Warmenhoven v. NetApp, Inc., No. 19-16960, __ F.4th __, 2021 WL 4143107 (9th Cir. Sept. 13, 2021) (Before Circuit Judges Christen and Bade, and District Judge Gary Feinerman).

Although ERISA does not require that welfare benefits vest, courts recognize that they can vest when an employer promises to provide such benefits for life. This case explores the thorny issue of when such a promise of lifetime healthcare benefits is irrevocable and, if not irrevocable, when such a promise constitutes a fiduciary breach and therefore lay the foundation for an equitable relief claim. 

NetApp established an ERISA plan in 2005 to provide healthcare benefits to its retired senior executives. After NetApp terminated the plan in 2016, Warmenhoven, and six other retirees who had been receiving benefits under the plan, sued alleging that NetApp had promised him lifetime benefits, as indeed NetApp had done in numerous PowerPoint presentations to its executives. NetApp also made public disclosures in filing with the SEC stating that the plan would provide lifetime benefits to retired executives and their spouses. However, the certificate of coverage prepared by Cigna, the insurance company hired to administer the plan, contained a clause stating that NetApp reserved the right to change or terminate the benefits and to terminate or amend the plan at any time.  

The retirees brought suit to clarify benefits under ERISA Section 502(a)(1)(B), 29 U.S.C. § 1132(a)(1)(B), and for equitable relief under Section 502(a)(3), 29 U.S.C. § 1132(a). The district court granted summary judgment in favor of NetApp and, although six of the seven plaintiffs appealed, all but Warmenhoven dropped out after mediation.

Turning first to the benefits claim, the Ninth Circuit relied on prior precedent holding that any contractual promise of vesting had to be expressly set forth in a plan document to be effective under Section 502(a)(1)(B). Under the same precedent, a written instrument only constitutes a plan document if it specifies: (1) a method of funding the plan; (2) a procedure for the plan’s operation and administration; (3) a procedure for amending the plan; and (4) a method of payments into and out of the plan. Warmenhoven argued that the PowerPoints were plan documents, but did not argue that they met the Ninth Circuit’s requirements, and the Court found this argument waived. The Court therefore concluded that Warmenhoven had failed to meet his burden of showing that a plan document promised lifetime benefits and, on this basis, affirmed the district court’s denial of his claim for benefits.

But the Court concluded that it was a different story with respect to Warmenhoven’s claim for equitable relief. Because a “reasonable factfinder could easily read the PowerPoints to convey a promise of lifetime benefits,” the Court concluded that “there was a genuine issue of material fact as to whether NetApp incorrectly represented to the Plan participants that the Plan provided lifetime health insurance benefits.” In so holding, the Ninth Circuit rejected NetApp’s argument that it did not breach its duties because it lacked the intent to deceive its employees. The Court noted that the Ninth Circuit had already rejected such a fraud analogy with respect to fiduciary misstatements. Instead, in the Ninth Circuit, a fiduciary breaches its duty if it provides materially misleading information about plan benefits regardless of any intent to deceive. Likewise, the fact that the certificate of insurance contained a reservation of rights clause did not defeat Warmenhoven’s claim. Finally, the Court rejected NetApp’s rather flimsy argument that Warmenhoven had waived his ability to seek appropriate relief by failing to anticipate and address this issue in his initial brief, which NetApp raised as an alternative ground for affirmance. The Ninth Circuit remanded for further consideration of the fiduciary breach claim in the district court.

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

Attorneys’ Fees

Eleventh Circuit

Publix Super Markets, Inc. v. Figareau, No. 8:19-CV-545-JDW-AEP, 2021 WL 4167685 (M.D. Fla. Sept. 14, 2021) (Judge James D. Whittemore). Publix objected to a Magistrate Judge’s report and recommendation denying its motion for attorneys’ fees. Having successfully established an equitable lien by agreement on proceeds held in trust by a plan participant and her law firm, Publix sought fees against the attorneys, not the participant, under Section 502(g)(1), 28 U.S.C. § 1132(g)(1). While the law firm was named as a defendant, the court held there was no substantive difference between a law firm named as a defendant and one unnamed but providing representation. In both instances, the attorneys were litigating on behalf of their respective clients, without any independent liability to the Plan. The court observed the function of the statute is not to sanction attorney misconduct. Alternatively, the court found, even if Section 502(g)(1) authorized a fee award against attorneys named as parties in an ERISA action, there was insufficient evidence of culpability or bad faith on the part of either the participant or her firm to justify a fee award. While their actions in hindsight, and at the summary judgment stage, were ultimately shown to be without merit, their actions were consistent with their responsibility as zealous advocates, attempting to maximize their clients’ recovery. For example, as ethically obligated, they escrowed the disputed funds, thereby protecting the res. They sought a lien allocation from the state probate court. In the federal proceeding, they opposed preliminary injunctive relief, challenged jurisdiction, challenged their inclusion as parties, and successfully challenged Publix’ attempt to seek declaratory relief. At each interval, they relied on case law and statutory provisions in support of their legal positions. And although unsuccessful, they attempted to show through evidentiary submissions that the lien amount sought by Publix was unreasonable or excessive. In sum, their conduct fell short of culpable actions and bad faith warranting a fee award.

