Peters v. Aetna Inc., No. 19-2085, __ F.3d __, 2021 WL 2546412 (4th Cir. June 22, 2021) (Before Circuit Judges Agee, Floyd, and Thacker)

In this case, the Fourth Circuit covers the whole shebang of ERISA: standing, fiduciary status, party in interest status, restitution, surcharge, disgorgement, and declaratory and injunctive relief for both an individual and a class. This opinion, which reads like an ERISA treatise, serves as a reminder of the many layers that exist within ERISA and its equity-based common law. What is not layered is the issue at the core of the suit: money.  

Mars, Inc. operated a self-funded health care plan and hired Aetna as a claims administrator of the Plan pursuant to a Master Services Agreement (MSA). The MSA permitted Aetna to subcontract its work. In one area, Aetna did this by subcontracting with Optum to provide chiropractic and physical therapy services to Plan participants for more cost-effective prices than Aetna alone could provide. From there it got interesting. 

The MSA specified that Aetna was solely responsive for payments due to subcontractors. However, Aetna did not wish to pay Optum out of the fees it received from Mars through the Plan. Instead, Aetna requested that Optum “bury” its fee within the claims submitted by Optum’s downstream providers. By doing so, the Plan and its participants effectively would pay part or all of Optum’s administrative fee notwithstanding the contrary terms of the MSA. 

The plaintiff filed a class action alleging that Aetna and Optum breached their fiduciary duties to her and the Plan based on Aetna’s arrangement to have the Plan and its participants pay Optum’s administrative fee via the bundled rate. The suit sought to redress the harm Peters suffered due to this structure, but also for breach of fiduciary duty under ERISA on behalf of the Plan. 

Pursuant to § 502’s provisions, Peters made four primary claims for herself, the Plan, and the class members: restitution, surcharge, disgorgement, and declaratory and injunctive relief. The court reviewed each in turn. But, before doing so, it addressed standing. 

Was financial harm in the aggregate needed for standing?

Aetna/Optum argued that Peters lacked standing because she did not suffer a financial loss in the aggregate and thus had no injury. Because restitution is a form of “make-whole” relief that is generally equitable in nature, but is directly tied to remedying a financial injury, Peters must have been “down” financially. In simple terms, Peters sought return of amounts she contended that she and the Plan paid by reason of Aetna/Optum’s alleged breach of a fiduciary duty. 

What the Fourth Circuit clarified was that the financial loss analysis must be conducted at the individual claims level rather than the aggregate claims level. This was so because—in the context of standing, as opposed to the merits—the fact that Peters may have benefitted from the determination of certain claims did not offset the fact that she was harmed by others. Given that Peters had shown potential damages amounting to $7.38, she had satisfied the injury-in-fact requirement for Article III standing and could proceed with her claim for restitution on the merits. 

Even if Peters had failed to demonstrate a financial injury for standing purposes as to the restitution claim, her allegations revolving around breach of fiduciary duty provided her standing to pursue claims for surcharge, disgorgement, and declaratory and injunctive relief. This was because establishing a financial injury was unnecessary for each of these forms of relief. Rather, she had standing by enumerating the fiduciary duties she contended were owed to her and the Plan, and Aetna/Optum’s subsequent violation of these duties. That Peters also sued on behalf of the Plan did not alter this conclusion. 

Was Aetna an ERISA fiduciary and, if so, did it breach any of its duties?

Satisfied that Peters had standing, the court turned to the assessment of her claims on the merits. Yet in evaluating the merits, the court returned to the question of whether Peters had suffered a financial injury as to the restitution claim. This time the lens was broader, as the question was about the merits of the claim, not narrower, as it was in the court’s standing analysis. With this broader lens, the court determined the proper assessment was whether there was injury in the aggregate. On this question it found that Peters had not showed that she suffered an injury in the aggregate (the benefit of the Optum relationship via its cheaper network was greater than the increased administrative charges), and thus her individual claim for restitution under § 502(a)(1) and (3) failed. The court was unable to make the same determination for the Plan, so it remanded that question for a determination in the first instance. 

