There is an embarrassment of riches this week for plan participants, as three cases share the notable decision spotlight.  Two are significant plaintiff wins with respect to mental health coverage under ERISA healthcare plans. The third is an important arbitration decision from the Second Circuit involving a pension plan, also a big win for plan participants.

The first case is a follow-up in Jessica U. v. Health Care Serv. Corp., No. CV 18-05-H-CCL (D. Mont. March 4, 2021) (Judge Charles C. Lovell).  In the District of Montana’s earlier decision in the case, 2020 WL 6504437 (D. Mont. Nov. 5, 2020), the court issued summary judgment for plaintiff and awarded mental health benefits under ERISA. Following that decision, plaintiff filed a motion for reconsideration requesting the court reconsider its decision as to the amount of benefits payable to plaintiff. In a rare move, the court granted the motion for reconsideration and ordered Blue Cross to reimburse plaintiff based on the single case agreement rate requested by the provider, not the Blue Cross Blue Shield of Montana rates. In a harsh rebuke of Blue Cross’s conduct during the course of the claim, the court acknowledged “significant confusion” regarding Jessica’s treatment and applicable benefits, finding that “much of this confusion is attributable directly to BCBS of Montana,” whether as the result of “internal disorganization, ineptitude, or of BCBS deliberately trying to prolong and derail payment to its insured.” 

The court also faulted Blue Cross for not responding to Jessica’s appeal regarding the single case agreement. In rereviewing the record, the court was “convince[d]” that Blue Cross “should not benefit from failing to respond or engaging in deceptive and/or dilatory tactics with its insured.” The court found the provider and plaintiff’s parents were given “the run-around for three months,” after which Blue Cross disengaged from the discussion and did not respond to the appeal. The court concluded that reconsideration was necessary to prevent injustice to Jessica and her family, and awarded benefits based on the rate of the single case agreement requested by the provider. 

The second case, Jane Doe v. United Behavioral Health, No. 4:19-cv-07316 (N.D. Ca. March 5, 2021) (Judge Yvonne Gonzalez Rogers), arose out of denied claims for autism treatment.  During the relevant time period, the healthcare plan at issue covered autism spectrum disorders, but expressly excluded Intensive Behavioral Therapies (“IPT”), specifically including Applied Behavioral Analysis (“ABA”), for the treatment of such disorders. After United denied the beneficiary’s claims for coverage of his treatment on the basis of these exclusions, his mother brought suit on his behalf, claiming breaches of fiduciary duty, including for violations of the Mental Health Parity and Addiction Equity Act (“Parity Act”). 

On cross-motions for summary judgment, the court denied United’s motion, concluding that United was acting as a fiduciary for purposes of ERISA when it applied the exclusions to deny plaintiff’s claims. Then, turning to plaintiff’s motion, the court concluded that the ABA/IBT exclusion violated the federal Parity Act in two ways. First, it contained a separate treatment limitation applicable only to autism, a mental health condition. The court reasoned that this violated the plain terms of the Parity Act, which expressly forbids “separate treatment limitations that are applicable only with respect to mental health or substance use disorder benefits.” The court also found that, because the exclusion rejected coverage for the primary treatment modality for autism, it “contravenes the Parity Act by requiring ‘more restrictive [limitations] than the predominant treatment limitations applied to substantially all medical and surgical benefits[].’” The court rejected United’s contention that it was permitted to carve out this treatment simply because the plan could have provided no treatment for mental health benefits without violating the Parity Act. The court likewise rejected United’s argument that the exclusion did not qualify as a treatment limitation under the governing regulations. To the contrary, by providing “zero” coverage for this type of treatment, the court concluded that the exclusion operated as both a quantitative and a non-quantitative treatment limitation for purposes of the regulation. Finally, the court concluded that there was no support in the statute or the regulations for United’s argument that the statute be limited to financial requirements and quantitative treatment limitations. Instead, the court found that the Parity Act plainly and broadly applies to all treatment limitations.               

The third and final case involves a third-party administrator’s unsuccessful attempt to force a plan participant to arbitrate his fiduciary breach claims. In Cooper v. Ruane Cunniff & Goldfarb Inc., — F.3d –, 2021 WL 821390 (2d Cir. 2021) (Before Lohier, Carney and Sullivan, Circuit Judges), a participant in a 401(k) profit-sharing plan, Clive Cooper, brought a putative class action against plan fiduciaries under ERISA Section 502(a)(2) asserting breaches with respect to an imprudent investment strategy leading to a $100 million plan loss, as well as self-dealing and failure to make adequate disclosures to participants. Cooper eventually settled with and dismissed claims against all the fiduciaries except Ruane Cunniff & Goldfarb, the plan’s third-party administrator and investment manager. Even though Ruane itself was not a signatory to the governing employment contract, Ruane sought to compel arbitration under a provision in Cooper’s employment handbook that required him to arbitrate “all claims arising out of or relating to employment” and that required such arbitration to be on a single employee and not a class basis. 

