There will not be a notable decision this week, although there are plenty of interesting cases below. Instead, as this is our last issue of 2021, we wanted to take a moment to thank you all for being loyal readers, and to wish you a very joyous holiday season and a happy new year. May 2022 be a year of peace, well-being, and long awaited reunions. As for what ERISA decisions the new year will hold, you’ll just have to read  “Your ERISA Watch” to find out. 

Attorneys’ Fees

Second Circuit

DeGreenia-Harris v. Life Ins. Co. of North Am., No. 2.19-CV-00218, 2021 WL 5979683 (D. Vt. Dec. 17, 2021) (Judge Christina Reiss). On June 10, 2021, twenty days before this case was set to go to trial, defendant Life Insurance Company of North America (“LINA”) decided to pay plaintiff Kasey DeGreenia-Harris the full accidental death benefit of $340,000 central to this Section 502(a)(1)(B) suit, as well as six percent interest in the amount of an additional $60,264.48. Ms. DeGreenia-Harris’s father, Denny DeGreenia, died tragically at the Burke Mountain ski resort in Vermont after a snowcat vehicle he was driving rolled over and drove over top of him. LINA denied Ms. DeGreenia-Harris’s claim for accidental death benefits, citing a drug exclusion and claiming that Mr. DeGreenia was under the influence of cocaine and marijuana at the time of the death. During her suit, Ms. DeGreenia-Harris supplemented the administrative record with records from the Vermont Occupational Safety and Health Administration (“VOSHA”) which revealed that a VOSHA investigator concluded that the incident could and should have been avoided had Mr. DeGreenia’s complied with safety standards. It was these records which prompted LINA to settle the case pre-bench trial. Plaintiff’s counsel then moved for an award of attorneys’ fees, costs, and interest. The court declined to award additional interest, as LINA already paid six percent interest to Ms. DeGreenia-Harris. However, the court held that LINA’s culpability in not seeking out the VOSHA records, as well as Ms. DeGreenia-Harris’s success in obtaining those benefits, justified awarding attorneys’ fees. Ms. DeGreenia-Harris was represented by counsel Michael F. Hanley, and counsel Paul J. Perkins. Plaintiff’s counsel requested a total of $457,235.96 in attorneys’ fees. Attorney Hanley spent 12.7 hours at the hourly rate of $400, and 388.3 hours at the hourly rate of $450 on the case. Attorney Perkins spent 56.3 hours at the rate of $350, and 469.1 hours at the rate of $400. These hours and rates totaled $387,160, to which counsel applied a 1.181 multiplier for a total requested fee award of over $450,000. The court did not award this amount. First, the court found there was a great discrepancy between the hours billed by LINA’s counsel and plaintiff’s counsel, with LINA’s counsel billing only 240.7 hours as opposed to plaintiff’s counsel’s 926.4 hours. Furthermore, the court concluded that the documentation of the hours submitted by plaintiff was deficient and vague. Accordingly, the court reduced the requested hours by 70%. The hourly rates fared no better. They were reduced from the requested $450 and $400 an hour to $275 and $225 per hour, because plaintiff’s counsel had no prior ERISA experience and the one-third contingency fee agreement they had with Ms. DeGreenia-Harris was worth less than a quarter of the amount than they requested the court award. In the end, the court awarded the attorneys a total of $68,547.00. As for the requested costs, the court granted them in total except with regard to the expert witness fees, which the court concluded were not “costs of action” under 29 U.S.C. § 1132(g)(1).  