Having addressed the claims for restitution based on an assumption of fiduciary status, the court then turned to whether Aetna and Optum were fiduciaries. This was necessary for an evaluation of the claims for surcharge, disgorgement, and declaratory and injunctive relief. The court determined Peters had provided sufficient evidence for a reasonable factfinder to conclude that Aetna was operating as a functional fiduciary when it exercised both discretionary authority or control respecting management of the Plan or its assets, and had discretionary authority or responsibility in the administration of the Plan. Moreover, under the MSA, a reasonable factfinder could find that Aetna had discretionary authority and control to spend Plan assets because “charges of any amount payable under the Plan shall be made by check drawn by Aetna[.]”

The court found that, at Aetna’s discretion, it had imposed Optum’s administrative fee upon Peters and the Plan. But it had done so without authority under the Plan and in direct violation of the MSA. Further, the MSA gave Aetna authority to pay benefits on behalf of Mars. This power to draft checks on the Plan account constituted control over plan assets. All these qualified Aetna as a functional ERISA fiduciary. 

Next, the court evaluated whether Peters produced sufficient evidence to withstand summary judgment as to whether Aetna’s actions amounted to a breach of its fiduciary duty. The court concluded Peters had met her burden based on four breaches of fiduciary duty: (1) referring to Optum, and not the actual health care provider, as the “provider” of the medical services; (2) using “dummy codes” that did not represent actual medical services; (3) misrepresenting the “amount billed” as including Optum’s administrative fee; and (4) describing the Optum rate, which included its administrative fee, as the amount that the Plan and its participants, like Peters, owed for their claim.

Because all these breaches were related to explanations of benefits (EOBs), Aetna attempted to undercut Peters’ arguments by correctly noting that she had not relied on her EOBs. However, the Fourth Circuit held the lack of reliance was not fatal to a theory of fiduciary breach because a showing of detrimental reliance was unnecessary for any of her claims. 

In sum, regarding Aetna, the Fourth Circuit held the district court had erred in granting summary judgment to Aetna, as Peters produced sufficient evidence for a reasonable factfinder to conclude that Aetna was at least a functional fiduciary under ERISA and breached its corresponding fiduciary duties. Specifically, a reasonable factfinder could conclude that Aetna was unjustly enriched when avoiding payment of Optum’s administrative fee and causing Peters and the Plan to shoulder that expense, and thus Peters could argue for surcharge and disgorgement. Moreover, a reasonable factfinder could find declaratory and injunctive relief appropriate based on the misrepresentations in the EOBs. Thus, Peters withstood summary judgment on her claims for surcharge, disgorgement, and declaratory and injunctive relief under § 502(a)(1) and (3), and for her claims on behalf of the Plan for surcharge, disgorgement, and declaratory and injunctive relief—as well as possibly restitution—under § 502(a)(2).

Was Optum an ERISA fiduciary? If not, might Optum be liable as a party in interest?

The court agreed with the district court that Optum was not an ERISA fiduciary. This was because Aetna retained the reins in the Aetna-Optum contracts, which were negotiated at arm’s length and involved Optum conducting purely administrative services. The Aetna-Optum contracts did not delegate discretionary authority or control over the Plan or its assets to Optum. Rather, Optum served in an administrative role as a third-party vendor, which is generally insufficient to give rise to functional fiduciary status. 

Whether Optum was a party in interest engaged in prohibited transactions with Aetna was a separate issue. The district court ruled that Optum could not be a party in interest as a matter of law because Optum had no “pre-existing relationship[s]” with either the Plan or Aetna. The Fourth Circuit acknowledged that Optum had no prior relationship with the Plan before entering a service agreement with Aetna. But that meant only that Optum was not a party in interest at the time it entered the agreement. Optum could become a party in interest after the execution of the Aetna-Optum contracts, when it became a service provider to the plan—that is, by making available its network of providers to plan members like Peters. Thus, Optum could be a party in interest because it “provided services to the plan at the time [its administrative] fees were paid[.]” 

