Browe v. CTC Corp., Nos. 19-677-CV, 19-813-CV, __ F.4th __, 2021 WL 4449878 (2d Cir. Sept. 29, 2021) (Before Circuit Judges Livingston, Lynch, and Bianco).
If you ever need to show someone a case to demonstrate how messy ERISA can be, you may want to consider this one. In this decision, the Second Circuit tackled a full buffet of ERISA issues, including statutes of limitations, “top hat” plan status, liability among fiduciaries, statutory penalties, and how to calculate and apportion remedies.
The trouble began when CTC Corporation, a Vermont photo-finishing company, decided to offer its employees a deferred compensation benefit plan in 1990. When the rise of digital photography obsoleted traditional film development, the company crumbled and so did the plan. CTC began using plan assets to fund the business in 2004, and eventually it was forced to cease doing business in 2014. This lawsuit, brought by several CTC employees against CTC and its managers, followed. The district court largely ruled for plaintiffs, but neither side was happy, and both appealed.
On appeal, the Second Circuit noted the significant passage of time, but ruled that defendants had waived any reliance on ERISA’s six-year statute of repose, and agreed with the district court that the three-year statute of limitations did not apply. Defendants argued that plaintiffs had “actual knowledge” of the breaches more than three years before the suit was filed in 2015. However, the Second Circuit found that while some of the employees knew of the breaches, defendants had not proven that all of the employees knew. At least three of the plaintiffs did not know; thus, the suit was not time-barred.
Second, the Second Circuit rejected defendants’ argument that the plan was a “top-hat” plan and thus exempt from many of ERISA’s rules. The court noted that a significant number of CTC’s employees were invited to join the plan, and thus it arguably was not a “select group.” Furthermore, several of the employees were not managers or highly compensated, and none negotiated any of the terms of participation in the plan. Thus, the district court properly concluded the plan was not a “top hat” plan.
Finally, the Second Circuit addressed the question of what the appropriate remedy should be and against whom it should be assessed. The court agreed with plaintiffs that the district court had erred by limiting the award to the amount that would have been in the plan in 2004, when CTC began raiding the plan’s assets. The court held that defendants were required under ERISA to make good any losses resulting from their breach, which included the value of plaintiffs’ losses through the date of judgment, and remanded for the district court to make this calculation.
As for who was liable to whom, the Second Circuit ruled that the district court erred in not issuing judgment against CTC. The court also found that the district court’s apportionment of liability was incorrect, because ERISA requires joint and several liability. The court did find that one of the defendants could seek contribution from another defendant, however, and remanded for the district court to consider that claim. The court also reversed the district court’s award of statutory penalties for failing to produce plan documents, because that claim had not been pled by plaintiffs.
The court also reversed the district court’s finding as a matter of law that many of the plaintiffs were not entitled to plan benefits because they had not met certain plan criteria, such as making required contributions. The record showed that the plan was ambiguous on this requirement, and in any event, it appeared that CTC had waived the requirement by not enforcing it. The court thus remanded for the district court to develop arguments further on this issue.
Finally, the court reversed the district court’s choice of remedy: a per capita award to all plan participants. The court agreed with plaintiffs that this remedy potentially jeopardized their vested rights under the plan, and thus it remanded for more fact-finding to ascertain a more individualized remedy for every employee affected, including non-parties.
Despite the numerous errors identified by the Second Circuit, the court recognized the “novel and difficult legal issues” in the case, which were “compounded by the significant amount of time that has passed since the underlying events occurred[.]” The court thus took it easy on the district court, and “acknowledge[d] its careful and diligent work.” Given the number of remanded issues, even more careful and diligent work will be required in order to avoid another appeal in this case.
Below is a summary of this past week’s notable ERISA decisions by subject matter and jurisdiction.
Averbeck v. Lincoln National Life Insurance Co. No. 20-cv-420-jdp, 2021 WL 4476788 (W.D. Wis. Sept. 30, 2021) (Judge James D. Peterson). Plaintiff Tamara Averbeck received long-term disability benefits for about a year before defendant Lincoln National Life Insurance Company terminated them. Ms. Averbeck appealed that decision, and then brought this lawsuit to recover the benefits in addition to attorney fees and costs. Four months into the lawsuit Lincoln reinstated her benefits, including the back benefits. Lincoln contended that now that it has paid and reinstated the benefits the case is moot, and moved to dismiss under Federal Rule of Civil Procedure 12(b)(1). As the court has jurisdiction to decide whether Averbeck is entitled to attorneys’ fees, the court denied Lincoln’s motion to dismiss for lack of jurisdiction. Because attorneys’ fees may only be awarded in ERISA cases where a party has achieved “some success of the merits,” Lincoln also contended that this means a party has received a favorable ruling on the merits from the court. The problem with this logic, according to the court, is that it is tantamount to requiring prevailing party status and would encourage plaintiffs to refuse to settle even when the administrator admits error, because only a merits decision from the court would result in an award of fees. Ms. Averbeck, on the other hand, argued that she has succeeded on the merits already, as proved by Lincoln’s reinstatement of benefits. The problem with this approach, according to the court, is that it would award fees whenever the plan administrator agrees to settle, regardless of the merits of the lawsuit. This, the judge fears, would encourage administrators to drag out the litigation process. Deciding neither of these approaches was satisfactory, the judge ordered Averbeck to show cause why this case should not be dismissed without payment of attorney fees, thus granting her a chance to succeed on the merits.
Desharnais v. Unum Life Insurance Co. No. 5:19-cv-06599-EJD, 2021 WL 4481861 (N.D. Cal. Sept. 30, 2021) (Judge Edward J. Davila). Plaintiff Matthew Desharnais brought suit against defendant Unum Life Insurance Company of America after Unum terminated Mr. Desharnais’ long-term disability benefits. The day after Mr. Desharnais filed his Section 502(a)(1)(B) complaint, Unum reinstated his benefits while Unum renewed its review of the claims. The parties agreed to continue their case management conference with the court for 90 days to afford Mr. Desharnais time to undergo an independent medical evaluation (“IME”). Although the parties attempted to arrange this IME, the two sides couldn’t agree on a physician. There were also delays in the case and the IME because of the COVID-19 pandemic. All the while, plaintiff continued to submit additional information about his condition. He also submitted a Social Security Administration notice of benefits award. Unum eventually decided that Mr. Desharnais was, in fact, entitled to benefits and assured him that it would approve the benefits beyond the “own occupation” period into the “any occupation” period. Plaintiff then moved for attorney’s fees and costs. The parties disputed whether Mr. Desharnais established “some degree of success on the merits,” following Unum’s reversal of its denial. The judge determined that although Mr. Desharnais ultimately obtained the relief he sought, it was not based on judicial merits-based determination. On this basis, the judge denied the motion for attorney’s fees.
Breach of Fiduciary Duty
Haley v. Teachers Insurance & Annuity Association of America No. 17-CV-855 (JPO), 2021 WL 4481598 (S.D.N.Y. Sept. 30, 2021) (Judge J. Paul Oetken). Plaintiff Melissa Haley brought a putative class action suit against defendant Teachers Insurance & Annuity Association of America (“TIAA”), alleging prohibited transactions regarding collateralized loans. The parties filed cross-motions for summary judgment. The judge denied the plaintiffs’ motion, concluding that she failed to show the fiduciaries knowingly caused the plan to engage in a prohibited transition. The court then turned to TIAA’s motion. TIAA argued that its loans were exempt from ERISA’s prohibited transaction rules because they satisfied ERISA Sections 408(b)(1), 408(b)(2), and 408(b)(17). Section 408(b)(1) excludes “any loans made by the plan to parties-in-interest who are participants of the plan if such loans bear a reasonable rate of interest and are adequately secured.” The court reasoned that, because the collateral secures TIAA, not the participants, the exclusive purpose of the loan program was not to for the benefit of the plan participants. Therefore, the court denied defendant’s motion for summary judgment on the 406(a)(1)(B) claim. Section 408(b)(2)(A) exempts transactions “contracting or making reasonable arrangements with a party in interest for office space, or legal, accounting, or other services necessary for the establishment or operation of the plan, if no more than reasonable compensation is paid therefor.” The judge found TIAA established that its compensation spread was reasonable as a matter of law, and therefore granted its motion for summary judgement on the 406(a)(1)(C) claim. Section 406(a)(1)(D) prohibits transactions that constitute a “transfer to, or use for or by the benefit of a party in interest of any assets of the plan.” TIAA argued that any transfers in the loan program were exempted under 408(b)(17) because the plan received “no less, nor paid no more, than adequate consideration.” TIAA argued that the crediting rate paid to plans was reasonable and therefore satisfied the “adequate consideration” mark. The judge disagreed and found that TIAA failed to establish this fact as a matter of law. Therefore, TIAA’s motion for summary judgment on the 406(a)(1)(D) claim was denied.
