offers health plans and administrative services to self-funded health plans) and Express Scripts, Inc. (a PBM with a network of 97% of U.S. pharmacies) alleging that the companies violated their fiduciary duties under ERISA in setting prescription drug prices. The alleged nefarious transaction was the following: Anthem and Express Scripts entered a 10-year PBM Agreement that resulted in Express Scripts’ purchase of three PBM companies owned by Anthem, in exchange for Express Scripts paying $4.76 billion for the companies with Anthem’s agreement that Express Scripts could charge higher prices for prescription medications during the PBM Agreement. The other option, which the companies did not select, involved Express Scripts paying only $500 million in exchange for providing prescription medication at lower prices.

Plaintiffs allege that this transaction, which led to inflated costs passed on to health plan subscribers, was a violation of ERISA, RICO, the ACA, and several state law torts. The district court granted the defendants’ motion to dismiss for failure to state a claim upon which relief could be granted.

Plaintiffs renewed their argument that they stated plausible claims under 29 U.S.C. § 1109(a) and 29 U.S.C. § 1132(a)(3), ERISA §§ 409 and 502, respectively. Specifically, Anthem was acting as a fiduciary when it negotiated the agreement to sell its companies for a higher price knowing it would result in higher prescription drug costs. Express Scripts was given discretionary authority by the PMB Agreement to set prescription drug prices, and that discretion allowed Express Scripts to act as an ERISA fiduciary. Plaintiffs argued that the defendants did not discharge their duties solely in the interest of participants and beneficiaries and that they should restore to the plans any profits they reaped through use of plan assets.

“Fiduciary” is defined in the statute as:

[A] person is a fiduciary with respect to a plan to the extent (i) he exercises any discretionary authority or discretionary control respecting management of such plan or exercises any authority or control respecting management or disposition of its assets, (ii) he renders investment advice for a fee or other compensation, direct or indirect, with respect to any moneys or other property of such plan, or has any authority or responsibility to do so, or (iii) he has any discretionary authority or discretionary responsibility in the administration of such plan.

29 U.S.C. § 1002(21)(A). 

The Second Circuit Court of Appeals sided with the district court, agreeing that neither company was acting in a fiduciary capacity when entering the PBM agreement or setting prescription drug prices. “This Court previously found that the decision to sell a corporate asset is not a fiduciary decision—even if the sale affects an ERISA plan.” It did not matter that Anthem’s decisions ultimately affected how much plan participants pay for drug prices. The court found “no error with the district court’s finding that Express Scripts was not a fiduciary… because (1) a PBM does not exercise discretion in setting prices when prices are set according to contractual terms; and (2) Express Script did not control its own compensation.”  Even if Express Scripts had “extraordinarily broad discretion in setting prescription drug prices,” that ability is a contractual term, not an exercise of authority over plan assets.   

The court summarily dismissed the remainder of Appellants’ arguments and affirmed the judgment of the district court.  

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

Attorneys’ Fees

Seventh Circuit

Clarson, et al. v. Raczkowski, No. 17 C 6797, 2020 WL 7027585 (N.D. Ill. Nov. 30, 2020) (Judge Ronald A. Guzman). In this lawsuit over unpaid contributions, the court denied Plaintiffs’ second supplemental motion for attorney’s fees. The court explained that when it approved the parties’ agreement on Plaintiff’s supplemental judgment it did not have the impression that additional fees were outstanding. “To date, Plaintiffs have recovered $61,127.02 in attorney’s fees, approximately half of the merits award. In addition, Plaintiffs are seeking an additional $31,515.26, plus an undisclosed sum subsequent to July 16, 2020, which the Court will conservatively estimate at $5,000.00. Plaintiffs then will have sought approximately $97,642.28 in attorney’s fees on a judgment amount of $127,024.63, or $.77 in attorney’s fees for every dollar received on the merits award. This is simply untenable, particularly given the subject matter of the suit. While the Court acknowledges that Defendant’s obstructionist behavior has led to Plaintiffs’ vigorous pursuit of their fees, it is Plaintiffs’ own failure to be transparent with the Court that has led to the current situation.”

Ninth Circuit

Swire Pac. Holdings, Inc. v. Jones, No. C19-1329RSM, 2020 WL 7059235 (W.D. Wash. Dec. 2, 2020) (Judge Ricardo S. Martinez). In this case where the court previously determined that Plaintiffs were entitled to $150,000 in subrogation and reimbursement from Defendants along with reasonable attorneys’ fees, the court awarded a total of $27,966.00 in fees. “The fees are based on 11.6 hours at a rate of $345 per hour, 113.4 hours at $210 per hour, and 0.6 hours at $250 per hour.” The court found the rates and the hours billed to be reasonable.  

