Becker v. Wells Fargo & Co., et al., No. 20-2016 (DWF/BRT), 2021 WL 1909632 (D. Minn. May 12, 2021) (Judge Donovan W. Frank). 

The Notable Decision this week exemplifies a recent trend in the courts to allow 401(k) participants in litigation challenging the appropriateness of certain investments to move forward on their class action complaints even where the named plaintiff is not invested in all of the funds being challenged.

In this case against Wells Fargo, Yvonne Becker, a single named plaintiff, brought this putative class action alleging breach of fiduciary duty and prohibited transactions for selecting and retaining 17 Wells Fargo proprietary funds for its own 401(k) plan. She alleges that these funds not only underperformed their benchmarks, but that the fees are higher than similar non-proprietary funds. In addition, she alleges that Wells Fargo added newly launched proprietary funds that had no historical performance to evaluate whether they were appropriate investment options for the plan. Becker claims the higher fees on the proprietary funds increases the salaries for executives who serve as the plan’s fiduciaries and were used as seed money for the newly launched funds. Becker invested her 401(k) savings in Wells Fargo/State Street Target Date Collective Trusts, one of several investment options being challenged.

Defendants moved to dismiss all of the claims other than those challenging funds in which plaintiff invested, arguing plaintiff does not have standing to challenge any other investment options. Defendants also moved to dismiss all claims, arguing the allegations fail to give rise to an inference of imprudence or disloyalty and the prohibited transaction claim fails to plead plausible allegations of self-dealing or party-in-interest transaction. 

The court denied the motion in its entirety. It first found plaintiff has standing to challenge all of the proprietary fund investment options because plaintiff seeks relief on behalf of the plan as a whole. The court noted that “Becker has plausibly alleged that defendants’ fiduciary violations caused broad-sweeping losses to other plan investments in which she did not invest that stemmed from defendants’ imprudent or disloyal conduct.” Earlier this month, the District Court of New Jersey similarly denied a motion to dismiss on the grounds plaintiffs lacked standing because they were not invested in all of the challenged funds explaining “the fact that Plaintiffs had not individually invested in every imaginable fund does not deprive them of their broader standing to ‘sue on behalf of the Plan and’[] seek relief under 1132(a)(2) that sweeps beyond [their] own injury.’’” In re Quest Diagnostics Inc. ERISA Litigation, No. 20-07936, 2021 WL 1783274 at *2 (D. NJ May 4, 2021) (quoting McGowan v. Barnabas Health, Inc., Civ. No. 20-13119, 2021 WL 1399870 (D.N.J. Apr. 13, 2021) (also finding plaintiffs had standing even though they were not invested in all of the challenged funds) (other citations omitted)). The defendants in these three cases argued that plaintiffs lacked standing under Thole v. U.S. Bank N.A., 140 S. Ct. 1615 (2020), reasoning that plaintiffs cannot be harmed if they were not invested in the challenged funds. Here, as in McGowan, the court rejected this, reasoning that “[t]his stretches Thole…too far.”

The court also rejected defendants’ arguments that the complaint failed to plead sufficient facts for breach of fiduciary duty, finding, to the contrary, that there were enough facts to infer that the decision-making process by the fiduciaries was tainted. The court also denied the motion to dismiss the prohibited transaction claims on the basis of an exemption. The court reasoned that an exemption is an affirmative defense that cannot be resolved on a motion to dismiss. Finally, the court found plaintiff sufficiently alleged Wells Fargo was a knowing participant in the prohibited transaction and had actual or constructive knowledge that the transactions were unlawful. 

