Wilson v. UnitedHealthcare Ins. Co., No. 20-2044, 2022 WL 552028 (4th Cir. Feb. 24, 2022) (Before Circuit Judges Agee, Thacker, and Quattlebaum).

This week’s notable case once again demonstrates how health insurance claims are confusing and littered with procedural and substantive land mines. This case involves one person who received treatment at one facility during one continuous period of time, yet the Fourth Circuit’s analysis of the related insurance claims submitted for that treatment has resulted in three different holdings: one regarding medical necessity, one regarding the administrator’s breach of fiduciary duty, and one regarding the claimant’s failure to properly follow procedural rules.

Plaintiff Kenneth Wilson submitted claims to UnitedHealthcare for treatment received by his son, J.W., at Change Academy at Lake of the Ozarks (“CALO”), a residential behavioral health treatment center. There were three groups of dates of service (“DOS”) of treatment involved, ranging continuously from 2015 to 2017.

United denied benefits for the First DOS, contending that the treatment involved during that time period was not medically necessary. United upheld this decision on appeal. J.W. continued to treat at CALO and submitted more claims. After United denied plaintiff’s claims for this Second DOS, plaintiff retained an attorney who sent United a letter stating plaintiff intended to appeal the second group denial “as well as any and all denied claims related to treatment received at [CALO].” The attorney referenced the dates of service in the Second DOS, asked for plan documents, guidelines, and other documents United relied on in denying plaintiff’s claim, and attached an authorization and a HIPAA release form.

United did not respond to this letter, so counsel sent a second letter, again specifically referencing the Second DOS claim numbers. Once again, United did not respond, and meanwhile J.W. continued to receive treatment at CALO during the Third DOS. Plaintiff did not submit any claims to United regarding the Third DOS.

Because he had not received a response from United, plaintiff filed suit in federal court under ERISA. The district court granted summary judgment to United, ruling that United’s denial of the First DOS treatment was supported by substantial evidence and was not an abuse of discretion. As for United’s denial of claims for the Second and Third DOS, the court found that plaintiff had failed to exhaust his administrative remedies and did not show that exhaustion would be futile. The court also found that the attorney’s letters did not constitute an appeal, and thus United was not required to respond to them. As a result, the court dismissed those claims with prejudice.

Plaintiff appealed. The Fourth Circuit upheld the district court’s decision regarding the First DOS, agreeing that United adequately considered the documents submitted and followed plan procedures and policies. Furthermore, United’s decision was “the product of a principled and reasoned decisionmaking progress” and “was consistent with ERISA’s procedural and substantive requirements.” The court concurred that while J.W. may have needed treatment, residential treatment was not medically necessary; he could have received treatment at a less intensive level. J.W. did not “require intensive psychological intervention,” and, while he was involved in some altercations and engaged in self-harm at CALO, he did not require “constant physical interventions for safety.”

However, the Fourth Circuit ruled that the district court abused its discretion regarding the Second DOS. The court noted it was undisputed that plaintiff had requested documents, that he was entitled to make those requests under ERISA, and that United had failed to respond. United contended that it had no obligation to respond because plaintiff’s HIPAA form was faulty. According to United, the signature was illegible, and it was unclear whether J.W. had signed the form or whether plaintiff had signed it on J.W.’s behalf. The court rejected this argument, noting that some of the documents requested (such as plan-related documents and internal guidelines) were not protected by HIPAA and thus should have been produced regardless. Furthermore, even if United believed the HIPAA form was inadequate, it had a fiduciary duty under ERISA to notify plaintiff’s attorney of the deficiency so it could be corrected.

As a result, the Fourth Circuit found that by not producing any documents, and indeed failing to respond at all, United “violated its fiduciary obligations under ERISA and the Plan,” “impeded the appeal process,” and put plaintiff “at a distinct disadvantage in understanding how to proceed.” Thus, plaintiff properly concluded that United was uninterested in complying with plan procedures, and that following through with an appeal would be futile. The Fourth Circuit reversed and ordered the claims in the Second DOS to be remanded to United for it to undertake a “full and fair review.”

