Romano v. John Hancock Life Ins. Co., No. 19-21147-CIV, 2021 WL 949939 (S.D. Fla. Mar. 12, 2021) (Magistrate Judge Jonathan Goodman).

As the readers of this newsletter know, the federal courts have long decided that claims under ERISA are traditionally equitable in nature, and as a result, litigants typically are not entitled to a trial by jury. However, the Supreme Court has issued several decisions in recent years suggesting that claims under ERISA can be viewed as legal or equitable, depending on the relief requested. As a result, attorneys representing ERISA plaintiffs have started wondering whether they should be pushing back against the established notion that their clients are not entitled to jury trials. This case is another chapter in that story.

This case is a class action brought by two personal injury lawyers (both named Romano) who served as trustees for their firm’s ERISA-governed 401(k) retirement plan. The Romanos purchased a group variable annuity contract from Defendant John Hancock to make investments available for their plan’s participants.

However, the Romanos were dissatisfied with John Hancock’s services. In their complaint, they alleged that John Hancock breached its fiduciary duties under ERISA in its handling of tax credits for the plan’s investments. Among their claims for relief, the Romanos brought two under 29 U.S.C. § 1132(a)(2) of ERISA. First, they alleged that John Hancock should not have retained “Plan Foreign Tax Credits” for international investments, as doing so reduced the plan’s assets. Second, they alleged that John Hancock caused the plan to enter an ERISA-prohibited transaction by not crediting the plan with the value of the tax credits. The Romanos sought class certification for all ERISA-governed plan trustees, sponsors, and administrators that purchased variable annuity contracts from John Hancock.

The Romanos acknowledged that they were not entitled to a jury on several of their claims, but on the two claims above they insisted they had a right to a jury trial. John Hancock moved to strike this demand.

Surprisingly, the court denied John Hancock’s motion. The court stated at the outset that the issue had not yet been decided by the Eleventh Circuit, rejecting John Hancock’s argument that a comment in a footnote in a 30-year-old Eleventh Circuit case controlled the outcome. The court considered that comment to be dicta, and further found that there were district court decisions on both sides of the issue within the circuit.

The court then applied the two-part test created by the Supreme Court in Granfinanciera v. Nordberg in determining whether a jury trial was available. First, the court considered the history of claims for breach of fiduciary duty, and acknowledged that they were typically considered equitable in nature. However, the court noted that the second part of the test, which considers whether the remedy sought is legal or equitable in nature, is “more important,” and found that some of the remedies sought by the Romanos were legal in nature. Specifically, the Romanos sought an order compelling John Hancock to “make good to the Plan all losses,” as well as “actual damages…in the amount of any losses the Plan suffered.”

The court further found that a jury trial right was supported by Supreme Court precedent and other authorities. Specifically, the court cited Great-West v. Knudson, which recognized that ERISA provides both legal and equitable remedies. The court also noted that the section under which the Romanos sued, 29 U.S.C. § 1132(a)(2), differs from 29 U.S.C. § 1132(a)(3), because (a)(2) allows for “appropriate relief” while (a)(3) explicitly offers equitable relief. Furthermore, 29 U.S.C. § 1109, which addresses breaches of fiduciary duty, allows for “equitable or remedial” relief. Thus, ERISA itself recognizes that equitable relief is not the only type of relief available under the statute.

The court rejected cases cited by John Hancock, finding they were either out-of-circuit, unpersuasive, or distinguishable. The court accepted that its view was a minority view, but stated, “Given that the Eleventh Circuit has not issued a binding ruling, one group of district court cases is, technically speaking, just as non-binding as another set.” Thus, “there is no legal impediment to an Order following the minority view.”

Is the pendulum swinging back to more jury trials in ERISA cases? It will be interesting to follow this case, and others like it, to find out.

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

Attorneys’ Fees

Ninth Circuit

 Bd. of Trs. Of San Diego Elec. Pension Tr. v. My Electrician, Inc., Case No.: 19-cv-1500-GPC-AHG, 2021 WL 961654 (S.D. Cal. Mar. 15, 2021) (Judge Gonzalo P. Curiel). Defendant was found liable for violations of ERISA. The court declined to award a summary request for fees. However, after receiving a detailed breakdown of the request, the court awarded all requested fees, and costs, in full.

