Thompson v. Oracle Corp., No. 4:21-cv-00026-YGR, 2021 WL 5865519 (N.D. Cal. Dec. 10, 2021) (Judge Yvonne Gonzalez Rogers). 

When Elisa Thompson went to work for Sun Microsystems, she specifically negotiated a job offer that included a guarantee of lifetime disability benefits because she was concerned about the possible return of a childhood disability. When Oracle Corporation, which had acquired Sun Microsystems, reneged on this promise following an amendment to the company’s disability policy, Ms. Thompson filed suit asserting claims under state law – for breach of contract, promissory estoppel, fraudulent and negligent misrepresentation and elder abuse – and under ERISA for benefits and fiduciary breach.  Oracle moved to dismiss three of the state-law claims and both of the ERISA claims.

First, Oracle argued that ERISA Section 514 preempted Ms. Thompson’s claims for breach of contract and promissory estoppel. The court disagreed, reasoning that the complaint alleged that Ms. Thompson entered into an employment agreement that promised her lifetime disability benefits. Because her claims did not depend on the existence or terms of an ERISA plan, but were instead based on her individual employment contract, the court concluded that they were not preempted.  

The court also agreed with plaintiff that these claims were timely under California’s statute of limitations for contract claims, concluding that the statutory period for the claims commenced when plaintiff first learned that Oracle intended to terminate her benefits, not when it amended the ERISA plan years earlier. The court also concluded that there was nothing indefinite, vague or ambiguous as to the company’s promise of lifetime benefits. Finally, with respect to the promissory estoppel claim, the court held that plaintiff sufficiently pled the elements of such a claim by alleging that the company misrepresented plaintiff’s benefits to her and that defendants either failed to ensure that the promise was carried out, or that they had no reasonable grounds for believing they would live up to their promise to provide lifetime benefits. 

Surprisingly, the court also allowed Ms. Thompson to proceed on her claim for elder abuse, which, in California, includes financial abuse. Defendants disputed whether plaintiff had identified personal property that was wrongfully obtained or retained by them. The court disagreed with respect to the contract-based claims, reasoning that the complaint sufficiently alleged that the disability benefits were vested under the employment contract. The court agreed with defendants so far as the elder abuse claim was based on the ERISA plan, because the court concluded that benefits under the plan were not vested and thus not covered by the California law.

With respect to the ERISA claims, plaintiff did not fare as well. First, addressing Ms. Thompson’s claim for plan benefits, the court pointed out that the plain terms of the plan required disability benefits to terminate at age 65. Plaintiff claimed that her employment contract essentially amended these plan terms with respect to her claims. The court noted, however, that the plan contained a detailed provision about how plan amendments are to take place and concluded that plaintiff had not sufficiently alleged how her employment contract comported with those requirements. The court thus dismissed this claim and did so with prejudice as this was plaintiff’s third complaint.

The court likewise dismissed Ms. Thompson’s claim for fiduciary breach. Plaintiff claimed that Oracle breached its fiduciary duties by failing to expressly include people like her, who had separately been promised lifetime benefits, in the plan. However, the court determined that because decisions about plan design are not fiduciary in nature, they cannot form the basis of a claim for fiduciary breach. Nor could the broken promise itself form the basis of a fiduciary breach claim because the promise of lifetime benefits happened before Ms. Thompson became a participant in the plan. The court concluded that the remaining bases for Ms. Thompson’s claim for fiduciary breach contained insufficient factual detail and were too conclusory to support such a claim.   

The plaintiff in this case is represented by my colleagues at Kantor & Kantor, Glenn Kantor and Anna Martin. 

Because, dear readers, this newsletter is called ERISA Watch, I won’t say that it is better to proceed under state law. But, of course, sometimes it is.   