As for the Third DOS, the Fourth Circuit affirmed the district court’s dismissal, ruling that because plaintiff did not submit claims for treatment received during that time period, he had not exhausted his administrative remedies. Plaintiff contended that his attorney’s letter requesting review of “any and all denied claims related to treatment received at [CALO]” properly included future denied claims, but the Fourth Circuit rejected this argument. The court noted that the attorney’s letters specifically referenced claims for treatment during the Second DOS, and any request by the attorney “could only be made for claims that had been denied as of the time it was made.” According to the court, “one cannot ‘review’ or ‘appeal’ a decision that has not yet been made.”

In short, the Fourth Circuit upheld the denial of treatment for two of the three time periods at issue, and reversed and remanded as to the third. Plaintiff will thus get another chance, although given United’s and the courts’ reviews on the merits thus far, it is unlikely he is optimistic.

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

Breach of Fiduciary Duty

Second Circuit

Daus v. Janover LLC, No. 2:19-cv-06341-FB-RER, 2022 WL 523548 (E.D.N.Y. Feb. 22, 2022) (Judge Frederic Block). After plaintiff Paul Daus’s employment with defendant Janover, LLC was terminated in 2016, Mr. Daus and his wife, plaintiff Traci Daus, had 31 days to convert Mr. Daus’s group life insurance policy into an individual policy. Neither defendant Janover nor defendant Security Mutual Life Insurance Company of New York informed Mr. Daus of his right to convert his life insurance policy and the option to do so lapsed. Mr. Daus eventually attempted to exercise his conversion option, but it was too late. The Dauses then brought this breach of fiduciary duty suit attempting to reinstate and recover benefits, clarify future benefits, and seeking attorneys’ fees. The complaint also alleged that defendants failed to furnish information to the Dauses upon request. Finally, the Dauses included a state law breach of contract claim in their complaint. Defendant Security Mutual moved to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). First, Security Mutual argued that it was not a fiduciary. The court denied Security Mutual’s motion to dismiss on this ground as the question of whether Security Mutual was a fiduciary, concluding that this is a factual issue not appropriate for a motion to dismiss. With regard to plaintiffs’ claim that defendants failed to furnish requested information, the court held that the plan document provides that Janover was the plan administrator and the duty imposed by ERISA Section 1002(16)(A) permits suit against Janover. Therefore, the court granted Security Mutual’s motion to dismiss this claim. Finally, the court found that ERISA preempted New York State contract claim because the conversion of a life insurance policy was a “matter governed by ERISA.” The court therefore dismiss the state-law claim against all defendants, even the nonmovants. Thus, the court granted in part and denied in part plaintiffs’ motion to amend and denied their request for leave to amend the complaint. 