Breach of Fiduciary Duty

First Circuit

Shields v. United of Omaha Life Ins. Co., No. 2:19-CV-00448-GZS, 2021 WL 982322 (D. Me. Mar. 16, 2021) (Judge George Z. Singal). Employee Myron was offered Basic Life and Voluntary Supplemental Life Insurance coverage through an ERISA-covered plan sponsored by his employer. Evidence of Insurability (“EOI”) was required for Voluntary life insurance coverage under the plan, but when Myron elected his coverage, he was not asked to provide EOI. Nevertheless, his employer began deducting premiums from Myron’s paycheck for coverage elected by Myron. When Myron died, United of Omaha denied the Voluntary Life claim for coverage on the ground that Myron had not provided the required EOI. Under an arbitrary and capricious standard of review, the Court granted the insurance company’s motion for summary judgment on the beneficiary’s claim for benefits because the plan language clearly required EOI to be furnished. The court declined to apply waiver because the insurance company lacked knowledge of the lack of approval of EOI. The court also granted United of Omaha’s motion for summary judgment on the beneficiary’s breach of fiduciary duty claim because the court concluded that it was the employer’s responsibility to collect the EOI, and the insurer had no fiduciary duty to doublecheck the work of an employer.

Ninth Circuit

Milton Stewart v. Nicholas L. Saakvitne et al., 2021 WL 951590, at *1 (D. Haw. 2021) (Judge Susan Oki Mollway). This case involves a claim of breach of fiduciary duty by the Acting Secretary of Labor against several fiduciaries for overpaying for company stock sold to the Employee Stock Ownership Plan (“ESOP”). The Secretary brought a motion for partial summary judgment for a determination of whether two board of director defendants were “functional” fiduciaries with respect to the ESOP stock purchase. The Secretary argued the two defendants were fiduciaries as of January 1, 2012, the effective date of the ESOP. The defendants argued that the ESOP was not formed until December 3, 2012, and was retroactively effective as of January 1, 2012. The court found the backdating of the ESOP to January 1, 2012, was not evidence of exercising discretionary control over the plan’s management to make them fiduciaries when there was no consideration of forming an ESOP at that time. The court further found that the two director defendants had appointed an independent fiduciary for purposes of the stock purchase and, therefore, had a limited duty to monitor the appointment, which remains the only issue for trial. The two defendants filed a cross-motion for summary judgment arguing the action was untimely, they had no duty to monitor, the recovery is limited to the funds paid to the Defendants’ individual trusts under ERISA Section 502(a)(5), they have been properly indemnified. The court denied the motion in its entirety.

Class Actions

Seventh Circuit

Smith on behalf of Smith v. Health Care Serv. Corp., No. 19 C 7162, 2021 WL 963814 (N.D. Ill. Mar. 15, 2021) (Judge John Z. Lee). Plaintiff represents a putative class alleging HCSC’s denial of coverage for residential treatment was the result of improperly narrow residential treatment guidelines that HCSC continues to employ in making benefits determinations in violation of ERISA. HCSC moved to dismiss the second amended complaint. The court found plaintiff fails to allege a “real and immediate threat of repeated injury.” While the complaint alleges that HCSC continues to use the residential treatment guidelines, the complaint does not allege any likelihood that Smith will ever seek residential treatment again in the near future. The court found that the claim for equitable relief also fails because the injury inflicted by HCSC can be remedied by an award of benefits, even though plaintiff expressly declined to seek an award of benefits. The court found plaintiff “may not forgo an award of damages only to seek less adequate forms of equitable relief.” The court found that plaintiff’s asserted injuries-in-fact do not satisfy standing and dismissed the complaint without prejudice, providing one more opportunity to amend the complaint.