Breach of Fiduciary Duty

Eighth Circuit

Rosenkranz v. Altru Health Sys., No. 3:20-cv-168, 2021 WL 5868960 (D.N.D. Dec. 10, 2021) (Judge Peter D. Welte). Employees of Altru Health System and participants of its defined contribution Altru Health System Retirement Savings Plan have brought this putative class action alleging defendant Altru Health System Retirement Committee breached its fiduciary duty of prudence and defendant Altru Health breached its fiduciary duties by failing to adequately monitor the performance of the Committee and its members. The plan is large, with 4,300 participants and over $350 million dollars in assets, giving the plan significant “bargaining power.” Plaintiffs alleged defendants mismanaged the fund by failing to negotiate lower management and recordkeeping fees, and by failing to investigate/participate in lower-cost share classes, and collective trusts. Defendants first moved to dismiss pursuant to Federal Rules of Civil Procedure 12(b)(1), arguing plaintiffs lacked standing because they failed to allege they were personally invested in the challenged funds. Defendants primarily relied on Thole v. US Bank. However, as the plan at issue is a defined contribution, not a defined benefit plan, the court found Thole “inapposite.” On top of that, defendants’ argument that plaintiffs were not personally invested in the challenged funds was simply untrue. Each named plaintiff participated in the investing options which were the subject of the lawsuit. Accordingly, plaintiffs sufficiently established standing under Article III, and the 12(b)(1) motion to dismiss was denied. Next, the court examined whether plaintiffs sufficiently stated claims for purposes of Rule 12(b)(6). First, the court concluded plaintiffs sufficiently demonstrated that the lower-cost class shares cited in the complaint were a comparable benchmark for the challenged funds, and therefore adequately pleaded a breach of fiduciary duty of prudence claim based on the availability of those funds. However, the court was not satisfied that plaintiffs sufficiently pleaded a breach of fiduciary duty of prudence claim based on a comparison of collective investment trusts to the retirement funds at issue, concluding that they were an inadequate “apples to oranges” benchmark. Plaintiffs fared no better with regards to their claim that the Committee breached its duties by selecting and retaining funds with high investment management fees and poor performance because the ICI Median Report on which they relied for their comparison includes expense ratios from both actively managed and passively managed funds. On the other hand, the court concluded that Plaintiffs’ claim that the Committee failed to monitor and control the recordkeeping fees was sufficiently pled given Plaintiffs’ limited access to information about monitoring. Finally, the court denied Altru’s motion to dismiss the claim against it, concluding that because plaintiffs sufficiently state a claim for breach of fiduciary duty of prudence against the Committee, they also sufficiently pleaded the derivative failure to monitor claim against Altru. For these reasons, the motions to dismiss were granted in part and denied in part as described above.

Ninth Circuit

Zavala v. Kruse-Western, Inc., No. 1:19-cv-00239-DAD-SKO, 2021 WL 5883125 (E.D. Cal. Dec. 13, 2021) (Judge Dale A. Drozd). Dead cows, poisoned horses, and inflated stock prices are the center of this EOSP case. Plaintiff Armando Zavala alleged defendants engaged in a prohibited transaction, breached their fiduciary duties, and failed to monitor to ensure the ESOP paid fair market value for the Kruse-Western stock. This ESOP fable began with Western Milling, LLC, a milling and feed manufacturer. In the poultry feed it created, Western Milling added an antibiotic called monensin, which is perfectly safe for poultry but toxic to horses. In 2010, the FDA discovered extremely high quantities of monensin in Western Milling’s feed samples, which had contaminated its horse feed, and led to the death of at least 21 horses. In 2016, in the same facility where the horse feed and poultry feed had cross-contaminated, more tainted horse feed improperly mixed with medicated cattle feed, and that event led to the death of dozens of dairy cows. That was not even the end of Western Milling’s fiascos; as the court described it, “additional cases of monensin poisoning (kept) coming to light.” On top of the company’s mistreatment of animals, it was also engaging in significant wage and hour violations at its California facilities. And all of this wrong-doing was costing the company. It paid $2.4 million in Fresno County Superior Court to settle monensin poisoning claims. It paid $726,000 in fines to the California Department of Food and Agriculture for “repeated and multiple violations.” It also spent $5.5 million to construct a new horse feed manufacturing plant separate from its cattle feed plant. Kruse-Western is the larger company that owns and operates Western Milling, and on November 4, 2015, in the midst of the contamination problems, the Western Milling ESOP was created. On that same day, GreatBanc Trust Company, the appointed trustee of the ESOP, caused the ESOP to purchase 100% of the outstanding shares of Kruse-Western stock for $244 million. According to Mr. Zavala’s complaint, the true value of those shares was about $24.8 million at the end of 2016. Mr. Zavala alleged that the stock price the ESOP paid did not properly reflect the future earnings of Kruse-Western given all of the problems the company was facing, and that Kruse-Western, the members of the administrative committee, and the board knew of all of this at the time of the sale but did not account for these issues in the projections they used to value the stock. Defendants moved to dismiss pursuant to Rule 12(b)(6), which the court granted in part and denied in part. First, the court denied the motion to dismiss the prohibited transaction cause of action except as against the Administrative Committee. Defendants argued that plaintiff failed to assert defendants were fiduciaries to the ESOP and sought legal rather than equitable relief. The court disagreed, finding all defendants were either fiduciaries or parties-in-interest functioning as fiduciaries. The court also held that plaintiff’s complaint sufficiently alleged that the money that he sought to have returned to the ESOP was in defendants’ possession and therefore adequately stated a claim under Section 502(a)(3). However, with regard to the Administrative Committee, the court held Mr. Zavala failed to sufficiently allege self-dealing to establish causation for the prohibited transaction claim against it. Mr. Zavala was granted leave to amend to address this omission. Lastly, defendants moved to dismiss the knowing participation in the breach of fiduciary duty claim. The court denied this, finding Mr. Zavala sufficiently alleged defendants were involved in preparing the financial projections and knew that these projections failed to factor in the contamination and wage and hour issues which ought to have affected the value of the stock. 

