Your ERISA Watch – Eighth Circuit Rules That Reliance Standard’s “Haphazard System of Ships Passing in the Night” Led to a Breach of Fiduciary Duty

Skelton v. Radisson Hotel Bloomington, No. 21-2641, __ F.4th __, 2022 WL 1434778 (8th Cir. May 6, 2022) (Before Circuit Judges Gruender, Benton, and Erickson).

ERISA-governed life insurance benefit plans are typically administered jointly by the employer and an insurance company. The exact duties of each party vary from plan to plan, but often the division of responsibility is confusing. It is common for one party to be uncertain as to what the other is supposed to be doing, and frequently neither party possesses full information as to which employees have signed up for what, and whether those employees have met all the requirements for eligibility or enrollment.

Because it recurs in case after case, this confusion unfortunately appears to be a feature of the system, not a bug. It gives both the employer and the insurer plausible deniability and leaves employees, who are supposed to be benefiting from the system, holding the bag. Today’s case hopefully accelerates a trend toward ending such arrangements.

Beth Skelton was a corporate group sales manager for Davidson Hotels LLC, and through her employment was eligible for supplemental life insurance coverage. When she indicated she wanted to enroll, the insurer of the benefit plan, Reliance Standard Life Insurance Company, sent her a letter indicating that she needed to provide evidence of insurability (EOI).

The parties disputed whether Ms. Skelton was required to submit EOI or ever submitted it, but regardless, it was undisputed that she received a “benefit verification” after enrolling, which listed her as having coverage for the insurance. She paid premiums for her insurance to Davidson, which were then forwarded to Reliance. Ms. Skelton later went on disability leave, during which time Davidson paid her insurance premiums. She passed away in 2015.

Ms. Skelton’s husband, Corey Skelton, submitted a claim for benefits, but Davidson and Reliance denied it.  Davidson stated that because Reliance had no record of receiving Ms. Skelton’s EOI, her insurance never made it out of “pending status.” Davidson admitted that it had paid premiums for Ms. Skelton but claimed it did so “incorrectly.”

Mr. Skelton sued both Davidson and Reliance. Davidson settled, but Reliance refused to do so. As a result, Mr. Skelton sought to recoup from Reliance the difference between Davidson’s settlement payment and the total amount of insurance at issue.

The district court ruled in Mr. Skelton’s favor, finding that Reliance breached its fiduciary “duty to ensure its system of administration did not allow it to collect premiums until coverage was actually” effective. Reliance appealed to the Eighth Circuit.

On appeal, Reliance contended that it could not be sued for breach of fiduciary duty because it was not a fiduciary. Reliance attempted to distinguish enrollment versus eligibility determinations, arguing that while it may have had fiduciary responsibilities for the latter, it did not have such responsibilities for the former. The Department of Labor filed an amicus brief in support of Mr. Skelton, arguing that, as the entity that collected premiums and determined eligibility for benefits, Reliance had fiduciary duties of prudence and loyalty to plan participants and that Reliance breached these duties by failing to set up and prudently operate a system designed to guard against the risk that premiums will be improperly collected before the policy is in force.

The Eighth Circuit rejected Reliance’s arguments and agreed with Mr. Skelton and the Department of Labor. The court noted that the plan gave Reliance discretionary authority, and enrollment in the plan occurred automatically as a result of Reliance’s eligibility decisions. Thus, “Davidson had a minimal role in effecting Skelton’s enrollment, and Reliance was the relevant fiduciary. Reliance’s own guidance shows that it managed enrollment.”

The court further found that Reliance “breached its fiduciary duties of prudence and loyalty by failing to maintain an effective enrollment system.” The court explained that “[a] reasonably prudent insurer – assigned the fiduciary roles for determining eligibility and enrollment – would use a system that avoids the employer and insurer having different lists of eligible, enrolled participants.” Reliance, however, “maintained a haphazard system of ships passing in the night.”