Class Actions

Second Circuit

Falberg v. The Goldman Sachs Grp., No. 19 Civ. 9910 (ER), 2022 WL 538146 (S.D.N.Y. Feb. 14, 2022) (Judge Edgardo Ramos). Plan participant Leonid Falberg brought this putative class action on behalf of the Goldman Sachs 401(k) Plan and similarly situated individuals against defendants The Goldman Sachs Group, Inc. and The Goldman Sachs 401(k) Retirement Committee. According to Mr. Falberg’s complaint, defendants breached their fiduciary duties of loyalty and prudence by retaining underperforming actively managed proprietary funds, engaging in prohibited transactions, failing to negotiate lower administrative fees, and failing to monitor fiduciaries in one of the country’s largest and highest-valued defined contribution plans. Mr. Falberg moved for class certification of a proposed class of “all participants and beneficiaries of the (plan) whose account held any Goldman Sachs mutual fund” any time between October 25, 2013, and June 6, 2017. Mr. Falberg sought to be appointed class representative, and to have his counsel, Kai Richter, Benjamin Bauer, and Brock Specht of Nicholas Kaster, PLLP and Major Khan of MKLLC Law designated as class counsel. First, the court examined the class under the requirements of Rule 23(a). Defendants argued that Mr. Falberg did not prove class-wide standing, because potential class members may not have been financially injured. Mr. Falberg countered that because he is suing on behalf of the plan, he need not establish individualized damages to each potential member of the class. The court agreed with Mr. Falberg, and because he personally invested in three of the five challenged funds, the court was satisfied he has standing to sue on behalf of the plan. Furthermore, the court held defendants’ actions implicate the same concerns for all plan participants. Defendants did not challenge numerosity, as the proposed class likely consists of 17,575 individuals, nor did they challenge the commonality of the class. Defendants did however challenge the typicality and adequacy requirements. They argued that Mr. Falberg is not typical and adequate as class representative because he was only invested in three of the five challenged funds and there are potential intra-class conflicts that may arise via the comparator funds Mr. Falberg selects. Defendants went on to argue that many potential class members may be time barred by ERISA’s statute of limitations, and thousands of other putative class members have signed arbitration agreements. Mr. Falberg retorted that defendants’ focus on individual damages and investment choices is misplaced, and what is relevant to class certification is defendants’ conduct and how it “affects the pool of assets.” The court agreed with Mr. Falberg, finding there was no intra-class conflict. As for the argument about the statute of limitations, the court stated that providing information about when each potential class member learned of the alleged breaches, “is not Plaintiff’s burden to bear,” and “not an issue that impedes class certification here.” With regards to the existence of the arbitration agreements, the court asserted that it need not address the issue at this stage of the litigation because this issue goes to a merits defense rather than a reason to bar certification. The court was thus satisfied that the proposed class met the requirements of Rule 23(a). Finally, turning to certification under Rule 23(b)(1)(B), the court held that because the resolution of Mr. Falberg’s claims will be dispositive of the interests of the other plan participants certification was warranted. Therefore, the court certified the class, and appointed Mr. Falberg class representative, and his attorneys, whom the court noted have significant ERISA litigation experience, as class counsel. 

Disability Benefit Claims

Sixth Circuit 

Alvesteffer v. Aerospace, No. 1:20-cv-703, 2022 WL 521963 (W.D. Mich. Feb. 22, 2022) (Magistrate Judge Phillip J. Green). Plaintiff Thomas Alvesteffer brought suit challenging the termination of his long-term disability benefits against his employer, Howmet Aerospace. Mr. Alvesteffer became disabled following multiple strokes and several neck surgeries. As a result of his ill-health, Mr. Alvesteffer stopped working in 2017 and applied for disability benefits. Mr. Alvesteffer received disability benefits for 24 months, before his benefits were terminated on the ground that Mr. Alvesteffer could perform several occupations despite his health limitations. His insurer, Aetna, upheld its decision during the administrative appeals process, after which Mr. Alvesteffer sued for benefits. In his complaint, Mr. Alvesteffer argued that the decision to terminate benefits was in direct violation of the plan terms and that he was not provided a full and fair review. He requested that the court find him entitled to disability benefits from the date they were terminated onward, and order Howmet to pay with interest all unpaid benefits. Mr. Alvesteffer moved for judgment on his claims, payment of benefits, and an award of reasonable attorney’s fees and costs. Defendant Howmet cross-moved for judgment, seeking the court find in its favor that the termination was not arbitrary and capricious. The court denied defendant’s motion, finding, to the contrary, that the shortcomings and failures of the decision making and appeals processes rendered the denial arbitrary and capricious. The administrative record revealed that, among other things, Aetna (1) failed to consider parts of the medical evidence; (2) had doctors inappropriately offer opinions on vocational matters; (3) gave only sections of the medical record to the reviewing doctors; (4) ignored Mr. Alvesteffer’s self-reported symptoms; (5) failed to share its medical evaluations with Mr. Alvesteffer; and (6) ignored the plan’s disability standard applicable after 24 months (any gainful occupation for which the participant is reasonably suited by training, education, or experience) and instead found Mr. Alvesteffer able to perform “any reasonable occupation.” However, although the court found the denial of benefits arbitrary and capricious, the court held that Mr. Alvesteffer has failed to demonstrate he is entitled to benefits, concluding that “whether plaintiff is disabled as defined by the Plan is a matter beyond the experience and expertise of this Court.” Accordingly, the court remanded to the insurer for further disability assessment. Mr. Alvesteffer was also directed by the court to brief a motion for attorney’s fees and costs. 

