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

Breach of Fiduciary Duty

Third Circuit

Johnson v. The PNC Financial Services Group, Inc., No. 2:20-CV-01493-CCW, 2021 WL 3417843 (W.D. Pa. Aug. 3, 2021) (Judge Christy Criswell Wiegand). In this case plaintiffs alleged that defendants, ERISA plan fiduciaries, breached their duties of prudence and loyalty by overpaying certain administrative and record-keeping services and that these excessive fees and costs demonstrated imprudence and disloyalty. Defendants brought a motion to dismiss. The court ruled that plaintiffs’ allegations “stop short of crossing the threshold from possible to probable.” The court found that the plan’s recordkeeping fees trended downward for the period at issue which pointed in the direction of prudence, not imprudence. The court ruled that plaintiffs’ claims for failure to monitor could not stand without a viable claim for breach of fiduciary duty. The court granted the motion to dismiss with leave to amend.

Class Actions

Second Circuit

In re Omnicom ERISA Litigation, No. 20-CV-4141, 2021 WL 3292487 (S.D.N.Y. Aug. 2, 2021) (Judge Colleen McMahon). The five plaintiffs in this putative class action are current or former participants in Omnicom’s 401(k) group retirement savings plan. Plaintiffs allege defendants mismanaged the plan due to prolonged inclusion of certain funds and excessive recordkeeping fees and expense ratios. Defendants filed a motion to dismiss allegations related to investment funds in which the named plaintiffs did not invest. The court held that because plaintiffs could not have been harmed by the mismanagement of funds in which they did not invest by their own choice, plaintiffs did not suffer any cognizable injury-in-fact that would confer Article III standing. Accordingly, the court dismissed plaintiffs’ allegations related to the plan’s offering of certain funds. The court denied the remainder of defendants’ motion to dismiss.

Eleventh Circuit

Kinder v. Koch Indus., Inc., No. 1:20-CV-02973-MHC, 2021 WL 3360130 (N.D. Ga. July 30, 2021) (Judge Mark H. Cohen). In this case involving breach of fiduciary duties relating to the management of the Georgia-Pacific LLC Hourly 401(k) Plan, the Georgia-Pacific LLC 401(k) Retirement Savings Plan, and the Koch Industries Inc. Employees’ Savings Plan, the parties reached a settlement agreement. The court issued an order preliminarily approving the settlement agreement as fair, reasonable, and adequate to warrant sending notice of settlement to class members. The court approved the proposed notices of settlement and set a date for a fairness hearing, after which class counsel would file papers in support of the final approval of the settlement agreement.

Disability Benefit Claims

Ninth Circuit

Hulbert v. Hartford Life & Acc. Ins. Co., No. 20-CV-03687-BLF, 2021 WL 3291888 (N.D. Cal. Aug. 2, 2021) (Judge Beth Labson Freeman). Plaintiff filed suit in response to the denial of his claim for long-term disability benefits. Under a de novo standard of review, the court granted Hartford’s Rule 52 motion for judgement, while denying plaintiff’s motion for the same. The court relied primarily on the “consistent opinions of [Plaintiff’s] treating physicians, who found that [plaintiff] was not disabled.”

Scott v. Standard Ins. Co., No. CV-20-8094-MWF (EX), 2021 WL 3406649 (C.D. Cal. Aug. 4, 2021) (Judge Michael W. Fitzgerald). Plaintiff Scott filed suit in response to the denial of his claim for life insurance waiver of premium benefits as well as long term disability benefits. The court held that Scott failed to carry his burden of showing by a preponderance of the evidence that he was disabled within the meaning of the plan. It also affirmed Standard’s denial of waiver of premium benefits, finding that Scott abandoned this claim on appeal.