Breach of Fiduciary Duty

Second Circuit

Doe v. Express Scripts, Inc., No. 18-346, __F.App’x__, 2020 WL 7133860 (2d Cir. Dec. 7, 2020) (Present: Ralph K. Winter, Rosemary S. Pooler, Circuit Judges, Judge Robert Sweet (SDNY) sitting by designation). See Notable Decision summary above.

Fourth Circuit

Hammer v. Johnson Senior Ctr., Inc., No. 6:19-CV-00027, 2020 WL 7029160 (W.D. Va. Nov. 30, 2020) (Judge Norman K. Moon). Plaintiff, an employee of a senior care facility, developed breast cancer and received treatment which was supposed to be covered by the facility’s ERISA-governed employee health care benefit plan. However, due to administrative mismanagement, the facility did not forward employee contributions and failed to pay premiums in a timely fashion. As a result, the coverage lapsed, leaving Plaintiff to incur $286,000 in medical expenses. Plaintiff sued the facility and several of its managers alleging violations of ERISA, COBRA, and Virginia common law. Plaintiff filed a motion for summary judgment, which the court granted in part and denied in part. The court found that Defendants breached their fiduciary duty by failing to remit employee contributions to the plan, failing to inform Plaintiff that the plan’s coverage had lapsed, and failing to take action to reinstate that coverage. However, the court found that disputed issues of material fact existed as to whether Defendants failed to properly segregate employee contributions from company assets because it was unclear whether the plan was a “cafeteria plan” exempt from segregation requirements. The court also denied Plaintiff’s motion regarding co-fiduciary liability, as Plaintiff provided insufficient evidence regarding the individual Defendants’ knowledge of each other’s activity. The court further denied Plaintiff’s claims under COBRA because the plan had terminated due to non-payment of premiums, and thus no COBRA notice was required; any notice required was governed by ERISA, not COBRA. Finally, the court denied Plaintiff’s motion regarding her Virginia common law claims, finding these to be preempted by ERISA.

Sixth Circuit

Comau LLC v. Blue Cross Blue Shield of Michigan, No. 19-CV-12623, 2020 WL 7024683 (E.D. Mich. Nov. 30, 2020) (Judge Stephanie Dawkins Davis). Comau retained BCBSM Cross as claims administrator for its self-insured group health benefit plan. Comau alleges breach of fiduciary duty based on allegations that BCBSM knowingly paid inflated claims to healthcare providers on Comau’s behalf and using Comau’s funds. Defendant brought a motion to dismiss. The court found that the first amended complaint alleges breach of fiduciary duty and not fraud and is therefore subject to the Fed. R. Civ. Proc. 8(a) pleading standard, not Rule 9(b). The court found the allegations that BCBSM knew its system was faulty which resulted in payment of inflated claims and that BCBSM did not fix its system are enough for the court to infer that BCBSM’s process was flawed. The court found these facts sufficiently allege a plausible breach of fiduciary duty. The court found it is too early to determine when the facts giving rise to the statute of limitations occurred and therefore the court cannot determine what the applicable statute of limitation is at this time. The court denied the motion to dismiss.

Ninth Circuit

Ely v. Board of Trs. of Pace Indus. Union-Mgmt. Pension Fund, No. 3:18-CV-00315-CWD, 2020 WL 7038540 (D. Idaho Nov. 30, 2020) (Magistrate Judge Candy W. Dale). The Defendant multi-employer paper industry pension plan is in “critical status” as defined by ERISA and has been since 2010. As part of its rehabilitation plan, Defendant added a provision to the pension plan imposing an “exit fee” on employers withdrawing from the plan. Plaintiff, an employee of one of the plan’s participating employers, filed this action under ERISA alleging that the exit fee was causing employers to leave the plan and was hastening its insolvency. As a result, he sought a declaration and injunction prohibiting enforcement of the exit fee and placing the plan in receivership. The parties filed several motions which were decided by the court. First, the court denied both parties’ motions in limine to exclude the expert witness reports filed in support of the parties’ motions for summary judgment. Second, the court granted Defendant’s motion for summary judgment on standing grounds. The court found that Plaintiff did not present facts demonstrating that it was “likely,” as opposed to merely “speculative,” that any injury to him would be “redressed by a favorable decision.” Specifically, the court found that no proposed plan, with or without an exit fee, was likely to eliminate the plan’s eventual insolvency, and thus Plaintiff’s benefits were in equivalent jeopardy regardless of the outcome of the case. The court further found that Plaintiff had not explained how his proposed remedy—placing the plan in receivership—constituted a rehabilitation plan under ERISA, or how the receivership would allow the plan to emerge from critical status. As a result, the court granted Defendant’s motion for summary judgment, denied Plaintiff’s, and denied as moot motions from both sides regarding the appointment of a receiver.

