McQuillin v. Hartford Life & Accident Ins. Co., No. 21-1514, __ F. 4th __, 2022 WL 2029879 (2d Cir. Jun. 7, 2022) (Before Circuit Judges Walker, Calabresi, and Cabranes).

 ERISA claims administrators and courts often hold plan participants and beneficiaries strictly to time limits and other plan-imposed or regulatory requirements and cut off their rights when they fail to meet these requirements. In this decision, the Second Circuit rules that insurance companies and other claims administrators must likewise meet regulatory time limits or suffer the consequences of their failure to do so.

In 2019, John McQuillin applied for disability benefits due to the effects of prostate cancer. Hartford denied his claim for lack of sufficient evidence of disability. Hartford informed Mr. McQuillin that he could appeal the denial, and if he did so, Hartford would decide the appeal within 45 days. If he disagreed with the decision on appeal, he could file a federal lawsuit.

Mr. McQuillin appealed and submitted additional evidence in support of the appeal. Twelve days later, Hartford informed Mr. McQuillin that it had overturned the original denial and forwarded the claim to its claims department, which would review the evidence, determine whether Mr. McQuillin was disabled, and render a new decision. Hartford did not, however, do so within the 45-day time limit. 

On the 46th day following his appeal submission, Mr. McQuillin filed suit in the Eastern District of New York seeking benefits under his plan. After the suit was filed, Hartford issued a final decision denying benefits. The district court dismissed the suit, reasoning that Mr. McQuillin failed to exhaust his remedies under the plan because his claim was still under review with Hartford when he filed suit.

The Second Circuit reversed, agreeing with Mr. McQuillin, supported by the United States Department of Labor as amicus curiae, that Mr. McQuillin’s administrative remedies were deemed exhausted because Hartford, in violation of the applicable ERISA regulation, failed to provide a final decision on his benefits within 45 days of his administrative appeal. The court pointed out that under the governing claims regulation, the “plan’s remedies are deemed exhausted if the plan administrator does not ‘strictly adhere’ to [the regulation’s] requirements,” including the requirement that the claims administrator must provide a “benefit determination on review” within 45 days of the initial denial. 

Hartford, supported by the American Council of Life Insurers as amicus curiae, argued that it did not miss the deadline because the decision it issued twelve days after Mr. McQuillin appealed the denial of benefits constituted a timely benefit determination on review. However, the court disagreed. Relying on the plain language, structure, and purpose of the regulation, the court held that a “valid benefit determination on review must determine whether a claimant is entitled to benefits.”

The court reasoned that the language of the regulation, which requires a “benefit determination” within 45 days, plainly denotes that “[i]t is the claimant’s benefits that the administrator has 45 days to decide, not only the appeal or some other aspect of the claim.” This reading was underscored, in the court’s view, by the regulation’s use of the word “determination,” connoting finality, a reading supported by Hartford’s own letter to Mr. McQuillin in which it stated that it had to “make a final decision no more than 45 days” after receipt of the appeal.

This understanding of the regulatory language was supported by the structure of the regulation. The regulation’s appeal process, the court reasoned, was “designed to result in a final determination of benefits.” The strict time limits set forth in the regulation, the court stated, could be rendered meaningless if the administrator could simply restart the limits through an interim decision such as the decision it issued twelve days after Mr. McQuillin appealed the initial denial of benefits.

Finally, the court concluded that this reading was supported by the purposes of the regulation. The court pointed out that ERISA was designed with the dual purposes of “ensuring fair and prompt enforcement of rights” under ERISA plans and encouraging the formation of such plans in the first place. The regulation sought to balance these two purposes by preventing plans from imposing “an unlimited number of administrative appeals” before the claimant was entitled to file suit. Hartford’s interpretation would frustrate that purpose.

Thus, the court concluded that a “‘benefit determination on review’ must finally decide the claimant’s benefits within 45 days, assuming the absence of special circumstances that require an extension.” Because that did not happen in this case, Mr. McQuillin “was deemed to have exhausted his plan remedies and could bring suit in federal court” on the 46th day.            