Breach of Fiduciary Duty

Fourth Circuit

Williams v. Centerra Group, LLC, No. 1:20-CV-04220-SAL, 2021 WL 4227384 (D.S.C. Sept. 16, 2021) (Judge Sherri A. Lydon). Defendants moved to dismiss a putative class action alleging improper investment decisions, excessive administrative fees and prohibited transactions. The complaint alleges the Centerra defendants hired Aon Hewitt Investment Consulting as its discretionary investment manager. Plaintiffs allege Aon breached its fiduciary duties by selecting and retaining Aon’s proprietary investment funds. Aon moved to dismiss the claim arguing fiduciary prudence cannot be assessed by hindsight comparison. The court did not necessarily disagree but found it was a factual dispute inappropriate to resolve on a motion to dismiss. Aon also moved to dismiss the allegation that it breached the duty of loyalty by investing in its own proprietary funds, but the court disagreed finding the allegations sufficient because the complaint alleges this investment provided seed money Aon could use for its own benefit. As for the Centerra defendants the court declined to dismiss the claim of breach of the duty of prudence because Centerra agreed Aon could exclusively consider its own funds rather than require Aon to consider all prudent investments, which the court found sufficient to state a claim for a co-fiduciary breach. The court dismissed the allegation that Centerra breached the duty of loyalty because there were no allegations Centerra placed its own interest ahead of the participants. The court, however, declined to dismiss plaintiffs’ claim for breach of the duty of prudence for excessive recordkeeping and administrative fees because Centerra failed to follow prudent practices and failed to monitor, but dismissed the duty of loyalty claim because there were no allegations Centerra benefited from the excessive fees. Finally, the court partially dismissed plaintiffs’ prohibited transaction claim because Aon was not acting in a fiduciary capacity with regard to its fees and the court allowed the duty to monitor claim to move forward finding the allegations that Centerra failed to take prudent and reasonable action in determining whether Aon was fulfilling its fiduciary obligations.

Ninth Circuit

Walsh v. Bowers, No. CV 18-00155 SOM-WRP, 2021 WL 4240365 (D. Haw. Sept. 17, 2021) (Judge Susan Oki Mollway). The Department of Labor sued an engineering firm and its principals, alleging that they violated ERISA in their establishment of an employee stock ownership plan. The DOL alleged that defendants sold all of the firm’s shares to the ESOP for the price of $40 million, but in reality, the company was worth far less, and defendants manipulated data to induce the ESOP to pay more than the firm’s fair market value. During a one-week bench trial, the DOL raised two primary arguments to show that $40 million was excessive: (1) a third party had offered to purchase the firm for $15 million; and (2) the DOL’s expert witness valued the company at $26.9 million. The court rejected these arguments. It noted that: (1) the $15 million number was not accurate because it did not reflect cash and debt on the balance sheet; (2) the firm never agreed to sell for $15 million, and little due diligence was done, thus that number did not reflect a true market value; and (3) the expert witness’ analysis rested on errors, and thus the court was not persuaded by it. As a result, the court found no breach of fiduciary duty under ERISA and ruled in favor of defendants.

Tobias v. Nvidia Corp., No. 2021WL 4148706 (N.D. Cal. Sept. 13, 2021) (Judge Lucy H. Koh). Plaintiffs Cristina Tobias, Anthony Briggs, Ann Macdonald, and David Calder brought suit against the NVIDIA Corporation for the mismanagement of their defined contribution plan. Plaintiffs alleged that NVIDIA breached their fiduciary duty of loyalty and failed to properly monitor the fund. The defendants moved to dismiss the plaintiffs’ claims for lack of Article III standing. The judge denied this dismissal and found the plaintiffs had standing to bring their case. Defendants also moved to dismiss the case on grounds that the plaintiffs could not prove their mismanagement and improper monitoring claims. Time and again the judge decides that cheaper is not better, comparable is impossible to compare, and that prudent and reasonable are adjectives without concrete meaning. Granting the defendants motion to dismiss, without prejudice, the judge states that doing otherwise would unduly prejudice defendants. 