Eleventh Circuit

Torres v. Starbucks Corp., No. 8:20-CV-1311-CEH-TGW, 2021 WL 964219 (M.D. Fla. Mar. 15, 2021) (Judge Charlene Edwards Honeywell). A participant and a beneficiary under an ERISA healthcare plan filed a putative class action alleging that Starbucks violated ERISA by failing to provide COBRA noticea that complied with law. Starbucks filed a motion to compel arbitration of individual claims. Plaintiff Torres consented to arbitration, but Plaintiff Lubin argued that the arbitration agreement was between Starbucks and Lubin’s wife, and therefore did not cover Lubin’s COBRA claims. Lubin contended that he was not suing on the basis of any contractual agreement, rather his claims were premised on deficient COBRA notice and statutory rights under 29 U.S.C. § 1166(a) and 29 C.F.R. § 2590.606-4. The court undertook an analysis pursuant to the Federal Arbitration Act and denied the motion to dismiss Lubin’s claims, determining that Lubin’s claims were based on statutory rights. 

Disability Benefit Claims

Ninth Circuit

Chapin v. The Prudential Insurance Co. of Am., et al., Case No. 2:19-cv-01256-RAJ (W.D. Wash. March 22, 2021) (U.S.D.J. Hon. Richard A. Jones).  Plaintiff is a software engineer for Microsoft and a participant in a long-term disability policy (“LTD”) governed by ERISA. After he was diagnosed with diagnosed with depression disorder, other trauma or stressor related disorder due to occupational harassment, and a cognitive disorder due to depression and several months of occupational harassment and sleep deprivation, plaintiff filed a claim for LTD benefits, noting that his doctor tentatively estimated that his disability would persist for approximately two years.  Between April and August, Prudential sent multiple letters seeking additional information and stating it could not make a determination regarding LTD benefits until Plaintiff underwent an independent medical examination.  The court granted plaintiff’s motion for summary judgment, finding that the evidence supported that plaintiff’s cognitive impairment precluded him from performing his duties as a software engineer engaged in the type of work he had been doing, which included cognitively demanding tasks. The court further found that Prudential failed to meet its fiduciary duty to investigate Plaintiff’s claims in light of the fact that Prudential did not request any additional testing until seven months after peer review was conducted.  Accordingly, the court held that Plaintiff was entitled to recover LTD benefits from September 19, 2018 to October 31, 2019, plus pre-prejudgment interest and attorney’s fees.

ERISA Preemption

Third Circuit

Caggiano v. Prudential Ins. Co., No. No. 20-7979 (JMV) (MF), 2021 WL 1050166 (D.N.J. Mar. 18, 2021) (Judge John Michael Vazquez). Plaintiff alleged defendant breached the terms of a settlement agreement related to a whistleblower suit by terminating plaintiff’s Long-term disability benefits when he reached the age of 65. The court granted plaintiff’s motion to remand the case to New Jersey superior court. The court determined that plaintiff’s case turned on contract or quasi-contract principles related to the settlement agreement because the promise to pay benefits past the age of 65 was separate from the ERISA plan and constituted a separate legal duty that was not preempted by ERISA.

Dansko Holdings, Inc. v. Benefit Trust Co., Case No. 19-3847 & 19-3892, — F.3d –, 2021 WL 969473 (3d Cir. March 16, 2021) (Before Ambros, Bibas, and Roth, Circuit Judges).  Dansko hired Benefit Trust Company as Dansko’s stock ownership plan’s trustee.  At that time, Dansko decided to refinance its debt and Benefit stated it would be able to do the deal, but ultimately backed out.  Dansko sued Benefit under state law, alleging that Benefit breached the trust agreement, which required it to help with the deal, made an implied promise that is now enforceable by promissory estoppel, and fraudulently induced Dansko to hire it by falsely denying the Department of Labor’s investigation. Benefit argued that ERISA preempted the lawsuit. The court disagreed. The court acknowledged that ERISA does preempt some state-law claims, but only those that are challenges to the actual administration of an employee benefit plan. It does not preempt “run-of-the-mill state law claims” that just happen to affect and involve ERISA plans and their trustees.” The court found that Dansko’s contract claim happened to involve an ERISA plan, but its claim was quite remote from the areas with which ERISA is expressly concerned—reporting, disclosure, fiduciary responsibility, and the like. Therefore, it was not preempted by ERISA.