Reversing the district court, which had granted Ruane’s motion to compel, the Second Circuit first held that Cooper’s breach of fiduciary duty claims could not be properly understood to arise out of his employment with the plan sponsor. The court reasoned that none of the facts needed to prevail on these claims related to his employment. Furthermore, other entities that were never employed by the plan sponsor, such as plan beneficiaries, the other fiduciaries and the Secretary of Labor could have brought identical claims. The court pointed out that, if enforced, the prohibition in the arbitration provision on class arbitration would be in considerable tension with the Second Circuit’s prior recognition that a claim under Section 502(a)(2) is, by its nature, brought in a representative capacity on behalf of the plan. Thus, the court concluded not only that the express language of the arbitration agreement did not require Cooper to arbitrate his claims, but that, more broadly, requiring him to do so would undercut the protective purposes of ERISA.   

Three resounding wins for plan participants.  Can spring be far off?  

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

Attorneys’ Fees

Third Circuit

Board of Trustees of the Greater Penn. Carpenters’ Medical Plan v. Schwartzmiller, No. 17-1442, 2021 WL 679988 (W.D. Penn. Feb. 22, 2021) (Judge Nora Barry Fischer).  In this consolidated action the parties return to the court to adjudicate contested motions for attorney fees and costs.  The motions followed the court’s dismissal of ERISA claims for repayment of benefits provided to the wife of a plan participant. After a one-day trial, the court determined that, although the Schwartzmillers had divorced in 1992, they entered into a valid common law remarriage in October 1993. Based on this ruling, the court denied William’s claim against defendant Greater Pennsylvania Carpenters’ Pension Fund and Carpenters Combined Fund for denial of a conversion of his pension from a 75% joint and survivor annuity to a single life annuity. The court evaluated the Schwartzmillers’ separate motions for attorney fees against plaintiff and determined that both Schwartzmillers achieved some level of success on the merits Applying the factors applicable in the Third Circuit, the court determined that the wife was entitled to reasonable attorney fees and costs, but that the husband was not. The husband did not act equitably as he claimed he did not know about the status of his marriage and he provided incredible testimony in an unsuccessful effort to prove that he was not married and that his wife was ineligible for medical benefits in an effort to increase his own pension benefits. The court explained that, under the circumstances it would be inappropriate for the trustees to pick up the tab for William’s defense.

Seventh Circuit

Sharp v. Trs. of UMWA 1974 Pension Tr., No. 18-CV-03056, 2021 WL 825989 (C.D. Ill. Mar. 4, 2021) (Judge Sue E. Myerscough). The court previously granted plaintiff’s summary judgment motion and awarded him disability benefits under his long-term disability plan. Plaintiff then filed this motion for attorney’s fees. The court analyzed the fee claim under both the five-factor test and the substantial justification test applicable in the Seventh Circuit and awarded fees. It found that trustees’ denial of plaintiff’s disability claim was arbitrary and capricious, and therefore not substantially justified. Turning to the five factor test, the court ruled that (1) the trustees’ culpability was a neutral factor because the decision was not made in bad faith even though its final decision was arbitrary and capricious, (2) the trustees had the ability to pay the attorney’s fees, (3) an award of attorney’s fees would deter future arbitrary and capricious decisions, (4) there was little benefit to other members of the plan in individual cases and therefore this factor is neutral, and (5) the relative merits of the parties’ positions weighed in favor of an award of fees.

Breach of Fiduciary Duty

First Circuit

In re Fidelity ERISA Fee Litigation, No. 20-1286, 2021 WL 836766, — F.3d — (1st Cir. Mar. 5, 2021) (Before Kayatta and Barron, Circuit Judges, and District Judge William E. Smith). Plan participants brought a putative class action under ERISA, alleging that defendant Fidelity violated fiduciary duties imposed by charging ERISA by 401(k) retirement plans excessive mutual funds fees. The district court granted Fidelity’s motion to dismiss, and the participants appealed. On appeal, the First Circuit affirmed. The court identified the central question as whether Fidelity acted as a “functional fiduciary” for the plan in charging the relevant fees, and rejected Plaintiffs’ three arguments that Fidelity met this definition. First, the court found that Fidelity was not “controlling its compensation from plans” because Fidelity’s fees were not necessarily “passed through” to plan participants. Second, the court rejected the idea that Fidelity acted as a fiduciary by determining which funds it offered to plans from its menu because plans were free to ignore Fidelity’s recommendations and in fact could shop elsewhere. Third, the court ruled that while Fidelity did have fiduciary duties under ERISA as a directed trustee of plan funds, the infrastructure fees at issue in the case were not part of those duties. In short, “Fidelity is able to charge funds a fee because it has lots of customers, not because it controls those customers or their assets in any meaningful manner.”