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

Attorneys’ Fees

Ninth Circuit

Amoroso v. Sun Life Assurance Co. of Can., No. C20-5887 BHS, 2021 WL 5761634 (W.D. Wash. Dec. 3, 2021) (Judge Benjamin H. Settle). Following a decision awarding summary judgment in favor of defendant Sun Life Assurance Company of Canada in this long-term disability benefits case, Sun Life moved for an award of $66,000 in attorneys’ fees. In its summary judgment decision, the court held that plaintiff Paul Amoroso failed to demonstrate that he had satisfied the disability policy’s elimination period. Mr. Amoroso has appealed that decision to the Ninth Circuit. Sun Life argued that it achieved some degree of success on the merits and is therefore entitled to an award of reasonable attorneys’ fees. Mr. Amoroso opposed defendant’s motion. The court examined the five Hummell factors of: (1) culpability, (2) ability to satisfy the award, (3) deterrence, (4) significance of legal question addressed, and (5) relative merits of the parties. First, the court held that “there is nothing approaching ‘bad faith’ in the record, (as) Amoroso has explained the onset date discrepancy…the court did not conclude that Amoroso ‘misrepresented’ anything.” The court went on to agree with Mr. Amoroso that the Hummell factors strongly assume that attorneys’ fees should not be charged against ERISA plaintiffs. Second, the court did not agree with Sun Life that Mr. Amoroso had the ability to satisfy the award simply because his home is valued at $1.1 million. Sun Life, the court held, failed to provide sufficient information to demonstrate that Mr. Amoroso could pay, and weighed this factor strongly against awarding the fees. Next, the court wrote that it has “no interest in deterring disabled insureds from seeking benefits under their long-term ERISA policies.” This factor too, weighed against awarding any fee. Under the fourth Hummell factor, the court was weary of the idea of emboldening insurers in denying claims at the administrative level by awarding attorneys’ fees. Doing so, the court wisely surmised, “would not benefit ERISA plan participants.” Finally, the court did not feel that summary judgment granted in favor of Sun Life was by any means enough to warrant a fee award. Accordingly, the court denied Sun Life’s motion for attorneys’ fees. This case belongs to a recent pattern of insurance companies seeking awards of attorneys’ fees in ERISA cases. Perhaps this recent trend is the smoke signaling a larger strategy of deterrence meant to scare participants from suing plans in benefits denial cases. If so, it was a good thing the court exercised its discretion against awarding fees, as such awards “would not be consistent with ERISA, the better-reasoned cases decided under it, equity, or common sense.”  

Breach of Fiduciary Duty

Fourth Circuit

Walsh v. Vinoskey, No. 20-1252, __F.4th__, 2021 WL 5764250 (4th Cir. Dec. 6, 2021) (Before Circuit Judges Niemeyer, Diaz, and Quattlebaum). Defendant Adam Vinoskey founded Sentry Equipment Erectors, Inc. (“Sentry”), a company that supplies equipment to soda manufacturers. In 1993, Sentry created an ESOP, which by 2004 owned 48% of Sentry with Mr. Vinoskey and his wife owning the remaining 52%. Not only was Mr. Vinoskey president and CEO of Sentry, he was also chair of its board and one of the ESOP’s trustees. In 2010, Mr. Vinoskey decided to sell his remaining company stock shares to the ESOP. To do so, Sentry brought on Evolve Bank and Trust (“Evolve”) to serve as the ESOP’s fiduciary to review the transaction. ERISA, of course, prohibits plans from engaging in transactions with a party in interest when the party in interest receives more than fair market value, which is exactly what happened here. The ESOP purchased Mr. Vinoskey’s stocks for $406 per share, totaling $20,706,000. $10,400,096 was paid to Mr. Vinoskey in cash and the remaining $10,305,904 would be an outstanding interest-bearing debt. Of that debt, Mr. Vinoskey forgave $4,639,467 four years later. The Secretary of the Department of Labor sued Evolve and Mr. Vinoskey seeking to recover the losses the ESOP suffered from the transaction, because the stock price paid to the party in interest, Mr. Vinoskey, was far above the fair market value. The fair market value for the Sentry stock was $278.50 per share, meaning Evolve paid an additional $127.50 per share, and overpaid Mr. Vinoskey $6,502,500. Following a bench trial, the district court concluded that Evolve breached its fiduciary duties, and Mr. Vinoskey, as a co-fiduciary participating in the fiduciary breaches, was liable for the ESOP’s losses. Evolve and Mr. Vinoskey moved for a reduction in the damages award by $4.6 million, representing the debt that Mr. Vinoskey forgave in 2014. The district court did not reduce the damages. Evolve and Mr. Vinoskey then appealed. Evolve settled with the Secretary and dismissed its appeal. The Fourth Circuit therefore ruled on Mr. Vinoskey’s appeal and found that the district court did not clearly err in its liability findings, but reversed the district court’s conclusion concerning the damages award. The court affirmed the district court’s finding that Mr. Vinoskey was liable as a knowing participant in an improper transaction, as the district court was able to prove that Mr. Vinoskey actually knew the $406 per-share price exceeded fair market value. In fact, Mr. Vinoskey had the stock price appraised in 2009, and was informed it was worth about $220 per share. However, the Fourth Circuit found the district court erred by not reducing the damages award by $4.6 million, as doing otherwise “would result in an inappropriate windfall for the ESOP.” The Fourth Circuit concluded that the debt cancellation was not a wholly unrelated transaction because the debt write-off is best understood as “reducing the final sale price at a later point in time given that the ESOP fully owned Sentry.” With this logic, the Fourth Circuit reversed the district court’s final liability judgment, ordering instead that Mr. Vinoskey is jointly and severally liable in the amount of $1,863,033. 