Kong, et al. v. Trader Joe’s Company, et al, Case No. CV 20-05790, 2020 WL 7062395 (C.D. Cal. Nov. 30, 2020) (Judge Percy Anderson). This case involves a class action filed by participants in Trader Joe’s Company Retirement Plan against Trader Joe’s and others.  Plaintiffs allege that there were numerous ERISA violations committed by those responsible for managing 1.7 billion dollars in assets. For example, managers chose higher cost mutual funds over less expensive options, charged “unreasonable” record-keeping fees, did not pursue lower cost investment options and diversification was not achieved, among other things. The court noted that Plaintiffs alleged mostly conclusory statements, did not allege facts to establish that other investments would have performed better, that the record keeping fee is unreasonable or other facts to establish the actions taken were not in the best interest of Plan participants. The court granted Defendants’ motion to dismiss without leave to amend. Plaintiffs had been granted leave to amend once before, a substantially similar case had been dismissed and Plaintiffs did not request leave to amend.

Class Actions

Second Circuit

Bekker v. Neuberger Berman Group 401(k) Plan Investment Committee, No. 16-CV-06123-LTS-BCM, 2020 WL 7043869 (S.D.N.Y. Dec. 1, 2020) (Judge Laura Taylor Swain). In this class action settlement providing a $17 million monetary recovery for 1,451 class members generally consisting of participants in the 401(k) retirement plan offered to employees of Neuberger Berman who invested in the Value Equity Fund during the Class Period, the court granted Plaintiff’s application for attorneys’ fees, reimbursement of expenses, and named plaintiff incentive awards. Plaintiff is represented by national counsel Gregory Porter, Ryan Jenny, and Mark Boyko of Bailey & Glasser, LLP. The court approved attorneys’ fees of $4,760,000, costs of $41,083.58, and the incentive award to Bekker of $20,000.

Disability Benefit Claims

Fifth Circuit

Revels v. Standard Ins. Co., No. 3:19-CV-1168-L-BH, 2020 WL 7047058 (N.D. Tex. Nov. 30, 2020) (Judge Irma Carrillo Ramirez). In her suit under ERISA seeking disability benefits, Plaintiff asked for discovery into Standard Insurance’s financial arrangements with its medical consultants, its knowledge and tracking of their performance, documents Standard provided its consultants, and Standard’s input into the procedures they followed. The standard was de novo review. The court held that these categories were not relevant or necessary to complete a de novo review of the claim denial and denied the requests.

Batchelor v. Life Ins. Co. of N. Am., No. 4:18-CV-3628, 2020 WL 7043476 (S.D. Tex. Dec. 1, 2020) (Judge Keith P. Ellison). This ERISA matter came before the court on Plaintiff’s motion for judgment on the record pursuant to Rule 52(a). After close consideration of the administrative record, the court concluded that Plaintiff was entitled to long-term disability (“LTD”) benefits under the terms of the Policy. The court reviewed the record de novo. Defendant paid LTD benefits to Plaintiff from 2011 to 2016, at which point it terminated the benefits based on an IME, TSA, and a surveillance video. Plaintiff appealed and provided objective medical evidence such as the FCE and rebuttal letters to the IME from his treating providers. Defendant obtained a peer review which found Plaintiff was capable of work. The court found the opinions of Plaintiff’s treating physicians were more reliable and credible because they had more information upon which to make conclusions about his inability to work. The video footage did not undermine Plaintiff’s diagnoses, symptoms, or physical abilities. Plaintiff did not drive longer than his reported ability of thirty minutes (with the accommodations described in his affidavit), and he does not walk, sit, or stand longer than he reports an ability to do so. Plaintiff was shown completing light tasks that were consistent with the other evidence stating he can do so on an occasional basis. He completed these activities for short periods of time and frequently alternated positions. The surveillance also makes it clear that Plaintiff can only complete these light tasks on an occasional basis, as he did not undertake the same activities every day he was surveilled. In sum, the administrative record—in particular the FCEs, PAAs, and vocational rehabilitation assessment—shows that Plaintiff is unable to perform all of the material duties of any occupation for which he is or may reasonably become qualified.