Class Actions

Third Circuit

Sweda v. The Univ. of Pa., No. 16-4329, 2021 WL 5907947 (E.D. Pa. Dec. 14, 2021) (Judge Gene K. Pratter). Class action plaintiffs moved for final approval of the class action settlement, attorneys’ fees, costs, and service awards following a fairness hearing held this past October. The unopposed motions were all granted. The court found the requirements of The Federal Rules of Civil Procedure Rule 23 satisfied as to the settlement class. Notice of the settlement was timely and appropriately distributed and met the requirements of Federal Rules of Civil Procedure Rule 23(c)(2) and due process. The settlement itself was the result of good faith negotiations, and was deemed fair, reasonable, and adequate. Any informal objections to the settlement were overruled with prejudice. The parties’ plan to distribute the settlement fund as described in the agreement was approved by the court. And going forward, all parties release their claims and their rights to any future suits relating to or arising out of any of the Released Claims as set out in the agreement. The court expressed that it retains jurisdiction over the parties regarding the “implementation, enforcement, and performance of the Settlement Agreement, and … any suit, action, proceeding or dispute arising out (of it).” The parties were thus directed to implement the settlement, and the settlement administrator was given final authority to allocate funds and resolve questions. The action was accordingly dismissed with prejudice. As for plaintiff’s motions for attorneys’ fee, costs, and service awards, the court was satisfied that class counsel, Schlichter, Bogard, & Denton’s requested $4,333,333 in fees and $369,857 in costs were appropriate and warranted, and ordered they be paid from the fund in accordance with the agreement. Finally, named plaintiffs were each awarded a service award of $25,000 to be paid from the settlement fund. 

Sixth Circuit

Slavens v. Meritor, Inc., No. 2:20-cv-13047, 2021 WL 5883147 (E.D. Mich. Dec. 7, 2021) (Judge Stephen J. Murphy, III). In this class action, retirement plan participants brought suit against Meritor, Inc. alleging fiduciary breaches with respect to the Meritor, Inc. 401(k) Savings Plan. The court granted the parties’ motion for preliminary approval of class action settlement set out in the Settlement Agreement. First, the court preliminarily certified a settlement class pursuant to Federal Rules of Civil Procedure 23(a) and (b)(1), comprised of all participants and beneficiaries of the plan between November 13, 2014, and September 30, 2021. The court was satisfied that the class was ascertainable from records and that the class was so numerous that joinder of all members was impracticable. The court also concluded that there were questions of law common to the settlement class and that the claims of the named plaintiffs were typical of the claims of the class, the interests of the named plaintiffs were consistent with the settlement class, and there were no conflicts between the named plaintiffs and the class. The court held individual adjudications would be impractical and would create a risk of inconsistent adjudications that would “establish incompatible standards of conduct for the parties opposing the claims asserted in the Action.” Finally, the court was satisfied that class counsel were sufficiently qualified. Accordingly, the class was preliminarily certified. Next, the court gave preliminary approval of the proposed settlement, which it deemed adequate, fair, and reasonable. The court was content that negotiations were fair, vigorous, and informed. The settlement amount of $470,000 was deemed appropriate given the risk of continued litigation. The method of distributing notice was also satisfactory. Finally, the court established a qualified settlement fund, and instructed the settlement administrator to “keep detailed and accurate accounts of all investments, receipts, disbursements, and other transactions of the Settlement Fund.” A fairness hearing in the case has been scheduled and class counsel was invited to petition for attorneys’ fees, costs, and case contribution awards. 