Class Actions

Sixth Circuit

Bailey v. Verso Corp., No. 3:17-cv-332, 2021 WL 5815727 (S.D. Ohio Dec. 6, 2021) (Judge Michael J. Newman). Plaintiffs filed this LMRA and ERISA class action lawsuit to recover collectively bargained life insurance coverage and death benefits for retirees from defendant Verso Corporation. The parties reached a settlement worth approximately $540,000 and the court in this order granted final approval to the class settlement under Federal Rule of Civil Procedure 23. Under the settlement, all living retirees previously covered under the now-terminated collective bargaining agreement are entitled to receive a life insurance death benefit of $2,750, and beneficiaries of any deceased class member will receive a $3,000 lump sum payment. The court was satisfied that appropriate notice was given to all class members as well as to the applicable state and federal officials with no objections to the settlement from any party. The final settlement was found to be fair, reasonable, and adequate. Class representatives were determined to be adequate representatives with aligned interests to the other class members. The court found the settlement to be mutually beneficial and an informed compromise. Class counsel were qualified under Rule 23(g) and sufficiently represented class members’ interest, and their attorneys’ fees of $80,000 and costs of $2,874 were found to be reasonable and justified, especially as they constituted about 15% of the common fund. Finally, the agreement was determined to provide final resolution of the legal dispute. The settlement was thus granted final approval and the case was dismissed. 

Disability Benefit Claims

Sixth Circuit

Yocum v. Aetna Life Ins. Co., No. 3:19-cv-761-DJH-RSE, 2021 WL 5854367 (W.D. Ky. Dec. 9, 2021) (Judge David J. Hale). A UPS employee, plaintiff Heather Yocum, first became disabled in July 2016 after fracturing her foot. She received short-term disability benefits for a few months during which time her foot healed. However, Ms. Yocum then began suffering from a slew of other medical problems including irritable bowel syndrome, Crohn’s disease, interstitial cystitis, pelvic floor dysfunction, anxiety, and depression. Ms. Yocum sought to extend her short-term disability benefits. Defendant Aetna Life Insurance Company instead terminated Ms. Yocum’s benefits. Ultimately, the denial of short-term benefits was resolved through settlement in an earlier case. Pursuant to that settlement, Aetna was required to accept a long-term disability application from Ms. Yocum. However, Aetna denied Ms. Yocum’s long-term disability application. Following an unsuccessful internal appeals process of the decision, Ms. Yocum commenced this suit, in which she argued that Aetna’s benefits denial was arbitrary and capricious. The parties filed cross-motions for summary judgment. Ms. Yocum first argued that Aetna had a conflict of interest and denied her claim because of this bias. However, as Aetna used the services of a third-party medical review company, the court was satisfied that Aetna’s conflict of interest did not warrant remand or reversal. Next, Ms. Yocum argued that Aetna ignored evidence from her treating physicians which supported her claims. Again, the court was not swayed as administrators are not required to give any special deference to claimants’ physicians. Ms. Yocum also stated that Aetna failed to consider a functional capacity questionnaire and a capabilities and limitations worksheet she provided. The former document was completed during a time period when Aetna had paid benefits, while the latter one was completed months after the disputed coverage period. Therefore, the court was not swayed by Aetna’s disregard of these documents. Nor was the court influenced by the fact Aetna failed to conduct a physical examination of Ms. Yocum, as her long-term disability claim was filed in 2018 but the coverage period at issue was for the previous year. Therefore, a review on the records was considered appropriate. Finally, Ms. Yocum alleged that Aetna’s decision was arbitrary and capricious as the denial failed to explain why it disagreed with the Social Security Administration’s finding that she was disabled. Aetna argued that because it neither required nor requested Ms. Yocum apply for Social Security disability benefits, it was not required to explicitly explain why its position differed from the SSA. Again, the court agreed with Aetna. Under the deferential review standard, the court found Aetna’s decision-making process deliberate and principled and “supported by substantial evidence.” Therefore, the court granted Aetna’s summary judgment motion and denied Ms. Yocum’s motion. 