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

Disability Benefit Claims

D.C. Circuit

Aveion Cason, et al., v. National Football League Players Association, et al., No. 1:20-cv-01875, 2021 WL 1840481 (D.C. Cir. May 7, 2021) (Judge Trevor N. McFadden). Plaintiff Aveion Cason and Donald Majkowski played in the NFL for years, suffered total & permanent disability (T&P) for which they received monthly disability benefits. Plaintiffs argued that a new Collective Bargaining Agreement (“2020 CBA”) negotiated between the NFL Teams and the players will decrease or eliminate their benefits.  As a result, plaintiffs filed this lawsuit against defendants – the association representing the NFL teams, the Players’ Association (i.e., Union) and two benefit plan Boards. Defendants moved to dismiss pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). As to counts 1-4, which allege violations stemming from changes made to plaintiffs’ T&P benefits in the 2020 CBA, the court dismissed those counts and held as follows:  (1) Plaintiffs lacked standing to challenge the proposed “whole person evaluation process” as this process could only harm plaintiffs at some future time and, as such, plaintiffs have failed to allege an injury in fact; and, (2) Plaintiffs’ challenge to the Social Security offset is unavailing as the relevant agreements do not create a vested right to T&P disability benefits. The court also dismissed counts 5 & 6, which allege that misrepresentations as to the benefit changes made in the 2020 CBA prevented players from mobilizing and challenging the proposed 2020 CBA before it was ratified, concluding that any injury plaintiffs will suffer from receiving less disability benefits is not fairly traceable to the alleged misrepresentations. The court also dismissed count 7, alleges that the Union failed to properly monitor the Boards, holding that any resulting injury is too tenuous. Finally, the court dismissed count 8, which alleges that the 2020 CBA was breached because the Social Security offset was added 10 days after the vote to ratify the 2020 CBA, explaining that plaintiff lacked standing to assert this claim because it was unclear whether a re-vote would redress plaintiffs’ alleged injury.

Sixth Circuit

Cassidy v. Aetna Life Ins. Co., Civil Case No. 6:19-cv-000201-GFVT, 2021 WL 1857297 (E.D. Ky. May. 10, 2021) (Judge Gregory F. Van Tatenhove). Plaintiff, a General Dynamics senior analyst, brought suit seeking disability benefits under an ERISA-governed employee benefit plan. Plaintiff was diagnosed at age 54 with chronic fatigue and chronic tonsillitis, chronic pharyngitis, throat pain, and fibromyalgia. She was awarded short term disability benefits but denied long term disability benefits.  The plan granted discretion to the insurer, Aetna, and therefore the abuse of discretion standard was applied by the court. Aetna determined that plaintiff’s occupation was sedentary and that her diagnoses did not prevent her from performing the duties of her occupation. She appealed and provided evidence of the Social Security Administration’s award of disability benefits for the same diagnoses. Despite this evidence, the court held that it was plaintiff’s responsibility to prove her disability, and concluded that she failed to provide sufficient evidence to support her claim. 

Seventh Circuit

Fetter v. United of Omaha Life. Ins. Co., No. 20-C-0633, 2021 WL 1842463 (E.D. Wis., May 7, 2021) (Judge Lynn Adelman). Plaintiff claimed disability benefits under an ERISA plan due to lumbar spondylosis and radiculopathy, and defendant denied the claim. In its written decision upholding the denial on administrative appeal, defendant accepted multiple medical opinions, including one that provided for restrictions on reaching and fine manipulation, and which therefore confirmed that the plaintiff would be unable to perform her job. The court concluded that because defendant had accepted those restrictions, defendant could not now reverse course and reject them, citing Gallo v. Amoco Corp., 102 F.3d 918, 923 (7th Cir. 1996) (“[i]f the justification that the plan administrator offers in court is inconsistent with the reason that he gave the applicant, the justification will be undermined”). Because the evidence in the record that defendant accepted as true established that plaintiff could not perform some of the material duties of her occupation, the court found that defendant’s denial of benefits was arbitrary and capricious. However, the court noted that it was unclear why plaintiff’s medical condition relating mostly to her lower body would restrict her ability to use her arms and hands. The court remanded the matter for a fresh administrative decision.

Eighth Circuit

Michaels v. Sedgwick Claims Management Services, Inc., et al., No. 4:20CV47 JCH, 2021 WL 1857107 (E.D. Mo. May 10, 2021) (Judge Jean C. Hamilton). Plaintiff Charon Michaels, a 65-year-old woman, was employed as an administrative assistant and unit clerk at Providence Health Center. The She was diagnosed with lumbago with sciatica, mechanical low back pain, sacroiliac joint pain, spinal stenosis of lumbar region, and chronic neck pain. The court held that Sedgwick did not abuse its discretion in denying short-term benefits initially and on appeal, as three peer reviewers opined that plaintiff was not disabled, leaving only subjective evidence as to plaintiff’s ailments. The court upheld the denial of long-term disability benefits because she has not yet completed the elimination period.