Third Circuit

Johnston v. Independence Blue Cross, LLC, No. 19-3524, 2021 WL 765771 (E.D. Pa. 2021) (Judge Juan R. Sánchez). The court granted defendant’s motion for summary judgment on plaintiff’s claims for breach of fiduciary duty and disgorgement after her pension was calculated using a cash balance formula rather than a final average compensation formula that she expected. Plaintiff had two periods of employment during which she earned pension benefits. In the first period of employment, the pension plan contained the final average compensation benefit formula. The plan was later amended to a cash balance formula for anyone hired on or after January 1, 2000. In 2001, plaintiff voluntarily ended her employment and just five months later the company offered to rehire her. During the rehire negotiations, two company representatives told plaintiff that her pension benefits would remain the same as they were during her first period of employment because she was rehired within a six-month period. She accepted the offer one day before the end of the six-month period. In 2017, plaintiff ended her employment under the company’s severance program and signed a separation agreement which contained a general waiver and release. After the claim for benefits was dismissed, defendant filed a motion for summary judgment on the breach of fiduciary duty and disgorgement claims. Plaintiff argued the court should permit extrinsic evidence of the representations made during the rehire negotiations. The court denied the request finding that the release language was unambiguous, it was signed knowingly and voluntarily, and the agreement was fully integrated, barring parol evidence. 

Sixth Circuit

McCool v. AHS Mgmt. Co. Inc., et al., No. 3:19-CV-01158, 2021 WL 826756 (M.D. Tenn. Mar. 4, 2021) (Judge William L. Campbell, Jr.). Plan participants contended that defendants violated their fiduciary duties under ERISA by imprudently selecting and monitoring plan investments and recordkeeping fees, as well as failing to monitor other fiduciaries. Defendants filed a motion to dismiss all counts. The court granted defendants’ motion regarding the allegations that they violated the duty of loyalty, finding that plaintiffs had not alleged sufficient facts to show that defendants engaged in transactions involving self-dealing or that otherwise involved or created a conflict between defendants’ fiduciary duties and personal interests. Even though plaintiffs alleged that Transamerica benefitted from defendants’ alleged mismanagement, the complaint failed to allege plausible facts supporting an inference that Defendants acted for the purpose of benefitting Transamerica, any other third party, or themselves. In contrast, the court denied defendants’ motion regarding the allegations they violated the duty of prudence, finding Plaintiffs did make a sufficient showing of financial loss (regardless of motive) and financial harm to reasonably support allegations that defendants violated their duty of prudence to plaintiffs. 

Seventh Circuit

Access Servs. of N. Illinois v. Capitol Administrators, Inc., No. 3:19-CV-50050, 2021 WL 780483 (N.D. Ill. Mar. 1, 2021) (Judge Iain D. Johnston). Access Services of Northern Illinois offered its approximately fifty employees health insurance through a self-funded plan under which the company paid for a portion of its employees’ healthcare costs up to a specified amount, and the rest was supposed to be covered by stop-loss insurance. But that insurance was never purchased. The failure to procure stop-loss insurance gave rise to the claims in this suit. Arthur J. Gallagher & Co. purchased Williams-Manny, and then transferred responsibility to purchase stop-loss insurance to its subsidiary, Gallagher Benefit Services (“Gallagher Parties”). The Gallagher Parties then delegated the responsibility to purchase stop-loss insurance to Capital Administrators, which was then purchased by CAI Holdings, which was finally purchased by Lucent Health Solutions (collectively, the “Lucent Parties”), which represented that it would provide the health insurance. Thomas Faeth-Miller’s spouse, Gyl, was an employee of Access Services of Northern Illinois. He believed he was covered by the company’s insurance benefit plan. Between September 2017 and August 2018, he incurred more than one million dollars in medical bills due to significant health problems, including cancer and two strokes. Because of a change in the way Access Services of Northern Illinois provided health insurance, the plan was no longer fully funded and instead relied on stop-loss insurance. The stop-loss insurance, however, was never procured by Lucent, and his bills went unpaid. He then intervened in this lawsuit to assert his rights to insurance coverage. The court denied a motion to dismiss his second amended complaint finding that he sufficiently alleged that the Gallagher parties (who had responsibility over the plan) acted as ERISA fiduciaries because he alleged that they represented that they would procure the stop-loss insurance but then delegated that responsibility to the Lucent Parties and failed to adequately supervise them.