Eberle v. Am. Electric Power Sys. Long-Term Disability Plan, No. 2:18-cv-1100, 2021 WL 5860633 (S.D. Ohio Dec. 10, 2021) (Judge James L. Graham). Plaintiff Diane Eberle was an employee of American Electric Power who worked as a store attendant. Her job included picking up, hauling, unloading, and delivering materials, including carrying objects weighing up to 70 pounds. Ms. Eberle began suffering from severe back and leg pains and weakness stemming from a herniated disc which required surgery. Following the operation, however, Ms. Eberle’s symptoms did not improve and precluded her from performing the duties of her job. She received long-term disability benefits for just over a year during the “own occupation” period before Prudential terminated them under the “any occupation” period, leading to this suit. Parties agreed that the arbitrary and capricious standard of review applied here as the plan language unambiguously gave the plan administrator full discretionary authority to determine eligibility for benefits. The parties both moved for summary judgment. Ms. Eberle argued Prudential’s decision was arbitrary and capricious because its physicians lacked the expertise to opine on her condition, as it did not conduct an in-person physical examination, and because Prudential had a conflict of interest with negatively affected her benefit determination. None of these process-related arguments were persuasive to the court. It held that Prudential’s doctors, although they were not neurologists or orthopedic surgeons, were sufficiently qualified to give their opinions. Prudential was also not required by the plan, the court held, to examine Ms. Eberle in person. As for the conflict of interest argument, the court found the allegation conclusory and not directly tied to the benefit outcome. Ms. Eberle also made arguments taking issue with the substance of the opinions on which Prudential relied, but these arguments were no more persuasive to the court. The court thus denied Ms. Eberle’s motion for summary judgment and granted the plan’s motion for judgment. 

Seventh Circuit

Hennen v. Metropolitan Life Ins. Co., No. 15 C 9452, 2021 WL 5769529 (N.D. Ill. Dec. 6, 2021) (Judge Thomas M. Durkin). Plaintiff Susan Hennen brought suit against Metropolitan Life Insurance Company after her long-term disability benefits were terminated after two years. Under the plan, there is a provision which limits disability eligibility to 24 months for people disabled due to a neuromusculoskeletal and soft tissue disorder, “unless the Disability has objective evidence of…radiculopathies.” Radiculopathies are defined by the plan as “disease of the peripheral nerve roots supported by objective clinical findings of nerve pathology.” Ms. Hennen, who suffers from spinal problems and has undergone several surgeries, was diagnosed by her treating physicians in 2013 with lumbar radiculopathy. Therefore, when MetLife discontinued her disability benefits under the neuromusculoskeletal provision, Ms. Hennen appealed, arguing she had objective evidence and a diagnosis of radiculopathies. She then initiated her ERISA suit challenging the denial. The district court granted summary judgment for MetLife. Ms. Hennen then successfully appealed that decision to the Seventh Circuit. The Seventh Circuit held MetLife’s denial was arbitrary and capricious as it credited its own doctor’s opinion over the opinions of Ms. Hennen’s four treating physicians, including two neurologists, and failed to order an independent medical evaluation including additional electrodiagnostic testing. Having so concluded, the Seventh Circuit remanded to MetLife to re-evaluate Ms. Hennen’s conditions. On remand, MetLife arranged a neurology independent medical examination, and fully evaluated Ms. Hennen’s medical file, only to reach the same conclusion that the medical evidence did not objectively support the condition of radiculopathy. Accordingly, MetLife upheld its benefits denial. The district court acted in much the same way as previously, finding MetLife’s denial not to be arbitrary and capricious. Although the parties disagreed on the findings of the exam and the opinion of MetLife’s doctor, the court held in a “‘contest of competing medical opinions’ the deferential standard of review requires the Court to defer to the claim administrator’s choice between opinions where it is supported by record evidence.” Because MetLife had rational support in the record, Ms. Hennen’s motion for summary judgment was denied in its entirety, and MetLife’s motion was granted. However, the court refused to grant MetLife’s motion for summary judgment on its claim for offset of overpaid benefits and denied MetLife’s request for attorneys’ fees. 

Ninth Circuit

Kieserman v. Unum Life Ins. Co. of Am., No. C21-0448-JCC, 2021 WL 5770275 (W.D. Wash. Dec. 6, 2021) (Judge John C. Coughenour). Dr. Jamie Shandro Kieserman is an emergency physician and an associate professor of emergency medicine at the University of Washington. She also has stage four breast cancer, which metastasized to her liver and rib. To undergo treatments, she went on full medical leave for a year. Following that time, and having consulted with her oncologist, Dr. Kieserman returned to work on a reduced 50% schedule without night shifts. Unum paid Dr. Kieserman’s disability benefits offset by her part-time income for ten months before terminating the benefits. Unum wrote to Dr. Kieserman that there was no evidence precluding her from returning to work full-time, and described the duties of her job as an emergency room physician as including, “evaluates patients, performing examinations to determine medical problems, using physical findings, diagnostic images, laboratory test results, and patient’s statements as diagnostic aids. Administers or prescribes treatments and drugs.” Dr. Kieserman’s treating oncologist strongly contested Unum’s findings, opining that side effects of both Dr. Kieserman’s prescriptions and the cancer itself rendered her incapable of full-time work, and that such work would be dangerous to her immune-compromised patient at risk of cancer recurrence. Dr. Kieserman and her treating oncologist also strongly contested Unum’s job task assessments. The denial was upheld on internal appeal, leading to this Section 502(a)(1)(B) suit. Both parties filed cross motions seeking summary judgment. Under de novo review, the court concluded that Dr. Kieserman was able to sufficiently establish that she was unable to safely return to full-time work and her motion for summary judgment was accordingly granted. Unum’s motion was denied, and Dr. Kieserman was found to be disabled as defined by the plan and entitled to “additional benefits under the Policy.”