Sixth Circuit

Lloyd v. The Procter & Gamble Disability Benefit Plan, et al., No. 1:18-CV-32, 2020 WL 7078507 (S.D. Ohio Dec. 3, 2020) (Judge Matthew W. McFarland). The court determined that the Plan acted arbitrarily and capriciously in finding that Plaintiff was not partially disabled as of January 16, 2017 due to chronic intestinal pseudo-obstruction (CIPO), fibromyalgia, and chronic fatigue. Regarding Plaintiff’s other arguments, the court determined that: (1) the Plan did not violate the ERISA regulations by not obtaining a medical review from a physician specializing in CIPO since their doctors were board-certified gastroenterologists; (2) the Plan did not adequately explain the basis for disagreeing with Plaintiff’s health care professional with respect to his January 27, 2017 application but it did so with his December 1, 2015 application; and (3) the Plan’s review was not prejudiced because it considered his medical history and the impact of different treatment protocols on his symptoms. With respect to remedies, the court found that the record clearly establishes Plaintiff was partially disabled as of January 16, 2017. Because Plaintiff was terminated on January 27, 2017 and the Plan terminates benefits as of the date of termination, the court awarded benefits through January 28, 2017.

Ninth Circuit

Lukianczyk v. Unum Life Insurance Company of America, et al., No. 2:20-cv-00223-WBS-CKD, 2020 WL 7122007 (E.D. Cal. Dec. 4, 2020) (Judge William B. Shubb). Plaintiff brought this action against Defendant alleging she was wrongly denied long-term disability benefits (“LTD”) under her employer’s group benefit plan in violation of ERISA. Plaintiff has a lengthy and complex medical history that includes being diagnosed with chronic rheumatoid arthritis in 2002, sleep difficulties such as obstructive sleep apnea, insomnia, and hypersomnia, and chronic fatigue syndrome. The court reviewed the case de novo, and found that while there can be little doubt that Plaintiff suffered from medical conditions that impaired her to some degree, there was insufficient evidence to persuade the court that she was disabled during the elimination period under the terms of her Policy. The medical records did not provide sufficient information or clinical bases for Plaintiff’s limitations and restrictions, and her activities throughout the elimination period were inconsistent with the reported severity of her symptoms.

Discovery

Sixth Circuit

Cohn v. W. & S. Fin Grp. Long Term Incentive & Retention Plan et. al., No. 1:19-CV-943, 2020 WL 7028469 (S.D. Ohio Nov. 30, 2020)(Judge Timothy S. Black) In this lawsuit over benefits due to Plaintiff, Plaintiff sought to compel discovery of documents regarding whether the Plan is a “top hat” plan, documents relevant to the denial of benefits, and documents regarding bias and conflict of interest. The court ordered the Plan to all documents responsive to the discovery requests.  

ERISA Preemption

Third Circuit

Medwell, LLC, v. CIGNA Corporation, No. CV2010627KMESK, 2020 WL 7090745 (D.N.J. Dec. 4, 2020) (Judge Kevin McNulty). Plaintiff, Medwell, LLC, is a healthcare provider that treats patients insured by Cigna. Cigna did an audit and determined it overpaid Plaintiff for a certain period so it stopped paying Plaintiff on other claims Plaintiff had submitted. Plaintiff brought several state law claims, which Cigna removed. The court denied Plaintiff’s motion to remand since its claims are preempted by ERISA. It determined that Medwell can bring its claims under ERISA and this is a “right to payment” case that requires looking at the terms of ERISA plans.

Sixth Circuit

The Prudential Insurance Company of America v. McFadden, No. 6:19-CV-051-CHB, 2020 WL 7083937 (E.D. Ky. Dec. 3, 2020) (Judge Claria Horn Boom). In an interpleader action, one defendant, the named beneficiary, filed a motion to dismiss against Prudential. The named beneficiary happened to be facing charges for her involvement in the death of the insured. Thus, Prudential argued that either Kentucky’s Slayer Statue or the common law of ERISA made interpleader appropriate. After evaluating the issue of ERISA preemption, the court determined under Kentucky’s Slayer Statute, she forfeited her interest as a beneficiary if it was proven that she took the life of her mother “by the commission of any felony under KRS Chapter 209” and is “convicted therefor.” Even if that statute is preempted by ERISA, she would be prohibited from taking the death benefit under federal common law if it was proven that she killed her mother and the killing was not the product of her own insanity, an accident, or committed in self-defense. The court denied the motion to dismiss, found interpleader appropriate, and reserved ruling on Prudential’s request for attorneys’ fees, because, in part, “courts have exempted insurance companies from the general rule (of awarding attorneys’ fees to initial interpleader) and denied them an award of attorneys’ fees because insurance companies, by definition, are interested stakeholders; filing the interpleader action immunizes the company from further liability under the contested policy.” 

