No case of the week this week, but keep reading to stay abreast of the latest ERISA developments.
Below is a summary of this past week’s notable ERISA decisions by subject matter and jurisdiction.
Kairys v. S. Pines Trucking, Inc., No. 2:19-cv-1031-NR, 2022 WL 1457786 (W.D. Pa. May 9, 2022) (Judge J. Nicholas Ranjan). Having succeeded on the merits with his statutory wage and ERISA claims, plaintiff Thomas Kairys moved for attorneys’ fees and costs. Defendant Southern Pines Trucking agreed that an award of fees and costs was appropriate but objected to the amount of both the attorneys’ fees and the costs requested, arguing they were excessive. Although the hourly rates were not specified in the decision, the court found “the rates Mr. Kairys’ counsel charged are well-supported and reflective of the market rate.” Accordingly, the court overruled defendant’s request to reduce the hourly rates. The court also articulated that the billing entries were appropriately detailed.
However, because Mr. Kairys was unsuccessful on his discrimination and disability claims, the court reduced the pre-verdict fees by 25%. The post-verdict fees, which related only to the successful ERISA claims were not reduced. Having so decided, the court awarded plaintiff’s counsel $90,404 for the pre-verdict work and $15,362.50 for the post-verdict work. Finally, the court awarded $6,215.29 in costs, which represented all of the costs requested except for reimbursement of the meditation costs. The court reasoned that the parties agreed to each pay half of the mediation costs and, “shifting those costs after trial would be contrary to the ADR agreement and would undermine the ‘spirit’ of the ADR cost-sharing agreement.” In total, the court ordered Southern Pines to pay $111,981.79 in attorneys’ fees and costs.
Romano v. John Hancock Life Ins. Co., No. 19-21147-CIV-GOODMAN, 2022 WL 1450770 (S.D. Fla. May 9, 2022) (Magistrate Judge Johnathan Goodman). Plaintiffs, trustees of an ERISA-governed defined contribution retirement plan, commenced this class action. The court in a previous order certified a class of “persons who owned variable annuity contracts” from defendant John Hancock Life Insurance Company. Plaintiffs asserted claims for breach of fiduciary duty of loyalty, and violations of ERISA’s prohibited transaction provisions. Their complaint alleged that John Hancock took benefits in the form of foreign tax credits that were created by plan assets and kept those benefits for itself. John Hancock moved for summary judgment. It argued that under both ERISA and the terms of the variable annuity contracts it had no obligation to provide its customers with rebates for the foreign tax credits it used. John Hancock also argued that it was not acting as a fiduciary when administering separate accounts for retirement plan investments or when it was preparing its taxes and applying for the tax credits. The court agreed with John Hancock and concluded that not only was the plan administrator not acting in a fiduciary capacity, but that the foreign tax credits were not plan assets that could be owned by plans “under ordinary notions of property law.” The court went on to state that even putting aside its conclusion that John Hancock was not acting as a fiduciary and the foreign tax credits were not plan assets, nothing in the complaint demonstrated that John Hancock acted disloyally or used plan assets contrary to the direction of the trustees. Simply put, the court held, “John Hancock’s actions did not deprive (the Plan) of any contractually-required benefit.” As for the prohibited transaction claims, the court determined that John Hancock’s tax filings were not “a transaction under ERISA involving plan assets.” Last, but not least, the court ended its decision by stating that plaintiffs lacked Article III standing to seek monetary relief because they did not incur a redressable injury as the foreign tax credits were not a loss to the plan, but rather a benefit to John Hancock, which it was not required to pass on to plaintiffs. For these reasons, John Hancock’s summary judgment motion was granted.
Disability Benefit Claims
Canter v. AT&T Umbrella Benefit Plan No. 3, No. 21-1514, __ F. 4th __, 2022 WL 1485191 (7th Cir. May 11, 2022) (Before Circuit Judges Manion, Wood, and Brennan). Plaintiff Craig Canter sued to reinstate his short-term disability benefits under Section 502(a)(1)(B). Mr. Canter worked for AT&T Services, Inc. as a premises technician. He became disabled from migraines, light-headedness, and dizziness which precluded him from performing his duties which included acts such as climbing up tall ladders to install wires and lifting heavy loads. The plan administrator terminated Mr. Canter’s benefits after its medical reviewer concluded that Mr. Canter’s test results were normalizing and his symptoms improving. The district court granted summary judgment in favor of defendants, concluding that the normal test results were reasonable evidence to terminate benefits and the decision to do so was not arbitrary and capricious. In addition, the district court awarded $181 pro hac vice fees as well as costs of $2,309.80 for deposition transcripts to the defendants. Mr. Canter appealed. The Seventh Circuit affirmed the summary judgment decision, but reversed the court’s pro hac vice fee award, holding that such fees are not taxable costs under 28 U.S.C. § 1920. As for the summary judgment decision, the appeals court concluded that, given the deferential review standard, it was not a clear error of law to determine that defendants’ decision was reasonable and supported substantial evidence. The contrary evidence within the medical record, the Seventh Circuit held, does not compel a finding that the termination of benefits was arbitrary and capricious.