Autran v. Procter & Gamble Health & Long-Term Disability Benefit Plan, No. 20-6432, __ F. 4th __, 2022 WL 557825 (6th Cir. Feb. 24, 2022) (Before Circuit Judges Boggs, Griffin, and Murphy). During an emergency surgery required to repair his aorta following an aortic aneurysm, Dr. Jean-Phillippe Autran’s brain was deprived of oxygen for an extended period of time. The surgery successfully repaired the aorta, but physicians informed Dr. Autran that he was at a serious risk of developing seizures. Unfortunately for the research scientist, this prediction came to fruition just over a year later, and Dr. Autran began experiencing seizures that left him disoriented and fatigued, and affected his memory. Unable to perform at the high-level required for his field, Dr. Autran left his work at Procter & Gamble, and went onto long-term disability under the Proctor & Gamble Health and Long-Term Disability Plan. After initially determining Dr. Autran was totally disabled and paying for benefits, the plan’s Committee re-evaluated Dr. Autran’s medical records and recharacterized him as partially disabled. This change lasted a couple of months before Dr. Autran was awarded Social Security disability benefits, and the Committee once again determined Dr. Autran was totally disabled. A month after this, the Social Security Administration awarded Dr. Autran over $72,000 in retroactive benefits. The plan’s administrators learned of this award and required that this amount be offset against Dr. Autran’s future disability payments and also determined, once again, that Dr. Autran was only partially-disabled. Dr. Autran sued under ERISA Section 502(a)(1)(B) seeking the more expansive total-disability benefits. During the course of the lawsuit, Dr. Autran died in an accident. His son was substituted as the plaintiff. The district court, under arbitrary and capricious review, granted defendants’ motion for summary judgment. The son appealed the district court’s order. The court of appeals agreed with the district court that the medical record contained adequate evidence to support the Committee’s conclusion that Dr. Autran met only the definition of “partial disability” per the terms of the plan. Accordingly, the Sixth Circuit concluded there were no clear errors in the district court’s findings and affirmed the order. 

Ninth Circuit

Zelhofer v. Metro. Life Ins. Co., No. 2:16-cv-00773-TLN-AC, 2022 WL 525562 (E.D. Cal. Feb. 22, 2022) (Judge Troy L. Nunley). Plaintiff Walter Zelhofer brought suit after his long-term disability benefits were terminated by his insurer Metropolitan Life Insurance Company. Mr. Zelhofer was an engineer who suffered from cardiac problems as well as related mental health disorders. After undergoing heart surgeries, Mr. Zelhofer applied for long-term disability benefits. The claim was initially approved and MetLife paid the benefits for two years. However, in March of 2012, MetLife determined, based off of current medical records, that Mr. Zelhofer was no longer disabled as defined by the plan and terminated the benefits. Parties filed cross-motions for summary judgment. Additionally, Mr. Zelhofer moved for admission of extrinsic evidence. First, the court denied the Mr. Zelhofer’s motion for admission of additional evidence, concluding that the evidence was relevant only to whether Mr. Zelhofer was wrongfully denied disability benefits, not to whether there were structural and procedural conflicts of interest. Next, the court concluded that the medical record reflected that both Mr. Zelhofer’s heart-related and mental health problems had improved at the time that MetLife terminated the benefits. This was supported by the records of Mr. Zelhofer’s treating physicians, who attested that, in their opinions, Mr. Zelhofer would be able to return to work. Under de novo review, the court decided Mr. Zelhofer’s illnesses were no longer disabling and the termination of benefits was therefore appropriate. Accordingly, the court granted defendants’ motion for summary judgment and denied Mr. Zelhofer’s motion. 