The Fourth Circuit concluded that Optum could be liable as a party in interest involved in prohibited transactions. Specifically, a reasonable factfinder could determine Optum had actual or constructive knowledge of the circumstances that rendered the bundled rate framework unlawful. As a result, even though Optum might not have been directly privy to the terms of the Plan, a reasonable factfinder could infer that Optum was fully aware of the questionable nature of the joint venture and concurred in it. Put another way, based on the record on summary judgment, Optum could be held liable as a party in interest involved in prohibited transactions based on its apparent participation in and knowledge of Aetna’s administrative fee billing model. 

Was there a class?

The Fourth Circuit held the district court abused its discretion in denying Peters’ motion for class certification when it failed to properly ascertain the full measure of available remedies. The district court analyzed ascertainability and commonality too rigidly. Specifically, the district court hinged its lack-of-ascertainability determination on its perception of Peters’ theory of financial injury. As explained above, however, Peters withstood summary judgment on claims that supported her request for certain equitable forms of relief on behalf of herself and the Plan—surcharge, disgorgement, and declaratory and injunctive remedies—without regard to financial injury. Thus, the district court’s basis for denying class certification as to surcharge, disgorgement, and declaratory and injunctive relief was erroneous. And the Plan’s entitlement to a remedy of restitution had yet to be determined. Thus, the issue of class certification was remanded for a full reevaluation under Rule 23. 

Brent Dorian Brehm, a partner at Kantor & Kantor, LLP, prepared this week’s notable decision summary. Brent has a particular interest in the subtleties of the equitable remedies at issue in Peters, having authored “Equitable Surcharge And Agency And Waiver, Oh My!” as published in Plaintiff magazine. Brent’s article is available HERE. When not suing insurance companies, he enjoys cycling and cartography.

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

Breach of Fiduciary Duty

First Circuit

Walsh v. Maine Oxy-Acetylene Supply Co., No. 2:20-CV-00326-NT, 2021 WL 2535942 (D. Me. June 21, 2021) (Judge Nancy Torresen). This is an action by the Department of Labor against Maine Oxy and various corporate officers, alleging violations of ERISA in the buyback of shares in an ESOP (employee stock ownership plan). One of the defendants, Carl Paine, was the ESOP trustee and a board member. He moved to dismiss, arguing that (1) the statute of limitations on the DOL’s breach of fiduciary duty claim had expired, and (2) he could not be liable for causing a prohibited transaction because he was not on the board at the time it voted to approve the purchase. The court denied his motion. First, the court found that the allegations against Paine constituted a breach of fiduciary duty by omission, and thus Paine’s duty was not triggered at the time the stock was assessed, but in fact was ongoing. As a result, the statute did not begin running until the ESOP buyback transaction was complete, and thus the DOL’s claim was not time-barred. The court also rejected Paine’s argument that he could not be liable for breach of fiduciary duty because he was not a member of the board of directors at the time the ESOP transaction was approved. The court noted that the complaint alleged otherwise, and in any event the DOL argued that even if Paine was not a board member at the time, as the trustee of the ESOP he allowed it to be sold at an improperly low price.

Third Circuit

Moon v. E.I. Du Pont De Nemours & Co., No. 1:19-CV-1856-SB, 2021 WL 2555503 (D. Del. June 21, 2021) (Circuit Judge Stephanos Bibas, sitting by designation). “Retirement-plan administrators must act with special care. Sometimes, they must even save participants from their own mistakes. DuPont may have owed that duty here.” Moon, a former DuPont employee, did not realize when he was eligible for his full pension, so he missed out on years of payments. He claimed that the company had a duty to be clearer about when he was eligible. DuPont responded that it had informed him a single time of his full pension eligibility date. However, when it did that, and in all subsequent communications, DuPont also referenced a fully irrelevant date. Because Moon had plausibly alleged that DuPont misled him, the court denied its motion to dismiss. 