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

Breach of Fiduciary Duty

Fourth Circuit

Porter v. First Bankshares, Inc., No. 3:21-0464, 2022 WL 2053183 (S.D.W. Va. Jun. 7, 2022) (Judge Robert C. Chambers). Plaintiff Sherrie N. Porter retired in 2017 at the age of 53. Her retirement plan’s summary plan description allows participants to diversify company stock they hold in retirement accounts once they have ten years or more of credited services and have reached the age of 55. Although Ms. Porter met the requisite number of years of credited service, she was ineligible to transfer her retirement assets because she ended her employment before reaching age 55. This proved disastrous. On December 31, 2016, the company stock Ms. Porter had in her retirement account was valued at $51,655.76. By December 1, 2018, when Ms. Porter became entitled to her first distribution, the stock was valued at $0. Ms. Porter brought this suit, challenging the actions taken by defendants which led to this loss. The court had already dismissed Ms. Porter’s claims regarding the actions taken when she asked to withdraw and transfer her retirement assets before she reached the age of 55 because she did not meet the requirements to diversify her account under the language of the plan. In this order the court granted summary judgment in favor of defendants on Ms. Porter’s remaining fiduciary breach claim pertaining to errors in distributing the stock after she left her employment. “To the extent Plaintiff alludes to some wrongful distribution after she terminated her employment, the court finds it is not a claim clearly alleged in the Complaint and it is belied by the fact the stock was worthless when Plaintiff was entitled to her first distribution.” 

Disability Benefit Claims

Second Circuit

Caccavo v. Reliance Standard Life Ins. Co., No. 21-1410-cv, __ F. App’x __, 2022 WL 1931420 (2d Cir. Jun. 6, 2022) (Before Circuit Judges Kearse, Jacobs, and Nardini). Plaintiff-appellant Frank Caccavo appealed the judgment the district court entered in favor of Reliance Standard Life Insurance Company in this long-term disability benefit case. Mr. Caccavo sued Reliance after the insurer reduced the benefits he receives due to the physical and cognitive disabilities he suffers from as a result of a car accident. Under deferential review, the lower court held that Reliance’s decision was based on substantial evidence supporting its determination there had been a change in Mr. Caccavo’s employment status, warranting the reduction in benefits. On appeal, Mr. Caccavo argued first that the district court had erred in reviewing the decision under the arbitrary and capricious review standard. According to Mr. Caccavo, Reliance was not entitled to deferential review because the denial violated the Department of Labor’s claims-procedure regulation by failing to reference specific plan provisions on which the denial was based, and by failing to give him a full and fair review by affording “deference to the initial adverse benefit determination.” The Second Circuit did not agree with either of these arguments, and held instead that Reliance had indeed cited specific plan provisions, and had afforded Mr. Caccavo a full and fair review on appeal. Accordingly, the Second Circuit, like the district court, applied arbitrary and capricious review to Reliance’s decision. Mr. Caccavo did, however, persuade the court of appeals that the district court erred by determining there was no evidence that Reliance’s conflict of interest affected its decision-making. A 2019 case from the Fifth Circuit, Nicholas v. Reliance Std. Life Ins. Co., 924 F.3d 802 (5th Cir. 2019), provided support to Mr. Caccavo’s claims that Reliance had a history of biased reviews. Nevertheless, as is often the case regarding courts’ analyses of insurers’ conflicts of interest, the Second Circuit stated that Mr. Caccavo’s “proffered case-specific evidence is unconvincing, as the record does not reflect that Reliance ‘committed acts of unreasonableness’ or ‘act[ed] deceptively.’” The Second Circuit therefore applied only “some weight” to the conflict of interest in its review. And that review was not favorable to Mr. Caccavo. The Second Circuit agreed with the lower court that evidence supported Reliance’s conclusion, making its determination reasonable, despite countervailing evidence provided by Mr. Caccavo. The court stated that the ultimate question was not whether the plan “made the ‘correct’ decision but whether (the plan) had a reasonable basis for the decision that it made.” As a result, the Second Circuit affirmed the judgment in favor of Reliance.