Specifically, the record showed that Reliance “sent Davidson a monthly status report listing pending applications, but the report tracked only ‘employees who submitted EOI requests,’ and not those seeking enrollment.” As a result, Reliance did not inform Davidson which employees had sought coverage but still needed to submit EOI, and further did not give Davidson a list of employees that were eligible and enrolled. In short, Reliance kept Davidson in the dark as to who was actually covered.

Meanwhile, Davidson “completed a worksheet listing the total number of employees being insured and remitted a bulk check, but never provided a list of the employees whom it thought were enrolled for what coverage, or from whom it received premiums.” This system of incomplete communication meant that “neither entity ever learned which employees the other one thought were or were not enrolled.”

The Eighth Circuit determined that this system was not only a breach of the duty of prudence, but also a breach of the duty of loyalty, as “Reliance profited at [Ms. Skelton’s] expense because it avoided any financial risk of having to pay coverage for her.” The court stated, “[A]llowing a fiduciary to escape liability because it designed an enrollment system that ensured it would not know it was collecting ‘premiums on non-existent benefit’ would endorse willful blindness – and the exact ‘perverse incentive’ this Circuit has decried.”

With an eye toward future suits, the court was careful to note that Reliance “did not become a fiduciary merely by receiving premiums from an ineligible employee.” Reliance was liable because of the particular way the Davidson plan was set up and administered, which in turn imposed fiduciary duties on Reliance that it breached.

Finally, the court turned to Mr. Skelton’s claim that he was entitled to plan benefits under 29 U.S.C. § 1132(a)(1)(B). The district court denied this claim because Mr. Skelton did not exhaust his administrative remedies, and the Eighth Circuit upheld this ruling. Because Mr. Skelton had already obtained what he wanted under his claim for breach of fiduciary duty, however, this defeat was of little consequence.

In the end, the Eighth Circuit affirmed the district court’s decision in its entirety, holding that the district court properly granted summary judgment to Mr. Skelton, and “properly calculated that Reliance owes $63,000 – the difference between the total $238,000 policy amount Skelton had sought and the amount Davidson already paid.”

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

Arbitration 

Fourth Circuit

Grounds v. Panther Creek Mining, LLC, No. 2:22-cv-00065, 2022 WL 1297098 (S.D.W.V. Apr. 29, 2022) (Judge Irene C. Berger). Plaintiff Mark Edward Grounds initiated this suit against his former employer, Panther Creek Mining, LLC. Mr. Grounds worked as an electrician in a mine in West Virginia. In 2019, Mr. Grounds was injured and the tip of one of his fingers was amputated. He then went onto short-term disability leave. After he was released to work full time the following year, he was discharged and his welfare benefits, including disability and medical benefits, were terminated. Mr. Grounds asserted a claim for retaliation under ERISA, alleging that defendant’s decision to terminate his employment was motivated by his exercise of rights to employee benefits. In addition, Mr. Grounds brought a breach of fiduciary duty claim under ERISA also pertaining to his employer firing him in an attempt to avoid paying benefits. Defendant moved to dismiss, or in the alternative moved to compel arbitration. The arbitration agreement that Mr. Grounds and his employer entered into states clearly that “This Agreement does not, however, limit any right to file…a claim for workers’ compensation benefits or unemployment insurance compensation; nor does it apply to employment benefit plans regulated by the Employee Retirement Income Security Act.” Defendant argued that the questions of the validity and applicability of the arbitration agreement have to be decided by the arbitrator, and the language within the agreement which states that any and all legal disputes between the parties are subject to arbitration supersedes the language excluding ERISA disputes. The court disagreed and held that the language of the delegation clause within the agreement was insufficient to delegate the questions of arbitrability, and it was for the court to decide the issue of whether the agreement requires arbitration of ERISA claims. Given the unambiguous language of the agreement, the court held that the ERISA claims are excluded from mandatory arbitration. Accordingly, the motion to dismiss and the motion to compel arbitration were denied. 