Disability Benefit Claims

Ninth Circuit

Hall v. Aetna Life Ins. Co., No. 20-cv-01863, 2021 WL 2576870 (N.D. Cal. June 23, 2021) (Judge Richard Seeborg). Plaintiff challenged Aetna’s denial of her ERISA-governed long-term disability benefits. Plaintiff worked as a Relationship Manager for City National Bank (“CNB”), but when CNB refused to accommodate her longstanding back issues, plaintiff submitted a claim for benefits to Aetna with a disability date of September 21, 2015. Plaintiff’s orthopedic surgeon, Dr. Light, certified her disability. Plaintiff was to undergo back surgery and Aetna continued to pay benefits under the assumption that the surgery would take place soon, which it never did during the 3+ years she was on claim. Aetna learned that plaintiff filed a lawsuit against CNB for wrongful termination and discrimination. Additionally, instead of having surgery, plaintiff married and had a baby. In early 2017, plaintiff purchased a yoga studio (later alleging her only involvement was financial). Plaintiff did not volunteer any of this information, but Aetna learned it from other sources. Aetna continued to pay disability benefits until May 2019, when Dr. Light called to advise Aetna that he was no longer certifying plaintiff’s disability and signed a form to that effect. Aetna terminated plaintiff’s disability claim without further medical evidence. In January 2020, Social Security deemed plaintiff totally disabled. Plaintiff appealed Aetna’s denial, but did not submit new medical documentation. Plaintiff claimed that she did not undergo surgery because she lost her health insurance. Aetna performed a peer medical review and three attempts were made to speak with Dr. Light without success. Aetna upheld its decision on appeal. This lawsuit followed and the parties filed cross-motions for judgment. The de novo standard of review applied. Plaintiff raised five arguments attacking the procedural soundness of Aetna’s review, all of which the court found unavailing. The court held plaintiff did not meet her burden of proving her disability. Plaintiff did not provide evidence in support of her allegation that Dr. Light’s withdrawal was a consequence of a lapse in coverage, substantiation for the lapse in coverage, updated medical information from a new treating provider, or a reasonable explanation for the absence of a new treating provider. Judgment was entered in favor of Aetna.

Eleventh Circuit

Leghorn v. Prudential Ins. Co. of Am., No. 5:20-CV-217 (MTT), 2021 WL 2580187 (M.D. Ga. June 23, 2021) (Judge Marc T. Treadwell). The court granted Prudential’s motion for summary judgment on plaintiff’s claim for disability benefits under ERISA. Prudential terminated plaintiff’s benefits after one year, when her policy definition of disability switched from disability from her own occupation to disability from any gainful occupation. The court analyzed the evidence pursuant to the Eleventh Circuit framework for reviewing ERISA benefit decisions. The court reviewed the medical and vocational evidence as well as Prudential’s reasoning for declining to follow the Social Security Administration’s decision approving plaintiff for disability benefits. The court concluded that plaintiff had failed to show that termination of her benefits was arbitrary and capricious and found reasonable grounds for Prudential’s decision.


Seventh Circuit

Ramirez v. Wisconsin Masons Welfare Fund, No. 21-CV-101-JDP, 2021 WL 2530991 (W.D. Wis. June 21, 2021) (Judge James D. Peterson). Plaintiff moved for leave to conduct discovery in this ERISA lawsuit. Defendants contended that the court’s review should be limited to the administrative record as in a typical case brought under § 1132(a), which would preclude discovery. But as Ramirez noted, there was not a traditional administrative record in this case, i.e., a body of evidence that a plan administrator considered before denying a claim for benefits. Records of the trustees’ meetings might reveal what information the trustees considered before denying Local 599’s request for equitable apportionment. But the court would likely have to go beyond those records to evaluate Ramirez’s claims. For example, the court would likely need to consider how the fund apportioned assets when other participating local unions withdrew from participation. And it would likely need to review the fund’s financial records to determine what would constitute equitable apportionment in this case. Thus, the court allowed plaintiff to conduct discovery to develop the evidence that the court would need.