Seventh Circuit

Berceanu v. UMR, Inc., No. 19-cv-568-wmc, 2021 WL 5918667 (E.D. Wis. Dec. 15, 2021) (Judge William M. Conley). Plaintiffs Luciana Berceanu and Judy Hernandez sought to certify a class of similarly-situated participants and beneficiaries in employer-sponsored health plans for which defendant UMR, Inc. is the benefit claims administrator. Plaintiffs alleged that UMR adopted clinical criteria, known as the UBH Level of Care Guidelines, and used these guidelines to deny coverage for inpatient mental health and substance use disorder treatments. According to plaintiffs, the guidelines UMR adopted are overly restrictive and breach the generally accepted medical care standards, and that UMR subjected participants and beneficiaries to an arbitrary and capricious process by using these guidelines. Plaintiffs asserted four causes of action: (1) breach of fiduciary duty Section 502(a)(1)(B) claim; (2) improper benefits denial claim also under Section 502(a)(1)(B); (3) a claim for equitable relief under the “safety net” Section 502(a)(3); and (4) a claim for equitable relief under Section 502(a)(3)(B), to the extent equitable relief under Section 502(a)(1)(B) was unavailable. Importantly, with regard to relief, plaintiffs are not seeking recovery of benefits, but instead seek a declaratory judgment that UMR’s application of the UBH Level of Care Guidelines violated the terms of the ERISA plans, and a permanent injunction ordering UMR to stop using the guidelines allowing participants to reprocess claims for residential treatment that were previously and improperly denied. Defendant moved to dismiss, and plaintiffs moved for class certification. First, the court granted in part and denied in part the motion to dismiss. The court denied the motion with regard to the Section 502(a)(1)(B) claims. Defendant argued that the court should dismiss the 502(a)(1)(B) claims because it was not a proper defendant in a challenge of a denial of benefits, which must be brought against the plans itself. The court concluded that plaintiffs may pursue claims against UMR, as the plan administrator, to enforce the terms of the plans and clarify their rights. However, the court dismissed plaintiffs’ Section 502(a)(3) claim, concluding that a plaintiff may not pursue a claim under the “safety net” provision if a remedy is available elsewhere in ERISA, in this case under Section 502(a)(1)(B). Next, the court examined the motion for class certification under Rule 23(a) and (b). Because there are at least 1,600 individuals who meet the proposed class definition of ERISA plan members whose request for coverage of residential treatment services were denied by UMR based on the guidelines, the court concluded that the numerosity requirement was met. The commonality requirement was also satisfied as the suit sought to answer whether the guidelines applied by UMR were consistent with generally accepted standards and whether UMR breach its fiduciary duties when it adopted those guidelines. As the named plaintiffs were denied inpatient treatment via use of the guidelines, they were typical of the proposed class, and adequate as class representatives. The court likewise determined that Class counsel was adequate, and the requirements of Rule 23(a) were therefore satisfied. Finally, the court determined that Rule 23(b) was satisfied because a single injunction requiring remand to UMR to reevaluate claims would provide relief to each member of the class and is a standard remedy under ERISA. Therefore, the court granted the motion for class certification. 

Disability Benefit Claims

Sixth Circuit

Klancar v. The Hartford Life and Accident Ins. Co., No. 1:20-cv-730, 2021 WL 5866907 (S.D. Ohio Dec. 12, 2021) (Judge Matthew W. McFarland). Plaintiff Patrick Klancar brought this Section 502(a)(1)(B) suit against defendant The Hartford Life and Accident Insurance Company (“Hartford”) seeking the reinstatement of his long-term disability benefits. Mr. Klancar was employed as a financial analyst by Robert Bosch Steering LLC. In late 2015, Mr. Klancar suffered a stroke. Eventually, Mr. Klancar’s conditions worsened to the point where he was unable to continue working, and he then applied for disability benefits. Hartford approved the short-term disability benefit claim and later the long-term disability benefit claim. Mr. Klancar’s treating physicians identified diabetes type II as his primary condition, “with stroke history, hypertension, and hyperlipidemia as secondary conditions.” As a financial analyst, Mr. Klancar’s job functions included “finance, overseeing financial functions, computers, typing, reporting, planning, reviewing capital assets, desk work, walking, (and) standing.” On December 28, 2018, however, Hartford terminated the long-term disability benefits because Mr. Klancar had failed to provide proof of his ongoing disability and because it determined that the medical record no longer supported that Mr. Klancar was unable to perform the duties of his job. The parties filed cross motions for judgment on the administrative record. Mr. Klancar also moved to strike defendant’s statement of proposed undisputed facts. First, the court granted the motion to strike, finding the statement unnecessary for its decision making. As for the summary judgment motions, the court granted Hartford’s motion and denied Mr. Klancar’s. The court held that although Mr. Klancar had provided “ample evidence that he suffers from several legitimate medical conditions. The preponderance of evidence in the medical record, however, does not show how these conditions rendered plaintiff disabled under the Plan.” Because only one of Mr. Klancar’s doctors opined that Mr. Klancar was unable to provide the duties of his occupation, with the other treating physicians refusing to do so, and because the Social Security Administration denied Mr. Klancar’s disability claim, the court was satisfied under de novo review that Hartford’s denial was appropriate and should be upheld. However, Hartford’s motion for attorneys’ fees was denied. 