Exhaustion of Administrative Remedies

Seventh Circuit 

Woodson v. Vill. Of Steger, IL, No. 21 C 03247, 2022 WL 507598 (N.D. Ill. Feb. 17, 2022) (Judge Rebecca R. Pallmeyer). Plaintiff Ronald N. Woodson suffered a back injury while working as a police officer for the Village of Steger, Illinois (“Steger”). Mr. Woodson took medical leave for eight months following the injury. At the end of that eight-month period, Mr. Woodson was informed by doctors that his injury required back surgery. The recovery from the surgery would be an additional six months. After Mr. Woodson informed Steger of his need for additional time off work, Steger terminated Mr. Woodson’s employment. In response, Mr. Woodson filed a seven-count complaint challenging his termination, making numerous claims including a claim under the Americans with Disabilities Act, a claim of common law retaliation, an ERISA Section 510 retaliation claim, a claim for intentional infliction of emotion dress, and a retaliation claim for seeking medical care and for filing a workers’ compensation claim. Steger filed an answer to Mr. Woodson’s last claim, and moved to dismiss the remainder of the claims against it. The court granted the motion to dismiss in its entirety. With respect to Mr. Woodson’s Section 510 ERISA claim, the court, relying on Seventh Circuit precedent, held that exhausting administrative remedies was a prerequisite to bringing suit. Nor did the court presume that exhaustion in this case was inevitably futile. The court therefore granted Steger’s motion to dismiss his ERISA claim (as well as his other claims), but did so without prejudice. 

Medical Benefit Claims

Second Circuit

Mohr-Lercara v. Oxford Health Ins., No. 18 CV 1427 (VB), 2022 WL 524059 (S.D.N.Y. Feb. 22, 2022) (Judge Vincent L. Briccetti). Plaintiff Anna Mohr-Lercara brought a putative class action against defendants Oxford Health Insurance, Inc., Optum, Inc., and Optum Rx, Inc. for violations of ERISA and the Racketeer Influenced and Corrupt Organization Act (“RICO.”) According to her complaint, defendants violated the terms of her ERISA welfare plan by overcharging for prescription drugs. Ms. Mohr-Lercara claimed that per the terms of her plan for prescriptions filled at Network and Participating Pharmacies she should have paid the lesser of three possible amounts: (1) her co-payment, (2) the usual and customary charge for the drug, or (3) the pharmacy rate. Instead, Ms. Mohr-Lercara was charged the lesser of first two options but was never given the option of paying the pharmacy rate, which was the least expensive of the three options. Ms. Mohr-Lercara alleged that defendants conspired with the pharmacies to overcharge her and other similarly situated individuals, to conceal their scheme, and to pocket the difference in the payments. Defendants moved for summary judgment. The court granted the motion, finding no dispute of material fact that defendants had complied with the terms of the plan. At all relevant times, under the plain language of the plan provide that Ms. Mohr-Lercara was not entitled to pay the pharmacy rate for prescription drugs. Thus, Ms. Mohr-Lercara’s ERISA claims, as well as her derivative RICO claims, were dismissed and summary judgment was entered in favor of defendants. 

Sixth Circuit 

Polonczyk v. Anthem BlueCross and BlueShield, No. 20-176-DLB-EBA, 2022 WL 551215 (E.D. Ky. Feb. 23, 2022) (Judge David L. Bumming). Plaintiff Teeanna Polonczyk brought suit under ERISA and the Affordable Care Act against Defendants Anthem BlueCross and BlueShield and Anthem UM Services, Inc. after the insurer denied claim for coverage of Ms. Polonczyk’s facial surgeries related to gender re-assignment, after Blue Cross determined that they  were “cosmetic” and not “medically necessary.” Ms. Polonczyk was born male and has undergone medical procedures to transition from male to female. After exhausting the internal appeals process with her insurers, Ms. Polonczyk sued for benefits under Section 502(a)(1)(B). Ms. Polonczyk additionally asserted claims under Section 502(a)(3) of ERISA for breach of fiduciary duty and under 42 U.S.C. § 18116 for discrimination on the basis of sex. Defendants moved to dismiss all claims under Federal Rule of Civil Procedure 12(b)(6). The plan language specifically addresses gender reassignment surgery, and allows for several types of gender reassignment surgeries, particularly those related to genital reconstruction. However, many other surgeries are listed by the plan as cosmic and not medically necessary. The plan distinguishes these surgeries, mostly surgeries of the face as, “primarily for the purpose of changing …appearance or self-esteem.” The plan’s list of non-covered cosmetic surgeries applies to all plan participants whether or not these surgeries are related to gender dysphoria. First, the court examined the benefits claim and held that because the plan expressly and clearly articulates that it does not cover the surgeries Ms. Polonczyk sought, she could not state a claim upon which relief could be granted under ERISA Section 502(a)(1)(B). Next, the court dismissed Ms. Polonczyk’s fiduciary breach claim stating it was barred under governing Sixth Circuit precedent as being a repackaged benefits claim. Finally, Ms. Polonczyk’s Affordable Care Act discrimination claim was dismissed because Ms. Polonczyk could not identify any actions or documents to support a finding that her insurance company was discriminating against her because of her transgender status. Contrary to Ms. Polonczyk’s assertion that the plan treats transgender and non-transgender employees differently, the court stated that the plan categorizes some surgeries as cosmetic regardless of a participant’s status as a trans individual, while allowing for other surgeries whose purpose is specifically to treat gender dysphoria. The court thus held the plan was not clearly discriminatory and dismissed the claim. Accordingly, defendants’ motion to dismiss was granted in its entirety. 