Disability Benefit Claims

Ninth Circuit

Cherry v. The Prudential Ins. Co. of Am., No. 21-27 MJP, 2022 WL 1302395 (W.D. Wash. May 2, 2022) (Judge Marsha J. Pechman). Plaintiff Andrew Cherry was a software engineer for Microsoft. He commenced this action against The Prudential Insurance Company of America after it terminated his long-term disability benefits under Microsoft’s ERISA-governed benefit plan. Mr. Cherry asserted a claim for benefits under Section 502(a)(1)(B) and a claim against Microsoft under Section 502(a)(3), claiming that Microsoft breached its fiduciary duties by failing to act as an impartial administrator and “actively looking for ways to terminate his claim.” Parties filed cross motions for summary judgment, or in the alternative, for trial on the record on Mr. Cherry’s first claim. The resolution of the second claim will occur after a trial and was not decided in this order. First, the court decided that de novo review applies. The court held that the plan grants discretion to Microsoft, as plan administrator, but does not delegate discretion to Prudential. The court further stated that Washington state’s ban of discretionary clauses makes abuse of discretion review inapplicable. Turning to the merits of the case, the court held the record clearly demonstrates by a preponderance of evidence Mr. Cherry’s spinal problems, including lumbar radiculopathy and a herniated disc at the lumbosacral joint, are disabling as defined by the plan and prevent Mr. Cherry from “perform(ing) the duties of any gainful occupation for which he is reasonably fitted by education, training, or experience,” and he is therefore entitled to disability benefits under the policy, especially given the fact that MRI imaging showed no improvement of his conditions. Prudential’s two justifications for terminating benefits were: (1) that Mr. Cherry had the capacity to increase work but failed to do so: and (2) that Mr. Cherry’s disability was due to mental illness, namely “somatic symptom disorder” which is characterized by an extreme focus on pain, and that the 24 month cap for disabilities due to mental illness was exhausted. The court rejected both arguments. With regard to the diagnosis that Prudential’s psychiatrist made of somatic symptom disorder, the court wrote, “his symptoms were consistent with people who experience chronic pain, and the diagnosis itself does not discount the medical basis for his symptoms,” and the “record does not show…that Plaintiff’s disability is due in whole or in part to mental illness.” Finally, the court declined Prudential’s request for remand, stating it was unwilling to let the insurer take “a second bite of the apple.” Accordingly, the court granted Mr. Cherry’s motion, denied Prudential’s cross motion, and ordered Prudential to immediately reinstate Mr. Cherry’s benefits and pay him all gross unpaid benefits plus prejudgment interest from the date of termination to the date of this order. Mr. Cherry may also move for attorneys’ fees and costs. 

Discovery

Seventh Circuit

Midthun-Hensen v. Grp. Health Coop. of S. Cent. Wis., No. 21-cv-608-slc, 2022 WL 1442842 (W.D. Wis. May 6, 2022) (Magistrate Judge Stephen L. Crocker). In this putative class action, plaintiffs Angela Midthun-Hensen and Tony Hensen, on behalf of their minor daughter, claim that their health insurance provider, defendant Group Health Cooperative of South Central Wisconsin, Inc., improperly denied coverage for speech and occupational therapy to treat their daughter’s Autism. They asserted a claim to recover benefits under Section 502(a)(1)(B), as well as a violation of the Mental Health Parity and Addiction Equity Act, and a violation of a Wisconsin state law that requires health insurers to provide coverage for certain treatments, including the therapies at issue here, to treat Autism. Plaintiffs moved for discovery. Group Health opposed the discovery motion. The court denied plaintiffs’ motion, concluding that because this case will be decided under the arbitrary and capricious standard, evidence beyond the administrative record should not be permitted because the plaintiffs failed to show they qualify for any exception to the general rule discouraging discovery beyond the record. The court stated this was especially true as plaintiffs offered no evidence of a conflict of interest beyond alleging that Group Health “saves money when it denies its members’ benefits claims,” which is a conflict of interest that exists in all cases where the insurer both makes coverage decisions and pays for benefits and “is insufficient on its own to open the door to discovery.” With regards to the Parity Act claim, the court decided that the complaint as currently pled, does not plausibly allege that Group Health had treatment limitations for Autism that were “separate from or more restrictive than those it applies to analogous medical treatment.” The court expressed that even assuming there is a plausible Parity Act violation, plaintiffs’ motion did not make a persuasive argument supporting the need for discovery, and that the information they seek can be found within the plan documents. However, although the court denied the discovery motion, it did open the door for plaintiffs to amend their complaint before they respond to Group Health’s summary judgment motion and guided them to address the deficiencies in their Parity Act claim that Group Health asserted. 