Fifth Circuit 

Sibley v. Citizens Bank & Tr. Co. of Marks, No. 3:20-CV-282-GHD-JMV, 2021 WL 5830598 (N.D. Miss. Dec. 8, 2021) (Magistrate Judge Jane M. Virden). Plaintiff Franklin L. Sibley is a retiree of Citizens Bank & Trust Company. In this ERISA and state-law suit, Mr. Sibley asserted claims against his former employer and against Peyton MB Self III, a controlling shareholder of the bank, chairman of the board, and CEO of Citizens Bank’s board of directors. Mr. Sibley moved for discovery, arguing that he should be allowed to proceed with discovery to “make certain the administrative record is accurate and complete and…to determine the nature and extent of the defendants’ conflicts of interest which would serve to undermine the alleged administrative basis for the belated denial of earned retirement benefits, as well as the nature and extent of defendants’ interference in plaintiff’s right to receive benefits.” Generally, the court agreed with Mr. Sibley and granted his discovery motion with a few exceptions where the court held the requested discovery was overly broad. All of the proposed nine interrogatories were granted, with one of them being slightly limited in its scope. Of the fourteen requests for production, the court granted twelve of them, limited one, and denied the last. The request for a complete copy of employment contracts between Citizens Bank and its holding company with defendant Self from 2016-2021 was denied for being overly broad. 

ERISA Preemption

Sixth Circuit

English v. Lincoln Life Assur. Co. of Boston, No. 5:21-271-DCR, 2021 WL 5761722 (E.D. Ky. Dec. 3, 2021) (Judge Danny C. Reeves). Plaintiff Jason English brought a two-count suit against Lincoln Life Assurance Company of Boston. The first count was for violation of ERISA and the second for breach of contract. Following an unsuccessful attempt to return to work, Mr. English was determined by Lincoln Life to no longer be disabled. His benefits were therefore terminated, and Mr. English challenged the decision. After an unsuccessful administrative appeal, he brought this lawsuit. Defendant Lincoln moved to partially dismiss. Lincoln sought dismissal of the state law breach of contract claim citing ERISA preemption. Because the contract Mr. English claimed was breached was the ERISA plan itself, and the charge was that defendant improperly processed Mr. English’s benefits claim, the court concluded that the breach of contract claim was preempted by ERISA, in this unusually straightforward ERISA preemption decision. Accordingly, Lincoln Life’s motion for partial dismissal was granted and the breach of contract claim was dismissed with prejudice. 

Pleading Issues & Procedure

Third Circuit

Wright v. Elton Corp., No. 20-3343, __ F. App’x __, 2021 WL 5822306 (3rd Cir. Dec. 7, 2021) (Before Circuit Judges Shwartz, Porter, and Fisher). In 1947, the duPont family created a trust in order to provide retirement benefits to household employees. At issue in this case is whether that duPont family trust was governed by ERISA, and if so, whether the trust was in violation of ERISA as plaintiffs allege in their suit against the trustee and trust administrators. The district court bifurcated these two issues and the parties filed cross-motions for summary judgment on the first issue, i.e., whether the trust was an ERISA plan. The court held that because there was “a documented history of multi-decade effort to provide pension benefits to the family’s long-term domestic employees,” the trust was governed by ERISA. The trustee, First Republic Trust Company of Delaware, LLC, moved for clarification of the ERISA order, asking the court to weigh in on whether the order required the trustee to alter the trust in order to comply with ERISA. Finding the trustee’s motion to be asking the court to “re-visit its previous rulings (and) attempting to abdicate any responsibility to operate the Trust in compliance with the law,” the district court denied the motion. First Republic then appealed the clarification order. The Third Circuit, finding it did not have jurisdiction, dismissed the appeal. First, the Third Circuit held that the clarification order was not an injunction as it did not direct any party to take any action, couldn’t be enforced by contempt, and accorded no relief sought in the operative complaint. Next, the Third Circuit concluded the ERISA order was not an injunction as it did not resolve the complaint’s substantive claims, and importantly, because the lower court hasn’t yet decided the second issue, whether defendants violated ERISA. Finally, the Third Circuit held that the clarification order did not modify an injunction. For these procedural reasons, the appeal was dismissed. 