Pension Benefit Claims

Seventh Circuit 

Urlaub v. CITGO Petroleum Corp., No. 21-4133, 2022 WL 523129 (N.D. Ill. Feb. 22, 2022) (Judge Matthew F. Kennelly). Plaintiffs Leslie Urlaub and Mark Pellegrini brought this class action lawsuit against their former employer, CITGO Petroleum Corporation, its two ERISA-governed defined benefit retirement plans, and the plans’ committees alleging that defendants violated ERISA by using out-of-date actuarial assumptions to calculate their benefits under the plans. To incentivize early retirement of high-salary employees, CITGO provides these employees with the opportunity to retire before the normal retirement age of 65 with an early retirement subsidy that provides participants with unreduced pension payments. Plaintiffs here both retired early and chose to receive their benefits in the form of a joint and survivor annuity. ERISA requires that joint and survivor annuities be the actuarial equivalent of a single life annuity, ensuring married participants are provided equal pension benefits as un-married participants. According to their complaint, plaintiffs contend that defendants used a mortality table from the 1970s to illegally reduce pension benefits. The complaint alleges that defendants violated, “(1) the JSA requirement of section 1055; (2) the actuarial equivalence requirements of sections 1054 and 1055; (3) the anti-forfeiture rules of section 1055 (and (4) breached their fiduciary duty under section 1104.)” Defendants moved to dismiss for failure to state a claim, and, with regard to the fiduciary breach claim, argued that the statute does not authorize plaintiffs’ requested remedies. The court denied the motion to dismiss. Regarding the first count, the court concluded that section 1055 does require actuarial equivalence between joint and survivor annuities and single life annuities at the time of retirement. Turning to the second count, the court disagreed with defendants’ argument that neither section 1054 nor section 1055 prohibits employers from using unreasonable mortality assumptions, writing, “it cannot possibly be the case that ERISA’s actuarial equivalence requirements allow the use of unreasonable mortality assumptions. . . defendants’ argument suggests that they could have used any mortality table-presumably, even one form the sixteenth century to calculate the plaintiffs’ JSAs.” Defendants’ argument, the court went on to say would render the requirements meaningless. As for plaintiff’s third count, alleging violations of ERISA’s anti-forfeiture requirement, the court found plaintiffs’ allegation that defendants caused them to forfeit their benefits through the use of the outdated mortality tables to plausibly state a claim. Defendants argued that section 1053(a) only protects plaintiffs’ entitlement to receive benefits, “and not the amount or method of calculating benefits.” The court disagreed, and found plaintiffs allegation constituted a forfeiture of rights under this provision. Finally, the court determined that the relief plaintiffs sought with respect their fiduciary duty claims under section 1132(a)(3) – and injunction – was equitable in nature. 