Ninth Circuit

ERISA Indus. Comm. v. City of Seattle, No. 20-35472, — Fed.App’x. –, 2021 WL 1035064 (9th Cir. Mar. 17, 2021) (Before Tashima, Rawlinson, and Bybee, Circuit Judges.)  Plaintiff, an industry group, appealed a district court decision holding that ERISA did not preempt a Seattle municipal ordinance requiring hotels to provide health benefit money directly to employees or include them in the employer’s benefit plan. The Ninth Circuit upheld the district court’s decision, confirming that the ordinance did not directly relate to health insurance plans and therefore did not trigger preemption.

Exhaustion of Administrative Remedies

Fifth Circuit

Theriot v. Bldg. Trades United Pension Tr. Fund, No. 20-30126, 2021 WL 955152 (5th Cir. Mar. 12, 2021) (Before Haynes, Higginson, and Oldham, Circuit Judges). The district court dismissed a plan participant’s case for benefits for a failure to exhaust administrative remedies. Plaintiff contended the district court’s dismissal on the pleadings was improper because the denial letter did not substantially comply with ERISA and thus did not trigger the 60-day appeal period. Alternatively, plaintiff contended that she should be excused from exhausting administrative remedies because the defendant failed to follow ERISA’s claims procedure. The court agreed with both arguments. The court held the appeal period had not started because the denial letter said one thing about appealing, while the plan’s review procedures (which were attached to the letter), suggested another. “The letter itself actively discouraged [plaintiff] from seeking administrative review.” This active discouragement conveyed to plaintiff that she had no further recourse on her claim, a violation of ERISA’s requirement to provide a statement describing any voluntary appeal procedures offered by the plan. Because the denial letter was (at least) ambiguous about plaintiff’s right to appeal, it did not substantially comply with ERISA’s requirements. Even if it assumed compliance, the court excused plaintiff from exhausting because the denial letter was not issued withing ERISA’s timelines for deciding the claim. It was five days late. In reaching this decision, the court rejected the Pension Fund’s argument that “a plan administrator may perfect a noncompliant denial notice at any time during the administrative process.” 

Tenth Circuit

Severine v. Anthem Blue Cross Life and Health Insurance Company, No. 19-CV-03301-RM-MEH, 2021 WL 1050008 (D. Colo. Mar. 19, 2021) (Judge Raymond P. Moore). The complaint did not allege the plaintiff had exhausted administrative remedies. On recommendation from the Magistrate Judge, the court considered whether exhaustion of administrative remedies was jurisdictional, and thus must be plead, or an affirmative defense, which a plaintiff generally need not plead. The court recognized that the issue was undecided in the Tenth Circuit, but cases deciding the issue had gone both ways. While defendant cited cases that exhaustion was jurisdictional, the court agreed with the recommendation and the courts which found exhaustion to be a non-jurisdictional affirmative defense. “Thus, the fact that Plaintiff is required to exhaust her ERISA claims does not mean she must plead exhaustion in her complaint.” 

Medical Benefit Claims

Fourth Circuit

Michael M., Barbara R., and Lillian M. v. Nexsen Pruet Group Medical and Dental Plan, Case No. 3:18-cv-00873, 2021 WL 1026383 (D.S.C. March 17, 2021) (Judge Sherri A. Lydon).  On cross motions for summary judgment, the court considered whether an ERISA-governed healthcare plan improperly denied plaintiff’s claim for residential treatment at Uinta Academy for plaintiff’s daughter, Lily, who was diagnosed with anxiety, depression, ADHD, relational issues and an eating disorder. The court also considered whether the plan’s denial of benefits violated the Mental Health Parity and Addiction Equity Act (“Parity Act”). The plan denied plaintiffs’ claim on the grounds that: (1) the residential treatment was not medically necessary; (2) the plan’s specific exclusion for recreational therapy, milieu therapy, and long-term custodial care at a therapeutic school applied to Lily’s claim; (3) the claim had not been pre-authorized; and (4) Uinta did not satisfy the definition of residential care. Plaintiffs sought an external review by the Medical Review Institute of America (MRI”). Had MRI determined that the medical services were medically necessary, the plan would have been obligated to accept the decision as binding. However, MRI determined that Lily’s treatment was not medical necessary and could be safely and effectively treated at a lower level of care. The court reviewed the plan’s denial of benefits under the abuse of discretion standard.  The court found in favor of the plan on all grounds asserted, except that the court held that pre-authorization was not a basis for denial under the language of the plan. As to the Parity Act claim, the court applied the de novo standard of review. The court determined that the plan did not contain a facial disparity that limits coverage for mental health care in a way that is more restrictive than medical/surgical care provided under the plan.  The court further held that the plan did not apply its criteria for admission into a mental health residential facility more restrictively than its criteria for admission in a skilled nursing facility.  Judgment was therefore entered in favor of the plan.