Curiale v. Hartford Life & Accident Ins. Co., No. 2:21-cv-54, 2022 WL 2063261 (D. Vt. Jun. 8, 2022) (Judge William K. Sessions III). Plaintiff Anthony Curiale brought this suit under Section 502(a)(1)(B) of ERISA challenging the termination of his long-term disability benefits by Hartford Life and Accident Insurance Company. Mr. Curiale worked as a vice president for Bear Stearns until December of 1999 when he was injured in a major car accident that left him, as his treating physicians would attest over the next two decades plus, permanently disabled. Since the car crash, Mr. Curiale has undergone many surgeries, experienced negative effects of doctor-prescribed pain medications, suffered a stroke, and began to suffer from depression. Nevertheless, in 2019 Hartford informed Mr. Curiale that he no longer met the policy’s definition of totally disabled and discontinued his long-term disability benefits. This decision was primarily based on a statement from one of Mr. Curiale’s treating physicians that he was hopeful his patient could return to work in six months if certain treatments and changes in medications proved effective. This same doctor later revoked his opinion that Mr. Curiale might improve and informed Hartford that Mr. Curiale was still disabled from all professions, despite his earlier optimism. The parties filed cross-motions for judgment on the administrative record. First, the court determined that the plan grants Hartford discretionary authority, making abuse of discretion review the applicable review standard in the case. The court also stated that it would factor in Hartford’s conflict of interest as both administrator and payor of the policy in determining whether the insurer had abused its discretion. In doing so, the court ultimately concluded that Hartford had done just that. Mr. Curiale’s medical history, the court decided, clearly established that since the car accident his treating physicians have all maintained that he is unable to perform full-time work and his conditions are permanent. As the court put it, Mr. Curiale has received disability benefits under the policy for nearly two decades, and “since the policy did not change in recent years, a denial of benefits needs to have been based upon a change in Plaintiff’s medical condition. The record does not evidence such a change.” Given the evidence, Hartford’s denial of coverage was “unreasonable, arbitrary, and an abuse of discretion.” The court thus granted Mr. Curiale’s motion for judgment and denied Hartford’s cross-motion. 


Second Circuit

Ragin v. Sun Life Assurance Co. of Can., No. 21-CV-8172 (JGK) (JLC), 2022 WL 2092971 (S.D.N.Y. Jun. 10, 2022) (Magistrate Judge James L. Cott). Plaintiff Sherri Ragin moved for discovery beyond the administrative record regarding defendant Sun Life Assurance Company of Canada’s conflict of interest as a claims administrator, as it both evaluates and pays claims for disability benefits. Specifically, Ms. Ragin requested information about the financial relationship between Sun Life and its hired medical reviewers, data about past determinations made by the medical reviewers, and internal guidelines and training documents concerning the way reviewers interpret the plan and make determinations. The court was not satisfied that Ms. Ragin was able to tie Sun Life’s general conflict of interest to her specific case and the adverse benefit determination she received when applying for long-term disability benefits. Instead, the court agreed with Sun Life that because it “spoke to treating physicians, and obtained medical reviews from a registered nurse, a board-certified neurologist, and a board-certified orthopedic surgeon,” there was nothing to suggest that its conflict of interest necessarily corrupted the claim review. Without particularity, the court was unwilling to find there was a reasonable chance that the requested discovery satisfied the good cause requirement. Accordingly, the motion for extra-record discovery was denied. 