Tuttle v. Metro. Life Ins. Co., No. 20-13013, 2020 WL 7075312 (E.D. Mich. Dec. 3, 2020) (Judge Paul D. Borman). The court denied Plaintiff’s objection to the removal order and denied remand to state court. The court explained that Plaintiff’s breach of contract claim for unpaid benefits from her deceased husband’s life insurance policy which was provided through his employer is preempted by ERISA.  

Ninth Circuit

Mack v. Banner Plan Admin. Inc., No. CV-20-00297-PHX-DLR, 2020 WL 7059550 (D. Ariz. Dec. 2, 2020) (Judge Douglas L. Rayes). The court found Plaintiff’s lawsuit preempted by ERISA where Plaintiff owned a business offering massage and chiropractic services and seeks reimbursement for services other chiropractors in his office allegedly provided to participants in Defendant’s ERISA-governed employee welfare benefit plan.

Life Insurance & AD&D Benefit Claims

Sixth Circuit

Richard v. Unum Life Insurance Company of America, No. 19-13415, 2020 WL 7122083 (E.D. Mich. Dec. 4, 2020) (Judge Victoria A. Roberts). The court granted Unum’s motion for judgment in this dispute over the payment of $200,000 in additional life insurance benefits due to the insured’s failure to execute an EOI for benefits over $500,000. The court also granted Unum’s motion to strike Plaintiff’s response since the court’s order required cross-motions for judgment on the administrative record but Plaintiff filed a response to Unum’s motion for judgment four days after the cross-motion deadline. In the response, Plaintiff raised a new argument regarding the Plan’s incontestability provision, which “states it will only use statements made in a signed application or an EOI form as a basis for a reduction or denial of benefits within the first two years coverage is in force, except in the case of fraud.” The court declined to consider the new argument because of the late filed response and because it raises a new argument that is not part of the administrative record and Unum does not have a chance to respond.

Ninth Circuit

Masuda-Cleveland, v. Life Insurance Company of North America, No. CV 16-00057 LEK-WRP, 2020 WL 7048257 (D. Haw. Nov. 30, 2020) (Judge Leslie E. Kobayashi). On remand from the Ninth Circuit, the court determined whether LINA had abused its discretion in denying an AD&D claim. The decedent had been acting strange before his death and then died in a strange motor vehicle accident (that included crashing into a lifeguard tower). An autopsy found the cause of death was an accident due to blunt force trauma from the crash. It also found severe narrowing of the “widow maker” coronary artery. LINA determined the cardiac condition was the cause of the accident, which in turn caused the lethal injuries. Then, following two appeals, LINA determined the car crash was not a cause of death at all, because a heart attack, not the injuries to the face and body, was the cause of death. The court was skeptical of this shifting of positions, and equally skeptical of opinions expressed by doctors that had not conducted autopsies. It held that, while the assumed medical event, or aberrant behavior, was possible a contributing factor to the collision, it did not substantially contribute to the loss. Thus, the court was left with a firm and definite conviction that LINA made a mistake in denying the claim. 

Medical Benefit Claims

Fourth Circuit

Greenwell v. Grp. Health Plan for Employees of Sensus USA, Inc., No. 5:19-CV-577-FL, __F.Supp.3d__, 2020 WL 7129936 (E.D.N.C. Dec. 4, 2020) (Judge Louise W. Flanagan). Before the court was Defendants’ motion to dismiss (a)(1)(B) and (a)(3) claims brought by Jeff Greenwell and putative class members who were denied proton beam radiation therapy (PBRT) by BCBS North Carolina. BCBS North Carolina allegedly applied a “Corporate Medical Policy: Charged Particle Radiotherapy (Proton or Helium Ion) Investigational (Experimental Services)” (“Corporate Medical Policy”) to rubberstamp wrongful denials of PBRT claims on the grounds that PBRT is considered experimental or investigational. Greenwell, himself, was forced to privately pay over $109,000 out of pocket to obtain PBRT from MD Anderson after BCBS North Carolina denied his requests for PBRT. As to Greenwell’s (a)(1)(B) claim, the court held that “viewed in [the] light most favorable to plaintiff, the facts alleged in the complaint permit a reasonable inference that defendant Blue Cross abused its discretion under several Booth factors.” The court held that the pleadings stated a plausible claim of wrongful claim denial under (a)(1)(B) due to an abuse of discretion by the plan administrator. As to Greenwell and the putative class members’(a)(3) claims for injunctive relief and the equitable relief of disgorgement of profits, the court held that the (a)(3) claim must be dismissed under Varity and Korotynska as the alleged injuries are adequately remedied by the relief available under (a)(1)(B).