Lutz Surgical Partners PLLC v. Aetna Inc., No. 15-2595 (ZNQ), 2021 WL 5760512 (D.N.J. Dec. 3, 2021) (Magistrate Judge Tonianne Bongiovanni). Plaintiff Lutz Surgical Partners sued Aetna Health Inc. and Aetna Life Insurance Company asserting two ERISA claims, a Section 502(a)(1)(B) benefits claim and an equitable/injunctive relief claim under Section 502(a)(3), to remedy fiduciary breaches. Defendants moved to file amended counterclaims pertaining to alleged overpayments it made to Lutz. Defendants amended to restate the claims as claims for appropriate equitable relief under Section 502(a)(3) and to assert common law claims for the non-ERISA plans. Plaintiff opposed the motion, alleging the motion would cause undue prejudice. The court disagreed with plaintiff and found that amendment would not require plaintiff to “expend significant additional resources to conduct discovery.” Additionally, the court determined there was no undue delay, as defendants filed the motion for leave to file amended counterclaims at the invitation of the court. As there was no undue delay, bad faith, or dilatory motive, and no evidence that the proposed amendments were obviously futile, the court granted the motion to amend. 

Applebaum v. Fabian, No. 18-11023 (KM) (JSA), 2021 WL 5833454 (D.N.J. Dec. 9, 2021) (Judge Kevin McNulty). The death of Todd Harris Applebaum caused a lot of problems. Mr. Applebaum was the sole owner of the Todd Harris Company (“THC”) a pool supply store that had over $10 million in annual revenue. Mr. Applebaum also owned a 51% share of Toben Investments, Inc., a condo in New Brunswick, a commercial building in Linden, New Jersey, and had $100,000 in a 401(k) account. His company also had an under-the-table deal with a Mr. Fabian, who loaned THC some unspecified amount of money in the 1990s. At the time of Mr. Applebaum’s death, Mr. Fabian claimed the outstanding amount of the loan payment was $231,700. Mr. Applebaum’s will named Mr. Fabian the executor of the estate, plaintiff (his wife Edita Applebaum) was given 40% of his stock, and a trust was created for the benefit of Ms. Applebaum and the couple’s children, with Mr. Applebaum’s son, Benjamin Applebaum, and defendants Mr. Fabian and Mr. Rajs named as the trustees. In sum, at the time of the death there was a lot of money and a lot of people with competing interests for that money. Following Mr. Applebaum’s death, there was a shady deferred compensation scheme that Mr. Fabian engaged in, forged signatures at Sun Bank for Mr. Applebaum’s personally guaranteed line of credit, stocks allegedly sold for a tiny fraction of their value, countless meetings, and several lawsuits, including of course this one. In the other two lawsuits that Ms. Applebaum brought, both in state court, all of her claims were thrown out as the courts concluded there was no evidence of fraud, and as this court put it, “they have approved the decisions Fabian made as executor.” In this suit, Ms. Applebaum asserted twelve counts, including RICO claims, common law fraud, defamation, a NJ Employee Protection Act claim, two ERISA claims, intentional infliction of emotional distress, tortious interference, negligence, and civil conspiracy. Defendants moved to dismiss and Ms. Applebaum cross-moved to amend her complaint. The motion to dismiss was granted with prejudice, and the cross-motion to amend was denied. In her ERISA claims, Ms. Applebaum alleged Mr. Fabian’s deferred compensation scheme and the payment of the 401(k) funds to the estate were both violations of ERISA. The court held Ms. Applebaum lacked standing to bring her claims as she was not the listed beneficiary of the 401(k) and had alleged no injury directly related to Mr. Fabian’s compensation scheme. 