Garthwait v. Eversource Energy Co. No. 3:20-CV-00902 (JCH), 2021 WL 4441939 (D. Conn. Sept. 28, 2021) (Judge Janet C. Hall). Plaintiffs are current and former participants in the Eversource 401(k) plan who have brought suit alleging breach of fiduciary duty, failure to monitor, and knowing participation in a breach of trust. Plaintiffs alleged that defendants breached their fiduciary duties by mismanaging underperforming funds, permitting excessive fees, and maintaining high investment management fees in the plan. The defendants moved to dismiss for lack of Article III standing and for failure to state a claim. The judge decided that plaintiffs do not have standing, as currently plead, with regard to the underperforming stocks because they have not included information on whether they were invested in those stocks, and thus harmed. On the other hand, the judge found that the plaintiffs have standing to bring the claims challenging the high fees and sufficiently stated such claims. The court therefore denied the defendants’ motion to dismiss the claims related to excessive recordkeeping fees but granted the defendants’ motion to dismiss with respect to plaintiffs’ claims as related to the selection, retention, and mismanagement of the funds. The judge has granted the plaintiffs leave to amend their complaint to include information on whether they were invested in and harmed by the underperforming funds.
In re: Allianz Global Investors Alpha Series Litigation No. 20 Civ. 5615 (KPF), 2021 WL 4481215 (S.D.N.Y. Sept. 30, 2021) (Judge Katherine Polk Failla). These are a number of related cases in which institutional investors sued Allianz Global Investors claiming ERISA and state law violations. Defendant filed a consolidated motion to dismiss 12 of these claims. As relevant here, defendant asserted that some of the claims were preempted by ERISA and/or duplicative of the ERISA claims and that Plaintiffs had failed to state fiduciary breach claims under ERISA. To determine the ERISA preemption issue, the court reasoned that it had to decide whether defendant was a fiduciary throughout the relevant period. Plaintiffs conceded that their state-law claims would be preempted if defendant was an ERISA fiduciary, however they argued that dismissal on preemption grounds at this stage of the litigation would be premature. The court agreed. Seeking to establish that the duties on which the state-law claims were owed directly to plaintiffs rather than the funds, plaintiffs argued that defendant served as an independent investor advisor, defendant retained discretionary control over plaintiffs’ investment assets, defendant’s representations to plaintiffs created an independent fiduciary duty, and the duty was created by contractual obligations. The judge disagreed with this logic, rejecting plaintiffs’ argument that defendant owed them a personal fiduciary duty under the LLC Agreement. The judge found that the LLC Agreement explicitly replaced any common-law fiduciary duties owed to plaintiffs, as permitted under Delaware law. Finally, the judge found the defendant served as an investment advisor to the funds, not to any individual investor. Thus, the court concluded that ERISA preempted the state law claims. On the other hand, the judge found plaintiffs’ breach of fiduciary duty claims and prohibited transactions claims to be strong. Plaintiffs alleged that defendant violated its duties by abandoning its risk management strategy, failing to disclose material facts, and further repudiating its risk management strategy because the funds’ compensation structure would prevent defendant from earning compensation unless it gambled with plaintiffs’ investments. These allegations sufficiently alleged that defendant acted against the fund’s interest with the purpose of benefiting itself. Further, plaintiffs’ argument that defendant managed the funds against plaintiff’s interest in order to preserve its own ability to profit from managing the funds also adequately pleads a prohibited transaction claim. For these reasons, defendants’ motion to dismiss was granted in part and denied in part.
Cutrone v. Allstate No. 20 CV 6463, 2021 WL 4439415 (N.D. Ill. Sept. 28, 2021) (Judge Manish S. Shah). Plan participants brought suit against their employer, defendant Allstate, for breach of fiduciary duty and prohibited transactions with respect to Allstate’s retirement plan. Plaintiffs argued that plan fiduciaries made imprudent investments, failed to remove those investments, saddled the plan with excessive fees, and caused the plan to make prohibited transactions. From 2015 to 2019, plan participants paid between $1,265,509 and $2,667,972 annually in advisory fees. Allstate also chose funds with a poor investment track record. These funds performed worse than 70% to 90% of comparable funds, but Allstate not only failed to remove the suite, it also set it as the plan’s default retirement investment option. This underperformance cost the plan millions. As of the filing of the complaint, plan participants assert that they lost over $70 million in retirement savings since 2014 through this mismanagement. Plan participants were even charged fees for an online advice program, despite not using that service. Fees were so high “it was difficult to break even on their investments.” Plaintiffs further alleged that Allstate turned a blind eye to the pay-to-play kickback scheme to the plan’s recordkeeper in which the recordkeeper was given a percentage of the fees in exchange for exclusively featuring the promoting the underperforming default fund to its clients. Defendants moved to dismiss for lack of Article III standing, and for failure to state a claim. The judge found plaintiffs have standing and have stated a valid ERISA claim, and the motion to dismiss was denied.
Laurent v. PricewaterhouseCoopers No. 06-CV-2280 (JPO), 2021 WL 4482147 (S.D.N.Y. Sept. 30, 2021) (Judge J. Paul Oetken). Retirement plan participants brought this ERISA class action against defendant PricwaterhouseCoopers (“PWC”). Following discovery and class certification, defendant moved to decertify the class under Federal Rule of Civil Procedure 23(b)(2). Plaintiffs moved for summary judgment on the plan’s normal retirement age and the plan’s projection rate, as well as summary judgment for relief. PWC made four arguments in favor of decertifying the class: (1) reformation of the plan under Section 502(a)(3) is inappropriate because it is not final injunctive relief, (2) the class, which comprises only former plan participants who have cashed out of the plan, does not have standing to reform a plan that no longer applies to them, (3) enforcement of the reformed plan under Section 502(a)(1)(B) would provide only money damages and therefore would also not provide injunctive or equitable relief, and (4) allowing class certification for the enforcement of the reformed plan would impermissibly preclude PWC from asserting individualized defenses. The judge found none of these arguments persuasive. The judge determined that the ultimate relief requested was injunctive, the class does have standing, and PWC’s individualized defenses were equitable and, unlike statutory defenses, were beside the point in enforcing a valid ERISA plan. Accordingly, defendants’ motion to decertify the class was denied. As there was no genuine dispute, the judge granted plaintiffs’ motion for summary judgment on the plan’s normal retirement age and the plan’s projection rate. As for the plaintiffs’ motion for relief, the judge denied it because plaintiffs failed to prove there was only one way of reasonably selecting and calculating a model portfolio to determine the correct amount of benefits.
Bagdon v. Bank of America No. 2:20-cv-00446-JMG, 2021 WL 4477015 (E.D. Pa. Sept. 30, 2021) (Judge John M. Gallagher). Plaintiff Zachary Bagdon was disappointed to learn his disability benefit payments after he had retired were much smaller after taxes than he had supposedly been led to believe. Mr. Bagdon filed suit under both Section 502(a)(1)(B), claiming he was entitled to greater after-tax payments either under the terms of his employee benefits program, and under Section 502(a)(3), based upon the repeated assurances he received from defendant Bank of America’s HR representatives. By selecting the upgraded option for his disability benefits, to which he contributed out of his own pocket, Mr. Bagdon was entitled to 60% of his regular salary and bonus. When considering whether or not to retire, Mr. Bagdon wanted to do research into what his payments would be like post retiring. Mr. Bagdon alleged that written materials and his conversations with HR representatives led him to understand that almost 72% of his benefit payments would be nontaxable upon receipt. However, once he had retired, only 25% of the benefit payment turned out to be nontaxable. The judge determined that there was no genuine dispute that Mr. Bagdon received what he was entitled to under the plan, so the court entered summary judgment in favor of the defendant on Mr. Bagdon’s 502(a)(1)(B) cause of action. As to whether Bank of America’s HR representatives misrepresented the terms of the plan to Mr. Bagdon, the judge found that there were genuine issues of fact and Bank of America was not entitled to summary judgement on this issue.