Sixth Circuit

A.G. v. Community Ins. Co. d/b/a/ Anthem Blue Cross and Blue Shield, No. 1:18-CV-300, 2020 WL 7028458 (S.D. Ohio Nov. 30, 2020) (Judge Timothy S. Black). Plaintiff seeks benefits for mental health residential treatment. The court considered a motion for judgment under an abuse of discretion standard of review. The court found Anthem’s decision to deny benefits as not medically necessary was not arbitrary and capricious because A.G.’s treating physician recommended she enter outpatient therapy, a lower level of care than residential treatment, A.G.’s providers recognized she was improving throughout her treatment, and two psychiatrists concluded A.G. could be safety treated at a lower level of care than residential treatment. The court found the treating physician’s opinion that A.G. should be treated at a lower level of care than residential treatment “is itself virtually dispositive” because Anthem relied on the medical opinions of A.G.’s providers. The court granted Anthem’s motion for judgment. 

Ninth Circuit

Brian H. v. Blue Shield of California, et al., No. 19-16775, __F.App’x__, 2020 WL 7054057 (9th Cir. Dec. 2, 2020) (Before: Tashima, Nguyen, and Hurwitz, Circuit Judges). The Ninth Circuit affirmed the district court’s decision that Blue Cross did not abuse its discretion in denying coverage of a two-month stay at a residential mental health treatment facility. Blue Shield “relied on the Magellan Health, Inc. Residential Treatment, Psychiatric, Child and Adolescent Guidelines (“Magellan guidelines”) and the opinions of at least five psychiatrists, three of whom were not affiliated with Blue Shield.” It was reasonable for the district court to rely on a psychiatrist’s declaration that “the [Magellan] guidelines are consistent with generally accepted professional standards.” The Ninth Circuit also found that any procedural error in Blue Shield not considering a report from a treating physician about risk of self-harm would not have affected the outcome of the appeals process. Blue Shield was not required “to list all of the Magellan guidelines in its initial denial letter, nor, having offered to provide Appellants a copy of the guidelines upon request, to supply one absent a request.”

Pleading Issues & Procedure

Sixth Circuit

Schobert, et al., v. CSX Transportation Inc., No. 1:19-Cv-76, 2020 WL 7028468 (S.D. Ohio Nov. 30, 2020) (Judge Douglas R. Cole). Plaintiffs take issue with how CSXT conducted certain FMLA-related investigations during the 2017–18 holiday season. Plaintiffs make several allegations on behalf of themselves and fourteen putative classes of current and former CSXT Train and Engineer employees, all related to those events, including a section 510 violation of ERISA. While Plaintiffs are not required to show that the employer’s sole purpose was to interfere with ERISA benefits, they must show that such interference was a motivating factor in the decision. Plaintiffs’ ERISA claim founders because they have not plausibly alleged that CSXT conducted the alleged FMLA investigation “with the specific intent of violating ERISA.” Plaintiffs say that CSXT “harassed, disciplined, and discriminated against Plaintiffs … for the purpose of interfering with the attainment of the rights to which they were, may become, or may have become entitled” under the ERISA plan. But that is a mere legal conclusion that does not carry the day at the motion to dismiss stage. Plaintiffs must allege actual facts that would support a plausible inference that CSXT intended to impact their ERISA rights or benefits, rather than pleading that such impacts were a “mere consequence” CSXT’s actions.

Provider Claims

Third Circuit

Prestige Inst. for Plastic Surgery, P.C. v. Keystone Healthplan, et al., Case No. 20-406 (KM) (ESK), 2020 WL 7022668 (D.N.J. Nov. 30, 2020) (Judge Kevin McNulty). Provider sued for under-reimbursement for patient H.G.’s “post-mastectomy breast reconstruction surgical services mandated by federal law.” Specifically, the provider alleged that “[b]reast reconstruction is a federal mandate under the Women’s Health and Cancer Rights Act (‘WHCRA’) . . . which requires that group plans cover breast reconstruction procedures after a mastectomy.” Provider alleges as well that Anthem’s underpayment for claims provided to H.G. amounted to Anthem not covering breast reconstruction procedures as it was required to do under federal law. Defendants moved to dismiss first on standing and the court held that the provider had a valid assignment from HG falling within the literal wording of the exception contained in the plan’s anti-assignment provision. However, the court also held that the provider could not establish a plausible claim for relief in that nothing in federal or state law prohibits Anthem from imposing out-of-network rates on breast reconstruction surgery and therefore underpayment based on these established rates was not improper.