Bustetter v. Standard Ins. Co., No. 21-5441,__ F. App’x __2021 WL 5873159 (6th Cir. Dec. 13, 2021) (Before Circuit Judges McKeague, Griffin, and Kethledge). Plaintiff-appellant Lewis Bustetter brought a Section 502(a)(1)(B) suit against Standard Insurance Company after Mr. Bustetter’s long-term disability and life-insurance benefits were terminated by Standard. Mr. Bustetter worked as a tank-truck driver. He became disabled after he underwent surgery to repair his left knee. He began suffering from numbness and weakness in his extremities and had spasms in his back and neck. Mr. Bustetter was eventually diagnosed with an inflammatory disorder of his spinal cord called transverse myelitis. Standard paid Mr. Bustetter’s long-term disability benefits for two years under the “own occupation” standard, and then terminated the benefits claiming Mr. Bustetter was not disabled from “any occupation.” In September 2019, the district court, remanded the matter to Standard “for a full and fair review.” During that review, Standard again denied benefits. After that denial, the district court granted judgment based on the administrative record in favor of Standard. Mr. Bustetter appealed that decision to the Sixth Circuit. The court of appeals affirmed the district court’s “notably thorough and well-reasoned” decision. Given that none of Mr. Bustetter’s physicians or physical therapists asserted that Mr. Bustetter would be unable to perform the duties of any occupation, the court reasoned that Mr. Bustetter was unable to prove his entitlement to benefits. Mr. Bustetter also requested the Sixth Circuit remand so he could move for an award of attorneys’ fees in the district court, based on his success earlier in the case when the district court remanded to Standard in 2019. The Sixth Circuit however, found the motion for attorneys’ fees to be untimely and the argument therefore forfeited. 

ERISA Preemption

Second Circuit

Alaimo v. Aetna Life Ins. Co., No. 21-CV-00370-LJV, 2021 WL 5921467 (W.D.N.Y. Dec. 15, 2021) (Judge Lawrence J. Vilardo). Plaintiff Mary Alaimo brought suit against Aetna Life Insurance Company in the Supreme Court of the State of New York, County of Chautaqua alleging her late husband, Alan Alaimo, had a life insurance policy with Aetna and that she is owed an $82,000 death benefit. Aetna, Ms. Alaimo alleged, failed to notify Mr. Alaimo that it had terminated his life insurance policy. Mr. Alaimo had been disabled and was approved by Aetna to have his premium payments waived and to retain his life insurance coverage. However, Aetna’s policy required Mr. Alaimo to submit proof of continued disability upon request, and if Mr. Alaimo failed to do so Aetna was allowed to terminate the life insurance benefits. Mr. Alaimo died in 2019, and when Ms. Alaimo submitted her claim for benefits Aetna denied the claim saying it had terminated Mr. Alaimo’s policy as he failed to submit proof of continued disability. Ms. Alaimo claims she and her husband never received notice of the termination and that the policy was in effect at the time of the death. Aetna removed the case to the Western District of New York, and then moved to dismiss for failure to state a claim upon which relief can be granted. The court granted in part and denied in part Aetna’s motion. The court held that Ms. Alaimo’s state law claims are preempted by ERISA and dismissed them. However, the court found that Ms. Alaimo was able to state a claim for benefits under Section 502(a)(1)(B) and allowed the case to proceed under ERISA. The court was not persuaded by Aetna’s arguments that Ms. Alaimo should not be allowed to proceed with a 502(a)(1)(B) claim for failure to administratively exhaust or for lack of timeliness. Those arguments were found to turn on a critical fact in dispute, whether or not Aetna sent the termination letter. Ms. Alaimo claimed the letter was never sent. As this was a motion to dismiss, the court accepted all Ms. Alaimo’s allegations as true and drew all inferences in her favor, and therefore declined to dismiss the 502(a)(1)(B) claim. 