Davis v. Stadion Money Management No. 8:19CV556, 2021 WL 4400298 (D. Neb. Sept. 27, 2021) (Judge Joseph F. Bataillon). Plaintiffs moved for class certification in their breach of fiduciary duty suit against defendant Stadion Money Management. They argued that Stadion breached its duties and violated ERISA by allocating participant assets into its own portfolios and by engaging in prohibited transactions with United Life Insurance, a party-in-interest. The proposed class would consist of participants in retirement plans enrolled in Stadion’s portfolios within United administered ERISA governed retirement plans, excluding defined benefit plans. Plaintiffs, as supported by their expert economist, contend that there is a method for calculating damages on a class-wide basis without the need for individualized assessments. Stadion opposed class certification, arguing that plaintiffs couldn’t succeed on the merits because Stadion is not a fiduciary. Stadion also argued that plaintiffs lack standing, because they have not suffered any loss. Finally, Stadion argued that plaintiffs failed to demonstrate that class certification is warranted under Rules 23(a), 23(b)(1), and 23(b)(3). The judge determined that Stadion is indeed an ERISA fiduciary because it invests participant’s contributions for fees. In addition, the judge found the defendant’s argument that plaintiffs lack standing meritless. Still, the judge denied the motion for class certification, because of a perceived disconnect between individual and common harm, and because allocating and adjudicating the individual claims through a class action would be difficult and improper.
Draney v. Westco Chemicals Inc No. 2:19-cv-01405-ODW, 2021 WL 4458953 (C.D. Cal. Sept. 29, 2021) (Judge Otis D. Wright II). Before the court was a motion for certification of a class and preliminary approval of a settlement reached between plan participants and defendants Westco Chemicals Inc, Ezekiel Zwillinger and Steven Zwillinger, pertaining to a mismanaged 401(k) pension plan. In their suit plaintiffs asserted claims for breach of fiduciary duties of prudence and loyalty and failure to administer the plan in accordance with ERISA. The judge was primarily concerned that the named plaintiffs were time-barred from bringing suit because they had actual knowledge outside the three-year time limit. Because of this, the judge was concerned that the statute of limitations defense created two subclasses of plaintiffs: a class of employees who were not aware of the plan’s holdings prior to the limitations period and were not time-barred, and a second class of employees, including the named plaintiffs, who had knowledge and whose claims were likely time-barred. The judge therefore concluded that the typicality and adequacy requirements of Rule23(a) were for this reason not met. Accordingly, the court denied the certification of the class and denied as moot preliminarily approving the settlement, both without prejudice.
Myers v. Administrative Committee, Seventy Seven Energy Inc. No. CIV-17-200-D, 2021 WL 4471613 (W.D. Okla. Sept. 29, 2021) (Judge Timothy D. DeGiusti). Plaintiff Kathleen Myers is a former employee of Seventy Seven Energy Inc, and a participant in its defined contribution retirement plan who sued defendants for breaches of fiduciary duty. Plaintiff moved to certify a class. Despite satisfying the numerosity and commonality requirements, the judge found that because Ms. Myers signed a release of ERISA claims under a severance agreement, she was therefore not typical of the rest of the class or adequate to represent it. As Ms. Myers did not carry her burden to satisfy all requirements of Rule 23(a), her motion for class certification was denied.
Disability Benefit Claims
Greer v. Unum Life Insurance Co. No. 3:17-CV-615-CWR-LGI, 2021 WL 4497489 (S.D. Miss. Sept. 30, 2021) (Judge Carlton W. Reeves). Plaintiff Susan Greer became disabled following a major car accident in which an 18-wheeler logging truck lost control on a freeway and collided with her head-on. This resulted in several surgeries, multiple broken bones, including in her leg, neck, and ribs, a severe head injury, a hernia, and several hematomas. At first, defendant Unum Life Insurance Co. granted Ms. Greer’s disability benefits. However, following an independent medical exam, Unum terminated the long-term disability benefits. Unum attested that it evaluated the files and statements Ms. Greer’s treating physicians as well as considered her Social Security benefits award. After administratively appealing the denial, Ms. Greer filed this suit. Ms. Greer contends that Unum’s termination of her benefits was an abuse of discretion because: Unum analyzed her claim under the “any occupation” standard rather than the “own occupation” standard the plan required; Unum arbitrarily disregarded her treating physicians’ opinions; and Unum breached its fiduciary duty by handpicking and distorting the evidence of her medical record. The judge found that Unum failed to properly evaluate Ms. Greer under the specific “own occupation” definition of disability under the plan. The judge also determined that Unum completely ignored the reports of her treating physicians. In addition, the judge found that Unum failed to obtain the diagnosis for the SSA determination, which amounted to procedural unreasonableness. For these reasons the judge granted Ms. Greer’s summary judgment motion, denied the defendants’ cross-motion for summary judgment, and granted the reinstatement of the disability benefits. Finally, the judge gave the plaintiff 21 days to submit a motion for attorneys’ fees.
Nuffer v. Aetna Life Insurance Co. No. 1:20-cv-10935, 2021 WL 4391119 (E.D. Mich. Sept. 24, 2021) (Judge Thomas L. Ludington). Plaintiff Rachel Nuffer is seeking reinstated long-term disability benefits from the administer of her policy, defendant Aetna Life Insurance Co. Ms. Nuffer suffers from severe and persistent migraines which caused blurred and double vision and extreme pain. The medication she was given to treat the headaches caused drowsiness and other problems. Her doctors therefore determined that she was unable to work, especially at her job driving trucks and operating heavy machinery. A magistrate judge reviewed the parties’ cross-motions for summary judgement and issued a report recommending that judgment be entered for Aetna. Ms. Nuffer objected to the report and argued that the magistrate judge improperly excused Aetna’s failure to consider her social security file when denying her claim. The judge agreed with this objection and emphasized the importance for a plan administrator to conduct a full and fair review under ERISA Section 503, which requires an administrator to consider any disability determination made by Social Security and explain why it agrees or disagrees with that determination. Because there was substantial evidence to indicate that Aetna did not review Ms. Nuffer’s Social Security file, the judge found that Aetna did not comply with the requirements of Section 503. The judge therefore rejected the magistrate judge’s report, and remanded the case to Aetna for a full and fair review of plaintiff’s claim.
Melenofsky v. Aetna Life Insurance Co. No. 20-CV-11222-TGB-RSW, 2021 WL 4458605 (E.D. Mich. Sept. 29, 2021) (Judge Terrence G. Berg). Following Plaintiff Brian Melenofsky’s heart attack, Mr. Melenofsky applied for both short-term and long-term disability benefits through his employer. Both were initially approved. After Mr. Melenofsky had heart surgery, however, defendant Aetna Life terminated the benefits. Plaintiff brought suit alleging the denial was in violation of ERISA. Aetna argued that it followed all necessary protocols under the plan and ERISA for evaluating his condition and determining eligibility. None of Mr. Melenofsky’s claims – that Aetna did not evaluate all of his medical records, that a conflict of interest existed, that Aetna did not consider his social security disability benefits, and that Aetna did not contact his treating physician or conduct an independent medical examination before determining eligibility – were persuasive enough for the judge to find Aetna’s decision arbitrary and capricious. Therefore, the judge granted Aetna’s motion for summary judgment and denied the plaintiff’s cross-motion.
Harman v. Standard Insurance Co. No. 8:18-cv-1441-KKM-TGW, 2021 WL 4473413 (M.D. Fla. Sept. 30, 2021) (Judge Kathryn Kimball Mizelle). Plaintiff Larry Harman filed a lawsuit seeking disability benefits. After the Magistrate Judge issued a report and recommendation, both parties filed objections. Defendant Standard Insurance Co. objected to the Magistrate Judge’s conclusion that ERISA does not govern Mr. Harman’s claims. Mr. Harman objected to the Magistrate Judge’s conclusion that Mr. Harman’s legal disability, the termination of his medical license because of sexual-harassment complaints, preceded his physical disability, depression. The district court judge disagreed with the report and recommendation insofar as it decided Mr. Harman’s plan was not an ERISA plan. The judge found that his plan was originally established by his employer and was therefore governed by ERISA. The judge agreed with the report that the legal disability predated the physical disability and so disqualified Mr. Harman from receiving disability insurance benefits under his plan. Accordingly, the report and recommendation was adopted in part, defendant’s motion for summary judgment was granted, plaintiff’s cross-motion was denied, and the case was closed.
Cloud v. The Bert Bell/Pete Rozelle NFL Player Retirement Plan No. 3:20-CV-1277-S, 2021 WL 4477720 (N.D. Tex. Sept. 30, 2021) (Judge Karen Gren Scholer). Plaintiff Michael Cloud brought suit for disability benefits lawsuit against the Bert Bell/Pete Rozelle NFL Player Retirement Plan for wrongful denial of benefits due under the terms of the plan and failure to comply with ERISA procedural regulations. Mr. Cloud then moved to compel the deposition of all six members of the retirement plan board, and to compel the production of information on other NFL players, including the number of claims granted by the plan, the level of benefits granted, and the basis on which such claims were granted. The judge partially granted the motion with respect to the deposition of board members, but decided deposing all six would likely elicit testimony that would be unreasonably cumulative or duplicative. The judge therefore ordered the defendant to present two members of the board, with at least one being a voting member who was appointed by the NFL Players Association for depositions on issues relating to the board’s compliance with ERISA procedural regulations. With respect to Mr. Cloud’s motion to compel the production of quarterly director’s reports and counsel reports as well as the database of claims, the court found that the defendant failed to meet its burden of showing how each of these requests would be unduly burdensome. The judge therefore ordered these documents to be produced. The judge further found that Mr. Cloud’s request to obtain information concerning the bases for grants of benefits to active football players and retirees proportional to the needs of the case. However, the judge found that Mr. Cloud was not entitled to information on each disability claim or “Article 65 Neuro-Cognitive Disability Benefits Awards” because those requests were overly broad. Defendant’s objections to these requests were therefore sustained.