Ninth Circuit 

Goodman v. First Unum Life Ins. Co., No. C21-902-LK, 2022 WL 2063995 (W.D. Wash. Jun. 8, 2022) (Magistrate Judge Brian A. Tsuchida). Plaintiff Tanya Goodman became disabled following a car accident. She sued First Unum Life Insurance Company under ERISA, including a claim for breach of fiduciary duty. Ms. Goodman moved to compel the continued deposition of Unum’s lead appeals specialist, Katherine Durrell. The parties were, as Magistrate Judge Tsuchida said, “speaking past one another in their zealous advocacy on behalf of their clients’ interests.” The Magistrate therefore felt the need to step in and set some guidelines. In this decision the court stressed that the deposition of Ms. Durrell needs to be “limited to her training, investigation of the claim, and relationship to Unum.” Additionally, the court guided the parties to note on the record that Unum has stated standing objections, including asked and answered, repetitive, beyond the scope of discovery, and general form of the question, and Unum can therefore make its objections known “without further elaboration and then permit Ms. Durrell to answer freely.” The court also denied Ms. Goodman’s request to order Unum to pay the costs of this motion and the continuing deposition. Finally, the court directed the parties to make a video recording “of the participants, including all counsel for the parties,” and to schedule a telephonic conference with the Magistrate should they again reach an impasse. 

Exhaustion of Administrative Remedies

Second Circuit 

Constantini v. Hartford Life & Accident Ins. Co., No. 21 Civ. 6826 (LGS), 2022 WL 1910137 (S.D.N.Y. Jun. 3, 2022) (Judge Lorna G. Schofield). Plaintiff Nuky Constantini sued Hartford Life and Accident Insurance Company seeking an award of disability benefits under ERISA Section 502(a)(1)(B). Ms. Constantini became disabled in January of 2018 after she was involved in a major car crash. Following an award of disability benefits from the Social Security Administration, Ms. Constantini filed a claim for long-term disability benefits under the benefit plan established by her employer, Allstate Insurance Company. Hartford denied her claim on the ground that she failed to supply certain necessary medical records for review. Before the court was Hartford’s motion to dismiss pursuant to Rule 12(b)(6) for failure to exhaust administrative remedies prior to bringing suit. First, the court took judicial notice of the plan and the denial letter, neither of which were in dispute and were relied upon by the parties. Ms. Constantini did not dispute that she failed to internally appeal her denial. She argued instead that she was unaware of the plan’s appeal requirement because “she was not provided a copy of the Plan until after initiating this action, and the Denial Letter does not state that an administrative appeal is a prerequisite to filing a complaint.” The court was not persuaded by either of these arguments, and stated that the denial letter “clearly put Plaintiff on notice of the appeal requirement,” and pointed to the unambiguous language within the letter stating, “should the claim decision be upheld on appeal, you will then have the right to bring a civil action under Section 502(a) of ERISA.” The court was equally unpersuaded by Ms. Constantini’s futility argument, and remained unconvinced that any appeal would have been denied for the same reason the claim was denied “i.e., that certain medical records were allegedly missing.” The motion to dismiss for failure to exhaust was therefore granted. Additionally, because Ms. Constantini has already amended her complaint and any future amendment, the court stated, would be futile given the time to exhaust the administrative remedies has already run, the court dismissed the complaint with prejudice. 

Pension Benefit Claims

Third Circuit

Kevin v. United States Steel Corp. Exec. Mgmt. Supplemental Pension Program, No. 21-766, 2022 WL 2073023 (W.D. Pa. Jun. 9, 2022) (Judge Cathy Bissoon). Plaintiff Thomas Kevin entered into the United States Steel Corporation Executive Management Supplemental Pension Program, an ERISA-governed top-hat plan, in 1998. At the time he was informed that he would receive benefits until he turned 60 so long as he kept working for defendants. Mr. Kevin asserted that he “had been asked by several other employers and recruiters to leave his employment and join a competitor (and) each time (he) declined because he believed he would be able to receive enhanced benefits” under the top-hat plan. However, unbeknownst to Mr. Kevin until nearly 20 years later, shortly before his planned retirement, defendants had removed him from the top-hat plan in 2000, only two years after he entered into the plan. Mr. Kevin has thus commenced this suit, asserting among other claims, a claim for promissory estoppel. Defendants moved to dismiss, but the court rejected defendants’ motion. “At the onset, most of the case law cited by the parties, and uncovered by the Court address the matters herein at the summary judgment stage, or later. Defendants’ attempts to ‘crack this nut’ at the 12(b) stage can be described as ambitious, at the least. In any event, dismissal presently is unwarranted.” Mr. Kevin, the court held, pled facts sufficient to state his claims. 