Medical Benefit Claims
Brannigan v. Anthem Blue Cross & Blue Shield, No. 8:21-cv-2353-KKM-SPF, 2022 WL 1500956 (M.D. Fla. May 12, 2022) (Magistrate Judge Sean P. Flynn). This case has an incredibly similar set of facts as another case Your ERISA Watch reported on in March, Worldwide Aircraft Services, Inc. v. Anthem Ins. Co., Inc., No. 8:21-cv-456-CEH-AAS, 2022 WL 797471 (M.D. Fla. Mar. 16, 2022) (Judge Charlene Edwards Honeywell). As in that case, plaintiffs are attorney Michael Brannigan, and emergency air-ambulance service provider, Worldwide Aircraft services, Inc. d/b/a Jet ICU, and the defendant is Anthem Blue Cross & Blue Shield, who moved to dismiss pursuant to Federal Rules of Civil Procedure Rule 12(b)(1), 12(b)(2), and 12(b)(6). The Magistrate Judge recommended granting the motion to dismiss, without prejudice, and giving plaintiffs leave to amend their complaint. The Magistrate agreed with Anthem that plaintiff Brannigan’s Power of Attorney does not confer derivative standing as attorney-in-fact to Jet ICU. Further, given the plan’s anti-assignment provision, and plaintiffs failure to present a valid assignment of benefits, the court recommended granting the motion to dismiss Jet ICU for lack of standing. Anthem’s argument, that plaintiffs failed to allege personal jurisdiction over it because they lack the requisite connections to the state of Florida to satisfy Florida’s long-arm statue, was not persuasive to the court. Section 502(e)(2) of ERISA, the Magistrate Judge concluded, provides for “nationwide service of process” making personal jurisdiction over Anthem proper. Anthem’s last argument was more persuasive. Anthem convinced the Magistrate that dismissal was warranted because plaintiffs failed to specify specific plan provisions under which they seek their recovery. The court agreed that plaintiffs did not adequately state their claim or point to the “claimed benefit under the Plan as it relates to benefits payable to” the patient.
Pension Benefit Claims
Needham v. The Chubb Corp., No. 3:20-cv-3470 (PGS) (LHG), 2022 WL 1505009 (D.N.J. May 12, 2022) (Judge Peter G. Sheridan). Plaintiffs Ellen Needham and Walter Dowman sued several related corporate entities, (“the corporate defendants”) as well as the Chubb Pension Plan, the Capital Accumulation Plan, the Employee Stock Ownership Plan, and the Retirement Administrative Committee. They brought three causes of action under ERISA: (1) an “action to enjoin further violations of ERISA against all defendants;” (2) a claim for benefits under Section 502(a)(1)(B) against the Committee; and (3) a breach of fiduciary duty claim against all defendants. Plaintiffs claimed that the corporate distinctions between Halifax Plantation Golf Management, Inc., and Bellemead Development Corporation were a sham and “transitioning workers like (plaintiffs) from Bellemead’s payroll to Halifax’s payroll…created a disparity between workers not permissible under ERISA.” Plaintiffs challenged the Committee’s benefit denial and its reasoning that they had rendered services only to Halifax, which was a nonparticipating employer, and thus were not qualified for benefits under the retirement plans. This same dispute came before Judge Sheridan in 2016. Then, the court granted defendants’ summary judgment motion in favor of Halifax, Bellemead, and Chubb, but denied the motion as to the Committee and remanded to the Committee for further consideration. The Committee reconsidered, and reached the same conclusion, once again denying benefits, prompting this lawsuit. Defendants moved for summary judgment and judgment on the pleadings. The motions were granted. The court held that the corporate defendants were not proper defendants in the case because they did not administer the benefits under the plans, as the Committee was delegated the exclusive authority to administer benefits. As for the Committee, the court was satisfied that its decision on remand to deny benefits was not arbitrary and capricious. The Committee’s conclusion that plaintiffs did not provide services to Bellemead and were thus not employees of the company under the terms of the plan was adequately supported, the court held, by the timesheets, salary control reports, and lack of any documents identifying plaintiffs as members of the plans. The court was satisfied that Bellemead’s internal procedure for designating its employees from those of Halifax was adequate to establish these employers as separate despite the fact that the employees worked alongside each other as a “merged workforce.” Finally, the court stated that no fiduciary duty had been breached and no misleading representations were made.