Midwest Operating Engineers Welfare Fund v. Davis & Son Excavation LLC, No. 19 CV 1153, 2021 WL 2588774 (N.D. Ill. June 24, 2021) (Magistrate Judge Young B. Kim). Plaintiffs (“the Funds”) brought this case pursuant to ERISA and the Labor Management Relations Act seeking an audit of Defendant’s records to identify any unpaid contributions owed and the payment of any amounts determined to be due along with audit fees, attorney’s fees, and costs. Before the court was the Funds’ motion for a protective order to bar discovery with respect to (1) the contractual relationship between the Funds and their attorneys. and (2) the amount of attorney’s fees the Funds had incurred. The Funds argued that the proposed discovery was unnecessary because attorney’s fees are a remedy under ERISA and asserted that if the Funds succeeded at trial, they would file a fee petition to establish the appropriate amount of fees to be recovered. Defendant argued that it was entitled to discover whether the Funds had actually incurred any fees. Defendant asserted that the local rules governing fee petitions addressed only the appropriateness of the amount of fees requested, not the “underlying agreement to pay or the arrangement between the purported attorney and client.” The court agreed with the Funds that Local Rule 54 governed the procedure, and that questions regarding the amount of fees or nature of the fee arrangements with counsel were premature at this time. Thus, defendant’s proposed discovery regarding the relationship between the Funds and their attorneys and the actual amount of fees the Funds had incurred was not relevant.

Ninth Circuit

Walker v. AT&T Benefit Plan No. 3, No. CV-21-00916-MCS(SKx), __ F.R.D. __, 2021 WL 2623231 (C.D. Cal. June 24, 2021) (Mag. J. Steve Kim). Plaintiff brought suit against his disability benefit plan, governed by ERISA, after the denial of his disability benefits. The litigation is subject to abuse of discretion review. The benefit plan sought a protective order barring all discovery other than the administrative record, which had already been produced. The court disagreed with the plan’s interpretation. It noted that the plan had failed to produce the entire record, as it had limited its production to those documents that third-party administrator Sedgwick “relied upon.” The court noted that although the plan and the third-party administrator were different entities, and there was no structural conflict of interest, that did not mean there could not be other bases for conflicts of interest. The court held that the requests for discovery for documents withheld from the administrative record were “incontestable.” The court agreed that the requests for documents related to conflicts of interest could also be proper, but only if the plaintiff could “proffer some objective facts from which the Court can plausibly infer the existence of a conflict of interest sufficient to justify proportional discovery about that conflict.” The court denied the motion for protective order and required the plan to produce the administrative record documents, and to meet and confer about the conflict of interest issue.

ERISA Preemption

Eighth Circuit

Neering v. AT&T, No. 4:21-00057-CV-RK, 2021 WL 2546724 (W.D. Mo. June 21, 2021) (Judge Roseann Ketchmark). After being denied short-term disability benefits under the AT&T plan, plaintiff brought this lawsuit claiming AT&T had discriminated against her based on a disability, committed harassment, and created a hostile work environment. Her allegations were tied to AT&T’s denial of her short-term disability claim under an ERISA plan, and therefore her claims were preempted by ERISA. The claims were dismissed, and plaintiff was given the right to amend her complaint to allege ERISA-based claims.

Exhaustion of Administrative Remedies

Ninth Circuit

G.N. v. Life Ins. Co. of N. Am., No. 20-CV-08907-HSG, 2021 WL 2633404 (N.D. Cal. June 25, 2021) (Judge Haywood S. Gilliam, Jr.). Plaintiff G.N. made claims for both short-term and long-term disability benefits under her employer’s ERISA-governed disability benefit plans, which were denied by defendant LINA. LINA moved to dismiss plaintiff’s complaint, arguing that (1) LINA was an improper defendant under plaintiff’s short-term claim, and (2) plaintiff failed to exhaust her administrative remedies under her long-term claim. The court denied LINA’s motion. First, the court found that under Ninth Circuit authority (Spinedex Physical Therapy USA Inc. v. United Healthcare of Arizona, Inc., 770 F.3d 1282, 1297 (9th Cir. 2014)), LINA, as a claim administrator that allegedly improperly caused the denial of plaintiff’s short-term claim, was a proper defendant. Second, the court noted that it was unclear from the complaint whether plaintiff had exhausted her long-term claim, and that her argument was “somewhat strained.” However, it chose not to dismiss the claim because the case was “not the ‘rare event’ where failure to exhaust is evident from the face of the complaint.” The court stated it would revisit the issue at the summary judgment stage, when it would “not hesitate to terminate” the case if LINA was able to prove a failure to exhaust.