Seventh Circuit

Curtis v. Komatsu U.S. Pension Plan, No. 20-cv-1611-bhl, 2022 WL 2066189 (E.D. Wis. Jun. 8, 2022) (Judge Brett H. Ludwig). Plaintiff Trevor Curtis retired from Komatsu Mining Corporation after working for the company for 45 years, including for four years after his pension plan’s “normal retirement date,” choosing to delay the start of his retirement benefits for additional benefits given to employees who chose late commencement of pension benefits. After retiring, Mr. Curtis was sent two “Retirement Kits” in the mail that informed him in writing of what he understood to be additional benefits due to him totaling $280,347 under his retirement plan. The Komatsu benefits supervisor challenged this and informed Mr. Curtis that he had been sent the Additional Benefit information accidentally and that this benefit did not pertain to his pension plan. Following the internal appeals process, Mr. Curtis brought this suit, asserting claims under ERISA Section 502(a)(1)(B) and 502(a)(3). Defendants moved to dismiss. The court granted the motion. First, the court stated that the Retirement Kits do not constitute part of the pension plan nor amend the plan to include the Additional Benefits described therein. “Accordingly, a plaintiff cannot base a denial-of-benefits claim on an alleged failure to comply with such a summary; a denial-of-benefits claim must be based on a failure to comply with the actual terms of the plan itself.” Next, the court rejected Mr. Curtis’s assertion that the Pension Committee had misrepresented the plan’s terms to him. The court determined that the Additional Benefit language in the Kits was not part of the pension plan, and stated, “the Pension Committee’s communications to Curtis that he was not owed the Additional Benefit were accurate and therefore not misrepresentations in violation of the fiduciary duty to inform.” Therefore, the court dismissed all of Mr. Curtis’ claims.

Pleading Issues & Procedure

Second Circuit

Hoeffner v. D’Amato, No. 09-CV-3160 (PKC) (CLP), 2022 WL 1912942 (E.D.N.Y. Jun. 2, 2022) (Judge Pamela K. Chen). Plaintiffs are unionized workers who changed their collective bargaining representatives from one union to another and subsequently switched their pension and welfare plans to the ones associated with their new union. For the past thirteen years, plaintiffs have been engaged in this class action suit against the trustees of their old union’s pension and welfare funds, arguing defendants were obligated to transfer assets to the new plans and because defendants have failed to do so they have been harmed in two primary ways: (1) their wages have not increased, and (2) the level of their pension benefits has decreased. Defendants moved to dismiss for lack of Article III standing. They argued that the Supreme Court’s decision in Thole v. U.S. Bank N.A., 140 S. Ct. 1615 (2020), mandates dismissal as this case also pertains to a defined benefit plan and plaintiffs have not been “‘denied any part of their defined benefit pension or any of the health benefits promised’ by the Local 175 Welfare Fund, and therefore have no ‘concrete stake’ in the outcome of this lawsuit.” The court rejected this argument, holding that Thole applies to cases where benefits are fixed, and not cases like this one where benefits are not even guaranteed from one year to the next, where the trustees “are free to increase or reduce benefits provided…at any time.” Furthermore, the court held that Thole does not apply to fund-to-fund transfer cases and instead is limited to cases pertaining to allegations of fiduciaries mismanaging funds. “Indeed, the Supreme Court expressly left open the possibility that participants in a defined-benefit plan could have standing if they ‘plausibly and clearly claim that the alleged mismanagement of the plan substantially increased the risk’ of the plan’s failure,” which is exactly what the plaintiffs here alleged, i.e. that defendants’ failure to transfer the funds could cause the plans of which they are now participants to be underfunded and fail. Therefore, the court was satisfied that plaintiffs had demonstrated concrete injuries. Additionally, the court stated, plaintiffs satisfied the requirements of traceability and redressability by explaining the chain of events that connects the failure to transfer the assets directly to the suffered harms and reduced benefits. “Defendants’ suggestion that there is no way to know whether the Local 175 Welfare Fund would use any monetary judgment in its favor to redress the alleged injuries is unfounded.” The relief in the form of the transfer of assets and the sum of prejudgment interest would in all likelihood “be used to redress the alleged injuries.” For these reasons, the court was satisfied that plaintiffs do in fact have standing, denied the motion to dismiss, and lifted the stay on expert discovery. 