Lawrence Viani v. Lincoln National Life Insurance No. 21-cv-00004-BEN, 2021 WL 4358729 (S.D. Cal. Sept. 23, 2021) (Judge Roger T. Benitez). Plaintiff Paul Lawrence Viani sought discovery outside the administrative claims record in his ERISA suit for long-term disability benefits against Lincoln National Life Insurance Co. He requested discovery regarding: two reviewing physicians, the number of claims denied and granted, claim handling manuals, and documents with information relating to financial bonuses, incentives, stock options, and any other compensation beyond regular salary paid to the reviewing physicians. Plaintiff argued this requested discovery was relevant and appropriate in determining whether there was a full and fair review of his claim, and whether there was any conflict of interest. Finding the discovery pertaining to conflict of interest overly broad, the judge declined to allow this area of discovery. Defendant claimed that all other documents relevant to the case were already in the administrative record and therefor further discovery was unnecessary. If this is true, the judge ordered the defendant to produce a declaration clearly stating that no further documents relevant to the claim existed. However, if any documents pertaining to the claim under the claims regulation do exist, the judge ordered that the defendant to produce them.
Phillips v. Boilermaker Blacksmith Nat’l Pension Trust No. 19-cv-02402-TC-KGG, 2021 WL 4453574 (D. Kan. Sept. 29, 2021) (Magistrate Judge Kenneth G. Gale). Plaintiffs moved to compel documents requested in discovery but withheld by defendants in their ERISA case alleging violations of the terms of their pension trust. At dispute is whether the documents the plaintiffs are seeking are privileged. Plaintiffs argued that the defendants are fiduciaries and that, because of that status, no attorney-client privilege applied to the communications at issue. Defendants disagreed and contended that the fiduciary exception to attorney-client privilege does not apply because the documents were related to amending the plan, which is a settlor function and not fiduciary in nature. Plaintiffs alleged that the trust agreement requires all amendments to be done for the benefit of employees, and actions taken to amend the plan are necessarily taken in a fiduciary capacity. The judge did not agree with this interpretation and determined the governing trust agreement does not transform the settlor function of amending the plan into a fiduciary function. Defendants, the judge determined, met their burden to show that the documents in dispute were covered by attorney-client privilege and that the fiduciary exemption to this privilege does not apply and the documents thus were not subject to discovery. Plaintiffs’ motion to compel was thus denied.
Emergency Physician Services of NY v. UnitedHealth No. 20-cv-9183, 2021, WL 4437166 (S.D.N.Y. Sept. 28, 2021) (Judge Alison J. Nathan). Plaintiffs are physician groups who staff emergency rooms at hospitals across New York. They brought suit against defendants UnitedHealth Group and Multiplan Inc. alleging a violation of the Racketeer Influenced and Corrupt Organizations Act (RICO), and participation in a RICO conspiracy. In addition, plaintiffs alleged that United violated two state laws: breach of an implied-in-fact contract, and unjust enrichment. In New York, emergency room physicians are obligated to treat patients, regardless of a patient’s insurance benefits. United, and all other insurers, are required to pay hospitals for these services provided to their insureds at a “reasonable” rate for similar providers in the same geographic area. Plaintiffs alleged that United was systematically underpaying by implementing a repricing mechanism that was reversed engineered to calculate United’s “target prices.” Nor is this the first time United has engaged in this scheme. In 2009, United was required to pay hundreds of millions of dollars in settlements and was forced to use the “FAIR Health database” for determining the allowed amounts for covered services. FAIR was designed expressly to prevent insurers from using skewed methodologies to calculate payments. In 2015, United’s legal obligation to utilize FAIR under the 2009 settlement agreement ended, and they promptly sought out the services of a different company, defendant MultiPlan, to determine rates. As alleged by the plaintiffs, United would send MultiPlan “target prices” and MultiPlan would then arrive at a number under that rate in exchange for a fee equal to between 6-9% of the difference between the target amount that United provided them with and the lower amount MultiPlan calculated. According to plaintiffs, United would then send “Provider Remittance Advice” letters that provided detailed and purportedly fraudulent explanations for the price reductions. Essentially, plaintiffs alleged that defendants are engaged in a nation-wide fraudulent cost saving scheme which is injuring thousands of emergency room providers. Through this scheme United is unjustly enriched, and hospitals, which are obligated to provide services to all patients, including United’s insureds, are harmed. United and Multiplan each filed motions to dismiss. The judge found that the RICO claims against both defendants failed as a matter of law because the plaintiffs failed to plausibly state the RICO violations were the proximate cause of their injury. As the RICO charges were the only charges alleged against MultiPlan, MultiPlan’s motion to dismiss was granted. For United’s two state-law claims, United argued that those claims were preempted by ERISA. The judge found that neither claim, breach of contract nor unjust enrichment, was either expressly or completely preempted by ERISA. United’s liability did not derive from the particular rights established by any benefit plan, nor did plaintiffs allege a violation of any plan provision. Instead, United’s obligation to compensate the hospitals stems from New York state law. Furthermore, the plaintiffs couldn’t have brought their claims under ERISA. The judge further concluded that plaintiffs adequately pled a claim for unjust enrichment but failed to plead a claim for breach of implied-in-fact contract. Therefore, the judge did not dismiss plaintiffs’ unjust enrichment or declaratory judgment claims, but did dismiss plaintiff’s RICO claims against both defendants, and plaintiffs’ claim for breach of contract against UnitedHealth.
Atlantic ER Physicians Team v. UnitedHealth Group No. 20-20083 (RMB/AMD), 2021 WL 4473117 (D.N.J. Sept. 30, 2021) (Judge Renée Marie Bumb). This New Jersey case is strikingly similar to the New York case above, (Emergency Physician Services of NY v. UnitedHealth). Plaintiffs here are New Jersey based emergency healthcare providers who have filed their suit against defendants UnitedHealth Group and Multiplan Inc. Plaintiffs alleged that United defendants underpaid for emergency healthcare which plaintiffs provided to patients covered by health insurance plans funded or administered by defendants. Defendants had participating agreements with plaintiffs, through which defendants agreed to pay plaintiffs agreed-upon rates for emergency treatment. These agreements were terminated by defendant. Following that cancellation, patients covered by defendants continued seeking and receiving emergency treatment from plaintiffs, and defendants continued to underpay for those services. Plaintiffs assert state law claims against the United defendants for quantum meruit, violations of the New Jersey Health Claims Authorization, violations of the Processing and Payment Act, tortious interference, and a violation of New Jersey RICO. Plaintiffs, like their New York counterparts, allege that United partnered with defendant Multiplan, to falsely represent to providers and patients that its process for determining payments was fair. Plaintiffs now wish to remand the case and have moved to do so. The brought suit in state court and defendants removed the case to federal court. Plaintiffs sought remand back to state court, arguing that there is no federal question jurisdiction, and removal was procedurally improper because all joined and served defendants did not consent to removal within thirty days of service. The United defendants have moved to dismiss the case arguing complete ERISA preemption of the state law claims. Specifically, United argued that plaintiffs needed to have brought their claims under ERISA Section 502(a), because their patients had essentially assigned their benefits to them. Plaintiffs countered that they could not have brought their claims under Section 502(a) because they are out-of-network providers, not ERISA plan participants, and because they were not assignees and defendants did not attempt to provide documents proving the governing plans even permitted such assignments. In the absence of affirmative evidence, the judge determined that plaintiffs were not assignees and had no standing to sue under ERISA. Furthermore, the plaintiffs’ claims were premised on agreements arising in the course of the parties’ dealings outside of ERISA plans. Therefore, defendants failed to meet their burden to show that plaintiffs had standing to bring an ERISA claim. The court also held that it lacked subject matter jurisdiction based on federal question. Accordingly, plaintiff’s motion to remand was granted.