Pleading Issues & Procedure

Fifth Circuit 

Tex. Med. Ass’n v. United States Dep’t of Health & Human Servs., No. 6:21-cv-425-JDK, 2022 WL 542879 (E.D. Tex. Feb. 23, 2022) (Judge Jeremy D. Kernodle). This case does not pertain to any ERISA-governed plan, rather its focus is on a new rule promulgated by the Departments of Health and Human Services, Labor, and the Treasury, along with the Office of Personnel Management, implementing a change in how the arbitration process for resolving payment disputes between out-of-network provides and insurers is conducted pursuant to the No Surprises Act. The No Surprises Act was passed in December 2020 to address surprise medical bills. Along with limiting the amount an insured patient will pay for emergency and certain non-emergency services in out-of-network facilities, the Act also requires insurers to reimburse the out-of-network providers at a “statutorily calculated out-of-network rate.” Plaintiffs are the Texas Medical Association, which represents more than 55,000 physicians, and an individual physician, Dr. Adam Corley. Plaintiffs filed suit against the Departments challenging the rule under the Administrative Procedure Act, arguing that the regulation impermissibly changed the arbitration processes outlined in the No Surprises Act. The arbitration process in the Act requires arbitrators to provide equal weight to several factors including: (1) the qualifying payment amounts (the median rate the insurer would have paid for the service by an in-network provider), (2) the level of training and experience of the provider, (3) the market share held by the provider or facility, (4) the acuity of the patient receiving the treatment, (5) the scope of services of the facility, and (5) demonstrations of “good faith efforts” made by the provider or insurer. In essence the rule requires arbitrators to presume that the offer closets to the qualifying payment amounts should be chosen, putting a “substantial thumb on the scale in favor of the (qualifying payment amounts.)” Plaintiffs argued that the rule deprives them of the arbitration process established in the No Surprises Act. Plaintiff asserted that the new arbitration process would cause them to suffer financial harm because the rule’s presumption in favor of the offer closest to the qualifying payment amounts “will systematically reduce out-of-network reimbursement compared to the process without such a presumption.” Plaintiffs further argued that the Departments issued the rule without the required notice and comment. The Departments for their part argued that the rule was consistent with the No Surprises Act, and that no notice and comment was required in this case because no harm was done without it. Parties filed cross-motions for judgment. Not only was the court satisfied that plaintiffs had Article III standing to bring suit, the court agreed with plaintiffs that the rule impermissibly altered the statutory terms and requirements of the Act. Accordingly, the court granted summary judgment in favor of plaintiffs. The court then decided that the rule should be vacated because the Departments failed to provide notice and comment required by the Administrative Procedure Act and that failing to do so was harmful and prejudicial to the health care providers affected by the change. Accordingly, the court determined that vacatur of the “challenged portions of the Rule” to be the proper remedy. 

Retaliation Claims

Seventh Circuit 

Chaudhuri v. Int’l Bus. Machs. Corp., No. 21-2631, __ F. App’x __, 2022 WL 543178 (7th Cir. Feb. 23, 2022) (Before Circuit Judges Easterbrook, Brennan, and St. Eve). Plaintiff/appellant Monodip Chaudhuri was diagnosed with a degenerative spinal disease while working for IBM India in Milwaukee, Wisconsin for a two month assignment. Mr. Chaudhuri is an Indian citizen who was working in the US on a work visa. He applied for and received short-term disability benefits through IBM India’s self- funded sickness and accident plan for traveling employees. After those benefits had expired, Mr. Chaudhuri applied for long-term disability benefits through a plan IBM India had for employees working the United States for longer than six months. During that same time, Mr. Chaudhuri’s H-1B visa expired and the U.S. Department of State denied his application to renew the visa. Doctors treating Mr. Chaudhuri had also independently recommended that he return to India to receive treatment. Therefore, Mr. Chaudhuri returned to India before qualifying for long-term disability benefits. He then sued IBM USA under Section 510 of ERISA for interfering with his benefits. The district court entered summary judgment for IBM USA, holding that IBM USA was a separate entity from IBM India, and neither Mr. Chaudhuri’s employer nor long-term disability plan sponsor. Mr. Chaudhuri, appearing pro se, appealed that ruling. The Seventh Circuit, in this unpublished decision, affirmed the ruling of the lower court, agreeing that the undisputed evidence showed that IBM USA and IBM India are separate entities, and that IBM USA never took any adverse employment action against Mr. Chaudhuri nor did anything to prevent him from accessing his benefits through IBM India. 