Fifth Circuit

Omega Hospital, LLC v. United Healthcare Services, Inc., et al., No. CV 16-560-JWD-EWD, 2020 WL 7049857 (M.D. La. Dec. 1, 2020) (Judge John W. deGravelles). Omega provided medical services to members of United Healthcare ERISA plans. United Healthcare filed a motion to dismiss Omega’s Second Amended Complaint, claiming first that Omega lacked standing because it was not a valid assignee for the ERISA claims. Omega only produced assignments for 1/3 of the claims for which it sought payment. The court denied United Healthcare’s motion pertaining to this argument, finding that the assignments produced along with testimony from Omega that all patients are required to sign assignments, was enough to survive the motion to dismiss. United Healthcare’s second argument was that the Second Amended Complaint failed to state a viable claim because all non-ERISA claims are preempted by ERISA, and the ERISA claims were not adequately alleged. The court agreed the non-ERISA claims were preempted by ERISA and dismissed Omega’s claims for breach of contract and denied United Healthcare’s motion in all other respects. 

Windmill Wellness Ranch, LLC v. BCBS Texas, Case No. 19-cv-01211-OLG, 2020 WL 7017953 (W.D. Tex. Nov. 23, 2020) (Chief Judge Orlando L. Garcia). Windmill is a psychiatric and substance abuse treatment center in Canyon Lake, Texas, and out-of-network provider of medical services as to BCBS who alleged ERISA and state law claims seeking more than $5 million between what it billed for services to BCBS Texas patients and what BCBS Texas reimbursed Windmill. On BCBS Texas’ renewed motion to dismiss, the court held that Windmill’s unavailing attempts to obtain plan documents from BCBS Texas met the Innova exception thus overriding Windmill’s failure to specify what plan provisions BCBS Texas allegedly violated and therefore not mandating dismiss of Windmill’s ERISA and breach of contract claims. 

Severance Benefit Claims

Seventh Circuit

Sharp v. Navistar Int’l Corp., No. 15-cv-00413, 2020 WL 7062557 (N.D. Ill. Nov. 30, 2020) (Judge Andrea R. Wood). Plaintiffs were executives at Navistar and participated in its Executive Severance Agreement (“ESA”) plan. The plan provided increased severance payments if an executive was terminated within 36 months of a change in control at Navistar. Plaintiffs were terminated and received severance but believed they should have received the higher amount provided in the event of a severance within the change of control window. Plaintiffs were terminated in 2013. In 2011 and 2012, “activist investors” Carl Icahn and Mark Rachesky purchased a combined total of over 30% of Navistar stock. Icahn and Rachesky each wanted board seats and were adverse to the other in their positions. In August 2012 Navistar removed its CEO and Board Chairman in preparation for a proxy fight with Icahn and Rachesky, deciding not to appoint a new permanent CEO until after that matter was settled. Eventually Icahn and Rachesky were each given the ability to appoint one Board member and to jointly appoint a third member. While the Navistar Compensation Committee decided that this process did not equate to a change in control under the ESA, both the interim CEO and the CFO, who were terminated in the same timeframe, disagreed. The Board voted unanimously that there was no change in control in March 2013 and the former CEO and CFO dropped their claims. In reviewing cross motions for summary judgment, the court held that where Icahn and Rachesky were acting independently, there was no group takeover by Icahn and Rachesky.  However, the court found that the question of whether there was a threatened election contest that triggered the removal of three board members, which would have in turn triggered the change in control provision in the ESA, was a question of fact for a jury.