ERISA Preemption

Ninth Circuit

PIH Health Hosp. Downey v. E.B.A. & M. Corp., No. CV 22-00271-MWF (AGRx), 2022 WL 1404244 (C.D. Cal. May 3, 2022) (Judge Michael W. Fitzgerald). Plaintiffs are hospitals that sued defendant E.B.A. & M. Corporation, a health plan administrator, for quantum meruit and breach of implied-in-fact contract in state court. Defendant removed the case to the federal court on ERISA preemption grounds. Defendant argued that plaintiffs’ state law claims were essentially claims for ERISA benefits. Plaintiffs here moved for remand. The court granted the motion, finding that ERISA does not completely preempt the state law claims. The court was not convinced that plaintiffs could have brought their claims under ERISA as claims for benefits. Additionally, the court stated that plaintiffs did allege “an independent legal duty implicated by defendant’s actions.” The implied contract that arose between the parties from the practice of the health plans authorizing care for its participants, is not the same as benefits due under the terms of any particular ERISA plan. Although the court decided that it lacks jurisdiction because the state law claims are not completely preempted, it chose to remain silent on the issue of conflict preemption and made no rulings “on the merits of the action, or whether a future demurrer should be overruled or sustained.” Doing so, it seems, will be up to the Los Angeles County Superior Court. 

Life Insurance & AD&D Benefit Claims

Eighth Circuit

Powell v. Minn. Life Ins. Co., No. 21-CV-2061-CJW-MAR, 2022 WL 1289331 (N.D. Iowa, Apr. 29, 2022) (Judge C.J. Williams). Plaintiff Kristina Powell commenced this life insurance action after defendants Minnesota Life Insurance Company and Securian Life Insurance Company denied her claim for her husband’s benefits. Ms. Powell asserted two causes of action, a claim for benefits under Section 502(a)(1)(B), and a claim for breach of fiduciary duty and equitable relief under Section 502(a)(3). After Ms. Powell’s late husband, Scott Powell, retired, his employer informed him that it would send him a conversion notice explaining his options to continue his life insurance policy. However, neither Mr. Powell’s employer nor defendants sent Mr. Powell this notice. Mr. Powell then died. Very shortly after his death, defendants sent a letter to Mr. Powell which stated that “Due to a recent audit, we discovered you were not provided with your option to keep (your life insurance) coverage when your employment terminated. Unfortunately, due to an error, you did not receive communication about your option to continue coverage after terminating.” Ms. Powell asserted that this letter extended the deadline for converting the life insurance policy, especially as the plan allows for posthumous conversion. Alternatively, she asserted that, under the terms of the plan, if a participant dies within the conversion window, as Ms. Powell alleged happened here, that individual is entitled to benefits automatically. Ms. Powell also argued that she detrimentally relied on the letter’s representation that it extended the conversion deadline, and that defendants had a fiduciary duty to give notice to participants on how to continue coverage after a qualifying event. Defendants moved to dismiss. They argued that the plan provided Mr. Powell only a 31-day window after retirement to convert his coverage and he missed that deadline. Therefore, they argued that Ms. Powell is not entitled to benefits, and the denial was appropriate. As for her fiduciary breach claim, they argued that it was duplicative of the claim for benefits, and they had no duty to inform the Powells of how to convert benefits after Mr. Powell retired. The court agreed and granted the motion to dismiss. 