Third Circuit 

RB Restoration, Inc. v. Mosaic, Terrazo & Chem. Prod. Decorative Finisher Masons Workers Ass’n, No. Civ 21-19770 (ES) (JSA), 2022 WL 557852 (D.N.J. Feb. 24, 2022) (Magistrate Judge Jessica S. Allen). In February 2021, the Mosaic, Terrazo & Chemical Production Decorative Finisher Masons Workers Association Local No. 7 of New York (“the Union”) requested an audit of RB Restoration, Inc.’s books and records to determine if the company had properly contributed to the Union’s multi-employer benefits plan pursuant to its requirements under a collective bargaining agreement. The Union, believing that RB Restoration failed to supply its complete financial information and fully cooperate with the audit, filed suit in November of that same year in the Eastern District of New York under ERISA and the LMRA seeking to recover delinquent contributions of over $6 million based on the audit’s actual and estimated findings. Rather than asserting counterclaims in the E.D.N.Y. case, RB Restoration filed this suit in the District of New Jersey pursuant to the federal Declaratory Judgment Act and ERISA seeking a declaration as to its rights and obligations under the collective bargaining agreement and, “regarding the propriety and legality of (the Union’s) demand for payment and books and records in connection with the Audit.” The Union moved to transfer the case, arguing that the EDNY action was filed first, and that the two cases were essentially mirror images of one another, involving the same circumstances and individuals. The court agreed with the Union stating, “allowing these two cases to proceed in different courts would be a tremendous waste of judicial efficiency and resources.” Therefore, the court granted the motion to transfer. 

Withdrawal Liability & Unpaid Contributions

Fourth Circuit 

Plumbers & Pipefitters Local 625 v. Nitro Constr. Servs., No. 20-2080, __ F. 4th __,  2022 WL 532946  (4th Cir. Feb. 23, 2022) (Before Circuit Judges Wilkinson, Wynn, and Richardson). Plaintiffs/Appellants are a group of labor unions and the West Virginia Pipe Trades Health and Welfare Fund, which sued Nitro Construction for liquidated damages after Nitro was late paying contributions to the multi-employer plan at least seventeen times. These payments were eventually paid in full. Plaintiffs then sued Nitro for its tardy payments, seeking $77,373.95 in liquidated damages, plus interest and attorneys’ fees, as provided in the plan for collection of delinquent payments and Section 502(g)(2) of the Multiemployer Pension Plan Amendments Act (MPPA) of ERISA. The district court granted summary judgment to Nitro, finding that liquidated damages constituted penalties and are therefore unrecoverable for tardy payments. Plaintiffs appealed the district court’s ruling, arguing that ERISA governs this case and allows for punitive liquidated damages, in an intentional departure from the traditional common law rule, choosing to favor the interest of employees over companies in labor disputes. The court of appeals disagreed with this argument, holding instead that Section 502(g)(2) is applicable only to “unpaid contributions” and not, as relevant here, to “tardy contributions.” The Fourth Circuit concluded that the traditional rules of contract law apply unless they directly conflict with ERISA, and because Section 502(g)(2) does not directly address punitive fees with regard to late but ultimately paid multi-employer contribution plans, there was no direct conflict between ERISA and the common law. The court of appeals went on to express that “tardiness, while not admirable, may be understandable,” and described liquidated damages as a “draconian sanction” that may “push struggling companies in the direction of insolvency.” Taking this view, the Fourth Circuit affirmed the summary judgement decision of the district court. Notably, the opinion of the court was not unanimous. Circuit Judge Wynn dissented from his colleagues finding the majority’s view provided “a ceiling of relief for plaintiffs, rather than a floor,” and prioritized the interests of the company of those of the plan participants in direct contrast with Congress’s guiding intent in enacting ERISA and MPPA. The dissent quoted the Senate Committee Print that noted that “failure of employers to make promised contributions in a timely fashion imposes a variety of costs on plans” to demonstrate that a financial harm was suffered to participants regardless of whether the contributions were eventually paid. Judge Wynn stressed that “employer contributions to multiemployer plans could be construed as part of the wages and benefit packages provided to each employee such that an employee is not deemed fully paid until the required contributions have been made.” In a final note, the dissenting opinion cautioned that, without the ability of participants to pursue liquated damages for late payments, they run the risk of having to initiate costly lawsuits only to lose the prospect of make-whole recovery “if the employer should pay the late contributions after the initiation of the lawsuit but before judgment.”