Statute of Limitations

Sixth Circuit

Lloyd v. The Procter & Gamble Disability Benefit Plan, et al., No. 1:18-CV-32, 2020 WL 7078507 (S.D. Ohio Dec. 3, 2020) (Judge Matthew W. McFarland). In this dispute over short-term and long-term disability benefits, the court found that Plaintiff’s lawsuit is timely. “Defendants argue that Plaintiff was required to bring this lawsuit within two years of March 20, 2015, the date when he received the first denial of a claim for disability benefits.” Plaintiff argued that Defendants are estopped from asserting the statute of limitations defense because of representations in their denial letters stating that the applicable limitations period would not run until after the date Plaintiff filed suit. The court found that promissory estoppel claims are viable under ERISA and that “Plaintiff asserts facts sufficient to collaterally estop Defendants’ argument for application of the statute of limitations. Plaintiff reasonably relied on Defendants’ statements regarding the applicable limitations period. Moreover, the provision relied upon by Defendants is not clear and unambiguous.” 

Withdrawal Liability & Unpaid Contributions

Second Circuit

Mason Tenders Dist. Council Welfare Fund, et al. v. Shelbourne Constr. Corp., No. 19-CV-7562 (AJN), 2020 WL 7028530 (S.D.N.Y. Nov. 30, 2020) (Judge Alison J. Nathan). The court granted the motion for default judgment to “Plaintiffs as follows: $361,358.30 for principal unpaid fringe benefit contributions for the period stemming from January 1, 2013 through March 28, 2017; interest on that amount at the rate provided by 26 U.S.C. § 6621; liquidated damages equivalent to the amount in interest due to Plaintiffs for the unpaid contributions; attorneys’ fees and costs in the amount of $4,973.39; $27,663.05 in principal unpaid dues checkoffs and PAC contributions for the period stemming from January 1, 2013 through March 28, 2017; prejudgment interest on the unpaid dues checkoffs and PAC contributions at an annual rate of 9%; and $122,861.82 for the imputed costs of the audit.”

Third Circuit

Trustees of The Local 813 Pension Trust Fund, Trustees of The Local 813 Insurance Trust Fund, et al. v. Rizzo Environmental Services Corp., No. 19CV6622RPKCLP, 2020 WL 7021595 (E.D.N.Y. Nov. 30, 2020) (Judge Rachel P. Kovner). The court adopted the R&R in full and awarded damages as recommended: “plaintiffs receive $11,907.00 in delinquent contributions; $1,691.67 in prejudgment interest on delinquent contributions; $2,381.40 in liquidated damages on delinquent contributions; $146,778.00 in withdrawal liability; $13,996.16 in prejudgment interest on the withdrawal liability; $29,355.60 in liquidated damages on the withdrawal liability; $22,406.25 in attorneys’ fees; and $952.45 in costs.”  

Trustees of The Local 7 Tile Industry Welfare Fund, et al. v. AM Tile Specialty Construction, No. 19CV1809RPKSJB, 2020 WL 7021646 (E.D.N.Y. Nov. 30, 2020) (Judge Rachel P. Kovner). The court adopted the R&R in full and awarded damages as recommended: “plaintiffs receive $98,118.11 in delinquent contributions; prejudgment interest on delinquent contributions at a rate of $28.88 per day, to be calculated by the Clerk of Court from June 30, 2016, through the date of entry of final judgment; $19,085.55 in liquidated damages; $4,390.40 in audit fees; $5,634.00 in attorneys’ fees; $403.38 in costs; and post-judgment interest in an amount to be calculated by the Clerk of Court under 28 U.S.C. § 1961(a).”

Ninth Circuit

Resilient Floor Covering Pension Fund, et al. v. Floor Covering Contracts, No. 20-CV-03577-EMC, 2020 WL 7056001 (N.D. Cal. Dec. 2, 2020) (Judge Edward M. Chen). The court granted Plaintiffs’ motion for default judgment. “Plaintiffs are awarded withdrawal liability in the amount of $56,376; interest in the amount of $9,230.12; and an additional award of interest (in lieu of liquidated damages) in the amount of $9,230.12. The total is $74,836.24.”

Board Of Trustees Of The Painters And Floorcoverers Joint Committee, et al. v. Super Structures Inc., et al., No. 218CV01364GMNEJY, 2020 WL 7029887 (D. Nev. Nov. 30, 2020) (Judge Gloria M. Navarro). “[T]he Court finds that Plaintiffs have met their burden to show the amount of recoverable damages in issue and grants summary judgment in favor of Plaintiffs for the demonstrated unpaid fringe benefit contributions, interest, and liquidated damages in the amount of $188,448.47.”

Your ERISA Watch is made possible by the collaboration of the following Kantor & Kantor attorneys:  Brent Dorian Brehm, Sarah Demers, Elizabeth Green, Andrew Kantor, Anna Martin, Michelle Roberts, Tim Rozelle, Peter Sessions, Stacy Tucker, and Zoya Yarnykh.