Seventh Circuit

Rush University Medical Center v. Mutual Medical Plans, Inc., No. 21 C 03697, 2021 WL 5882139 (N.D. Ill. Dec. 13, 2021) (Judge Thomas M. Durkin). Plaintiff Rush University Medical Center brought suit alleging defendant Mutual Medical Plans, Inc. improperly denied reimbursement for medical services it provided to a Mutual Medical beneficiary. The patient received medical care by Rush from August 6 to August 21, 2020, and was a beneficiary of an ERISA healthcare plan administered by Mutual Medical. The medical bills totaled $103,358.62. After Mutual Medical failed to pay these bills, Rush sued in state court asserting claims for breach of implied-in-fact contract and quantum meruit. Mutual Medical removed the case to the Northern District of Illinois, claiming the state law causes of action were completely preempted by ERISA and then moved to dismiss. Rush moved to remand the case to state court, arguing that this court lacks subject matter jurisdiction. Rush pointed to the Plan’s “Claim Procedures & Deadlines,” which states unambiguously that “benefits are not assignable.” Because of this language, Rush argued ERISA does not completely preempt its state law claims as it was unable to bring a Section 502(a)(1)(B) benefits claim. The court agreed, finding this language precluded Rush from suing as a beneficiary. Therefore, the court concluded that the first prong of the Davila test was not satisfied, and ERISA did not completely preempt the claim. On the other hand, the court was not persuaded by Mutual Medical’s argument that ERISA completely preempts the suit because the state law causes of action relate to the ERISA governed plan. The court found this argument to be a substantive defense relevant to conflict preemption rather than a basis for complete preemption. The court offered, “no opinion on the conflict preemption issue.” Concluding that it therefore lacked federal jurisdiction, the court granted the motion to remand and denied the motion to dismiss as moot. 

Life Insurance & AD&D Benefit Claims

Fourth Circuit

The Lincoln Nat’l Life Ins. Co. v. Steen, No. 5:21-cv-00042, 2021 WL 5979528 (W.D. Va. Dec. 17, 2021) (Judge Thomas T. Cullen). Plaintiff The Lincoln National Life Insurance Company filed this interpleader action to determine to whom to pay the benefits of Douglas H. Steen’s life insurance policy. Two people claimed the funds. The first is defendant Faith M. Steen, Douglas Steen’s daughter, and policy’s contingent beneficiary. The second is defendant Carol Mautino, Douglas Steen’s partner, and the policy’s primary beneficiary. Faith M. Steen argued that Douglas Steen intended to remove Carol Mautino as the policy’s primary beneficiary before he died. Carol Mautino’s argument is simply that the policy lists her as the primary beneficiary, and the policy requires that the insurance funds be paid to the primary beneficiary; therefore, she is entitled to the life insurance funds. Carol Mautino moved for judgment on the pleadings. Faith M. Steen did not file an opposition to Carol Mautino’s motion. Reasoning that ERISA plans are interpreted “according to their plain terms” the court looked to the policy, which provides that “at an Insured Person’s death, the amount of his or her Personal Life Insurance will be paid to the surviving Beneficiary,” and expressly explains that the named primary beneficiary receives the life-insurance benefit. As Carol Mautino was the primary beneficiary, the court granted her motion for judgment on the pleadings.