Medical Benefit Claims

Fifth Circuit

Cervantes v. 3NT LLC, No. EP-19-CV-00383-DCG, 2022 WL 1308830 (W.D. Tex. May 2, 2022) (Magistrate Judge Robert F. Castañeda). Plaintiff Brenda Isabel Cervantes sued her employer, 3NT LLC, after she was injured during her job driving a tractor trailer and her claim for disability benefits was denied by 3NT, which determined that text messages Ms. Cervantes sent about the accident and her potential injuries failed to satisfy the plan’s requirement that claims for benefits be submitted in writing. 3NT moved for summary judgment. In this decision, the Magistrate recommended granting in part and denying in part the motion. First, the Magistrate recommended denying defendant’s motion as it pertains to Ms. Cervantes’s Section 510 claim. The court found that Ms. Cervantes provided evidence which could lead a reasonable jury to conclude that her employer interfered with her ability to meet the plan’s requirements by preventing Ms. Cervantes from accurately completely a required form, and then basing its benefits denial in part on the unsigned form. These actions, the court held could have been motivated by the company’s desire to interfere with Ms. Cervantes’s receipt of ERISA-protected benefits. The court also recommended denying the motion as it pertains to Ms. Cervantes’s Section 502(a)(1)(B) claim. The court found defendant’s interpretation of the plan’s writing requirement “not legally correct,” and Ms. Cervantes’s text messages could meet the requirements. And because defendant contradicted the plain langue of the plan, a genuine issue of material fact exists as to whether defendant abused its discretion in denying benefits. However, the Magistrate recommended granting the summary judgment to 3NT with respect to Ms. Cervantes’s breach of fiduciary duty claims and her ERISA-estoppel claim. As Ms. Cervantes has a claim for benefits under Section 502(a)(1)(B), the court recommended dismissing the 502(a)(3) claim be dismissed as duplicative because it is premised on the same injury. Ms. Cervantes’s estoppel claim failed because the court saw “no material misrepresentation.” Accordingly, the Magistrate judge recommended granting in part and denying in part 3NT’s summary judgment motion. 

Pleading Issues & Procedure

Fourth Circuit

Silva v. Voya Servs. Co. Emp. Welfare Benefits Plan, No. 20-1668, __ F. App’x __, 2022 WL 1403981 (4th Cir. May 4, 2022) (Before Circuit Judges Agee, Thacker, and Floyd). The Fourth Circuit in this brief unpublished decision affirmed the district court’s entry of judgment in favor of defendant/appellee Voya Services Company Employee Benefits Plan on this ERISA Section 502(a)(1)(B) case. As the plan at issue contains a discretionary clause, the appeals court agreed with the lower court that abuse of discretion judicial review was appropriate. Under the deferential standard, that administrator’s benefits decision in denying plaintiff/appellant Christopher Silva’s claim for coverage was reasonable and supported by substantial evidence. The Fourth Circuit therefore concluded that Voya hadn’t abused its discretion and upheld the district court’s decision. 

Fifth Circuit

Gomez v. Biomet 3i, LLC, No. 21-945, 2022 WL 1302885 (E.D. La. May 2, 2022) (Magistrate Judge Donna Phillips Currault). Plaintiff Heath Gomez brought this suit pursuant to Louisiana’s state wage payment law claiming defendant Biomet 3i, LLC, his former employer, intentionally manipulated its bonus program to avoid paying him the $100,000 in bonuses he asserts he was entitled to upon termination. Biomet 3i filed a counterclaim against Mr. Gomez for breach of contract relating to a COVID-19 advance it paid to him. And now we arrive at ERISA, and the issue at hand in this decision. Before filing this suit, Mr. Gomez appealed the company’s denial of his ERISA-governed severance benefits. Biomet 3i produced documents during that proceeding including privileged communications that it produced pursuant to the fiduciary exception to attorney-client privilege. Upon producing these documents, Biomet 3i stipulated that Mr. Gomez has the right to access these communications but that he does not have the right to disclose them to any third parties. Mr. Gomez however filed emails with the court which contained the documents Biomet 3i claims are privileged. Here Biomet 3i moved to strike these allegedly privileged documents from the court record. The court denied the motion without prejudice. According to the court, the relevant issues were whether a single beneficiary can make public confidential communications without the consent of the other plan participants, and whether the plan administrator has the ability to assert attorney-client privilege on behalf of the plan participants who have not consented to disclose of the communications. Nevertheless, the court ultimately did not resolve these issues because the motion to strike/seal itself was a “blanket invocation of privilege” and not a document by document discussion of why privilege applies or why any applicable privilege should out way the presumption of openness. Therefore, the court denied the motion, but provided defendant with the opportunity to refile a motion to seal providing more specific information on each document it wishes to have sealed and why and addressing the issues of standing and privilege waiver by one party without the consent of the co-parties. 