Life Insurance & AD&D Benefit Claims

Fifth Circuit

Morgan v. Prudential Life Ins., No. 4:20-CV-01150, 2021 WL 2555645 (S.D. Tex. June 22, 2021) (Judge Kenneth M. Hoyt). This case involves a determination of the beneficiary of a life insurance policy. The policy owner originally named her two sisters as beneficiaries but years later, after suffering a severe stroke, she changed the beneficiary to her friend. The two sisters challenged the designation of the friend as the beneficiary because she was not designated on official policy forms. Both sides filed motions for summary judgment to determine the proper beneficiary. The court found in favor of the decedent’s friend using the doctrine of substantial compliance because the decedent attempted to change the beneficiary, which was confirmed in a phone call with the employer, and she had signed testamentary type documents expressing her intent to name her friend as beneficiary.

Medical Benefit Claims

Sixth Circuit

Kevin D. v. Blue Cross & Blue Shield of South Carolina, No. 3:19-CV-00934, 2021 WL 2590171 (M.D. Tenn. June 23, 2021) (Judge Aleta A. Trauger). Plaintiffs sought benefits for their minor son, J.D.’s, residential treatment. J.D. was diagnosed with several mental illnesses including disruptive mood dysregulation disorder and had a complex diagnostic picture. His behavioral problems including rages, hitting walls, destroying toys and property, lying, and tantrums. The court found that the plan language authorizing the plan to “pay all Covered Expenses directly to the Member upon receipt of a due proof of loss” was sufficiently clear to grant discretion under Sixth Circuit precedent. The court found that a deferential review was proper despite procedural errors raised by plaintiffs. Under a deferential review, the court found defendants appropriately used review criteria to assess medical necessity, and plaintiffs did not show that the criteria conflicted with the plan. The court found that the denial was supported by the record. The court acknowledged that under a de novo review, plaintiffs’ arguments regarding medical necessity “would make some headway” but not so under the “extremely deferential review that applies to the decision.” The court denied plaintiffs’ motion regarding the federal parity act claims because it found the plaintiffs did not present any evidence regarding defendants’ application of their medical necessity criteria in the medical/surgical context for purposes of their “as applied” challenge. The court granted summary judgment to the defendants.

Tenth Circuit

D.K. v. United Behavioral Health, No. 2:17-CV-01328-DAK, 2021 WL 2554109 (D. Utah June 22, 2021) (Judge Dale A. Kimball). Plaintiffs sought mental health benefits for residential treatment. In the 20 months before A.K.’s residential admission at issue, A.K. had a suicide attempt, eleven psychiatric emergency room visits, five inpatient hospitalizations, four stints of residential treatment, six enrollments in partial hospitalization, and weekly therapy. The court found that none of this treatment proved sufficient to keep A.K. from self-harming. The first two denials were based on an exclusion which had been deleted from the Plan. The third and fourth denials were based on lack of medical necessity. In applying a deferential review, the court found defendants abused their discretion in finding that A.K.’s care had become “custodial” under the Plan because the services provided – such as physician visits and therapy – could not be rendered by a medically unskilled person. The court found that defendants abused their discretion by not fairly engaging with A.K.’s treating professionals’ opinions. The court found that defendants did not acknowledge A.K.’s serious mental health history, and “shut their eyes to readily available information when the evidence in the record suggests that the information might confirm the [Plaintiffs’] theory of entitlement” (quoting Gaither v. Aetna Life Ins. Co., 394 F.3d 792, 807 (10th Cir. 2004)). The court concluded that the denials were arbitrary because they lacked “any analysis, let alone a reasoned analysis,” consisting of “nothing more than conclusory statements.” The court found that defendants’ shifting and inconsistent denial rationale was arbitrary and capricious. The court found remand was not required and ordered defendants to pay for A.K.’s treatment. 