Kindred Hospitals East v. Local 464A United Food No. 21-10659, 2021 WL 4452495 (D.N.J. Sept. 29, 2021) (Judge John Michael Vazquez). Plaintiff is an LLC that operates hospitals in several states, including the “Kindred Hospital New Jersey- Rahway.” Kindred claims that defendants Local 464A United Food and Commercial Workers Union Welfare Service Benefit Funds and the Maxon Company, refused to pay for medical services Kindred provided to a beneficiary of the fund. Before admitting the patient, Kindred contacted Maxon to confirm eligibility for coverage and determine the terms of payment. The person at Maxon allegedly informed Kindred that the fund covered the first 31 days of inpatient stays at 100%, and at 80% for any time beyond that, and that preauthorization was not required. Based on these statements Kindred admitted the patient and provided him with weeks of care and treatment before he was discharged to a rehabilitation facility. Kindred then submitted its claims to the fund, but the fund refused to pay because Kindred was a non-covered facility. Kindred filed a complaint against defendants alleging fraudulent misrepresentation, negligent misrepresentation, and promissory estoppel. Defendants have moved to dismiss the state law claims citing ERISA preemption. The judge disagreed, finding that the claims largely turned on legal duties generated outside the ERISA context and required only a cursory examination of the plan. Accordingly, the judge denied the defendants’ motion to dismiss the state law claims.
Sadeghi v. Aetna Life Insurance Co. No. 20-447-SDD-EWD, 2021 WL 4448921 (M.D. La. Sept. 28, 2021) (Judge Shelly D. Dick). The plaintiffs are both plastic surgeons who performed post-mastectomy breast reconstruction surgeries on two patients on the same day, who were both covered by ERISA plans sponsored by defendant Aetna Life Insurance Co. After Aetna paid only 25% of the cost of a single surgery for both surgeries, the plaintiffs brought this state lawsuit asserting that they were entitled to the “in network” rate for the surgeries based on Aetna’s agreement prior to the surgery to this effect. Aetna argued that the state lawsuit was completely preempted by ERISA. The plaintiffs stated that they were designated authorized representatives of both patients, not assignees because both patients were participants in plans that had anti-assignment provisions. Aetna argued that plaintiffs functioned as assignee’s by administratively appealing the underpayments, and that allowing them to shed that designation now in court would be unjust. The judge agreed, stating that plaintiffs “cannot have their cake and eat it too.” Plaintiffs further argued that they were asserting a right to payment based on a separate pre-surgery agreement between themselves and the ERISA provider and that the claim was thus not preempted by ERISA, emphasizing their issue was the rate of payment, not the right to payment. The judge disagreed, reasoning that the evidence in this case was centered around an “in-network exception” letter that went out to plan members as well as to the plaintiffs, and that there was no evidence that any oral or written promises were made in addition to this letter. With this logic, the judge decided that the state lawsuit was completely preempted by ERISA, and granted Aetna’s motion for partial summary judgment.
Life Insurance & AD&D Benefit Claims
Todd v. Aetna Life Insurance Co. No. 3:19-cv-699-HTW-LGI, 2021 WL 4497488 (S.D. Miss. Sept. 30, 2021) (Judge Henry T. Wingate). Plaintiff, Marianne Todd, was the spouse of Dudley Tardo, and the beneficiary of an ERISA life insurance policy, that included a provision for Accidental Death and Personal Loss. Mr. Tardo died in a car crash. Aetna denied benefits for accidental death, finding that he died of natural causes. Ms. Todd filed suit, asserting three causes of action under ERISA: a claim for benefits under the plan, a breach of fiduciary duty claim, and a claim alleging Aetna’s failure to establish reasonable review procedures. Aetna moved for partial dismissal pursuant to Federal Rules of Civil Procedure 12(b)(6) arguing that Ms. Todd’s claims were duplicative. Aetna contended that only plaintiff’s claim for benefits can be plead under Fifth Circuit precedent. The judge agreed and found the law clear in the Fifth Circuit. Accordingly, the court granted Aetna’s motion for partial dismissal of Ms. Todd’s separate claims for breach of fiduciary duty and unreasonable review procedures.
Boyle v. L-3 Communications Corp. No. 21 C 2136, 2021 WL 4459467 (N.D. Ill. Sept. 29, 2021) (Judge Ronald A. Guzman). Plaintiff Pauline Boyle is the surviving spouse of Tom Boyle, a civilian contractor in Afghanistan. Pauline brought this suit for violation of ERISA and breach of contract against several defendants. Ms. Boyle believed that her husband had a life insurance policy, an accidental death and dismemberment policy, and possibly other supplemental policies. She claimed that her husband never received copies of the policies prior to his arrival in Afghanistan but that he made all required premium payments. Defendants moved to dismiss. The judge found Ms. Boyle’s complaint vague and conclusory and thus granted the motion to dismiss of defendants Marsh Inc, Seabury & Smith Inc, Marsh U.S. Consumer, and Mercer Health & Benefits Administration LLC. The judge also granted defendant MetLife Insurance Company’s motion to dismiss the amended complaint. The amended complaint was dismissed without prejudice.
Bird v. Metropolitan Life Insurance Co. No. 2:20-cv-08902-ODW, 2021 WL 4458954 (C.D. Cal. Sept. 29, 2021) (Judge Otis D. Wright II). Plaintiff Dr. Bird brought this ERISA suit to recover supplemental life insurance benefits from her late husband’s employee benefit plan administered by MetLife. Although her husband had opted to change the way his life insurance benefits would be calculated, because he was not actively at work on the date that change went into effect, MetLife determined his widow was not qualified to receive that additional amount of money. The judge decided that MetLife correctly paid Dr. Bird the life insurance benefit equaling what it would have had to pay had her husband’s employer never decided to change its earnings calculation method. This, the judge determined, was a fair decision given the circumstances. For that reason, the judge found in favor of MetLife and determined Dr. Bird was not entitled to recover anything more in way of benefits from MetLife.
Medical Benefit Claims
Wisbar v. Health Care Service Corp. No. 20-732, 2021 WL 4429451 (M.D. La. Sept. 27, 2021) (Judge John W. deGravelles). Plaintiff Frederick Wisbar is a participant in an ERISA plan provided by his employer YCI Methanol One, and administered by defendant Blue Cross and Blue Shield of Texas. The case arises from a denial of medical benefits for Mr. Wisbar’s son, Taylor, who is a beneficiary under the plan. After first preapproving with Blue Cross, Taylor underwent medically necessary jaw surgery. The $15,000 bill was then denied by the insurance company, who sent the family a letter stating, “the only amount that could be subtracted from the $15,000.00 amount billed was $56.02 and the only amount covered . . . was $281.03.” Plaintiffs then filed suit under both ERISA Section 502(a)(3) and Section 502(a)(1)(B) seeking to recover the full $15,000, as well as attorney’s fees and interest. Defendant moved to dismiss plaintiff’s 502(a)(3) claim, arguing that it impermissibly duplicated plaintiff’s 502(a)(1)(B) claim for benefits. Defendant argued that both claims were based on the same facts and the same theory of liability, and both were seeking the same recovery of plan benefits. Opposing this, plaintiffs contended that in this early stage of litigation both of their claims were properly pled. The judge agreed with the defendant, concluding that plaintiffs were dressing up their ordinary benefit claim in “fiduciary duty clothing,” with the intent to avoid the deferential arbitrary and capricious standard of review. For this reason, the judge granted the defendant’s motion to dismiss the 502(a)(3) claim without prejudice.
Marski v. Courier Express One No. 19 CV 4132, 2021 WL 4459512 (N.D. Ill. Sept. 29, 2021) (Judge John Robert Blakey). Plaintiff Michelle Marski brought numerous claims related to the termination of her employment. Among those claims, plaintiff asserted that defendants violated COBRA by failing to give her timely notice of her COBRA rights. The judge ruled in favor of defendants on this claim holding that neither of the defendants was a plan administrator subject to suit under COBRA.
John R. v. United Behavioral Health No. 2:18-cv-35-TC-DAO, 2021 WL 4393422 (D. Utah Sept. 24, 2021) (Judge Tena Campbell). Plaintiff Charles R. received in-patient mental health and substance use treatment from three facilities: Summit Achievement, Second Nature Blue Ridge Wilderness Therapy, and In Balance Ranch Academy, from the years 2014-2016. Charles R. was a teenager during this time, and was covered under the ERISA plan of his father, John R. United Behavioral Health denied John R’s claims for all three of Charles’ in-patient stays claiming they were not “medically necessary” and that lower levels of care would have sufficed in treating Charles for his mental health and substance use disorders. For at least one of the claims, United Behavioral Health also denied the submitted claim because the one-year deadline for submitting a claim had elapsed. Summit, Second Nature, and In Balance Ranch Academy were all out-of-network providers and none had contracts with United Behavioral Health. Under the deferential arbitrary and capricious standard of review for the Summit and Second Nature claims, the judge found the denials reasonable. Under de novo review, the judge found the In Balance denial should also stand because it was supported by four qualified reviewers. Satisfied with United Behavioral Health’s decisions, the judge granted its motion for summary judgment, and denied the plaintiff’s cross motion for summary judgment.