Moore v. Unum Life Ins. Co. of Am., No. 3:21-cv-253-SA-JMV, 2022 WL 1372007 (N.D. Miss. May 3, 2022) (Magistrate Judge Jane M. Virden). The court in this order granted defendant Unum Life Insurance Company of America’s unopposed motion to file the administrative record under seal. Plaintiff Sherry Moore in this action seeks to recover her disability benefits that were terminated by Unum. Defendant’s argument that the administrative record contains sensitive and confidential medical records, protected from disclosure under both federal and state law, was deemed by the court to be a compelling reason to file them under seal. Finally, the court stressed that its ultimate resolution of the case will be decided upon a review of the administrative record, and in order to be able to do this, the record will need to remain without redaction. Thus, the court ordered that defendant’s motion be granted and that the administrative record be filed under seal, without redaction. 

Tenth Circuit

Gutierrez v. Johnson & Johnson Int’l, No. Civ. 21-984 KK/GJF, 2022 WL 1421981(D.N.M. May 5, 2022) (Magistrate Judge Kirtan Khalsa). Plaintiff Nicole Gutierrez is the court appointed guardian and conservator for her brother, Juan D. Baca. Mr. Baca’s wife Lisa Baca was an employee of defendant Johnson & Johnson International from 1988 until her death in 1994 and participated in the company’s retirement plan. Mr. Baca is the surviving beneficiary of the retirement plan. Plaintiff Gutierrez contacted Johnson & Johnson in 2015 and attempted to apply for benefits for her brother. She asserted that her attempts to submit and process the benefits claim was frustrated by Johnson & Johnson’s actions in unjustifiably refusing to allow her to act on her brother’s behalf, failing to disclose material information, “making misleading representations,” and eventually wholly ignoring her communications. Ms. Gutierrez originally filed this action in state court. Johnson & Johnson removed the case to the federal district court and moved to dismiss. Ms. Gutierrez filed a first amended complaint. The amended complaint includes a claim for benefits under Section 502(a)(1)(B), breach of fiduciary duty claims under Section 502(a)(3), a claim for failure to provide claims procedure and notice as required by ERISA, a claim under the Americans with Disabilities Act, and claims for declaratory and injunctive relief. Before the court were defendant’s first and second motions to dismiss, (filed before and after the amended complaint), and Ms. Gutierrez’s motions for leave to amend and for a hearing on her motion to amend. The court in this order denied as moot defendant’s first motion to dismiss, granted in part and denied as moot in part defendant’s second motion to dismiss, granted in part and denied in part Ms. Gutierrez’s motion to amend, and denied her motion for hearing. The court, which decided that Ms. Gutierrez’s first amended complaint was improvidently filed, directed her to refile her amended complaint with certain modifications. The court ordered Ms. Gutierrez to remove the liquidated damages claim unless she can add specific allegations demonstrating she requested documents listed in the summary plan description that Johnson & Johnson failed to provide within 30 days. The court also struck Ms. Gutierrez’s ADA claim, reasoning that an employee benefit plan is not the offering of a public accommodation within the meaning of the ADA. In all other respects, the court held that MS. Gutierrez had plausibly plead allegations supporting her theories of liability and may therefore include the remainder of her causes of action in her re-filed amended complaint. 