Nohara v. Prevea Clinic, Inc., No. 20-C-1079, 2022 WL 1504925 (E.D. Wis. May 12, 2022) (Judge William C. Griesbach). Plaintiff Alison J Nohara brought this putative class action for breaches of fiduciary duty in connection with the Prevea Clinic, Inc. 401(k) and Retirement Plan against defendants’ Prevea Clinic Inc. and its board of directors. Defendants moved to dismiss, and Ms. Nohara moved for leave to amend her complaint. Last year, the court stayed the case pending the Supreme Court’s decision in Hughes v. Northwestern University, No. 19-1401, __ S. Ct. __, 2022 WL 199351 (U.S. Jan. 24, 2022). After the Hughes decision in January, the court lifted the stay, and in this order, turned to the motions previously filed. Ms. Nohara’s motion for leave to amend sought to add an additional plaintiff whose claims were, Ms. Nohara asserted, substantially identical to her own. In addition to adding another named plaintiff, the motion sought to add “additional allegations to support her claims.” Defendants argued that Ms. Nohara lacks Article III standing, and that the proposed amendments would be futile. As to standing, defendants stressed that Ms. Nohara’s two-week participation in the 401(k) plan prior to filing this action, makes her injuries de minimis. The court disagreed, holding Ms. Nohara has adequately alleged an injury to her account which sufficiently establishes her standing to sue. Nor was the court persuaded that amendment would be futile. Finally, because Ms. Nohara filed her motion to amend while defendants’ motion to dismiss was pending and before any discovery has been conducted in the case, the court did not agree with defendants that they would be prejudiced by undue delay. Accordingly, the court granted the motion for leave to amend and denied as moot, defendants’ motion to dismiss.
Pleading Issues & Procedure
Hosp. for Special Care v. Mallory Indus., No. 3:21-CV-00199 (SVN), 2022 WL 1443978 (D. Conn. May 6, 2022) (Judge Sarala V. Nagala). In this suit, plaintiff Hospital for Special Care sued under ERISA to recover payment for services it provided to a covered patient. The defendants in the case are Mallory Industries Inc., the employer who provided the welfare benefit plan, Creative Plan Administrators, the administrator for the ERISA plan, and Underwriting Management Experts, which is the managing general underwriter to Gerber Life Insurance Company, the insurer of Mallory’s Excess Loss Policy, which Mallory had set up to protect itself from having to pay expensive claims. The issuer of the excess loss policy, Gerber Life Insurance, is not a defendant in this case. Mallory filed crossclaims against Underwriting Management Experts for breach of contract, bad faith, and indemnification in connection with the Excess Loss Policy. Mallory claimed that Underwriting Management Expert had an obligation under the policy to forward Mallory’s premiums, which it failed to do, resulting in coverage loss. Underwriting Management Expert moved to dismiss the crossclaims against it. The motion was granted. The court held that Underwriting Management Expert was not a party to the Excess Loss Policy, because the contract was between Gerber Life and Mallory, and Underwriting Management Expert’s name appears nowhere within the policy itself. Without a valid contract, the breach of contract and bad faith claims were dismissed. Additionally, Mallory’s indemnification claim was dismissed because the court concluded that it did not allege facts to support the idea that Underwriting Management Expert acted negligently.
UnitedHealthCare Servs. v. Team Health Holdings, Inc., No. 3:21-CV-00364-DCLC-JEM, 2022 WL 1481171 (E.D. Tenn. May 10, 2022) (Judge Clifton L. Corker). UnitedHealthCare Services sued Team Health Holdings, Inc. and its related subsidiaries for allegedly upcoding, inflating, and improperly passthrough billing the claims it submits to the insurer. According to United’s complaint, it estimates that it has overpaid for approximately 60% of TeamHealth’s claims dating back to 2016 due to this “deliberate and fraudulent” billing scheme. In support of its position, United listed 13 examples of improperly coded claims that it found, and “contends that these examples are representative of thousands of claims.” In its suit, United brings claims under both state and federal law, including violations of ERISA. Defendants moved to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). The court denied the motion. First, the court would not dismiss the suit as being time-barred, concluding it is not possible or appropriate at this stage of the litigation to determine when or if the applicable statute-of-limitations expired. Next, the court held that it would not dismiss United’s fraud and negligent misrepresentation claims at this time because as the Sixth Circuit held, “it is a principle of basic fairness that a plaintiff should have an opportunity to flesh out its claim through evidence unturned in discovery.” Defendants argued that United’s ERISA claim should be dismissed because United did not specify the ERISA plans at issue or allege any provision within an ERISA plan that they allegedly breached. Nevertheless, the court that, given the scope of the case, providing all of the ERISA plan documents would be “impossible without overwhelming the Court and TeamHealth in documents early on.” United, the court concluded should be allowed to produce the relevant plan documents during discovery.