Eighth Circuit

Scalia v. Reliance Trust Co. et al., No. 17-CV-4540, 2021 WL 795270 (D. Minn. Mar. 2, 2021) (Judge Susan Richard Nelson). The Department of Labor (“DOL”) brought a civil suit to enforce ERISA against a number of pension plan fiduciaries. The case involved sale of stock by Mr. Kuban, the then-majority shareholder and board chairman of Kurt Manufacturing, Inc. (“Kurt”), a closely held Minnesota company, to Kurt’s employee stock ownership plan (“ESOP”). DOL contended that defendants breached their duties of loyalty and prudence to the ESOP because they approved the stock purchase transaction despite being aware of information suggesting the stock price was unreasonably high, and that as a result, Kuban and defendants were enriched at the expense of Kurt employees. Defendants included Directors who approved the transaction and Reliance, the appointed ESOP trustee. The court denied both Plaintiff’s and Defendants’ motions to exclude expert testimony. On claims of breach of duties of loyalty and prudence against the Directors and Reliance, the court denied motions for summary judgment finding that the theories the DOL asserted required a review of the full evidentiary record. Likewise, the court determined that other claims, such as claims that the transaction was prohibited under ERISA and that Reliance failed to substantively negotiate the transaction, involved questions of fact that precluded summary judgment. All motions for summary judgment and for exclusion of expert testimony were therefore denied.

Class Actions

Fourth Circuit

Johnson v. Duke Energy Corp., No. 3:20-CV-00528-RJC-DSC, 2021 WL 828480 (W.D.N.C. Mar. 4, 2021) (Mag. J. David S. Cayer). Plan participants brought this putative class action against Duke Energy and related fiduciaries, alleging that they violated ERISA by breaching their duty of prudence and failing to monitor fiduciaries of Duke’s 401(k) employee retirement plan. Specifically, the participants alleged that fiduciaries allowed the plan to pay the plan’s administrators excessive fees for recordkeeping and managed account services. Defendants filed a motion to dismiss, which the magistrate judge recommended denying. The magistrate found that the participants had plausibly alleged that similar plans had paid less for comparable services, and defendants failed to negotiate or solicit competitive administrative services bids for several years while fees across the industry dropped. The magistrate also recommended denying defendants’ motion to dismiss Duke Energy as a defendant, finding that plaintiffs had plausibly alleged that Duke was the ultimate decision-making authority with respect to the plan and thus was liable for any breaches of fiduciary duty.

Frankenstein v. Host Int’l, Inc., No. CV 20-1100 PJM, 2021 WL 826378 (D. Md. Mar. 4, 2021) (Judge Peter J. Messitte). Plaintiff, an employee of Host International, brought this putative class action against Host and other related defendants, alleging that they violated ERISA in their administration of Host’s retirement benefit plan. Specifically, plaintiff alleged that defendants prevented employees who were paid partly through tips from contributing a portion of their tips as deferred compensation under the plan, thereby discriminating against such employees. Defendants filed a motion to dismiss, contending that they did not abuse their discretion by denying plaintiff’s claim. The court rejected this argument, finding that plaintiff had plausibly alleged that he was entitled to benefits. Defendants’ policy “effectively denies tipped employees the opportunity to defer that income on a pretax basis, and it appears to be an essentially arbitrary decision[.]” The court also rejected defendants’ motion to dismiss plaintiff’s breach of fiduciary duty claim for similar reasons. It further found that plaintiff could maintain simultaneous claims for failure to pay benefits and breach of fiduciary duty because, although there was some overlap between the two claims, they were based on different theories and different facts. Finally, the court denied defendants’ motion to dismiss plaintiff’s claim for discrimination under Section 510 of ERISA, finding that defendants had “offered no sufficient alternative justification to the alleged specific intent of denying tipped employees the opportunity of deferring some of that compensation under the Plan.”

Tenth Circuit

Amy G., et al. v. United Healthcare, et al., No. 2:17-CV-00413-DN-DAO, 2021 WL 778578 (D. Utah Mar. 1, 2021) (Judge David Nuffer). The court previously denied plaintiffs’ motion to certify a class action based on the commonality requirement and Plaintiffs thereafter sought to amend their complaint to add a cause of action under the Mental Health Parity and Addiction Equity Act (“Parity Act”) and modify and amend class allegations. The court denied the motion because plaintiffs failed to show good cause to extend the deadline for amending the complaint. The court found that its order denying class certification did not support plaintiffs’ argument for extending the deadline. The court also found plaintiffs knew about the Parity Act when filing their complaint but made no factual allegations for claims under the Parity Act and did not provide authority for why they did not include such allegations in their complaint or amend prior to the deadline. The court further found the proposed amendments untimely, unduly prejudicial, and futile. The amendments were futile because they fail to address the deficiencies in the order denying class certification. 