Provider Claims

Fifth Circuit

Experience Infusion Ctrs. v. Blue Cross & Blue Shield of Tex., No. 19-5040, 2022 WL 1289342 (S.D. Tex. Apr. 29, 2022) (Judge Lynn N. Hughes). Plaintiff is an infusion therapy specialist medical provider in Houston Texas who brings claims against Blue Cross & Blue Shield of Texas for underpaying claims for treatment and for recouping money it already paid. Plaintiff brings ERISA claims under Section 502(a)(1)(B), 502(a)(3), and 503, as well as state law claims for breach of contract, breach of the duty of good faith, negligent misrepresentation, fraudulent inducement, promissory estoppel, and violations of the Texas Insurance code. Blue Cross moved to dismiss. First, the court held plaintiff, who has valid assignments of benefits from patients, has standing to bring its claims for benefits under Section 502(a)(1)(B). According, the motion to dismiss the benefit claim was denied. However, the other two ERISA claims were dismissed. The court dismissed the fiduciary breach claim because the provider has a remedy under Section 502(a)(1)(B) to recoup benefits. The court also dismissed the ERISA full and fair review claim because BlueCross is the plan administrator and Section 503 “only imposes a duty of full and fair review on the employee benefit plan itself.” Plaintiff’s state law negligent misrepresentation, fraudulent inducement, promissory estoppel, and breach of contract claims were all dismissed as preempted by ERISA. The duty of good faith and fair dealing claim was likewise dismissed, because the court held that the law does not extend the duty of good faith to a third-party medical provider and plaintiff “is not owed a duty as the insured.” Finally, as an assignee, the court concluded that plaintiff lacks standing to bring a claim under the Texas Insurance Code against an insurance company for unfair and deceptive acts. This claim too was dismissed. For these reasons, the motion to dismiss was granted with the exception of the benefits claims. 

Withdrawal Liability & Unpaid Contributions

Seventh Circuit

Riverstone Grp. v. Midwest Operating Eng’rs Fringe Benefit Funds, No. 21-1794, __ F. 4th __, 2022 WL 1397844 (7th Cir. May 4, 2022) (Before Circuit Judges Ripple, Wood, and Kirsch). Riverstone Group, Inc. filed this suit seeking a declaratory judgment after the Midwest Operating Engineers Fringe Benefit Funds sent the company an audit letter informing it that it owed the Funds $243,882.40 in unpaid benefit contributions on behalf of new employees. Riverstone sought judgment that it did not owe the payments sought by the Funds because the collective bargaining agreement between the union and the employer had expired a few years earlier and “no language in the agreement imposes on Riverstone an obligation to make contributions after the agreement’s expiration.” The Funds then filed counterclaims under ERISA seeking the payment of the unpaid contributions. The parties filed cross-motions for summary judgment. The district court granted Riverstone’s motion, and concluded that under Supreme Court precedent once the collective bargaining agreement has expired ERISA does not confer jurisdiction on district courts to determine “whether the employer’s failure to make post-contract contributions violated the (the National Labor Relations Act “NLRA”)…(and) the duty to maintain the status quo after the expiration of the collective bargaining agreement derives from NLRA not the collective bargaining agreement.” Thus, it concluded that Riverstone no longer had a contractual duty to contribute to the Funds, and it lacked jurisdiction to evaluate the dispute. The Funds appealed, arguing that the lower court erred in concluding that Riverstone had no obligation to maintain the status quo while the parties continued to negotiate a new agreement and therefore Riverstone’s refusal to make payments to the Funds for its new employees violated this obligation. The Seventh Circuit disagreed with the Funds and affirmed the district court’s decision. Without an intact contract, the Seventh Circuit held that the district court was correct in determining that it lacked jurisdiction to resolve the underlying issue of the unpaid contributions.