Eleventh Circuit

Schwartz v. ADP, Inc., No. 2:21-cv-283-SPC-MRM, 2021 WL 5760434 (M.D. Fla. Dec. 3, 2021) (Judge Sheri Polster Chappel). It’s spy versus spy in this case. Plaintiff David Schwartz worked for ADP, Inc. Their relationship soured when Mr. Schwartz blew the whistle on ADP for illegal business practices including hacking. ADP, angry with Mr. Schwartz, locked him out of his work computers and fired him, and then sued him in state court for breach of contract and taking trade secrets. Mr. Schwartz counterclaimed for wrongful termination, and ADP followed with another state action for defamation. All those state cases are pending. In this case, Mr. Schwartz brought ERISA/COBRA claims as well as a host of other claims. Defendants ADP, Inc. and Automatic Data Processing, Inc. moved to dismiss. The court granted in part the motion to dismiss including granting the motion with regard to the ERISA claims. Mr. Schwartz argued that ADP did not give him notice of his right to coverage under COBRA. Without COBRA benefits, his family lost their insurance. The court held that Mr. Schwartz did not have standing to bring his COBRA claims as he sued only for statutory penalties: “Schwartz was a participant or beneficiary with standing in the past. But he isn’t anymore…. the Complaint does not allege ADP fired Schwartz to deprive him of COBRA or other ERISA benefits (nor could he). And any COBRA rights Schwartz had expired long ago – whether or not ADP provided notice.” ADP’s failure to provide COBRA notice was determined not to be the “but-for” cause of Mr. Schwartz being uninsured. Because he had no standing, Mr. Schwartz’s ERISA claims were dismissed. 

Retaliation Claims

Second Circuit

Moleon v. Alston, No. 21 Civ. 1398 (PAE), 2021 WL 5772439 (S.D.N.Y. Dec. 3, 2021) (Judge Paul A. Engelmayer). Plaintiff Frantz Moleon is a former garage attendant who was terminated in October 2020 after he urinated outside an occupied employee bathroom, an event that occurred due to Mr. Moleon’s diabetes which impairs his bladder control. Mr. Moleon had worked for his employer for 15 years when he was discharged. Until the pandemic, Mr. Moleon was assigned eight-hour work shifts and 40-hour work weeks. When the pandemic began, his employer gave him erratic work shifts, reduced his workload to 13 hours per week, and assigned him remote and inconsistent worksite locations. Additionally, Mr. Moleon claimed that he and fellow workers were denied water, lunch breaks, refrigeration (important for his insulin and special dietary meals), and reasonable restroom access. Mr. Moleon’s employer and his union threated to withhold contributions to his ERISA plans and terminate him if he refused his work assignments. Then, on October 1, 2020, Mr. Moleon, while working for eight hours, did not receive restroom breaks, a lunch break, or an opportunity to administer his insulin. The single bathroom available to him required key access and was being shared with workers from several other companies. Ultimately, Mr. Moleon lost control of his bladder, and was fired for “urinating in public” and “vandalization.” Mr. Moleon then filed this suit alleging violations of several federal and state laws against his former employer, his union, and other defendants. Defendants moved to dismiss, and the court granted the dismissal. Specifically relating to ERISA, Mr. Moleon brought Section 510 and Section 404 claims. The court found the ERISA arguments conclusory and speculative. Mr. Moleon did not sufficiently prove that defendants specifically intended to interfere with his ERISA benefits because he was diabetic, elderly, or African-American. Likewise, Mr. Moleon failed to prove that his union was acting as a fiduciary when taking the actions alleged in the complaint.

Severance Benefit Claims

D.C. Circuit

Keister v. Am. Ass’n of Retired Persons, No. 19-2935 (FYP), 2021 WL 5865444 (D.D.C. Dec. 9, 2021) (Judge Florence Y. Pan). Plaintiff Kim Keister is a former employee of the American Association of Retired Persons, Inc. (“AARP”). Mr. Keister suffered a stroke which left him unable to work due to lost language and cognitive skills. Mr. Keister received short-term disability benefits, but was denied long-term disability benefits. While Mr. Keister was appealing this denial, AARP offered him a severance agreement. Mr. Keister signed that agreement, which barred him from pursuing “any and all claims for damages, personal injuries, discrimination, retaliation, reinstatement, or other relief that you may have…based upon your employment, separation, and/or any event or transaction that occurred prior to your signing this Agreement.” After signing this agreement, Mr. Keister filed a lawsuit against Aetna and AARP Benefits Committee (Keister I). In that lawsuit Mr. Keister alleged that defendants wrongfully denied his claim for benefits in violation of ERISA. Summary judgment was granted in favor of defendants, as the court determined that by signing the separation agreement, Mr. Keister waived his right to bring his claims. Mr. Keister appealed, and the D.C. Circuit affirmed the judgment, writing that “the district court correctly concluded the release was unambiguous…it’s hard to image how the contract could be any clearer.” This lawsuit against AARP was filed after the court issued its order in Keister I, but before the docketing of the Memorandum Opinion. In this case, Mr. Keister alleged that AARP violated ERISA by misrepresenting the effect of the severance agreement on his claim for disability benefits and by intentionally interfering with his right to claim benefits. AARP moved to dismiss, arguing that Mr. Keister’s claims were barred by both claim preclusion and issue preclusion under the doctrine of res judicata. The court agreed with AARP and granted the motion. The two cases were found by the court to arise from a “common nucleus” of facts, and the parties were found to be the same in both cases. Even though the legal theories in the cases differed, the court was satisfied that Keister I explicitly addressed the misrepresentation issue at the center of this case. Furthermore, the court reasoned that preclusion of the issues in this case would not be unfair to Mr. Keister because there was no evidence Mr. Keister was prejudiced in any way in Keister I. In construction, workers are cautioned to “measure twice, cut once”; in the law, people should be warned to read contracts twice and maybe don’t sign.