ERISA Preemption

Ninth Circuit

Zimmerman v. The Guardian Life Ins. Co. of America, No. 4:21-CV-3346-YGR, 2021 WL 3271391 (N.D. Cal. July 30, 2021) (Judge Yvonne Gonzalez Rogers). Plaintiff Zimmerman brought this action against Guardian based on Guardian’s alleged miscalculation and misinformation of Zimmerman’s benefits under his former employer’s benefit plan. Zimmerman brought five causes of action: (1) recovery of employee benefits under 29 U.S.C. § 1132(a)(1)(B); (2) equitable relief under 29 U.S.C. § 1132(a)(3); (3) failure to produce plan documents; (4) negligent misrepresentation; and (5) intentional infliction of emotional distress. Defendants moved to dismiss, arguing that Zimmerman’s state law claims were preempted by ERISA. The court found that plaintiff’s claims for negligent misrepresentation and intentional infliction of emotional distress were not preempted by ERISA because they were based on common law negligence principles and did not have a connection to an ERISA plan.

Pension Benefit Claims

Ninth Circuit

Kurisu v. Svenhard Swedish Bakery Supp. Key Mgmt. Ret. Plan, No. 20-CV-06409-EMC, 2021 WL 3271252 (N.D. Cal. Jul. 30, 2021) (Judge Edward M. Chen). The plaintiffs are former employees of a bakery, and filed suit seeking payment of pension benefits. The owners of the bakery were named as individual defendants. The individual defendants allegedly promised the employees a pension of at least 30% of their salaries at their time of retirement, for life. After plaintiffs retired, the defendants paid only a portion of that amount and denied that any plan documents existed. Defendants then sold the bakery and all pension benefits ceased. The individual defendants filed two motions to dismiss and produced a written plan that conflicted with the alleged promises. The court rejected the individual defendants’ argument that they were not proper defendants under ERISA and were not plan administrators. The court did agree, however, that the individuals could not be held personally liable. The court further ruled that exhausting administrative remedies would have been futile as the new owners claimed the pension plan did not apply to them. The court also held that if the plan was not a “top hat” plan, equitable estoppel could not expand benefits beyond what was provided in the plan document. It dismissed that claim without prejudice while the issue of whether the plan was a “top hat” plan was determined.

Pleading Issues & Procedure

Fifth Circuit

Lirette v. Symetra Life Ins. Co., No. 20-2954, 2021 WL 3362941 (E.D. La. August 3, 2021) (Judge Nannette Jolivette Brown). In this case for disability benefits under an ERISA plan, Symetra filed a motion to dismiss, arguing that the court lacked jurisdiction over the matter because the amount in controversy did not exceed $75,000. The court denied the motion. The court considered the amount of damages at issue and estimated attorney’s fees to determine that the plaintiff had established by a preponderance of evidence that the amount in controversy was satisfied.

Sixth Circuit

Boyle v. United States Parcel Service, No. 3:20-CV-541-DJH-LLK, 2021 WL 3432887 (W.D. Ky. Aug. 5, 2021) (Judge David Hale). Plaintiffs alleged that the plan administrator of UPS employee benefit plans Plan 524 and Plan 525 violated the terms of the plans in numerous ways, including ending plan benefits to retirees too early, ending spousal benefits, and failing to complete forms for plan participants to be eligible for Medicare. Defendants filed a motion to dismiss for lack of standing. The court found that the plaintiffs had failed to plead an individualized injury-in-fact sufficient for Article III standing for their breach of fiduciary duty claims under 29 U.S.C. § 1132(a)(2) and § 1132(a)(3). Plaintiffs alleged the plan administrator mismanaged the plans which caused injury to plan members and would cause injury in the future – but the court stated that harm to other plan members or potential future harm was not a specific, present threat to support their claims. The court dismissed the plaintiffs’ claims without prejudice for lack of subject matter jurisdiction, and granted plaintiffs leave to amend their complaint to correct the defects.