Pension Benefit Claims

Fifth Circuit

Chetlin v. Exxon Mobil Oil Corp., No. 20-20641, __ Fed. Appx. __, 2021 WL 2492771 (5th Cir. June 17, 2021) (Before Circuit Judges Davis, Stewart, and Dennis). Plaintiff filed this suit against Exxon Mobil after it denied her claim for her deceased ex-husband’s ERISA-governed retirement benefits. At the district court, Exxon filed a motion for summary judgment arguing that it was not the proper defendant, plaintiff failed to exhaust her administrative remedies, and its denial was supported by the record and the terms of relevant plan documents. On appeal, plaintiff argued that the district court erred in granting summary judgment because (1) there was a material dispute as to whether Exxon was the proper defendant; (2) the benefit determination was incorrect; and (3) the administrative record was incomplete. The Court was unpersuaded by plaintiff’s arguments. For example, it noted “Plaintiff’s disagreement with Exxon’s numbers is of no consequence because she provides no evidentiary support for her claim that the benefits determination is incorrect. Rather, she merely speculates that Exxon has not provided a complete and accurate record to support its calculations. As the district court properly concluded, that is not enough to survive summary judgment.” Thus, the Fifth Circuit affirmed.

Clark v. Certainteed Salaried Pension Plan, Case No. 20-30059, __ Fed. Appx. __, 2021 WL 2620557 (5th Cir. June 24, 2021) (Before Circuit Judges Barksdale, Elrod, and Ho). Plaintiff Clark appealed the entry of summary judgment against him and the Fifth Circuit affirmed. Defendant Saint-Gobain Retirement Income Plan is an ERISA-qualified retirement plan. Defendant CertainTeed Salaried Pension Plan is a sub-plan of the Saint-Gobain Retirement Income Plan, which is generally limited to those who were employees of CertainTeed or select affiliates prior to January 1, 2001. Plaintiff began working for GS Roofing in 1989, which was part of a Saint-Gobain-controlled group of corporations. In 2007, plaintiff transferred to a position with CertainTeed. Plaintiff believed himself to be a participant in the CertainTeed Plan, but in 2017, it was discovered that a “coding error” placed him in the incorrect plan and that he was actually a participant in the Saint-Gobain Plan. Plaintiff was denied retirement benefits under the CertainTeed Plan because he did not become an employee until 2007. Plaintiff appealed the decision to the Saint-Gobain Plan, which denied the claim on the same ground. Plaintiff sued both plans to recover benefits. Saint-Gobain’s pension administrator testified that it had resolved a discrepancy between plaintiff’s pension records and payroll records in favor of the payroll records. It further testified that the benefits committee had been notified of the correction to plaintiff’s records during the appeals process. Finally, it testified that the 1-A code used in plaintiff’s records corresponded with participation in the CertainTeed Plan only for those individuals who had been employed by CertainTeed before January 1, 2001. The district court granted defendants summary judgment on all counts. The Fifth Circuit affirmed, finding that the CertainTeed Plan clearly provided that “an individual who becomes an Employee on or after January 1, 2001 shall not be eligible to become a Participant.” Exceptions are made only for those who, among other things, (1) were participants in the plan prior to January 1, 2001, or (2) ceased to be active participants due to transfer or termination. Individuals qualify as “employees” by working for either CertainTeed or a CertainTeed affiliate that “adopts t[he] Plan with the consent of the Board of Directors.” “Affiliate” was defined broadly as “any employer which is included as a member with the Company in a controlled group of corporations.” The court rejected plaintiff’s argument that he had been a qualifying employee and participant in the CertainTeed Plan since 2000 (i.e., once he worked for GS Roofing long enough following its acquisition by Bird Corporation). The court found it was undisputed that neither of the entities for which Clark worked – GS Roofing or Bird Corporation – ever “adopt[ed]” the CertainTeed Plan “with the Consent of the Board of Directors.” The court found that plaintiff did not begin working for CertainTeed proper until 2007, i.e., after January 1, 2001. Accordingly, plaintiff was ineligible for benefits under the CertainTeed Plan, and thus the Fifth Circuit affirmed the denial of his claim.