Class Actions

Ninth Circuit

Condry v. UnitedHealth Group, Inc., Nos. 20-16823 & 20-16857, __ F. App’x. __, 2021 WL 4225536 (9th Cir. Sept. 16, 2021) (Before Circuit Judges McKeown and Nguyen, and District Judge Royce C. Lamberth). Plaintiffs brought a class action requesting reprocessing and full and fair claims review of denied claims for lactation services. The parties appealed from the district court’s grant in part and denial in part of the parties’ cross motions for summary judgment, the court’s grant in part and denial in part the of request for class certification and the court’s denial on a motion to intervene. The Ninth Circuit affirmed the district court’s grant of summary judgment in favor of United as to the reimbursement claims of two named plaintiffs on the grounds that they sought care from out-of-network lactation providers even though in-network providers were available.  As to their full and fair review claims, the Ninth Circuit determined that it did not have Article III standing because their benefit claims were not covered by the Plan and there was no injury on which to base standing.  The Ninth Circuit reversed the district court’s grant of class certification as to a second class of plaintiffs who challenged the adequacy of the denial letters they received, reasoning that the district court focused only on the “remark codes” used in United’s denial letters rather than considering the entire course of communication between United and the insureds. The district court’s denial of class certification as to the class that sought reprocessing was affirmed on appeal. The Ninth Circuit found that the district court was not arbitrary and capricious when it determined that United did not take a uniform approach to resolving claims for “out-of-network comprehensive lactation services,” thus, the plaintiffs’ claims were not typical of the claims of the class.

Disability Benefit Claims

Sixth Circuit

Mason v. Federal Express Corp., No. 2:20-CV-02484, 2021 WL 4206629 (W.D. Tenn. Sept. 15, 2021) (Judge Samuel H. Mays, Jr.). Plaintiff worked as a handler/Non-DOT Warehouse in which she was required to lift and maneuver packages up to 50 lbs. Defendant offered employees a self-funded short term disability plan (the “Plan”) which was administered by Aetna Insurance Co. The Plan granted Aetna discretionary authority and required that the disability be “substantiated by significant objective medical findings.” Plaintiff claimed disability beginning April 1, 2019, due to complications from and numerous procedures required by scar tissue from breast reduction surgery. Aetna approved disability benefits from April 1, 2019 through July 31, 2019, but denied benefits thereafter, claiming that plaintiff failed to substantiate a functional impairment.  Plaintiff provided her medical records, which documented her consistent pain complaints and the significant and numerous medical procedures that she underwent. One doctor opined that plaintiff should refrain from lifting her arms. Plaintiff also received treatment from a Nurse Practitioner (“NP”) beginning March 29, 2019, who recommended no lifting of over 5 lbs.  On appeal the NP updated this recommendation and claimed that plaintiff needed “additional time off to avoid stress and fear the scar formation may worsen.” Aetna commissioned four “independent” medical doctors during the administrative process (three on appeal). Each doctor opined that plaintiff did not offer objective evidence of functional impairment.  The parties filed cross motions for summary judgment. The court granted defendant’s motion and denied plaintiff’s motion. The court found that plaintiff did not establish that she was disabled. Aetna’s doctors considered all the medical records, did not selectively review the medical records and consistently found that the medical records did not support the disability.  Aetna’s reliance on paper medical reviews was not arbitrary and capricious.

Seventh Circuit

Robinson v. Aetna Life Ins. Co., 20 C 4670 WL 4206785 (N.D. Ill. Sept. 15, 2021) (Judge Rebecca R. Pallmeyer). The matter was before the Court on Defendant’s Motion to Dismiss. Plaintiff brought the action seeking long-term disability (“LTD”) benefits against Aetna and her former employer. Defendants moved to dismiss on three grounds: (1) plaintiff was no longer eligible for LTD benefits because she no longer met the policy definition of disability, which required her to qualify for SSDI benefits after 24 months of LTD payments; (2) that her claim was time-barred; and (3) that her former employer was not a proper party. The Court granted the motion to dismiss but only as to her former employer. As to Aetna, the Court found that even under a deferential arbitrary and capricious standard of review, Aetna’s interpretation of the Plan’s eligibility requirements for LTD benefits was not reasonable. As for the argument that plaintiff’s claim was time-barred, the court held that any statute of limitations or other defense based on timeliness is tolled during the time that any such voluntary appeal is pending. Thus, the court concluded that Plaintiff’s claim was not time-barred.