Sixth Circuit

Bartalino v. Citizens Ins. Co. of Midwest, No. 2:19-CV-13431, 2021 WL 978810 (E.D. Mich. Mar. 16, 2021) (Judge Stephen J. Murphy, III). Plaintiff was injured in an automobile accident and alleged that he had a no-fault insurance policy with the defendant, and a medical insurance policy through his employer. Plaintiff claimed that defendant improperly refused to pay his insurance claim. The court held that the ERISA plan disavows coverage for any loss covered by the no-fault policy, and because ERISA preempts the no-fault plan, Defendant has primary responsibility for the pending claim. Because the ERISA plan here expressly disavowed liability if other insurance covered the injury, Plaintiff was entitled to summary judgment, and Defendant must assume the priority insurer role.

Seventh Circuit

T.S. by and through T.M.S. and M.S. v. Heart of Cardon, LLC, No. 1:20-cv-01699 (S.D. Ind. March 16, 2021) (Judge Tanya Walton Pratt).  In this case, the parents of a minor filed suit on his behalf and on behalf of and against a healthcare plan (and the plan sponsor) challenging the plan’s exclusion of Applied Behavioral Analysis (“ABA”) therapy for the treatment of autism spectrum disorder (“ASD”). The parents challenged the ABA exclusion under ERISA and the Mental Health Parity and Addiction Equity Act (“Parity Act”). The plaintiffs also challenged the plan’s complete exclusion of coverage for autism and ASD under other federal statutes, specifically the Affordable Care Act (“ACA”) and the Rehabilitation Act. The court granted the defendants’ motion for judgment on the pleadings with respect to the ERISA and Parity Act claims, concluding that the exclusion was both permissible on its face and as applied because it did not constitute a treatment limitation nor was it applied more stringently than limitations applied to medical and surgical benefits.  However, the court denied the defendants’ motion with respect to the plaintiffs’ ACA and Rehabilitation Act claims, allowing those claims to proceed to trial. 

Ninth Circuit

Hoffman v. Screen Actors Guild-Producers Pension Plan, No. 20-55534, — F. App’x –, 2021 WL 1041693 (9th Cir. 2021) (Before Kleinfeld, Tallman, and Owens, Circuit Judges). In this complicated procedural case, Plaintiff appealed the district court’s denial of her motion to reopen her claim over entitlement to lifetime health benefits after her claim for disability pension had been resolved. The district court assumed the health coverage issue was still outstanding, was subject to administrative review and exhaustion and would be decided sometime in the future. The Ninth Circuit found the claim was constructively denied and remanded the case to the district court to reopen the case and decide, de novo, whether Plaintiff is entitled to continuing health benefits.