ERISA Preemption

Ninth Circuit

Steigleman v. Symetra Life Ins. Co., No. CV-19-08060-PCT-ROS, –F. Supp. 3d –, 2021 WL 778605 (D. Ariz. Mar. 1, 2021) (Senior Judge Roslyn O. Silver). Plaintiff is the owner of a business. When she first purchased disability coverage from Symetra, she was the only individual covered. Because employee coverage is required for the existence of an ERISA plan, and only an owner was covered, ERISA did not apply. Years later, prior to the relevant events in the lawsuit, Plaintiff’s company let two of its employees apply for disability coverage from Symetra. The company paid the premiums for those staff-LTD policies. Thus, the employer was paying for LTD coverage for an owner and two employees. The court held that, “Once [the employer] offered its employees coverage under the Symetra disability policy, and began paying the associated premiums, it would be strange to conclude there was not an ERISA plan, of some type, in the picture.” The court rejected plaintiff’s argument, supported with no authority, that “a policy subject to ERISA when established may remain so even if it subsequently covers no employees, but non-ERISA policies do not convert to ERISA when employees gain coverage.” The court found no evidence that the employer’s intent was to create distinct benefits, one for the owner and another for the two employees. It also found “intertwined” benefits because it was the same type of benefit offered, through the same insurer, all paid for by the employer. Thus, an ERISA plan existed and ERISA preempted any related state law claims. 

Emergency Group of Arizona Professional Corp. v. United Healthcare, Inc., No. 20-15684, 2021 WL 816071 (9th Cir. Mar. 5, 2021) (Before Fletcher, Miller, and Hunsaker, Circuit Judges). Plaintiff, a group of medical providers, appealed the district court’s dismissal of its state-law claims against United Healthcare pertaining to the insurer’s rate of reimbursement. The Ninth Circuit determined that the district court erred in dismissing the state law claims because plaintiff had asserted legal duties arising under an implied-in-fact contract based on a course of dealing between the parties. These alleged legal duties were independent from legal obligations imposed by the ERISA plans, and therefore the claims were not completely preempted by ERISA. The case was reversed and remanded with instructions for the district court to remand the case to state court.

Soba Living LLC v. California Physicians Service, No. LACV2011325DOCDFMX, 2021 WL 808729 (C.D. Cal. Mar. 2, 2021) (Judge David O. Carter). Plaintiff, a medical care provider, pled a breach of contract claim arising from interactions between themselves and Defendants, a health insurer. Plaintiffs did not sue based on assignment from the patients of their rights under ERISA, but rather based on their own right pursuant to an independent obligation. Thus, the court held Plaintiff’s state-law claims based on the alleged contract were not brought, and could not have been brought, under ERISA. Further, plaintiffs alleged they were entitled to reimbursement from defendants because of an implied-in-fact contract or oral contract, not because any ERISA plans so required. Because plaintiff’s state-law claims did not derive from an obligation under ERISA, they were based on independent legal duties, and ERISA did not apply. 

Exhaustion of Administrative Remedies

Second Circuit

Ruderman v. Liberty Mut. Group, Inc., No. 1:20-CV-945, 2021 WL 827693 (N.D.N.Y. Mar. 4, 2021) (Judge David N. Hurd). A plan participant brought this action in state court challenging the termination of her ERISA-governed long-term disability benefits by Liberty. Liberty removed the action to federal court and moved to dismiss, arguing that plaintiff had failed to exhaust her appeals under her benefit plan. Plaintiff responded that appealing would have been futile because Liberty was likely to deny her appeal, and that Liberty did not tell her about her right to appeal until after her benefits had ended. The court rejected these arguments and granted Liberty’s motion. The court ruled that in order to demonstrate futility Plaintiff had to show that Liberty was certain to deny her appeal, not simply likely to deny it. The court further found that Liberty had complied with ERISA regulations by informing her of her right to appeal at the time it denied her claim for benefits. The court also noted that Plaintiff had successfully appealed a prior denial by Liberty, and thus she knew how the appeal process worked.

Whitley v. Bldg. Serv. 32BJ Health Fund, No. 19-CV-2665 (PKC) (CLP) 2021 WL 836236 (E.D.N.Y. March 4, 2021) (Judge Pamela K. Chen). The pro se plaintiff, a disability plan participant, brought suit in state court and defendants removed it to federal court and moved for summary judgment. Defendants argued that plaintiff’s claims for both long term disability benefits and pension disability benefits were not properly exhausted, were time-barred, and in any event failed on the merits. The facts established that plaintiff had twice made claims for these two benefits based on the same illness and both times she failed to appeal the denial. The court found that the plan, the summary plan description, and the denial letter all made clear the duty to appeal, as well as the manner in which it was to be done. The Court also found that plaintiff’s stated reasons for her failure to appeal – that it was too stressful – did not provide a “clear and positive” showing that pursuing administrative remedies would have been futile. Plaintiff also argued that the period for her to submit an administrative appeal should be equitably tolled because of her depression but the court was not persuaded because plaintiff never sought to file an appeal. Plaintiff also argued that defendants “engaged in a course of conduct of misrepresenting and giving [her] inaccurate and false information as to her rights under the respective contract[s].” The court found that no reasonable factfinder could find that plaintiff was provided inaccurate or misleading information with respect to the need to exhaust administrative remedies before challenging any denial of disability benefits in court because the denial letters clearly and accurately stated that plaintiff had the right to appeal, and indeed had to appeal, before pursuing any action in court. Accordingly, the court found that defendants were entitled to summary judgment on this basis. The court went on to analyze the merits of the case and found that defendants would still be entitled to summary judgment on the merits of plaintiff’s claims, and the court therefore granted defendants’ motion on this alternative basis. The court found that in both 2008 and 2011, defendants denied plaintiff a long-term disability benefit and a disability pension because they determined that she did not become totally disabled while working in covered employment, but rather became totally disabled in 2005, after leaving covered employment in 2004.