Nelson v. North Central States Regional Council of Carpenters’ Pension Fund, Case No. 20-CV-585-WMC, 2021 WL 4206691 (W.D. Wis. Sept. 16, 2021) (Judge William M. Conley). Plaintiff applied for retroactive disability benefits and unreduced early retirement benefits after he injured his neck lifting tiles at work. Defendant’s executive committee determined he was owed no more than 12 months of retroactive disability benefits, but failed to make a final determination as to whether plaintiff was eligible for unreduced early retirement benefits. Plaintiff filed an ERISA action and defendant filed a counterclaim. On plaintiff’s motion for summary judgment and defendant’s motion for judgment on the administrative record, the court plaintiff’s requested relief for unreduced early retirement benefits and dismissed defendant’s counterclaim. The court found that under the plan at issue, a participant may apply for early retirement benefit (reduced or unreduced) upon reaching the later of age 55 or his tenth anniversary of participation in the plan. Moreover, a participant may receive unreduced early retirements if he has twenty years of continuous service immediately preceding his retirement and is determined to be totally and permanently disabled at the time he applies for an early retirement benefit, provided the total and permanent disability occurred within 36 months of the last month for which contributions were made on his behalf. To be eligible to receive early retirement benefits, he must have “applied for an Early Retirement Benefit on a form prescribed by or satisfactory to the Trustees,” and further, the Trustees must have approved the application.  The court found that plaintiff was a carpenter from 1984 to 2006, when he was injured at work and that there was sufficient evidence that he was permanently disabled under the plan. The court found that there was no dispute that the plan gave the Trustees the discretionary authority to determine benefits eligibility. However, because the executive committee did not issue a timely decision regarding plaintiff’s claim for unreduced early retirement benefits, the court’s review reverts back to a de novo standard. On de novo review, the court held that the record contained more than sufficient information to confirm that plaintiff met all of the plan’s substantive requirements for unreduced early retirement benefits. The court awarded plaintiff prospective, as well as retroactive unreduced early retirement benefits.

Eighth Circuit

Ayoka v. Family-Care Disability & Svship. Plan, 10-cv-1962 (WMW/DTS) WL 4226069 (D. Minn. Sept. 15, 2021) (Judge Wilhemina M. Wright). This case was before the court on cross-motions for Summary Judgment. Plaintiff alleged that Defendant acted in an arbitrary and capricious manner in denying his short-term disability (STD) and long-term disability (LTD) benefits. Defendant contends that its decision to terminate plaintiff’s STD benefits was reasonable and supported by the evidence and that plaintiff failed to exhaust his administrative remedies in seeking his LTD benefits. With regard to the STD claim, the court found that defendant’s doctors provided an accurate description of the medical evidence and that plaintiff’s treating physician did not rebut their conclusions, The court found that it was thus reasonable for the administrator to rely on the conclusions of the three doctors who concluded that plaintiff was not disabled. Accordingly, the court held that defendant’s denial was not arbitrary and capricious and granted summary judgment in defendant’s favor.

Ninth Circuit

Kollar v. Sun Life Assurance Co. of Canada, No. C20-5278-JCC, 2021 WL 4209426 (W.D. Wash. Sept. 16, 2021) (Judge John C. Coughenour). The court denied plaintiff’s motion for Rule 52 judgment, finding plaintiff failed to establish by a preponderance of the evidence that he was unable to perform the material duties of his job prior to his date of termination. The court did not find the evidence of the Social Security Administration disability award or a late completed attending physician statement supportive of plaintiff’s claim because the Social Security disability award was determined under its own criteria and the attending physician statement was not accompanied by any medical evidence. 