David P. v. United Healthcare Insurance Co. No. 2:19-cv-00225-JNP-JCB, 2021 WL 4460104 (D. Utah Sept. 29, 2021) (Judge Jill N. Parrish). Plaintiff David P. brought this ERISA suit seeking the recovery of benefits, against defendants United Healthcare Insurance Co. and United Behavioral Health, after they denied his daughter L.P.’s in-patient treatment for her mental health disorders and substance use disorder in violation of the Mental Health Parity and Addiction Equity Act. Plaintiffs contend that United Behavioral Health’s denials caused them to pay over $177,000 in out-of-pocket expenses. United Behavioral Health claimed it denied the treatments because they were not “medically necessary,” or in line with their “level of care guidelines,” and for lack of preauthorization. The judge determined that the denials suffered from a number of serious procedural irregularities, and that United Behavioral Health failed to consider L.P.’s substance use disorder as an independent condition that was relevant in evaluating the medical necessity of her in-patient stays. The judge additionally found the denial claims cursory and lacking factual medical support. Siding entirely with plaintiffs, the judge granted their motion for summary judgment, and ordered United Behavioral Health pay the benefits claims for the treatment facilities. In addition, the judge awarded plaintiffs prejudgment interest on the benefits, and granted their request for attorney’s fees.
Pension Benefit Claims
Caballero v. Fuerzas Armadas Revolucionarias de Colombia No. 1:21-cv-11393-IT, 2021 WL 4477436 (D. Mass. Sept. 30, 2021) (Judge Indira Talwani). In this lawsuit, the court was asked to decide whether ERISA’s anti-alienation provision prevents a terrorism victim from attaching funds in 401(k) accounts belonging to drug cartel members. The southern district of Florida issued a final judgment in May of 2020 in favor of Mr. Caballero against Fuerzas Armadas Revolucionarias de Colombia and Norte de Valle Cartel. These cartels had kidnapped, tortured, and murdered Mr. Caballero’s father. Mr. Caballero registered the judgement and moved ex parte for insurance of a post-judgment summons directing trustee process on Fidelity Investments to allow enforcement of his judgment. Mr. Caballero sought to attach assets held by Fidelity in the names of Rafael Marquez Alvarez, Leonardo Gonzalez Dellan, and MFAA Holdings Limited. Mr. Caballero was asking the court to issue final judgment in his favor and order Fidelity to turn over the funds held in the five accounts. Fidelity filed a response stating the assets held for the benefit of Marquez Alvarez were in a 401(k) plan subject to ERISA. Fidelity asked the court to determine whether the 401(k) assets were subject to turnover pursuant to a federal law, TIRA, designed to compensate terrorism victims, thereby overriding ERIA’s anti-alienation rule. The judge ruled that TIRA was specifically designed to ensure that victims of terrorist acts are fully compensated, and TIRA’s opening clause expressly supersedes ERISA’s anti-alienation provision. The funds in Mr. Alvarez’s 401(k) were therefore subject to execution to enforce Mr. Caballero’s judgment. Having so decided, the court turned to the question raised by the plan as to the scope of Mr. Caballero’s judgment, essentially whether Mr. Caballero’s rights were the same as those of Mr. Alvarez himself. The judge found that holders of judgments may attach certain blocked assets in satisfaction of those judgments. The judge therefore limited Mr. Caballero’s rights to Mr. Alvarez’s 401(k) assets to those which Mr. Alvarez himself had in the account. Mr. Caballero’s motion for TIRA turnover judgment was thus granted, but limited to those assets which Marquez Alvarez has a right to receive under the terms of the plan.
Radcliffe v. Aetna Inc. No. 3:20-cv-01274-VAB, 2021 WL 4477408 (D. Conn. Sept. 30, 2021) (Judge Victor A. Bolden). Mergers, acquisitions, and retirement plans converge in this complicated ERISA suit. Plaintiffs filed this consolidated putative class action against Aetna Inc, CVS Health Corporation, the Aetna Benefits Finance Committee, as well as against several individual “Doe” defendants, alleging defendants breached their fiduciary duties of loyalty and prudence and engaged in prohibited transactions. Defendants moved to dismiss the suit for failure to state a claim and the court granted the motion. With respect to Defendants Aetna and CVS, the court concluded that they and their officers and directors were acting in their corporate and not their fiduciary capacities with respect to the security disclosures. With regard to the remaining defendants, the court held that the plaintiffs failed to sufficiently allege that they breached their fiduciary duties of prudence by removing the Aetna stock fund as an investment option. The court reasoned that the complaint did not allege that these defendants failed to take protective action based on material nonpublic information and also failed to allege that these defendants knew or should have known of Omnicare’s prescription drug rollover practice. With respect to the disloyalty claims against the defendants, the court concluded that the allegations in the complaint contained insufficient detail to make out these claims.
Gelschus v. Hogen No. 20-823(DSD/BRT), 2021 WL 4462097 (D. Minn. Sept. 29, 2021) (Judge David S. Doty). Plaintiff Robert Francis Gelschus is the personal representative of decedent Sally Hogen’s estate. Defendant Clifford Hogen is Sally Hogen’s ex-husband and, during their marriage, was the beneficiary of her 401(k) plan. Mr. Gelschus claims that during their divorce, the parties agreed that Mr. Hogen would no longer be the beneficiary of the plan. Mr. Hogen argued, to the contrary, that he agreed with his ex-wife that he would remain as beneficiary in exchange for including other accounts in the divorce settlement. It is clear that Sally Hogen submitted a change of beneficiary form in an attempt to remove Mr. Hogen as beneficiary. The form, however, did not comply with the technical requirements of the plan and Mr. Hogen was never removed as beneficiary. The parties disputed whether Sally Hogen received notice from the plan that the form was not satisfactory. When Sally Hogen died in 2019, the plan contacted Mr. Hogen and informed him he was the named beneficiary of the plan. Mr. Gelschus disputed the designation, sent the plan the divorce decree, and requested the benefits be paid to the estate. The plan nevertheless paid the benefits to Mr. Hogen. Mr. Gelshus filed suit asserting state-law claims and the parties filed cross-motions for summary judgment. Although the judge did not find plaintiff’s claims preempted by ERISA, because they arose out of a contract between private parties, the judge did determine that plaintiff lacked standing to sue because the contract did not remain in effect after Sally Hogen died. The judge therefore granted the defendant’s motion for summary judgment and denied the plaintiff’s cross-motion.
Goodwin v. National Electrical Annuity Plan No. 20-cv-1044-WJM-STV, 2021 WL 4472918 (D. Colo. Sept. 30, 2021) (Judge William J. Martínez). In this family drama, plaintiff and defendant are father and daughter. While incarcerated, plaintiff Daniel Goodwin signed a power of attorney (“POA”) form which designated his daughter, defendant Quinn Goodwin, as his agent. Defendant Goodwin gave this POA to defendant National Electrical Annuity Plan (“NEAP”), her father’s retirement plan. At the time, Plaintiff Mr. Goodwin had a NEAP account valued at about $548,0000. The POA included special instructions that provided that Ms. Quinn Goodwin was allowed to withdraw no more than a sum of $50,000 from the NEAP account to be used, if needed, for legal expenses, and any further contributions to Quinn Goodwin would need to be authorized in writing by Daniel Goodwin. When Quinn Goodwin tried to withdraw the $50,000 that was authorized in the special instructions, NEAP notified her that partial withdrawals were not permitted by the NEAP plan. Then NEAP sent Ms. Goodwin a withdrawal application packet. Ms. Goodwin submitted a normal benefit application to NEAP, requesting a lump sum distribution of the entire account. Mr. Goodwin did not sign the application. Defendant NEAP then issued a check for the full value of the account minus taxes in Daniel Goodwin’s name, in the care of Ms. Quinn Goodwin. A few months later, Mr. Goodwin revoked the POA and alleged that defendant Ms. Goodwin had misappropriated his funds. Mr. Goodwin sued the plan to recover his retirement funds. Defendant Neap then filed a crossclaim against defendant Quinn Goodwin for the amount of the retirement claims. A Magistrate Judge reviewed this case and issued a report and recommendation concluding that defendant NEAP erred as a matter of law in dispersing plaintiffs benefits to defendant Goodwin and ignoring the very specific special instructions of the POA. The district court judge agreed with the recommendation and entered judgment in favor of Mr. Goodwin against defendant NEAP for the amount of the retirement plan, excluding the $50,000 Quinn Goodwin was authorized to withdraw per the POA.