Pleading Issues & Procedure

Third Circuit

Visnefski v. Truist Bank, Case No. 3:20-CV-1432, 2021 WL 2530642 (M.D. Pa. June 21, 2021) (Judge Christopher C. Conner). Plaintiff worked at Truist Bank for fourteen years. Her compensation included health insurance through an employee benefit plan pursuant to ERISA. Plaintiff was terminated in August 2019 and filed a lawsuit against her former employer. Plaintiff alleged, in part, that her termination was wrongful and due, in part, to her use of ERISA-protected health insurance benefits. Count Six of the complaint alleged that defendant interfered with plaintiff’s right to receive benefits under her employment plan when it fired her, in violation of Section 510 of ERISA, 29 U.S.C. § 1140. The court found that plaintiff could establish a prima facie case of ERISA interference by demonstrating prohibited employer conduct taken for the purpose of interfering with the attainment of any right to which the employee may become entitled. The court found that the complaint provided enough factual allegations to proceed to discovery. The court found that plaintiff alleged that she used her ERISA coverage, which she stated was expensive, in connection with her various medical conditions. She further claimed that defendant fired her because of “her use of ERISA-protected health insurance benefits.” The court held that these allegations, read together and accepted as true, made for a plausible theory that defendant fired plaintiff at least in part because of her use of ERISA benefits. Accordingly, the court denied defendant’s motion to dismiss Count Six.

Eleventh Circuit

Lord v. American Gen. Life Ins. Co., Civ. No. 4:21-cv-00031, 2021 WL 2546454 (S.D. Ga. Jun. 21, 2021) (Judge R. Stan Baker). Plaintiff filed a complaint against the insurer of his employer’s group disability plan for terminating her benefits in 2015. The plan included an elimination period during which an insured had to be disabled from “any gainful occupation” before the employee could be eligible for benefits. It also included a three-year contractual limitation on suit. Plaintiff had previously sued the insurer in 2017, alleging breach of contract.  In that case the court found for the insurer on summary judgment, ruling the denial was not arbitrary or capricious. The insurer moved to dismiss the new complaint as barred by res judicata and the contractual limitation on suit. The court agreed with the insurer that the prior litigation barred the current complaint under res judicata rules, and that it was also barred by the three-year limitation on suit.

Provider Claims

Third Circuit

Lutz Surgical Partners v. Aetna, Inc., 3:15-CV-02595 (BRM)(TJB), 2021 WL 2549343 (D. N.J. June 21, 2021) (Judge Brian R. Martinotti). In this complex case between medical providers and Aetna over the alleged underpayment of ERISA-governed healthcare benefits, the court considered cross-motions for summary judgment. In analyzing the issues, the Court ruled that (1) Aetna Health was a proper defendant, (2) Aetna Inc. was an improper defendant, (3) plaintiffs had standing to bring some of their claims as assignees of plan beneficiaries, but did not have standing for other claims due to invalid assignments, (4) Aetna breached its fiduciary duties under ERISA by conducting unlawful cross-plan offsetting (i.e. refusing to pay or reducing a payment under one plan in order to recover benefits paid under another plan), and (5) Aetna’s state law defenses and counterclaims were preempted by ERISA. The court ordered the parties to meet and confer regarding the amount of damages to be awarded to plaintiffs.

Standard of Review

Sixth Circuit

Martin v. Guardian Life Ins. Co. of Am., No. 5:20-507-DCR, 2021 WL 2516083 (E.D. Ky. June 15, 2021) (Judge Danny C. Reeves). The court determined that it should apply the arbitrary and capricious standard of review in reviewing Martin’s claim for long-term disability benefits under ERISA. Although the plan contained language specifying that defendant had discretionary authority in making benefits determinations, Martin argued that he was entitled to de novo review because Guardian did not comply with claims procedure rules under 29 C.F.R. § 2560.503-1 when it failed to render a decision on Martin’s appeal within 45 days. The court acknowledged that there were valid legal arguments for altering the standard of review, but cited precedent to conclude that the administrator’s failure to act on an appeal did not affect the standard of review; rather the plaintiff’s remedy was to consider his administrative remedies exhausted and pursue relief in court.