Seventh Circuit

Employers & Operating Engineers Local 520 Pension Fund v. A&A Companies, No. 3:21-CV-57-MAB, 2021 WL 3287765 (S.D. Ill. Aug. 2, 2021) (Magistrate Judge Mark A. Beatty). Five employee benefits funds sued signatories to a collective bargaining agreement for unpaid contributions to various employee fringe benefit funds. The defendants did not answer, and default was entered against them. Two weeks later, defendants filed a motion to compel arbitration. The court denied the motion on two grounds: (1) defendants did not dispute the default, so there was no “good cause” to set aside default and (2) neither the relevant fund agreements nor the collective bargaining agreement evidenced the intention to require the claims to be submitted to arbitration.  

Hesse v. Case New Holland Indus., No. 20-CV-1267-JPS, 2021 WL 3272031 (E.D. Wis. July 30, 2021) (Judge J.P. Stadtmueller). Plaintiff Hesse alleged that his employer’s pension plan should be estopped from recouping alleged overpayments from his benefit payments. The court dismissed the case because plaintiff brought a claim for equitable relief under ERISA but did not allege that the defendant ever violated ERISA or the terms of the benefit plan. Without any basis in ERISA, the court declined to evaluate whether plaintiff sufficiently pleaded federal common law claims.

Ninth Circuit

Local 640 Trustees of IBEW v. Cigna Health & Life Ins. Co., No. CV-20-01260, 2021 WL 3290534 (D. Ariz. August 2, 2021) (Judge Michael T. Liburdi). The trustees of a self-funded multiemployer plan executed an Administrative Services Agreement (“ASO”) with Cigna to provide claims administration. The ASO contained mandatory dispute resolution procedures. The Trustees requested an Executive Review, which was step one of these procedures, claiming that Cigna breached its fiduciary duties under ERISA, breached the ASO, and engaged in overpayment and self-dealing. Subsequently, the Trustees asserted that the Executive Review would not resolve the dispute and recommended that the parties move directly to mediation. Instead of engaging in mediation, however, the Trustees brought this lawsuit asserting claims for breach of fiduciary duty and prohibited transactions under ERISA. Relying on the ASO, Cigna moved to compel arbitration. The Trustees argued: (1) the Fund, not the Plan, is a party to the ASO and the Plan is not bound by the ASO; and (2) the arbitration agreement does not encompass the alleged claims which concern only Cigna’s distinct, preexisting statutory obligations under ERISA. As to (1), the court applied the “direct benefit test” and explained that the court would not allow the Plan to claim the benefits of the ASO while simultaneously avoiding its burdens. The court also noted that it was ambiguous as to whether the Fund and Plan were distinct entities. Because the direct benefit test was satisfied, the court concluded that the Plan was bound by the ASO. As to (2), the court noted that the alleged ERISA claims necessarily referenced the ASO. Additionally, the allegations in the complaint were virtually identical to the allegations asserted by the Trustees in its request for Executive Review by Cigna. Because the matters underlying the Trustees’ claims touched on matters covered by the arbitration agreement, the court found those claims must be arbitrated. Finally, the court noted that if there were any doubts concerning the scope of arbitration, those issues should be resolved in favor of arbitration. The court thus granted Cigna’s motion to compel arbitration.

Provider Claims

Third Circuit

Alkon, M.D., PC v. Cigna Health & Life Ins. Co., No. 2:20-CV-02365, 2021 WL 3362562 (D.N.J. Aug. 3, 2021) (Judge William J. Martini). Plaintiff, an out-of-network medical provider, alleged that Cigna under-reimbursed for post-mastectomy breast reconstruction surgical services for a patient. Cigna had previously moved to dismiss; the court granted that motion and dismissed the case with prejudice. Plaintiff filed a motion for reconsideration. The court wrote that “for the fourth time in one year,” the question before the court is whether a designated authorized representative has standing under ERISA to challenge adverse benefits determinations in federal court where the patient’s plan contains an anti-assignment provision. The court wrote: “Again, the Court concludes that the answer is no.” In addition to the anti-assignment provision ruling, the court found that a Designation of Authorized Representative did not amount to a power of attorney sufficient for representation in litigation. The court thus denied plaintiff’s motion for reconsideration.