Ninth Circuit

Elkington v. Deseret Mut. Benefit Administrators Ins. Co., Case No. 4:20-cv-00317-CRK, 2021 WL 1840886 (D. Idaho May 7, 2021) (Judge Claire R. Kelly). The parties disputed plaintiff’s eligibility for long-term benefits under his disability plan and filed cross-motions for summary judgment. Plaintiff claimed his health conditions prevented him from working in any occupation, rendering him totally disabled as defined by the disability plan, and eligible for long-term disability benefits. Defendant argued that, given the deferential standard, the court could not substitute its judgment for defendant’s judgment and that defendant was justified in concluding, based on the record, that plaintiff could engage in sedentary work requiring limited walking or standing. When plaintiff submitted his long-term disability claim to defendant, defendant found that plaintiff was not disabled from completing “any occupation” because, despite the fact that plaintiff’s conditions limited his ability to work in his prior field, there were jobs that “are sedentary and do not require more than occasional standing and walking or lifting more than 10 pounds occasionally, and the salaries meet the required earnings potential of 70% of your pre-disability income.” The court held that defendant’s findings and decision were supported by the record, denied plaintiff’s motion for summary judgment, and granted summary judgment in favor of defendant.

ERISA Preemption

Eleventh Circuit

Patterson v. Hartford Life & Acc. Ins. Co., No. 21-CV-21255, 2021 WL 1945829 (S.D. Fla. May 14, 2021) (Judge Beth Bloom). Patterson, proceeding pro se, filed this action in Florida state court, arguing that Hartford had improperly terminated her long-term disability benefits. Hartford removed the case to federal court and filed a motion to dismiss based on ERISA preemption. Patterson filed a motion to remand the case to state court. The court granted Hartford’s motion, and denied Patterson’s. The court found that the plan at issue, which was sponsored by Amazon, was governed by ERISA, that Patterson’s claims were governed by ERISA, and as a result Patterson’s state law claims were completely preempted by ERISA. The court dismissed Patterson’s complaint, but gave her leave to amend, and cautioned Patterson that she needed to plead exhaustion of administrative remedies, which she had failed to do in her initial complaint.

Life Insurance & AD&D Benefit Claims

Second Circuit

Campbell v. We Transport, Inc., No. 20-1289, 2021 WL 1941636, (2d Cir. May 14, 2021) (Before Parker, Carney, and Menashi, Circuit Judges). In this unpublished opinion, plaintiff (the deceased’s sister) challenged the district court’s judgment holding that the insurer’s payment of life insurance benefits to the deceased’s adopted children, rather than to the estate to help cover the costs of funeral expenses was reasonable. The life insurance policy granted the insurer discretion, when no beneficiary is named, to pay the benefits at its option to the (1) estate, (2) legal spouse or (3) natural or legally adopted children. The court thus affirmed the district court’s decision.

Seventh Circuit

Alberth v. Southern Lakes Plumbing & Heating Inc., et al., Case No. 19-CV-62, 2021 WL 1923796 (E.D. Wis. May 13, 2021) (Magistrate Judge Nancy Joseph). Plaintiff sued his former employer and its owner for ERISA violations with regard to a life insurance plan in which he was a participant. At summary judgment, the court held that there was an ERISA plan in place with regard to the life insurance policy that insured plaintiff and that defendants’ failure to provide a copy of the life insurance policy to plaintiff violated ERISA Section 502(c), which permits civil actions by a participant or beneficiary “to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan.” The court further held that the plan had a cash value payment option, the cash value benefit continued after plaintiff’s employment ended, and awarded a penalty to plaintiff in the amount of $8,700.00 to compensate plaintiff for the defendants’ statutory violation of § 502(c) and $2,778.99 in prejudgment interest.

Medical Benefit Claims

Second Circuit

Benson v. Tiffany & Co., No. 20 CIV. 1289 (KPF), 2021 WL 1864035 (S.D.N.Y. May 10, 2021) (Judge Katherine Polk Failla). Plaintiff sued for reimbursement of dental expenses. Defendant brought a motion to dismiss. The court found that plaintiff failed to allege exhaustion of her administrative remedies as she did not file a timely second appeal. The court found that the first level denial did not establish that any further pursuit of plaintiff’s claims would be futile. The court declined to apply the doctrine of equitable tolling to the second appeal deadline to preserve the timeliness of her filing because plaintiff’s arguments were based on “mere administrative inconvenience,” which is insufficient. The court found plaintiff has not provided a basis for injunctive or equitable relief and her alleged harms can be compensated by money damages. The court then dismissed plaintiff’s claims for attorney’s fees based on the court’s dismissal of other claims and dismissed plaintiff’s request for jury trial as moot. 