Life Insurance & AD&D Benefit Claims

Fifth Circuit

Aetna Life Ins. Co. v. Starks, No. CV 20-01157, 2021 WL 765377 (E.D. La. Feb. 26, 2021) (Judge Gerard Guidry). Aetna filed an interpleader action seeking an order directing payment of life insurance proceeds. Aetna sought to pay the deceased’s estate rather than the named beneficiary, as the named beneficiary had been found guilty of the deceased insured’s murder. Aetna argued that according to Louisiana State law, no beneficiary shall receive benefits resulting from the death of an insured where the beneficiary is “held by final judgement. . . to be criminally responsible for the death [of the insured.]” The court granted Aetna’s motion, finding that a prior decision to disqualify the named beneficiary from a different life insurance policy held by the same insured was proper despite the pending appeal of the murder conviction. Because the group policy had no secondary or contingency beneficiary, the court ordered benefits paid to the insured’s estate.

Sixth Circuit

D.S.S. v. The Prudential Ins. Co. of Am.¸et al., Case No. 3:20-CV-248-CRS, 2021 WL 784323 (W.D. Ky. March 1, 2021) (Judge Charles R. Simpson III). Plaintiffs brought suit in state court to recover life insurance proceeds following the death of their mother, Jacinta Malone, under Malone’s employee welfare benefit plan with her employer, Time Warner. As part of her employment, Malone participated in an ERA plan and received $147,000 in life insurance coverage, $88,000 of which was basic life insurance and $59,000 of optional life insurance.  Upon Malone’s death, Prudential communicated with Time Warner that plaintiffs were not listed as Malone’s primary beneficiaries, but instead, Malone changed her beneficiary designation for her life insurance benefits from plaintiffs to Malone’s aunt, Tiffani Q. Graves. Graves received all policy proceeds. An investigation revealed that Malone listed Graves as primary beneficiary as of September 9, 2015 and that plaintiffs were secondary beneficiaries. Prudential also confirmed that prior to that, as of February 6, 2014, plaintiffs were the only beneficiaries.  Prudential removed the action to federal court and filed a motion to dismiss. Prudential successfully argued that plaintiffs’ state law claims were preempted by ERISA and that the claims for benefits under ERISA section 502(a)(1)(B) were untimely under the insurance plan’s one-year limitations provision. The court dismissed all of Plaintiffs’ claim with prejudice. Plaintiffs then filed a motion to alter or amend the court’s order under Federal Rule of Civil Procedure 59(e), which the court denied. In doing so, the court held that plaintiffs’ ERISA claim accrued on December 31, 2014, when any belief or expectation that Plaintiffs were entitled to Malone’s life insurance proceeds was repudiated and could not have been reasonably maintained beyond that point because plaintiffs could confirm that Malone’s life insurance proceeds were paid to someone else. Accordingly, the court held that plaintiffs’ claim for the alleged wrongful payment of benefits was time barred since they failed to file a lawsuit within a year of that date. The court also declined plaintiffs’ request for additional discovery because both parties previously submitted extrinsic evidence addressing the issue of whether Plaintiffs’ claim for alleged wrongful payment of benefits should be dismissed.

Medical Benefit Claims

Third Circuit

Alkon v. Cigna Health & Life Ins. Co., Case No.: 2:20-cv-02365, 2021 WL 822789 (D.N.J. Mar. 3, 2021) (Judge William J. Martini) In an ERISA action for reimbursement for out-of-network medical care, the court granted the insurer’s motion to dismiss.  The insurer had agreed to cover the bilateral mastectomy at the “out of network” rate, without specifying what that meant, and the insurer eventually covered $2,721.83, leaving the insured with a bill for $289,362.  The doctor filed suit on behalf of the patient.  The court held that the anti-assignment provision in the plan booklet was binding, and that the insurer did not waive it.  Nor could the doctor stand in as an “authorized representative.” Therefore the doctor plaintiff did not have standing and the case was dismissed. 