Discovery

Sixth Circuit

Avery v. Sedgwick Claims Mgmt. Services, Inc., No. 20-11810, 2021 WL 4169714 (E.D. Mich. Sept. 14, 2021)(Judge Robert Cleland). In this dispute over long-term disability benefits, plaintiff filed a “Statement of Procedural Challenge” to contest actions taken by defendant Sedgwick that she contended were procedural violations of ERISA and its accompanying claims regulations. Plaintiff argued Sedgwick did not properly notify her of the initial denial of benefits and her right to appeal it and did not properly consider her SSDI approval. The court determined that the insurer had substantially complied with ERISA’s adverse benefit determination notification requirement when it sent two letters which, taken together, provided the required information. And since the older ERISA claims regulations applied, which did not explicitly require a fiduciary to consider a favorable SSDI award, the court also found Sedgwick’s failure to do so was not a procedural defect. The court rejected plaintiff’s Statement of Procedural Challenge, which meant no further discovery was justified.

Martin v. The Guardian Life Insurance Company of America, No. 5:2020cv00507, 2021 WL 4164682 (E.D. Ky. Sept. 13, 2021) (Judge Danny C. Reeves). Plaintiff William Martin filed a series of discovery motions in his lawsuit challenging his denial of his long-term disability benefits by Guardian Life Insurance. First, the plaintiff moved to compel the depositions of two case managers at Guardian. The judge found that Mr. Martin may depose these individuals but that the issues must be limited to conflict of interest and bias. Second, the plaintiff requested sanctions against Guardian Life Insurance for failure to make their employees available for depositions. The judge denied the plaintiff’s request for sanctions because Guardian had reasonable reason for disagreement. Mr. Martin also moved to strike portions of the administrative record that were included after Guardian’s denial timeline had expired. The judge denied Mr. Martin’s motion to strike stating that it wasn’t an appropriate remedy. Finally, the plaintiff moved to compel responses from the defendant regarding; statistical information on denials of benefits, information regarding annual payments made to Guardian medical reviewers, communication between Guardian and their medical reviewers, and information on how bonuses are awarded. In regard to the statistical information and the information of annual payments the judge found in favor of the plaintiff. The judge stated that there was no communication between Guardian and their medical reviewers so that request was moot. As far as the annual bonuses, the judge stated that such information was proprietary and therefore could not be compelled by the plaintiff. 

Eighth Circuit

Clark v. Unum Grp., No. 4:20-CV-04013-KES, 2021 WL 4134520 (D.S.D. Sept. 10, 2021) (Magistrate Judge Veronica L. Duffy). This case involved a dispute over denial of long-term disability benefits in which plaintiff alleged state-law bad faith and breach of contract claims and alternative claims under ERISA. In response to plaintiff’s motion to compel, defendant lodged general objections to all requests in plaintiff’s first set of requests for production. The court overruled the objections, finding that the general objections were entirely non-specific because defendant had failed to show specifically how each production request was not subject to discovery. The court reviewed individual objections to requests for documents related to the ERISA plan and other communications and documents, and ultimately rejected all of defendants’ arguments, including arguments that the requests were vague and ambiguous, or overbroad, among others. The court also rejected defendant’s argument that documents sought by plaintiff provided information cumulative of the documents defendants had already produced. The court granted plaintiff’s motion to compel, and also granted reasonable costs and attorney’s fees.

ERISA Preemption

Ninth Circuit

California Surg. Ctr., Inc. v. UnitedHealthcare, Inc., No. CV-19-02309-DDP-AFMx, 2021 WL 4196976 (C.D. Cal. Sept. 15, 2021) (Judge Dean D. Pregerson). Plaintiffs, a group of related medical providers, brought this action alleging breach of contract and other claims under California law against United. Plaintiffs contended that United underpaid for treatment they provided to one of United’s insureds. United moved to dismiss, arguing that plaintiffs’ claims were preempted by ERISA. Plaintiffs opposed, contending that their claims were based on their individual rights, were not derivative of the patient’s claims, and did not require interpretation of ERISA or any plan documents. However, the court found that plaintiffs’ allegations contained “extensive allegations about both the existence and role of [the patient’s] insurance coverage,” which were “not merely incidental background references that substantiate Plaintiffs’ independent claims.” Instead, plaintiffs’ allegations “would necessarily require interpretation of [the ERISA plan at issue] to determine whether she had coverage at the time Plaintiffs treated her.” The court thus granted United’s motion to dismiss on preemption grounds.