Sacerdote v. Cammack Larhette Advisors, LLC, No. 17-CV-8834 (AT) (VF), 2022 WL 2078012 (S.D.N.Y. Jun. 8, 2022) (Magistrate Judge Valerie Figueredo). Back in 2016, plaintiffs filed a lawsuit against NYU for breaches of fiduciary duties in connection with its management of its ERISA-governed retirement plan. That case, Sacerdote I, ended with the court granting judgment in favor of NYU and denying plaintiffs’ motion for leave to amend to add defendants. Plaintiffs appealed the district court’s denial of their motion for leave to amend. On appeal, the Second Circuit concluded that the district court had erred and applied the wrong legal standard in denying the leave to amend “and that the error was not harmless.” Rather than amend Sacerdote I, plaintiffs filed this new action, Sacerdote II, in 2017 alleging essentially the same claims revolving around the same nucleus of facts but this time against new defendants; NYU Langone Hospitals, NYU School of Medicine, Cammack Larhette Advisors, LLC, the Retirement Plan Committee, and past and present individual Committee members. NYU School of Medicine was unhappy about this new lawsuit and its counsel sent a letter to plaintiffs’ counsel stating that the complaint was “an outrageous attempt at avoiding Judge Forrest’s October 17, 2017 Order denying (their) motion to file a second amended complaint,” and requesting that plaintiffs “immediately withdraw the complaint.” Following this letter, NYU School of Medicine moved for sanctions pursuant to Federal Rule of Civil Procedure 11, 28. U.S.C. § 1927, and/or the inherent powers of the court, as well as for attorneys’ fees under ERISA § 502(g)(1). The court denied the motions. The court agreed with plaintiffs that the two suits are not duplicative because they were asserted against different defendants, not in privity. It was therefore not objectively unreasonable for plaintiffs to have filed this separate suit, nor did they act in bad faith. Furthermore, the court rejected the idea that the letter NYU School of Medicine sent to plaintiffs’ counsel met the procedural requirements for filing a motion for sanctions. Finally, as the central principal of ERISA is “to protect beneficiaries of employee benefit plans,” the court was unwilling to award defendants attorneys’ fees under Section 502(g)(1). 

Third Circuit

Bd. of Trs. of the UAW Grp. Health & Welfare Plan v. Acosta, No. 14-6247 (JXN) (CLW), 2022 WL 1963686 (D.N.J. Jun. 6, 2022) (Judge Julien Xavier Neals). Plaintiffs are the Board of Trustees of the UAW Group Health & Welfare Plan and the Plan itself who commenced this action pertaining to “allegedly fraudulent administration of health insurance benefits to ineligible participants under the Plan,” referred to in the decision as the ABA/AMA enrollees. They sued the Union’s trustee, Sergio Acosta, the Plan’s auditor, Bacheler P.C., and the Union’s former insurance broker, Lawrence Ackerman, asserting claims under ERISA as well as common law fraud, negligent representation, professional negligence, and breach of the trust agreement. Defendant Acosta brought a counterclaim against plaintiffs for indemnification and contribution from the Trustees with respect to any damages the court may eventually award. Mr. Acosta also filed a third-party complaint against the Union similarly seeking to “recover contribution, indemnification, or both, in the event that the Court determines that he is in any way liable to the Plan.” In addition, the Bacheler Defendants also brought a third-party complaint against the Union seeking damages “on the theory of indemnification, contribution, and unjust enrichment.” The plaintiffs moved to dismiss Mr. Acosta’s counterclaim, and the Union moved to dismiss the two third-party complaints asserted against it. All three motions were granted by the court. First, the court dismissed the counterclaim asserted against plaintiffs, holding that there was no implied right of contribution and/or indemnification against plaintiffs under ERISA. The court went on to state that even if it were to recognize common law contribution or indemnity, Mr. Acosta failed to state a viable claim because he failed to allege that the Trustees are the wrongdoers responsible for the violations asserted against him in the complaint and instead his claims were based upon actions taken by the Trustees “that occurred at a separate time and caused a separate injury.” Turning to the Union’s motion to dismiss Mr. Acosta’s third-party complaint, the court agreed with the Union that courts within the Third Circuit as well as courts in other circuits have found that contribution and indemnification are not remedies under ERISA “where a non-fiduciary participated in a fiduciary breach.” The court therefore stated that it was without basis to allow these claims to proceed. Finally, the court addressed the Union’s motion to dismiss Bacheler’s third-party complaint, and agreed with the Union that the Bacheler defendants failed to state viable claims for contribution, indemnification, and unjust enrichment.  