Romano v. John Hancock Life Insurance Co. No. 19-21147-CIV-GOODMAN, 2021 WL 4441348 (S.D. Fla. Sept. 28, 2021) (Magistrate Judge Jonathan Goodman). Timing is everything, especially for the Magistrate Judge in this case. Here, Eric and Todd Romano, trustees of an ERISA defined contribution plan, filed a lawsuit on behalf of a putative class against defendant John Hancock Life Insurance Co. alleging that John Hancock breached its fiduciary duty of loyalty and caused the plan to enter into an ERISA prohibited transaction by not crediting its plan with the value of Foreign Tax Credits. John Hancock filed a motion for leave to file a third-party complaint and to amend its answer and file counterclaims against the Romanos. Granting the motion would result in reopening discovery, amending the trial schedule, and overall extending the time and scope of the case. John Hancock stated that through discovery it learned new information which prompted its move to belatedly file leave. However, the judge found this plainly untrue, and found that the record evidence “reveals that John Hancock knew the alleged facts underlying its contribution claims months, and probably more than a year before it took the depositions.” Because granting the request would be impractical and generate undue delay and prejudice, the judge denied the motions.
Jones v. EVRAZ Inc. North America No. 1:18-cv-04519-SDG, 2021 WL 4441161 (N.D. Ga. Sept. 28, 2021) (Judge Steven D. Grimberg). Plaintiff Michael D. Jones filed suit alleging defendants wrongfully denied his pension benefit claim and breached various disclosure obligations related to the plan. Mr. Jones amended his complaint to add additional claims for other fiduciary duty breaches. Mr. Jones worked for EVRAZ from 1989 to 1996. In 1996 he became disabled and started collecting disability insurance. He received disability insurance payments until 1999. Mr. Jones remained disabled and did not work or earn money from 1999 to 2004. In 2015, Mr. Jones applied for early retirement benefits. Under the plan, a participant is eligible to take early retirement when his employment ends after he has reached 15 years of service and is between 55 and 65 years old. The administrative committee determined that Mr. Jones was not eligible for benefits. The judge agreed with this decision. The judge found that there was no reasonable basis to conclude that Mr. Jones’ employment and accrual of service continued past 2004 when he began working again. In 2004 Mr. Jones had not reached the age of 55 and thus did not satisfy both requirements needed for eligibility. The court therefore granted the defendants’ motion for judgment on the administrative record and summary judgment and closed the case.
Blake v. Life Insurance Company of North America No. 3:20-cv-319-DJH-RSE, 2021 WL 4430774 (W.D. Ky. Sept. 27, 2021) (Judge David J. Hale). After plaintiff Jessica Blake’s husband died, defendant Life Insurance Company of North America (LINA) denied her claim for supplemental AD&D benefits. The parties dispute whether ERISA governs Blake’s supplemental AD&D policy. The issue is whether Blake’s former employer, Jack Henry & Associates (JHA), contributed to and endorsed the supplemental AD&D policy. Ms. Blake claimed that JHA neither contributed to nor endorsed the additional policy and that it falls within the ERISA safe-harbor exemption and is thus not an ERISA plan. LINA argued to the contrary and contended that the AD&D policy was part of the larger employee welfare benefit plan. The judge emphasized a need for a uniform application of ERISA and found that an employer contributed to a plan when it paid for only some employee benefits, as in this case. By merely obtaining coverage for its employees, JHA was administering an ERISA plan that covered all policies within it, even those it did not pay for. Therefore, the judge concluded that ERISA governs the supplemental AD&D policy. The plaintiff’s motion for declaratory judgment finding that ERISA does not govern the policy was thus denied. The defendant’s motion to the contrary was granted, and the case was referred back to the Magistrate Judge as an ERISA case.
Adams v. Symetra Life Insurance Co. No. CV-18-00378-TUC-JGZ (LAB), 2021 WL 4458234 (D. Ariz. Sept. 29, 2021) (Judge Jennifer G. Zipps). On November 3, 2020, the district court adopted the report and recommendation of the Magistrate Judge to deny Defendant Symetra Life Insurance Company’s Motion for Partial Summary Judgment on ERISA. Symetra sought reconsideration of that order. At issue was the status of the plan as one governed by ERISA. Adams owned his own insurance agency, Luke Adams Agency, which sponsored a disability plan that covered himself and one other employee. The court concluded that because the plan covered one employee in addition to Adams, it was an ERISA governed plan. For this reason, the court concluded that Adam’s state law claims were preempted by ERISA. Symetra’s motion for reconsideration was granted, as was its partial motion for summary judgment on the ERISA issue.
Pleading Issues & Procedure
Cho v. Prudential Insurance Co. No. 19-19886, 2021 WL 4438186 (D.N.J. Sept. 27, 2021) (Judge John Michael Vazquez). Putative class members, participants in a 401(k) retirement plan, brought this ERISA suit alleging defendants breached their fiduciaries duties, engaged in prohibited transactions, and breached their monitoring duties. Plaintiffs claimed that Prudential failed to act solely in the interest of the plan and its participants and failed to exercise prudence and diligence in investing the assets of the plan. They claim defendants breached their fiduciary duties by offering investment options with high fees, in selecting and maintaining underperforming fund options, and by engaging in prohibited transactions with parties-in-interest. The plan participants claim this led to a loss of millions of dollars in retirement savings. Defendants moved to dismiss, claiming plaintiffs lacked Article III standing, and that plaintiffs failed to state a claim. Defendants’ Article III motion was denied, as the judge found that the plaintiffs sufficiently alleged harm and thus had standing. However, the defendants’ 12(b)(6) motion to dismiss for failure to state a claim was granted, without prejudice. The judge determined that plaintiffs failed to sufficiently plead any of their claims and only provided the court with conclusory allegations.
Graphic Communications v. Rollins No. 4:21cv00009, 2021 WL 4437494 (W.D. Va. Sept. 28, 2021) (Judge Thomas T. Cullen). Defendant Sandra Rollins received a check from plaintiff Graphic Communications for $26,511.50 after her husband’s death. Graphic Communications told Ms. Rollins that this check was a one-time payment to correct for an earlier underpayment of her late husband’s pension. It seems the fund was prone to mistakes because it then sent Ms. Rollins two more checks for the same amount. Assuming that the fund found further underpayments to her husband and that their earlier statement about a “one-time payment” was a mistake, Ms. Rollins deposited these checks to her bank. She said she assumed that if these checks were sent to her in error, the fund would catch it and the bank would not deposit them. She thought no more about this money until Graphic Communications demanded the money back and filed suit alleging three causes of action: breach of fiduciary duty, constructive trust, and unjust enrichment. Graphic argued that any person who accepts any fund assets to which they are not entitled, even if by mistake, is a fiduciary who may be sued under ERISA. The judge was not convinced by this definition and denied judgment on the pleadings as to the breach of fiduciary duty count. As to the plaintiff’s second cause of action, constructive trust, the judge determined that it is a remedy, not an independent cause of action, thus the plaintiff was not entitled to judgement on that count. Lastly, the judge was not moved by the plaintiff’s unjust enrichment arguments as they stood and found that judgment on that claim was not appropriate on the pleadings alone. For these reasons, plaintiff’s motion for judgment on the pleadings was denied.
Dover v. Yanfeng No. 20-CV-11643-TGB-DRG, 2021 WL 4440324 (E.D. Mich. Sept. 28, 2021) (Judge Terrence G. Berg). The plaintiffs in this case are retirement plan participants who seek to represent a class. They were participants in defendant Yanfeng’s ERISA retirement plan. Plaintiffs brought claims of breach of fiduciary duties and failure to monitor other fiduciaries, which they allege resulted in losses to the plan. Plaintiffs alleged the plan incurred excessively high fees, that actively managed funds were selected over index funds, the funds were underperforming, and Yanfeng was not properly monitoring potentially conflicted advisors and their commissions. Defendants moved to dismiss. The judge found that plaintiffs have standing to assert their claims. The judge further found plaintiffs sufficiently alleged breach of fiduciary duties and failure to monitor claims to a satisfactory degree to survive dismissal. The motion to dismiss was therefore denied.
Kumar v. KRS Global Biotechnology No. 21-80151-Civ, 2021 WL 4427456 (S.D. Fla. Sept. 27, 2021) (Judge William Matthewman). Plaintiff Suresh Kumar brought this suit against his former employer, defendant KRS Global Biotechnology, alleging violations of the Fair Labor Standards Act and breach of fiduciary duty under ERISA. According to the Mr. Kumar, defendants failed to pay him any wages from November 15, 2019, to January 10, 2020. Mr. Kumar claimed he was owed $54,690 for work he performed during that period. He further claimed that defendants failed to remit insurance payments to plan providers, which resulted in the loss health care of coverage. Mr. Kumar allegedly incurred medical expenses after his coverage had ended without his knowledge. He also alleged that defendants deducted payments for insurance premiums from his pay after his coverage was terminated. Mr. Kumar claimed that defendants’ failure to pay insurance premiums was a breach of their fiduciary duties. Defendants moved to dismiss. Plaintiffs’ FLSA claims were deemed sufficient by the judge to survive the motion to dismiss. Mr. Kumar’s ERISA claims however, were dismissed because the judge was not satisfied that KRS Global was a fiduciary under ERISA. The ERISA claims were dismissed without prejudice.