Medical Benefit Claims

Tenth Circuit

E.W. & I.W. v. Health Net Life Ins. Co., et al., No. 2:19-CV-00499-TC-DBP, 2021 WL 4133950 (D. Utah Sept. 10, 2021) (Judge Tena Campbell). Plaintiff sought benefits for residential treatment. The parties filed cross motions for summary judgment. Plaintiff asserted a de novo review applied due to defendant’s serious procedural errors. The court found procedural deficiencies did not warrant de novo review, for example, finding that that Health Net’s reviewers were qualified, the InterQual criteria that Health Net applied in denying the claim are generally accepted standards, and plaintiffs had a full and fair opportunity to challenge the denial on appeal. The court found plaintiffs are limited to arguments made during the appeal process and therefore the court must disregard plaintiffs’ medical necessity argument because it was not raised in their appeal. Ultimately the court found Health Net’s decision was not arbitrary and capricious and granted defendants’ motion for summary judgment upholding the denial of plaintiff’s claim.

Pension Benefit Claims

First Circuit

Chan v. Baker, No. 20-CV-11449-DJC, 2021 WL 4197359 (D. Mass. Sept. 15, 2021) (Judge Denise J. Casper). Chan, a former employee of the Massachusetts Bay Transportation Authority, brought this pro se action against the governor of Massachusetts, the MBTA, and other defendants, raising a number of claims related to his layoff from a customer service position. One of Chan’s claims was that payments from MBTA’s deferred compensation plan were intentionally delayed in violation of ERISA. The judge noted that governmental benefit plans are exempt from ERISA, and thus the court lacked jurisdiction to hear his claim. The judge also stated that Chan had not alleged an injury that would be cognizable under ERISA in any event, as he had not alleged that he was owed money under the plan or that the plan prohibited the delay in processing his benefits. The judge thus dismissed Chan’s ERISA claim.

Second Circuit

Lardo v. Bldg. Serv. 32BJ Pension Fund, 20 Civ. 5047 (JPC), 2021 WL 4198233 (S.D.N.Y. Sep. 14, 2021) (Judge John P. Cronan). Plaintiff applied for benefits under a disability pension plan offered by his employer. His claim was denied in 2015. The denial letter stated that he needed to receive Social Security disability benefits to qualify.  He then applied for Social Security benefits and sent the letter approving these benefits to his employer in 2015. The plan again denied his application, stating that because Social Security would review his claim every three years, his disability was not “permanent.” Plaintiff sent in yet another letter in 2018 showing that Social Security had stated it would not be reviewing his claim further and did not make decisions related to “permanent disability.” The plan refused to review the letters, stating it was submitted outside the 180-day appeal window and the statute of limitations therefore barred suit.  Plaintiff filed suit as a purported representative of a class, and the plan moved to dismiss. The court determined that the Section 502(a)(1)(B) claim for benefits was indeed time-barred. But it allowed the breach of fiduciary duty claim to continue.

Sixth Circuit

Allison, et. al. v. L Brands, Inc. 401(k) Sav. & Ret. Plan et. al., No. 2:20-CV-6018, 2021 WL 4224729 (S.D. Ohio Sept. 16, 2021)(Judge Edmund A. Sargus). Defendants filed a motion to dismiss this 401(k) class-action breach of fiduciary duty lawsuit under Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). They claimed plaintiff did not have standing to bring the lawsuit because she released her claims in a separation agreement with her former employer. The court declined to dismiss on this basis because the lawsuit relates to mismanagement of plan funds and not employment. The court also denied defendants motion to dismiss for failure to state a claim, finding that plaintiffs had adequately alleged that the plan had overpaid for recordkeeping and provided investment options that were imprudent.

Pleading Issues & Procedure

Third Circuit

Henry v. Wilmington Trust, No. 1:2019cv01925, 2021 WL 4133622 (D. Del. Sept. 10, 2021) (Judge Maryellen Noreika). A plan participant filed a class action lawsuit claiming the fiduciaries of his ESOP pension plan breached their duties by overpaying for company stock. Defendants moved to dismiss under Article III and under a mandatory arbitration clause. With respect to Article III, defendants argued that plaintiff lacked standing because he didn’t plausibly allege that he had been harmed by the mismanagement. The court disagreed, holding that Mr. Henry’s allegations that the value of his stock holdings diminished were sufficient to establish standing. As for the arbitration claim the judge found that Mr. Henry did not agree to the arbitration clause because it was added many years after his employment began and that he didn’t know about it until after the suit was filed. This case is a resounding victory for the plaintiff, who is represented by ERISA Watch subscribers Greg Porter, Patrick Muench, Dan Feinberg, and Todd Jackson. 