Provider Claims

Fifth Circuit

Bridgepoint Healthcare La. v. Blue Cross Blue Shield of N. Dakota, No. 21-1926, 2022 WL 2048093 (E.D. La. Jun. 7, 2022) (Judge Greg Gerard Guidry). Healthcare provider Bridgepoint Healthcare Louisiana, LLC sued Blue Cross Blue Shield of North Dakota under ERISA and state law after the insurer failed to pay the cost of treatment that Bridgepoint provided to an insured patient. Blue Cross moved to dismiss, arguing that Bridgepoint lacks standing because of the plan’s anti-assignment clause. Blue Cross also moved to dismiss the state law causes of action arguing that they are preempted by ERISA. Bridgepoint responded that the anti-assignment clause is vague and its ambiguity must be interpreted to allow assignments. It also argued that “the anti-assignment provision is invalidated by a Louisiana law requiring ‘insurers to honor assignments.’” Finally, Bridgepoint held that its state law claims – breach of contract, detrimental reliance, negligent misrepresentation, failure to promptly pay, and unjust enrichment – are independent of ERISA and may proceed. The court first addressed the anti-assignment clause, and concluded that its language was indeed ambiguous, specifically its reference to the undefined term “ineligible persons,” which naturally implies that certain persons are eligible for assignment. On top of the ambiguous language, the court also agreed with Bridgepoint that Louisiana’s statute requiring insurers to honor assignments of benefits was applicable here because Bridgepoint sought to honor a “direct-payment authorization,” as allowed for by the law. Consequently, the court denied the motion to dismiss the ERISA claims for lack of standing. The court also denied the motion to dismiss regarding Bridgepoint’s breach of contract, detrimental reliance, and negligent misrepresentation claims because Bridgepoint was able to point to promises Blue Cross made authorizing treatment and approving payment of care. However, the court did dismiss the claim for failure to promptly pay under Louisiana law as being preempted by ERISA because the award the state law allows is payment of benefits due under a policy which naturally invades “‘an area of exclusive federal concern,’ namely the interpretation of a plan.” Finally, the unjust enrichment claim was also found to be inextricably connected to the plan and was therefore also determined to be preempted by ERISA and dismissed. 

Seventh Circuit

Advanced Physical Med. of Yorkville v. Blue Cross & Blue Shield of Neb., No. 21 C 1786, 2022 WL 2064855 (N.D. Ill. Jun. 8, 2022) (Judge Thomas M. Durkin). Advanced Physical Medicine of Yorkville is a chiropractic service provider who commenced this suit against Blue Cross & Blue Shield of Nebraska and Blue Cross & Blue Shield of Illinois (collectively “Blue Cross”) under ERISA Sections 502(a)(1)(B) for unpaid claims, and Section 502(a)(1)(A) for statutory penalties, in connection with Blue Cross’s failure to provide plan documents. Blue Cross moved to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). Blue Cross attached the relevant summary plan descriptions (“SPDs”) to its motion to dismiss. Plaintiff did not dispute that these documents were authentic but argued that as descriptions they are not the relevant Plans themselves, and therefore the anti-assignment provisions within them are not enforceable. The court disagreed, concluding the SPDs are either the Plans or, more likely, parts of the Plans, “so the fact that the SPD contains an anti-assignment clause means that the Plan contains an anti-assignment clause.” Furthermore, the court rejected plaintiff’s argument that Blue Cross waived the enforcement of the clause by not asserting it during the administrative process. The court stated that because plaintiff never expressly informed Blue Cross during the “administrative process that it was proceeding as the beneficiary’s assignee,” Blue Cross was under no obligation to assert the anti-assignment clause at that time. The court therefore dismissed the claims, holding that plaintiff does not have standing to sue. Additionally, the court communicated that regardless of the anti-assignment provision, plaintiff’s claim for statutory penalties ought to be dismissed because the SPDs show that “neither of the defendants are the ‘Plan Administrator,’” and ERISA only imposes disclosure requirements on plan administrators. Thus, Blue Cross’s motion to dismiss was granted with prejudice. 