Medical Benefit Claims

Tenth Circuit

Peter E. v. United Healthcare Servs., Inc., No. 2:17-cv-435-DBB-DAO, 2021 WL 5962259 (D. Utah Dec. 16, 2021) (Judge David Barlow). Plaintiff and ERISA plan beneficiary, Eric E., was admitted to Vista Adolescent Treatment Center, an inpatient facility, on December 10, 2014, to treat his substance use and mental health disorders, including major depressive disorder and ADHD. Eric remained at Vista for approximately 9 months. United Healthcare Services, the plan’s claims administrator, approved coverage for the treatment at Vista from December 10, 2014, to January 14, 2015, and then denied the claims for reimbursement for the remainder of Eric’s stay at the facility. Eric and his father, Peter, commenced this suit alleging United’s denial violated ERISA and the Mental Health Parity and Addiction Equity Act. Parties filed cross-motions for summary judgment. Under arbitrary and capricious standard of review, the court found the denial violated ERISA, and was not supported by substantial evidence. Although the court was satisfied that United’s reviewers considered all of the medical records, their explanations as to why they concluded that Eric no longer met the Coverage Determination Guidelines required for inpatient treatment were flawed and inadequate. When United approved the coverage for the first month of the stay, the reviewers had concluded that, “Eric could not be treated in a less restrictive level of care because of his mental health conditions and his mother’s alcohol use at home compromised his ability to prevent relapse.” However, after January 14th, the reviewers determined that Eric no longer qualified for inpatient treatment, even though his home life factors, and his mental health conditions had not improved. Especially as Eric was still having dreams about using drugs and expressing fears about relapsing upon leaving the treatment facility, the medical records clearly demonstrated that Eric’s relapse prevention skills had not improved by January 14th to the point where he no longer faced an imminent relapse risk, as required by the guidelines, the court found the denial to be arbitrary and capricious. The court went on to say that “because Plaintiffs succeed on their ERISA claim, there is no need to consider their Parity Act claim.” Finally, rather than ordering an award of benefits, the court remanded the case to United, as the real flaw in the denial, according to the court, was a lack of an explanation. Plaintiffs were however awarded attorneys’ fees and costs, but not prejudgment interest. Accordingly, plaintiff’s motion for summary judgment was granted in part and defendants’ motion for summary judgment was denied. 

Pension Benefit Claims

Second Circuit

Ford v. Pension Hospitalization and Benefit Plan of the Electrical Industry Pension Trust Fund Plan, No. 17-CV-933, 2021 WL 5917353 (E.D.N.Y. Dec. 3, 2021) (Judge I. Leo Glasser). Plaintiff Bernard Ford brought a wrongful denial of benefits suit against defendants, the Pension Trust Fund, its administrator, and the Joint Industry Board of Electrical Industry, alleging he was improperly denied a disability pension for the years 2003-2006. The parties filed cross motions for summary judgment. The court granted defendants’ motion and denied Mr. Ford’s motion, applying the deferential arbitrary and capricious review standard. In 2009, Mr. Ford applied for a disability pension. In his application he listed his last date of employment as August 18, 2006. He was awarded a disability pension as of October 1, 2006. Mr. Ford wrote to defendants inquiring, “why has my pension…been approved but only effective 10/1/2006 and not 12/1/2002 when I had first applied?” It is clear from Mr. Ford’s application in 2009, as well as from employment records that Mr. Ford worked from September 2004 to August 2006 and was employed by three employers who contributed to the multi-employer plan. The dispute turned on whether Mr. Ford had “secured gainful employment” during the relevant time period within the meaning of the plan. Although the plan did not define “secure gainful employment,” the committee unambiguously had the authority to interpret and apply the term. The court concluded that the Committee and the Board of Trustees’ interpretation that Mr. Ford was in covered employment through August 2006 was supported by substantial evidence, as “contemporaneous employment records showed that plaintiff was employed multiple times, for extended periods, and usually for four or five days per week.” Therefore, the court concluded that defendants’ determination that Mr. Ford only became eligible for a pension in October 2006 was not arbitrary and capricious. Lastly, Mr. Ford’s conflict of interest argument was given no weight by the court, as there was no evidence that the conflict affected the decision of the administrator. 

Severance Benefit Claims

Seventh Circuit

Smith v. Lutheran Life Ministries, No.  21 C 2066, 2021 WL 5937789 (N.D. Ill. Dec. 16, 2021) (Judge Joan H. Lefkow). Plaintiff Lori Smith brought this lawsuit against her former employer Lutheran Life Ministries, alleging she is owed severance payment and other compensation after being “constructively terminated.” In January 2021, Ms. Smith voluntarily terminated her employment per a change in the control severance payment agreement and requested the 78 weeks of severance pay she was entitled to under the terms of the agreement. Lutheran Life did not pay Ms. Smith, which led to this suit in which Ms. Smith alleged two state-law causes of action: a breach of contract claim and a promissory estoppel claim. Lutheran Life moved to dismiss under Rule 12(b)(6). The motion was granted in part and denied in part. First, the court granted the motion to dismiss the breach of contract claim, concluding that it was preempted by ERISA. Lutheran Life attached a copy of the ERISA plan which governed the severance arrangement to its motion to dismiss. Ms. Smith claimed she never knew the ERISA plan existed and was not aware of the adoption of it or any change to the severance agreement. The court, however, was satisfied that the plan was legitimate and because of its existence, Ms. Smith’s breach of contract claim was preempted by ERISA. The court nevertheless allowed the promissory estoppel claim to proceed, and the motion to dismiss this claim was denied. 