Fourth Circuit

Walsh v. M-E-C Co., et al., No. 2:19-CV-1660-DCN, 2021 WL 1909904 (D.S.C. May 12, 2021) (Judge David C. Norton). The plaintiff, Martin J. Walsh, Secretary of Labor (“Secretary”) of the United States Department of Labor, moved for default judgment alleging defendants failed to remit certain participant insurance contributions under retirement plans in violation of its fiduciary duties under ERISA. The court found the Secretary properly alleged that defendants violated fiduciary duties of loyalty and care under ERISA by failing to remit employee contributions to the plans and by commingling these contributions with its general assets. The court also found the Secretary sufficiently alleged that the defendants failed to pay health premiums, resulting in retroactive cancellation of the health plan, and effectively abandoned the retirement plan which violated the duty of care. The court grants default judgment and issued an award to the Secretary. The court also granted the Secretary’s request for injunctive relief barring the defendants from acting in any fiduciary capacity with any ERISA-covered employee benefit plan. 

Pleading Issues & Procedure

Second Circuit

Garrett v. Provident Life & Cas. Ins. Co., No. 11-CV-00133(DG)(PK), 2021 WL 1946330 (E.D.N.Y. May 14, 2021) (Judge Diane Gujarati). Garrett filed an action in 2010 against Provident after Provident terminated her ERISA-governed long-term disability benefits. In 2011, the parties stipulated to remand the case to Provident for further evaluation. In 2016, five years later, Garrett submitted additional medical evidence to Provident, which Provident refused to consider because it was untimely. The court reopened the case, after which Garrett identified further evidence that she wanted to be considered at trial. Provident filed a motion in limine to exclude Garrett’s evidence. The court granted the motion, finding that Garrett had not demonstrated “good cause” under Second Circuit authority to introduce the evidence. The court ruled that nothing had impeded Garrett from producing the documents earlier, and there was no justification for the delay in producing them. However, the court did order Provident to produce a copy of its claim procedures, as a dispute had arisen during briefing regarding whether Provident had done so already.

Sixth Circuit

Bowen v. Dobbins, No. 3:20-CV-292, 2021 WL 1909654 (S.D. Ohio May 12, 2021) (Judge Michael J. Newman). Plaintiff Bowen was an employee of a pharmacy owned by Defendant Dobbins. When Bowen was terminated, she requested that her 401(k) retirement plan balance be paid in a lump sum, but Dobbins refused, and Bowen sued the 401(k) plan to recover the funds. Dobbins, on behalf of the pharmacy, then counterclaimed against Bowen, and made a third-party complaint against Bowen’s boyfriend, alleging various state law claims for relief based on allegations that Bowen and her boyfriend had stolen from the pharmacy. Bowen moved to dismiss the counterclaims, arguing that the pharmacy was not a proper party to the litigation. The court agreed and dismissed the pharmacy’s claims. The court noted that Bowen had sued the 401(k) plan, not the pharmacy, which was correct because ERISA benefit actions are traditionally brought against benefit plans, not against the employers who sponsor them. Because the pharmacy was not a party to the litigation, it was improper for it to file counterclaims and third-party claims.

Eighth Circuit

Tucker v. Express Scripts Health and Welfare Ben, Plan., Metropolitan Life Ins. Co., No. 4:20-CV-00987-NCC, 2021 WL 1857109 (E.D. Mo. May 10, 2021) (Judge Noelle Collins). The parties disagreed about whether Missouri or Minnesota law should be applied. Plaintiff argued the employer is a Minnesota company and MetLife delivered the applicable long-term policy to the employer in Minnesota. Defendant argued the Policy contained a choice of law provision stating that Missouri law governed. Plaintiff countered that defendants had not produced the policy when it was requested, and that they should be allowed to amend the complaint to include a claim for penalties for failure to produce plan documents if the Policy indeed controlled. The court determined that since the policy governed the relationship between the employer and MetLife, its disclosure to plaintiff was not required under 29 C.F.R. § 2560.503-1. The court then applied the policy’s choice of law provision for Missouri law. The court denied plaintiff’s request to serve discovery regarding MetLife’ potential conflict of interest because, under an abuse of discretion standard of review, conflicting medical opinions are not evidence of a conflict of interest that warrant permitting discovery. The court dismissed plaintiff’s breach of fiduciary duty claim because it concluded that it was a repackaged claim for benefits due. The substance of plaintiff’s allegations regarding the breach were rooted in the handling of his claim and whether a limitation on the period of benefits was properly applied. 