Ninth Circuit

Continental Medical Transport LLC v. Health Care Service Corp., No. 21-35481, __ F. App’x __, 2022 WL 2045385 (9th Cir. Jun. 7, 2022) (Before Circuit Judges Graber and Bea, and District Judge Christina Reiss). Continental Medical Transport LLC, d/b/a Jet Rescue, appealed the district court’s summary judgment decision in favor of Blue Cross Blue Shield of Illinois and the Boeing Company Consolidated Health and Welfare Benefit Plan. The case involves reimbursement for emergency medical air ambulance transportation from Peru to Florida for a patient experiencing multiorgan failure who died a few days after being transported. Defendants would not approve benefits for the air transport. They referred to the medical emergency clause of the plan which requires that the “first hospital does not have the required services or facilities to treat your condition and you need to be transported to another hospital,” and stated that the hospital in Lima was one of South America’s most advanced facilities which could perform all the care needed for the patient. Jet Rescue appealed both the summary judgment decision and the application of abuse of discretion review. The Ninth Circuit began its decision by finding that the plan granted Blue Cross “full discretionary authority,” making arbitrary and capricious review appropriate. The court went on to express that under either de novo or abuse of discretion review the district court’s conclusion that the air transport was not medically necessary as defined by the plan “was overwhelmingly supported by the record.” Accordingly, the district court’s order was affirmed. Senior Circuit Judge Bea nevertheless dissented from the majority, on both the issue of the applicable standard of review and the ultimate conclusion that Blue Cross was not required to pay for the transport under the plan terms. Judge Bea stated that it was not at all clear that plan delegated authority to Blue Cross, and as Blue Cross has the burden to prove that it is entitled to deferential review, Judge Bea concluded that de novo review ought to have been applied in this case. Under de novo review, Judge Bea went on to say that there were genuine issues of material fact as to whether or not the air transport was medically necessary under the plan, and for this reason Judge Bea stated that he would have reversed the district court’s grant of summary judgement in defendants’ favor.

Withdrawal Liability & Unpaid Contributions

Second Circuit

Trs. of Local 7 Tile Indus. Welfare Fund v. Castle Stone & Tile, Inc., No. 17-CV-3187 (NGG) (RER), 2022 WL 2063267 (E.D.N.Y. Jun. 8, 2022) (Judge Nicholas G. Garaufis). In the words of this decision, “one could hardly think of a clearer case” of two entities constituting a single employer, alter egos of one another. Here those two entities are called Castle Stone and Tile, Inc. and Cathedral Stone & Tile Co, Inc. Plaintiffs are trustees of labor management funds who sued these employers for failure to make contributions as required by a collective bargaining agreement. This decision clearly lays out that Castle and Cathedral, “though nominally two entities,” were run by one person and operated as one employer. It also clearly determined that defendants are jointly and severally liable for their delinquent contributions, as well as interest, liquidated damages, audit costs, and attorneys’ fees. However, the court held off from awarding these damages to plaintiffs because their audits and calculations had serious problems identified in this order. Plaintiffs were thus directed to provide new numbers, show their work, and re-submit a more detailed accounting. Plaintiffs were also advised that they should not request attorneys’ fees for the hours they incurred in fixing these errors in their calculations.