Pleading Issues & Procedure

Sixth Circuit

Sheet Metal Workers’ Health & Welfare Fund of N.C. v. Law Office of Michael A. DeMayo, LLP, No. 21-5011,__F.4th__2021 WL 5984357 (6th Cir. Dec. 17, 2021) (Before Circuit Judges Batchelder, Larsen, and Readler). Plan participant Courtney Simpson was hurt in a car accident in which he suffered injuries which resulted in $16,225 in medical expenses. Defendant Sheet Metal Workers’ Health and Welfare Fund of North Carolina (“the fund”), paid these expenses. Ms. Simpson then hired defendant-appellee the Law Office of Michael A. DeMayo, LLP (“the firm”) to represent her in a personal injury suit arising from the car accident. Following the personal injury suit sought reimbursement of the $16,225 it had paid under a subrogation provision in the plan. The firm instead paid only $9,029.18 to the fund, which prompted this suit against the firm under ERISA Section 502(a)(3). The district court granted the fund’s request for a temporary restraining order (“TRO”), requiring the firm to maintain the remainder of the outstanding reimbursement claim in its operating account until the court resolved the fund’s claim. The parties then filed cross motions for summary judgment. The firm argued that the fund sought a legal remedy not available under Section 502(a)(3) because it no longer possessed the settlement funds, having dissipated the funds before the district court had issued the TRO by spending them on its own expenses. The Fund argued it sought an equitable remedy because the funds were in the firm’s possession. The district court granted the firm’s motion, concluding that the firm had dissipated the funds and the fund therefore sought a legal remedy beyond the scope of Section 502(a)(3). The fund appealed to the Sixth Circuit. On appeal, the fund argued that the district court erred by failing to apply the lowest intermediate balance test in determining whether the firm dissipated the funds prior to the TRO. The court of appeals concluded that the fund failed to preserve this argument for appellate review and, on this basis, affirmed the district court’s ruling. 

Ninth Circuit

Zavala v. Kruse-Western, Inc., No. 1:19-cv-00239-DAD-SKO, 2021 WL 5890200 (E.D. Cal. Dec. 13, 2021) (Judge Dale A. Drozd). You may recognize this case from above under the Breach of Fiduciary Duty heading. That was actually the first of two decisions in this case this week. In this second decision, the court ruled on defendants’ motion for judgment on the pleadings, or alternatively, motion for summary judgment. Not mentioned in the previous decision, but central to the motions for judgment, was a severance agreement that Mr. Zavala signed upon resignation that “forever discharges … ‘the Releasees’ from any and all claims, demands, causes of action, obligations and liabilities whatsoever, ….including but not limited to, claims, demands, or causes of action under …. (the) Employee Retirement Income Security Act.” Mr. Zavala claimed that an HR representative gave him a stack of documents during his exit interview and directed him to the sign the documents in several places, and that he was not explicitly told what he was singing except that the documents were “standard.” Mr. Zavala went on to say that he believed signing all the documents was a necessary step in his exit process and was never informed he could take the documents home to read over or consult with a lawyer. First, the court converted defendants’ motion for judgment on the pleadings into a motion for summary judgment. The court then addressed the merits of defendants’ arguments and denied the motion. Defendants argued that the plain language of the release precluded Mr. Zavala from bringing claims against them, and that Mr. Zavala is not entitled to pursue Section 502(a)(2) claims on behalf of the ESOP. Defendants also argued that Mr. Zavala did not suffer losses as a result of any alleged breach of fiduciary duty because Mr. Zavala became a participant in the ESOP more than a year after the ESOP purchased the Kruse-Western stock at the inflated prices. None of these arguments persuaded the court. First, the court was satisfied that Mr. Zavala sought only equitable relief, “including but not limited to disgorgement of ill-gotten gains, fees, and profits and the imposition of a construction trust and/or equitable lien.” Not only that, but Mr. Zavala filed this action on behalf of the ESOP under Section 502(a), not as a class action in which he must allege that he was personally injured in the same way as other participants. The court also found that even if Mr. Zavala’s release of claims in the severance agreement was found to be valid, “defendants do not point to any evidence demonstration that the ESOP released any of its Section 502(a)(2) claims.” Finally, the court concluded that the losses arising from the ESOP purchase of private company stock are determined on the basis of the stock’s value as well as on the shares price. This meant that if the alleged valuations are proven inaccurate, Mr. Zavala will have suffered an injury in fact by receiving fewer shares of the stock when he became a participant.