Standard of Review

Ninth Circuit

Metaxas v. Gateway Bank F.S.B., No. 20-cv-01184-EMC, 2021 WL 5771134 (N.D. Cal. Dec. 6, 2021) (Judge Edward M. Chen). Plaintiff Poppi Metaxas brought suit under ERISA Sections 502(a)(1)(B) and (a)(3) seeking disability and termination of employment benefits from her employer’s supplemental executive retirement plan, a top-hat plan. Ms. Metaxas moved to supplement the administrative record. The court held it was necessary to first determine the appropriate standard of review applicable in this case in order to opine on the motion to supplement. The court therefore requested the parties submit supplemental briefing addressing the standard of review question. As the plan at issue unambiguously confers discretionary authority to the Administrative Committee to construe the plan terms, determine benefits eligibility, and “decide or resolve any and all questions including interpretations of this Plan,” the court determined the abuse of discretion standard of review was appropriate. None of Ms. Metaxas’s arguments to the contrary – that the plan does not expressly use the term “make benefit determinations,” that the Committee lacks authority to determine whether an employee has had a change in employment status, that the Committee was not properly appointed, that the plan at issue is a top-hat plan, or that there was a conflict of interest – were persuasive to the court. Finally, as the standard of review was determined to be abuse of discretion, the court limited the proceedings to the administrative record except for any evidence pertaining to any conflict of interest which would affect the level of deference accorded under the deferential arbitrary and capricious review standard.


Second Circuit

Schuyler v. Sun Life Assur. Co. of Can., No. 20-CV-10905 (RA)(BCM), 2021 WL 5853991 (S.D.N.Y. Dec. 9, 2021) (Judge Ronnie Abrams). In this wrongful denial of disability benefits case, plaintiff Kristen Schuyler filed suit against Sun Life Assurance after her long-term disability benefits were denied following a head trauma which left Ms. Schuyler with a traumatic brain injury. Sun Life moved to transfer the case to the Middle District of Florida. Ms. Schuyler opposed the motion. First, the court concluded that venue was proper in the Southern District of New York. The court also held that the case could have been brought in the Middle District of Florida. The court was therefore left with deciding whether to transfer, and after weighing the factors, concluded defendants failed to demonstrate transfer was appropriate and in the interest of justice. Importantly, the alleged breach occurred in New York. Ms. Schuyler lived both in New York and Florida, but during the relevant events she resided in New York. Additionally, she was receiving medical treatments in New York. The court held that convenience of the parties, plaintiff’s forum choice, and the convenience of witnesses all weighed heavily against transfer. Perhaps most importantly, discovery had already been conducted in this case. Therefore, the court determined the efficiency and interest of justice weighed heavily in favor of denying the motion. With all factors being either neutral or favoring denial of transfer, the court reached its decision with relative ease. 

Withdrawal Liability & Unpaid Contributions

Eighth Circuit

Greater St. Louis Construction Laborers Welfare Fund v. Roadsafe Traffic Systems, Inc., No. 4:20-CV-1201 PLC, 2021 WL 5823880 (E.D. Mo. Dec. 8, 2021) (Magistrate Judge Patricia L. Cohen). Plaintiffs – four employee benefit plans, their trustees, and the union affiliated with those benefit plans – brought suit against defendant Roadsafe Traffic Systems, Inc. seeking to recover $128,561.18 in unpaid contributions, liquidated damages, and interest, plus attorneys’ fees, accounting fees, and costs. The parties filed cross-motions for summary judgment. Defendant argued plaintiffs’ claims for delinquent contributions were improperly based on “a formula that is not supported by either the plain language of the CBA (collective bargaining agreement) or Plaintiffs’ ‘own extrinsic evidence.’” According to defendant, it was in compliance with the CBA and did not owe any additional fund contributions because the work at issue was not performed on construction sites, which Section 2.01 of the CBA requires (“This Agreement shall apply only to work of the Employer on construction sites.”). Given this language, the court granted summary judgment in favor of defendant and denied plaintiffs’ motion for summary judgment.