Sixth Circuit

AeroCare Med. Transp. Sys. v. Tractor Supply Co., No. 3:20-CV-00179-PX, 2021 WL 3406685 (M.D. Tenn. August 4, 2021) (Judge Aleta A. Trauger). Before the court in this matter were cross-motions for judgment on the administrative record. Plaintiff brought this case under ERISA seeking to recover expenses incurred in connection with air ambulance transportation services it performed in 2017. The record did not reflect that any effort was made to obtain preauthorization for the air transport. Because no formal request for preauthorization was made, defendant was not required to issue a pre-transport denial letter, or, for that matter, an approval. The plan required “Preadmission Review and Pre-Authorization.” The court found plaintiff’s arguments in support of its motion for judgment to be without merit and thus granted defendant’s motion for judgment.

Subrogation/Reimbursement Claims

Ninth Circuit

P&B Intermodal v. Johnson, No. 2:21-cv-0603, 2021 WL 3418449 (E.D. Cal. August 5, 2021) (Magistrate Judge Carolyn Delaney). Plaintiff, the plan administrator of a self-funded medical benefit plan, paid over $32,000 in medical expenses for injuries Johnson, a plan beneficiary, sustained in a motor vehicle accident. Johnson settled her lawsuit against the tortfeasor and was on notice that plaintiff had a lien prior to the settlement of her lawsuit, but did not reimburse plaintiff for any of the medical expenses paid by the plan. Plaintiff brought a section 502(a)(3) action to enforce subrogation and reimbursement rights set forth in the plan. Johnson did not answer and plaintiff moved for a default judgment. The court granted plaintiff’s motion for default judgment based on its application of the seven factors set forth in Eitel v. McCool, 782 F.2d 1470 (9th Cir. 1986). The court determined that plaintiff met its burden and was entitled to a constructive trust upon the settlement funds in Johnson’s actual or constructive possession.

Old Dominion Freight Line Inc. v. Bowman, No. CV-20-01292-PHX-DLR, 2021 WL 3371533 (D. Ariz. Aug. 3, 2021) (Judge Douglas L. Rayes). Bowman, a beneficiary of Old Dominion’s medical benefit plan, was injured in a motorcycle accident. The plan paid $137,175.99 of Bowman’s resulting medical expenses. Bowman filed suit against third parties as a result of the accident and recovered $100,641.74. Plaintiffs then brought this lawsuit under 29 U.S.C. § 1132(a)(3) to enforce a reimbursement clause in the summary plan description (SPD) against Bowman. Plaintiffs sought an equitable lien over Bowman’s third-party settlement funds to reimburse the plan for the medical expenses it paid on his behalf. Bowman counterclaimed against plaintiffs, alleging that they failed to furnish the required plan documents and seeking statutory penalties under 29 U.S.C. § 1132(c). The court denied Bowman’s motion because it was time-barred, as it was brought more than a year after the cause of action accrued. The court granted plaintiffs’ motion because the SPD was a formal plan document, and awarded $137,175.99 in reimbursement.