Eighth Circuit

Shafer v. Zimmerman Transfer, Inc., No. 1:20-cv-00023, 2021 WL 805529 (S.D. Iowa Mar. 3, 2021) (Judge Robert W. Pratt). Plaintiff underwent bariatric surgery in April 2015. Six months later, plaintiff started working for defendant Zimmerman and enrolled in its health insurance plan. On June 23, 2017, Plaintiff underwent emergency surgery to remove an obstruction of his bowel. Plaintiff was denied coverage for his June 2017 medical emergency because it resulted from his 2015 surgery. This lawsuit followed. This opinion addressed plaintiff’s claims against one defendant, the Phia Group LLC, whose involvement, if any, with the plan was unclear. In its prior order, the court dismissed one count against Phia after concluding that Plaintiff had not alleged facts to show that defendant Phia was either a designated or a de factor plan sponsor, plan administrator or claims administrator. In an attempt to address this issue in his Third Amended Complaint, plaintiff alleged that Phia communicated with plaintiff’s attorney concerning a potential subrogation claim beginning in May 2019. The court noted that these communications had nothing to do with the payment or denial of benefits under the plan, nor did plaintiff allege any facts that supported that Phia was a fiduciary or functioning as one. Nor did plaintiff allege that Phia was his employer or that he suffered an adverse employment action. For these reasons, the court dismissed the claims against Phia with prejudice.

Tenth Circuit

Nathan W. v. Anthem Bluecross Blueshield of Wisconsin, No. 2:20-CV-00122-JNP-JCB, 2021 WL 842590 (D. Utah Mar. 5, 2021) (Judge Jill N. Parrish). Plaintiff brought this action on behalf of his son, who received behavioral and mental health treatment. Defendants denied his claims for benefits under an ERISA-governed medical benefit plan, contending that the treatment the son received was not medically necessary. Plaintiff filed suit and included a claim for violation of the Mental Health Parity and Addiction Equity Act of 2008 (the “Parity Act”). Defendants filed a motion to dismiss, contending that Plaintiff had not identified a specific treatment limitation on mental health benefits, and had not plausibly alleged a disparity between the treatment limitation on mental health/substance abuse benefits as compared to medical/surgical benefits. Plaintiff responded that he had adequately alleged that Anthem imposed treatment limitations on mental health care and that the same limitations were not applied to analogous medical/surgical care. The court agreed with Plaintiff and denied Defendants’ motion to dismiss. The court found that Plaintiff had properly alleged that Defendants used more stringent criteria for evaluating Plaintiff’s claims that it would have for analogous medical/surgical care, and that Defendants had used acute-level medical necessity criteria to evaluate Plaintiff’s sub-acute level treatment. The court also rejected Defendants’ argument that Plaintiff was required to provide more documentation to support his allegations, noting the “discrepancy in information” between the parties, and the fact that Defendants had refused to provide some information during the appeal process.

Pension Benefit Claims

Second Circuit

Brightman v. 1199SEIU Health Care Employees Pension Fund, et al., No. 18-cv-4932, 2021 WL 809373 (S.D.N.Y., 2021) (Judge Lewis J. Liman). This case involved a multi-employer pension plan covering certain hospitals contracted with New York City. Plaintiff had worked at different hospitals for different lengths of time and earned a pension benefit. She ultimately retired on a disability retirement but later accepted another position at a hospital participating in the plan and her benefit was suspended. Plaintiff challenged the calculation of her benefit and the notice of suspension of benefits. On previous cross-motions for summary judgment the Court remanded two issues to the committee that oversaw plan claims for consideration: (1) whether plaintiff’s new job used the same skills as her prior employment and (2) whether the suspension of benefits notice was adequate. On this second cross-motion for summary judgment, plaintiff challenged the calculation of her average final pay used to calculate her benefit and whether her benefit was lawfully suspended. On the average final pay issue, the court held it was not arbitrary and capricious for the committee to use the pay that it could verify as “regular pay,” i.e. pay that did not include overtime. On the suspension of benefits notice issue the court found during the first summary judgment motion that the notice was insufficient because it did not contain the claims process. On this motion for summary judgment, defendants relied on the “substantial compliance” doctrine arguing that because the committee decided to pay the benefits up to the date plaintiff filed her appeal there was no prejudice to suspending her benefits after that date. The committee also relied on the summary plan description that was sent to plaintiff on two occasions prior to and after the suspension which contained the required language for appealing. Recognizing that the Second Circuit has not addressed whether substantial compliance with an ERISA’s procedural obligation is sufficient, the Court analyzed cases from the Fourth, Seventh, Ninth, Tenth and D.C. Courts of Appeals who have all accepted the doctrine of substantial compliance in circumstances similar to those presented in this case. The court then found plaintiff had been sufficiently notified of the process for appealing the suspension of benefits and denied plaintiff’s motion for summary judgment and granted defendants’ motion for summary judgment.