Durnack v. Retirement Plan Committee of Talen Energy Corporation  No. 20-5975, 2021 WL 4149145 (E.D. Pa. Sept. 13, 2021) (Judge Jeffrey L. Schmehl). Plaintiffs, Annette M. Durnack, Anne W. Fiore, Timothy G. Wales and Jeffrey S. Weik, all long-term employees of Pennsylvania Power and Light and later defendant Talen Energy Corporation, brought suit alleging several ERISA claims against defendants after they were terminated and given severance packages. Plaintiffs say that they retired years earlier than they planned and are seeking retirement pension benefits that they believe they are entitled to from Talen but have been denied. Defendants moved to dismiss arguing that the plaintiffs released all of their claims against defendants and that two of the plaintiffs, Fiore and Wales, are time-barred from bringing suit. The judge found the defendants’ arguments unpersuasive. The judge also did not allow the defendants to include a “Separation Agreement and General Release” document that the plaintiffs signed, because the plaintiffs did not attach copies of the releases into their complaint and did not explicitly rely on them. Furthermore, the judge reasoned that the defendants fail to elaborate on how the releases were integral to the plaintiff’s complaint. With regard to the two plaintiffs being time-barred, the judge found that Fiore and Wales had no knowledge of the facts that led to their claim for reformation until 2019, and found that they were not time-barred. For these reasons the defendant’s motion to dismiss was denied by the judge. 

Sixth Circuit

Hale v. State of Tennessee, No. 3:14-CV-2194, 2021 WL 4221613 (M.D. Tenn. Sept. 14, 2021) (Judge Eli Richardson). The plaintiffs in this case operated a medical center, which was charged by the State of Tennessee with using illegal clinical marketing practices. As part of that action, the center was placed in receivership, after which the receiver withdrew the assets in the center’s ERISA-governed defined benefit plan. Plaintiffs filed a complaint with the Tennessee Claims Commission (TCC) to recover these funds, and then filed this federal action, alleging claims under ERISA. The state moved to dismiss, contending that plaintiffs had waived their ERISA claims by filing a complaint with the TCC. The court noted there was no case law directly on point. However, it stated that “the Sixth Circuit has indicated that filing with the TCC waives any corresponding federal causes of action,” and thus it ruled that plaintiffs’ ERISA claims were waived. The court noted, “On several occasions, Sixth Circuit judges have written separately from the majority to express concerns over waiver of corresponding federal causes of action,” but the district court was “bound to follow binding Sixth Circuit precedent[.]” Thus, the court granted the state’s motion to dismiss.

Provider Claims

Third Circuit

Atlantic Neurosurgical Specialists v. Anthem Blue Cross & Blue Shield, Case No. CV 20-10415, 2021 WL 4148149 (D.N.J. Sept. 10, 2021) (Judge Claire C. Cecchi). A neurosurgery practice filed an action alleging that Home Depot, Patient DC’ employer and the sponsor of his ERISA self-funded employee health-care plan, Anthem, the administrator of the Plan, and Horizon, the Plan’s “host” for medical services provided in New Jersey, under-reimbursed plaintiff for emergency brain surgery they performed on DC, a resident of Georgia, while DC was located in New Jersey. Defendants filed a motion to dismiss on the grounds that plaintiff lacked standing to sue under the plan’s anti-assignment clause. The parties agreed that healthcare providers, like Atlantic Neurosurgical, may bring claims under ERISA Sections 502(a)(1)(B) and 502(a)(3) after being granted a valid assignment of rights. However, such an assignment of rights is not valid where the ERISA healthcare plan contains an “anti-assignment” clause that forbids the assignment of such rights. In this case, the court concluded that the plan’s anti-assignment clause expressly covered insurance policies administered by Anthem and therefore barred DC from assigning any benefits under the plan to plaintiff. Accordingly, the court held plaintiff lacked standing under ERISA to bring a complaint and dismissed the complaint without prejudice.

Emami v. Community Ins. Co., No. CV-19-21061-ES-CLW, 2021 WL 4150254 (D.N.J. Sept. 13, 2021) (Judge Esther Salas). Dr. Emami brought suit claiming that Defendant Community Insurance Company d/b/a Anthem Blue Cross and Blue Shield (“Community”) improperly denied his patient, Amy M., benefits under the terms of her ERISA-governed health insurance plan. Community moved to dismiss for lack of standing, as time-barred, for failure to exhaust administrative remedies, and for failure to state a claim. The court granted defendant’s motion and dismissed the complaint without prejudice. The court explained that it appeared an open question whether a physician could get around an anti-assignment clause by obtaining a power of attorney, as Dr. Emami did in this case, and that the parties did not address the validity of it. However, even if the power of attorney as valid, the court dismissed the case for failure to state a claim.