Withdrawal Liability & Unpaid Contributions

Eighth Circuit

Marshall v. Anderson Excavating & Wrecking Co., No. 19-3040, __ F.4th __, 2021 WL 3436326 (8th Cir. Aug. 6, 2021) (Before Circuit Judges Smith, Colloton, and Erickson). The trustees of a multiemployer pension plan sued a participating employer for failing to pay contributions to the plan in accordance with a collective bargaining agreement (CBA). In a previous appeal, the employer successfully argued that the district court erred in applying the alter-ego doctrine to justify an award of unpaid contributions for an alleged employee’s work. On remand, the district court complied with the Eighth Circuit’s ruling and removed all contributions for the alleged employee’s work and recalculated the amount of prejudgment interest, liquidated damages, and attorneys’ fees. The employer appealed again, challenging this new calculation. First, the employer challenged the award of prejudgment interest because it contended the rate was not in the CBA and it had never agreed to the interest rate in the plan. The Eighth Circuit rejected this argument, finding that the employer had agreed to be bound to the plan’s rules. The court also found that the employer’s arguments based on Nebraska usury law were preempted by ERISA, and that the district court properly corrected the inaccurate interest amount requested by the trustees. The Eighth Circuit also affirmed the liquidated damages award because it was properly based on the prejudgment interest calculation. Finally, the Eighth Circuit affirmed the award of attorney’s fees. The court ruled that the district court’s recalculation of the fee award on remand did not violate the rule of mandate because the Eighth Circuit had explicitly declined to rule on the issue in the first appeal. The Eighth Circuit also found that the district court did not abuse its discretion in awarding fees because the award was proportional to the degree of success, created a sufficient deterrent, and was appropriately reduced to encourage plaintiffs “to take a more measured approach to their pursuit of claims against employers.”

Nesse v. Green Nature-Cycle, LLC, No. 20-2365, __ F.4th __, 2021 WL 3412123 (8th Cir. Aug. 5, 2021) (Before Circuit Judges Smith, Shepherd and Grasz). The trustees of five multi-employer fringe benefit funds sued Green Nature-Cycle, LLC under ERISA, alleging defendant failed to contribute to the funds on behalf of its non-union employees. Plaintiffs sought to collect from defendant the delinquent contributions, interest, costs, and attorney’s fees. The parties filed cross-motions for summary judgment; the district court granted plaintiffs’ motion and ordered defendant to pay plaintiffs’ attorney’s fees. Defendant appealed, and the Eighth Circuit affirmed. The Eighth Circuit found that the collective bargaining agreement at issue unambiguously required defendant to contribute funds for non-union employees. The court further found that plaintiffs were not precluded or estopped from pursuing remedies simply because defendant had been audited, which defendant contended conclusively resolved the issue of what amounts were owed to the funds for fringe benefits to non-union employees. The court found that plaintiffs were not in privity with any parties to the audit, the audit occurred because defendant failed to pay its employees, defendant did not cooperate during the audit, and even after it was ordered to pay its employees the delinquent wages and benefits, defendant failed to do so. The court further concluded that the district court did not abuse its discretion in awarding attorney’s fees.

Ninth Circuit

Northwest Admins., Inc. v. Valley Pump, Inc., No. 2:20-CV-01343-BAT, 2021 WL 3288131 (W.D. Wash. August 2, 2021) (Judge Brian A. Tsuchida). At issue in this case are contributions to a collectively-bargained pension fund. Defendant did not dispute that it was required to make the contributions. Instead, it challenged the amounts owed pursuant to the collective bargaining agreement (“CBA”) because it believed the CBA was not signed by a necessary signatory. Alternatively, assuming that it was bound to the CBA, defendant argued that plaintiff’s claims were barred by latches because defendant paid for the same benefits to its employees, and/or that plaintiff had waived any right to the contributions. Regarding the signature issue, the court held that while defendant might dispute the validity of the signature, the dispute did not raise a genuine issue of material fact sufficient to defeat a motion for summary judgment because defendant adopted the CBA by its conduct. Next, the court held that defendant was precluded from asserting a laches defense because the record reflected that plaintiff did not know about the delinquent contributions until an audit was completed, and plaintiff was permitted to seek delinquent contributions more than six years old (the statute of limitations in Washington) when they are discovered for the first time in an audit. Regarding waiver, the court held that the defendant incorrectly relied on state law governing contractual rights, and that ERISA supersedes all state laws relating to employee benefit plans. Accordingly, because there were no genuine issues of material fact as to defendant’s obligation to pay the requested delinquent contributions, the court granted plaintiff’s motion for summary judgment.