Eighth Circuit

Destifanes v. Bricklayers Local #1 of Mo. Supp. Pension Fund, No. 4:20-CV-00750-NCC, 2021 WL 842552 (E.D. Mo. Mar. 5, 2021) (Mag. Judge Noelle C. Collins). Plaintiff filed this action for declaratory relief contending that she was entitled to the proceeds of an ERISA-governed pension account as a surviving spouse. In doing so, she contended that her marriage had never dissolved and thus the decedent’s subsequent marriage to the named beneficiary under the pension was unlawful and did not entitle the subsequent wife to benefits. At the same time, probate proceedings were underway in Missouri court, involving substantially similar issues. The court had previously granted a motion to stay the federal ERISA case while the state court probate action proceeded. Plaintiff filed a motion to lift this stay, but the court denied the motion, finding that circumstances had not changed significantly, and that the probate claims could be tried as soon as next month.

Pleading Issues & Procedure

Second Circuit

American Family Life Assur. Co. of N.Y. v. Baker, No. 20-1435, — F.App’x –, 2021 WL 772281 (2d Cir. March 1, 2021) (Before Kearse, Katzmann and Carney, Circuit Judges).  Former Aflac employees appealed from a district court order compelling arbitration of their claims under ERISA and other federal statutes. On appeal, the former employees argued that Aflac’s arbitration agreement that they each signed was unconscionable and unenforceable because it operated as a prospective waiver of rights under ERISA and other federal statutes. They pointed to broad language in one paragraph that mandated arbitration of “any dispute” between a sales associate and the company, together with language in another provision that limited the scope of any arbitration to claims for breach of contract, fraud, or willfully tortious conduct. Appellants contended that under the agreement’s terms, they could not effectively vindicate their statutory rights. The proper remedy, they argued, was to void the agreement in its entirety. However, Aflac represented to the district court that it would waive the application of the problematic paragraph, making clear that the former employees would be able to raise their statutory claims in arbitration. The district court agreed and the court of appeals affirmed. The Second Circuit relied on its previous decision in Ragone v. Atlantic Video at Manhattan Center, 595 F.3d 115, 120 (2d Cir. 2010), and concluded that the problematic provision was a single, isolated provision in an otherwise valid arbitration agreement, which did not go to the core of the arbitration agreement. Accordingly, the court held that the agreement did not represent an integrated scheme to contravene public policy, and therefore the offending provision was severable.

Statute of Limitations

Third Circuit

Casale v. Local 158 Carpenter’s Union 1803, No. 20-4552 2021 WL 767933 (E.D. Penn. Feb. 26, 2021) (Judge Michael Baylson). A plan participant files suit for plan benefits three months after the three-year limitations period in his plan had run. The only issue in dispute was whether the defendant adequately pled that the suit was time barred in its answer. Plaintiff argued that the contractual limitations period of three years could not be raised by defendant because it was not included in the answer. Defendant argued that the affirmative defenses included in its answer were sufficient to put the participant on notice of its argument that the complaint was time barred. The court found that defendant’s second affirmative defense raising the statute of limitations was adequately pled and that defendant therefore did not waive the argument. Further, the court pointed out that the Supreme Court has specifically noted the importance of suit limitations provisions in this context and held that a three-year limitations provision, such as the one in this case, is reasonable. Accordingly, the court granted defendant’s motion for judgment on the pleadings.


Sixth Circuit

Sheet Metal Workers’ Health v. Stromberg Metal Works, Inc., NO. 3:19-cv-00976 2021 WL 780728  (M.D. Tenn. Mar. 1, 2021) (Judge Richardson)  Plaintiff in this ERISA action sought unpaid fringe benefits under the plan pursuant to collective bargaining agreements. Defendant employer asked to dismiss or transfer for improper venue. Where defendant was not located in Tennessee, and had no employees in Tennessee, Defendant argued that the case should be transferred to North Carolina, where it was located, as well as the plaintiffs.  Plaintiffs noted that under ERISA, suit may be brought where the plan is administered, and the third party administrator for the plan was located in Tennessee. The court noted that the plan was actually administered in both North Carolina and Tennessee. Where the bulk of the factors weighed in favor of transfer, Plaintiff’s preference was not enough to keep jurisdiction in Tennessee, and the case was transferred to North Carolina

Withdrawal Liability & Unpaid Contributions

Ninth Circuit

Carpenters Health & Sec. Tr. v. GHL Architectural Millwork, LLC, No. 2:19-CV-01030-RAJ, 2021 WL 779109 (W.D. Wash. Mar. 1, 2021) (Judge Jeffrey Maxwell). The trustees of a multiemployer plan sued a participating employer and others for breach of fiduciary duties for failing to timely pay fringe benefit contributions collected from an employee’s paychecks. The court granted plaintiff’s motion for a default judgment after defendants failed to respond to the complaint or to plaintiffs’ motion for default judgment. The sole owner of the employer company was found personally liable for damages caused by the breach of fiduciary duty because he had control of the plan assets. Defendants were also ordered to pay plaintiffs’ attorney’s fees of $8,440.00 and $735.00 in costs.