Romano v. John Hancock Life Ins. Co., No. 19-21147-CIV-GOODMAN, 2022 WL 1447733 (S.D. Fla. May 9, 2022) (Magistrate Judge Johnathan Goodman). Along with issuing a decision granting defendant John Hancock Life Insurance Company’s summary judgment motion this week (see above under the Class Actions heading), the court issued this decision deciding the parties’ Daubert motions seeking to exclude portions of the opposing party’s exerts’ reports. As the court noted, these experts offered opinions on such topics as whether foreign tax credits are compensation or revenues and whether they have any value, whether John Hancock acted as a fiduciary when it used foreign tax credits that originated with the Romano’s plan, and whether prohibited transactions occurred. Quoting Arthur C. Clarke and David Baldacci, the court noted that the parties were rather inconsistent in asking that the opinions of their opponent’s experts be excluded but not those of their experts on the same topics and, in the end, granted in part and denied in part each party’s motion to exclude. Simply put, the court excluded any portion of an expert’s testimony that it deemed to offer improper legal conclusions or make credibility assessments. The court also dismissed portions of expert’s testimony on relevance and reliability grounds. However, the court did not exclude portions of the reports that it deemed merely “statements of law,” which offered no legal conclusions.
Mele v. Pan-Oceanic Eng’g Co., No. 21-4477, 2022 WL 1487257 (N.D. Ill. May 11, 2022) (Judge Matthew F. Kennelly). Plaintiff Martin Mele sued his employer, Pan-Oceanic Engineering Co., for retaliation under Section 510 of ERISA for interfering in his attainment of retirement benefits. According to his complaint, Pan-Oceanic “retroactively reclassified” him from an employee to an independent contractor to prevent his work from being covered under a collective bargaining union contract, and therefore not subject to pension benefit contributions. Mr. Mele also asserted that Pan-Oceanic brought suit against him in state court in a further attempt to interfere with his rights to benefits. Mr. Mele seeks an injunction from the district court prohibiting Pan-Oceanic from pursuing the state court case against him, as well as attorneys’ fees and costs for his defense of the state court lawsuit and the prosecution of this Section 510 suit. Pan-Oceanic moved to dismiss for failure to state a claim. First, the court held that Mr. Mele’s claim that Pan-Oceanic reclassified him in an attempt to frustrate his attainment of benefit rights, could constitute an action that runs afoul of the ERISA retaliation provision. According to the court, the “key difference” between the employee and independent contractor classification was that Pan-Oceanic could avoid paying Mr. Mele retirement contributions for the work he did while classified as an independent contractor. Therefore, the court denied the motion to dismiss the Section 510 claim based on the reclassification. Nevertheless, the court granted the motion to dismiss Mr. Mele’s claim to the extent it was premised upon Pan-Oceanic’s filing of the state court lawsuit. As the court put it, “filing of a lawsuit against Mele does not qualify as a change or attempted change in his employment status.” Thus, the motion to dismiss was granted in part and denied in part.
Statute of Limitations
Anderson v. Intel Corp. Inv. Policy Comm., No. 19-cv-04618-VC, 2022 WL 1511785 (N.D. Cal. May 13, 2022) (Judge Vince Chhabria). In this case, the only remaining cause of action is plaintiff Winston R. Anderson’s ERISA Section 502(c)(1) claim for failure to provide plan documents upon written request against the Intel Corporation Investment Policy Committee. Mr. Anderson commenced his suit 18 months after the date of the Committee’s failure to provide him with requested documents. The Committee moved for judgment on the pleadings. The court in this decision focused on answering the question of what statute of limitations governs, and whether Mr. Anderson’s suit is time-barred. The court pointed out that ERISA does not provide a statute of limitations for Section 502(c)(1) claims, and therefore the job of the court was to decide which state law statute of limitations was “most closely analogous” to the ERISA claims at issue. The Committee argued that California’s one-year statute of limitations period, which governs actions “upon a statute for a penalty” applies, while Mr. Anderson argued that California’s three-year statute which pertains to actions “upon a liability created by a statute, other than a penalty” actually applies to his claim. According to the court, the test under California law for whether a recovery is a penalty or not is “whether the wrong sought to be redressed is a wrong to the public, or a wrong to the individual.” Holding that ERISA Section 502(c)(1) “addresses a wrong that is ‘substantially more private than public,” the court concluded that the three-year statute of limitations applies, and Mr. Anderson’s claim is therefore not time-barred. Thus, the motion for judgment on the pleadings was denied.