Pleading Issues & Procedure

Eighth Circuit

Crystal Holland, Individually and on Behalf of All Others Similarly Situated v. Rock Bordelon, et al., Case No. 4:20-cv-00344 KGB, 2021 WL 966422 (E.D. ARK March 15, 2021) (Judge Kristine G. Baker).  Plaintiff filed a class action against Rock Bordelon, Allegiance, T. Jason Reed, and Freedom Behavioral Hospital of Central Arkansas LLC for deprivation of vacation time, sick time and insurance coverage in violation of contracts with defendants. Before the court is defendants’ motion to dismiss plaintiff’s complaint and plaintiff’s motion for leave to file a First Amended Complaint (“FAC”). In plaintiff’s FAC, she seeks to add certain individual plaintiffs, name two more defendants, add sub class members and three additional claims for relief.  Defendants argued that futility bars plaintiff’s claims.  Defendants asserted that the Arkansas Minimum Wage Act (“AMWA”) addresses the payment of minimum or overtime wages only, not vacation or sick time.  Plaintiff countered that vacation and sick time withheld constitutes minimum wages under the AMWA.  The court noted that the Director of the Labor Division is authorized to make and revise administrative rules providing for further definition of terms within the AMWA, but has not done so.  The court was unwilling to dismiss plaintiff’s claims on this basis this early in the litigation without any promulgated rules construing vacation time, sick time or insurance coverage as wages. Defendants asserted that plaintiff’s employment was “at-will” and that she cannot state a claim for breach of an employment contract.  The court held that plaintiff did allege the elements of a contract sufficient to survive dismissal. Defendants challenged plaintiff’s unjust enrichment claim on the grounds that it cannot coexist with a breach of contract claim.  The court noted that unjust enrichment can be plead as an alternative to breach of contract and rejected defendants’ argument at the pleading stage.  Defendants asserted that plaintiff’s claims were preempted by ERISA.  The court explained that whether ERISA applies to a particular plan or program requires an evaluation of the facts combined with an interpretation of the law.  The court held that dismissal based on ERISA preemption at this stage of the litigation is not appropriate.  Finally, defendants asserted that plaintiff has stated no facts that would create individual liability on behalf of Mr. Bordelon. Plaintiff asserted that Mr. Bordelon was her employer and he, along with others, set the policies at issue in this action.  The court explained that because this is also a fact-based inquiry it is not appropriate for resolution at this time.  The court denied defendants’ motion to dismiss and grants plaintiff’s motion to amend.

Eleventh Circuit

Anastos v. Ikea, Inc., No. 1:19-CV-03702-SDG, 2021 WL 1017410 (N.D. Ga. Mar. 17, 2021) (Judge Steven Grimberg). Plaintiff worked for Ikea for several decades, during the course of which plaintiff secured entitlement to ERISA-governed life insurance benefits. After noticing his retirement, Plaintiff signed a voluntary release encompassing “any and all claims, known and unknown, asserted or unasserted, … including, but not limited to … The Employee Retirement Income Security Act (except for any vested benefits under any tax qualified benefit plan).” Plaintiff discovered shortly thereafter that IKEA believed he had waived his rights to his Life Insurance benefits by signing the voluntary release. Plaintiff filed suit and Defendant moved to dismiss based upon the plain language of the release. The Court denied Defendant’s motion, finding that for plaintiff’s claim to be covered by the release, it must have been available as of the date of the execution of the agreement; because plaintiff’s claim could not arise until after the date of the agreement, it is not within the scope of the agreement. 


Third Circuit

Secretary of Labor v. Doyle, et al., No. 05-CV-2264, 2021 WL 973471 (D.N.J. Mar. 16, 2021) (Judge Joseph H. Rodriguez). This Opinion addresses the narrow issue of whether Defendant Cynthia Holloway (“Holloway”) must pay prejudgment interest on the $776,709 judgment entered against her for having breached her fiduciary duties as a trustee to an employee benefit plan governed by ERISA. Although ERISA does not expressly require defendants to pay prejudgment interest, district courts may award prejudgment interest to make plaintiffs whole and to preclude defendants from garnering unjust enrichment. The Secretary argued that prejudgment interest was required in this case “to make the Plan whole,” and to allow the Plan to repay beneficiaries for outstanding benefits claims. The Secretary pointed out that Holloway’s conduct deprived the Plan of funds that the Plan should have invested to benefit the Plan subscribers, and that prejudgment interest will compensate the plan for “lost opportunity cost of nearly two decades.” In response, Holloway argued that prejudgment interest would be inequitable based on precedent, her limited role in the scheme to divert Plan Funds, the Secretary’s lack of diligence in prosecuting its case, and Holloway’s decision to report the diversion of funds to the Department of Labor in October 2002. The court agreed with Holloway that prejudgment interest would be inequitable under the facts and circumstances of the case.

Statutory Penalties

Seventh Circuit

W.A. Griffin, M.D. v. Seven Corners, Inc., No. 4:18-CV-7-PPS, 2021 WL 964304 (N.D. Ind. March 15, 2021) (Judge Philip P. Simon). A doctor brought suit for statutory penalties under ERISA after the company that employed his patient refused to produce all the requested documents during the doctor’s pursuit of payment on the claims. The court conclude that multiple factual disputes concerning, among other things, whether the policy at issue was an ERISA plan, precluded summary judgment.