Jones v. UnitedHealth Group No. 19-CV-7972 (VEC), 2021 WL 4443142 (S.D.N.Y. Sept. 28, 2021) (Judge Valerie Caproni). Plaintiff Michael E. Jones, M.D. is a plastic surgeon who brought suit against defendants UnitedHealth Group and Optum for denying healthcare claims and delaying payments. He claimed ERISA violations, federal antitrust violations, and related state law violations. The judge found the state law claims expressly preempted by ERISA. The judge dismissed the ERISA claims because Mr. Jones did not refer to any ERISA plan documents, nor any assignment of rights from any of his patients. Without these essential documents, the judge could not evaluate any alleged violations. According to the judge, the entire complaint by the plaintiff was conclusory and speculative and devoid of factual content. For that reason, the plaintiff’s antitrust allegations were also dismissed. Defendant’s motion to dismiss was granted, and the plaintiff was granted leave to amend his complaint.
Regional Medical Center of San Jose v. WH Administrators Inc. No. 5:17-cv-03357-EJD, 2021 WL 4481667 (N.D. Cal. Sept. 30, 2021) (Judge Edward J. Davila). Plaintiff is an acute care hospital, Regional Medical Center of San Jose, whose complaint consists of five counts: a claim for benefits under ERISA 502(a)(1)(B), a claim for enforcement of the ACA § 2707(b), intentional misrepresentation, negligent misrepresentation, and intentional interference with contractual relations. The defendants are RHC Management Co., the plan sponsor, RHC Management Health & Welfare Trust, the plan, WH Administrators Inc, the plan administrator, the Phia Group, and Benefit Administrative Systems, whom the plaintiff refers to as “de facto plan administrators.” The complaint arises from a month-long hospital stay of a patient who was a beneficiary of the plan. Plaintiff called to verify the patient’s benefits under the plan. Plaintiff claims that a plan representative confirmed the patient’s coverage and stated that the plan would cover 80% of the patient’s hospital stay, and there was a $6,350 maximum out of pocket amount that had not yet been met. In addition to this, plaintiff alleged that the plan provided a specific authorization number for the patient’s inpatient care. Relying on this information, plaintiff provided the patient with inpatient care. Plaintiffs then billed the plan for $892,269.79. The plan paid just $73,043.32, 8% of the total bill. According to defendants, this amount was 120% of the Medicare rate for the services. Plaintiff argued that defendants caused this substantial underpayment through a scheme circumventing the maximum out-of-pocket (MOOP) limitation of the plan and the MOOP limit of the Affordable Care Act. Plaintiff contends that the plan had a $6,350 MOOP provision and therefore defendants were required to pay all of the beneficiary’s medical expenses above this amount at a “reasonable and customary” rate. Defendants countered that pursuant to the plan, they are required to pay no more than 120% of Medicare rates, which they believe have already been paid. The judge found that the MOOP provision did not entitle plaintiff to any additional benefits beyond what was already paid. According to the court, the MOOP provision clearly limited the plan’s obligation to pay “reasonable and customary charges,” which is defined by the plan as 120% of the Medicare rates. Such a definition, the judge determined, was fair, clearly written, based on normative data, and not buried deep within the plan, rather located on page 19. Because the judge found all of plaintiff’s improper denial theories unpersuasive, the court granted the defendants’ motion to dismiss plaintiff’s first cause of action under 502(a)(1)(B) without leave to amend.
Severance Benefit Claims
JPMorgan Chase v. Baez No. H-21-1688, 2021 WL 4391232 (S.D. Tex. Sept. 24, 2021) (Judge Lee H. Rosenthal). After defendant Maria Baez refused to return an alleged $111,628.98 overpayment of her severance package to JPMorgan Chase, the plan administrator filed this suit under 29 U.S.C. § 1132(a)(3). Ms. Baez moved to dismiss under Rules 12(b)(1) and 12(b)(6). Though the judge did not agree with any of Ms. Baez’s reasons to dismiss under Rule 12(b)(1), the judge granted the motion to dismiss under Rule12(b)(6) because the plaintiff didn’t seek appropriate equitable relief as required under § 1132(a)(3). The Judge rejected JPMorgan Chase’s argument that Ms. Baez was unjustly enriched, and found that, because there was no provision for the return of money in the severance agreement, there was no basis for an equitable lien by agreement.
JPMorgan Chase Severance Pay Plan v. Romo No. H-21-1685, 2021 WL 4442519 (S.D. Tex. Sept. 28, 2021) (Judge Lee H. Rosenthal). In a nearly identical case to the one above, plaintiff JPMorgan Chase is again seeking the repayment of an alleged $102,660.40 overpayment of severance compensation from its former financial advisor defendant Patricia Romo. Ms. Romo moved to dismiss under rules 12(b)(1) and 12(b)(6). Finding exactly for Ms. Romo as the judge found for Ms. Baez in the above case, the motion to dismiss under Rule12(b)(1) was denied, and Ms. Romo’s motion to dismiss under Rule12(b)(6) was granted because the plaintiff had not sought an appropriate equitable relief as required under section 1132(a)(3).
Statute of Limitations
Royal v. Retirement Board of the Bell/Rozelle NFL Retirement Plan No. 20-4184, __ F. App’x__2021 WL 4484925 (2nd Cir. Oct. 1, 2021) (Before Circuit Judges Wesley, and Sullivan, and Judge John G. Koeltl). During his time as a professional football player, plaintiff-appellant Andre Royal developed seizures. Since 2001, he has been receiving disability benefits under the Bert Bell/Pete Rozelle NFL Retirement Plan, after the plan administrator classified him as permanently disabled. Mr. Royal unsuccessfully sought reclassification into a disability category that would have resulted in greater benefits. He then brought suit against the plan and several board members claiming they violated ERISA by failing to provide summary plan descriptions, and by failing to disclose the plan terms in advance of Mr. Royal’s original application for disability benefits. The board moved to dismiss Mr. Royal’s complaint as time-barred. The district court granted the board’s motion. Mr. Royal argued that his claims are not time-barred because the statute of limitations period did not begin until 2016, when he received the plan documents and had actual knowledge of the plan provisions. The Circuit Judges found this argument unpersuasive because the fraud or concealment exception to ERISA’s six-year statute of limitations did not apply because Mr. Royal alleged no fact giving rise to a plausible inference that the board fraudulently concealed its failure to provide the documents at the time of his original application. The court concluded that the board could not have concealed its failure to provide the documents because even Mr. Royal acknowledged that he “knew at the time he filed his original application that he did not have the SPD.” Plaintiff was therefore aware that he had not received the SPD for 16 years, and his claims were therefore time-barred. Accordingly, the Second Circuit affirmed the lower court’s decision dismissing the suit.
Howard W. v. Providence Health Plan No. 2:20cv463 JNP, 2021 WL 4459856 (D. Utah Sept. 29, 2021) (Judge Jill N. Parrish). Plaintiffs Howard W., Wendy W., and Kathryn H.W. brought a Mental Health Parity suit against Providence Health Plan and the Swedish Health Services Employee Benefits Plan after they failed to pay for treatment Kathryn received at facilities in Utah and Hawaii. The defendants moved to dismiss for lack of personal jurisdiction and alternatively moved to transfer venue to Washington. The judge denied the defendants’ motion to dismiss for lack of personal jurisdiction concluding that defendants did not prove a burden rising to the level of constitutional concern from having to argue the case in Utah. As for transferring the case, the judge did not see any significant difference between Utah and Washington with respect to the cost of defending the case, the enforceability of a judgment, the ability to receive a fair trial, or the congestion of dockets. As the plaintiffs did not live in Utah, and their only connection to Utah was the treatment Kathryn received, the judge did not feel a strong need to defer to the plaintiffs’ venue choice. Nor was the convenience of witnesses important to this ERISA case, where the court’s review would likely be limited to the administrative record. Conversely, weighing in favor of transfer was the fact that the plan and plaintiffs reside in Washington, and that Washington is significantly closer to Beaverton, Oregon where the plan was administered, the decision to deny the claims was made, and where relevant documents and witnesses are located. Thus, the judge granted the defendants’ motion to transfer the case to the Western District of Washington.