Prestige Inst. for Plastic Surgery v. Horizon Blue Cross Blue Shield of N.J., No. CV-20-3733-ES-CLW, 2021 WL 4206323 (D.N.J. Sept. 16, 2021) (Judge Esther Salas). Prestige, a medical provider, brought this action under ERISA against Horizon and related defendants, alleging that Horizon underpaid for a procedure Prestige performed on one of Horizon’s insureds. Defendants moved to dismiss, contending that the ERISA benefit plan at issue contained an anti-assignment provision which prohibited Prestige from suing on the patient’s behalf. Prestige responded that ERISA regulations allow an authorized representative to pursue a benefit claim for a participant during the administrative appeal process, and that this concept should be extended to litigation. The court noted that Prestige conceded that the plan had a valid anti-assignment provision, and that it applied to the action. The court rejected Prestige’s argument that the “authorized representative” regulation applied to litigation because the regulation was aimed solely at the claim process. The court further rejected the idea that the regulation should be extended to litigation as a matter of public policy, because the creation of common law under ERISA is limited to “gap-filling,” and the court would not take the “drastic step of making law here.” The court thus granted defendants’ motions to dismiss.

Severance Benefit Claims

First Circuit

Sweeney v. Santander Bank, N.A., No. 19-CV-10845-ADB, 2021 WL 4224312 (D. Mass. Sept. 16, 2021) (Judge Allison D. Burroughs). Sweeney filed this action alleging numerous claims against her former employer, Santander, for firing her in 2017. One of these claims was for breach of contract for denied severance pay. Santander filed a motion for summary judgment, contending that: (1) this claim was preempted by ERISA; and (2) Sweeney was not entitled to benefits in any event. The court did not reach the preemption issue because it agreed with Santander on the second issue. Benefits under the plan were only available to employees who were terminated as a result of a workforce reduction or position elimination, but Sweeney was fired for misconduct. As a result, she was ineligible for benefits, and thus the court granted Santander summary judgment.

Standard of Review

Fourth Circuit

Jordan v. The MEBA Pension Trust, No. ELH-20-3649, 2021 WL 4148460 (D. Md. Sept. 10, 2021) (Judge Ellen L. Hollander). Captain Horace Jordan filed a wrongful denial of benefits case after his 2019 denial of pension benefits of his employee pension benefit plan. At issue is the 1990 merger between the United Maritime Officers Association and the Maritime Engineer’s Beneficial Association and whether this merger led to an amendment of the plan. In their motion to dismiss, defendants claim that no such amendment occurred, and Mr. Jordan was never eligible for benefits under the plan. However, defendants relied on an amended copy of a 2020 plan document, despite the fact the denial occurred in 2019. Relying on an abuse of discretion standard the judge reasoned: “If the Merger Agreement did not amend the Plan’s terms (or the Plan’s terms were not otherwise modified), then there can be no argument that the Trustees abused their discretion. But, if the Plan’s terms were amended, as Jordan alleges, then the Trustees’ failure to adhere to the amended terms could provide ground for abuse of discretion.” The judge denied MEBA’s motion to dismiss finding that Mr. Jordan plausibly alleged that the Trustees abused their discretion in denying his pension benefits. 

Statute of Limitations

Fourth Circuit

Cudd v. The Prudential Ins. Co. of Am., No. 1:20-CV-00224-MR, 2021 WL 4228881 (W.D.N.C. Sept. 16, 2021) (Judge Martin Reidinger). In this action plaintiff Cudd alleged that Prudential wrongfully terminated his ERISA-governed long-term disability benefits in July of 2018. Prudential moved to dismiss, alleging that Cudd’s lawsuit was untimely under the plan’s limitation on time to sue. Prudential relied on plan language stating that a claimant “can start legal action regarding your claim . . . up to 3 years from the time proof of claim is required[.]” The court found that this provision only applied to denials of initial claims for benefits, not to terminations of benefits: “The Plan measures the contractual limitations period for the denial of an initial claim based on when ‘proof of claim’ is due but makes no reference to a ‘proof of claim’ in these other provisions stating when Prudential will stop disbursing LTD payments.” The court found that Prudential’s interpretation could lead to “patently absurd” results because it could “simply stop paying any benefits after 36 months of beginning payments without repercussion.” Because the plan language did not apply to benefit terminations, the court applied state law to find that the applicable statute of limitations was six years, and thus determined that Cudd’s action was timely.