Ninth Circuit

Smith v. Cigna Health & Life Ins. Co., No. 3:20-CV-624-SI, 2021 WL 1895234 (D. Or. May 11, 2021) (Judge Michael H. Simon). Plaintiff filed suit alleging that Cigna improperly denied him health insurance benefits by refusing to reimburse him for some of his minor son’s covered treatment for Autism. Cigna filed a motion to dismiss Plaintiff’s complaint, alleging it was deficient because it (1) failed to allege that Cigna was liable for benefits under the plan, and (2) failed to allege that Cigna wrongfully denied Plaintiff’s claims. The court rejected Cigna’s arguments, noting that according to Ninth Circuit precedent, Cigna is a proper defendant in a suit under 1132(a)(1)(b) even if acted only as administrator, and not funder, of the employer Plan.


Eighth Circuit

Shafer v. Zimmerman Transfer, Inc., No. 1:20-CV-00023, 2021 WL 1851032 (S.D. Iowa May 5, 2021) (Judge Robert W. Pratt). The court resolved motions to dismiss by one defendant against the plaintiff and another between the two defendants via a cross-claim. Plaintiff’s suit revolved around whether plaintiff’s June 2017 emergency surgery was covered under his self-insured medical plan. One defendant cross-claimed for, essentially, indemnification. On plaintiff’s causes of action, the court dismissed his claim for interference with protected ERISA rights because he had not alleged an adverse employment action. It also dismissed his claim under ERISA Section 502(a)(3)(B) after finding it duplicative of his claim for denial of benefits. Asserting the relief sought (coverage/payment for the surgery) was legal in nature rather than equitable, the court concluded that it was not “appropriate equitable relief.” On the cross-claims, the court addressed three claims. In the first, Zimmerman, the plan sponsor, asserted that BPA, the claims administrator, was solely liable because Zimmerman delegated its discretionary authority to BPA. In the second, Zimmerman sought equitable relief in the form of indemnification or surcharge. In the third, Zimmerman asserted a common-law claim for indemnification. BPA argued all three amounted to claims for contribution or indemnity by a co-fiduciary that ERISA did not expressly or impliedly permit. Citing Eighth Circuit authority that there is no right of contribution under ERISA and that state-law claims are preempted, the court dismissed the third cross-claim. Turning to the second, the court noted that ERISA expressly permits a named fiduciary to delegate its fiduciary duty to another if provided for in the plan. If that occurred, the named fiduciary was not liable for a breach of fiduciary duty flowing from the delegated responsibilities. However, the court held this was properly raised as an affirmative defense because 29 U.S.C. § 1105(c) does not create a private right of action. Thus, the court dismissed the second cross-claim. As with plaintiff’s claim under Section 502(a)(3), the court held Zimmerman’s claim for relief for make-whole surcharge was a thinly veiled attempt to seek non-permitted indemnification. Because the relief was legal in nature, not equitable, the court dismissed the first cross-claim. In resolving both plaintiff’s and defendant’s claims for equitable relief, the court never discussed or cited Amara. 

Severance Benefit Claims

Second Circuit

Fromer v. Pub. Serv. Enter. Grp., No. 1:20-cv-963, 2021 WL 1873155 (N.D.N.Y. May 6, 2021) (Judge Gary L. Sharpe). A plan participant filed suit claiming entitlement to severance benefits. Defendants moved to dismiss, arguing that the participant failed to state a claim under section 502(a)(1)(B) of ERISA because an arbitrary and capricious standard was applicable, and its decision should be upheld because as reasonable. In response, the participant argued that, regardless of the standard of review, defendants’ motion should be denied. Although the court concluded that the plan administrator had discretionary authority under the plan, the court also found that plaintiff adequately pled the existence of an ERISA plan, that he was a beneficiary under the Plan and that defendants improperly denied him severance benefits. For these reasons, the Court denied the motion to dismiss.