Harris v. Lincoln Nat’l Life Ins. Co., No. 21-13186, __ F.4th __, 2022 WL 3009199 (11th Cir. July 29, 2022) (Before Circuit Judges Jordan and Rosenbaum, and District Judge John Steele).

ERISA is very specific about some things, but on others it is famously vague. For example, ERISA says that plan participants are allowed to bring a civil action for benefits, but it doesn’t give much guidance as to how the courts should handle those actions. Are they handled the same way as other civil cases under the Federal Rules of Civil Procedure? Do claimants have the right to a jury? What standard of review should the courts use? 

The Supreme Court has answered some of these questions. For example, in Firestone Tire & Rubber Co. v. Bruch, the Court held that denials of claims under ERISA should be reviewed de novo by the courts unless the benefit plan contains language to the contrary. However, other questions have not been answered, and in that vacuum the lower courts have been forced to create their own rules.

One of these lingering questions is: in cases where the court is performing de novo review, what evidence is admissible? As this week’s notable decision explains, the Circuit Courts have not answered this question uniformly. Some courts are quite restrictive, holding that review should be limited to the record that was before the administrator at the time it made its decision. Others have struck a middle course, holding that while review should typically be limited to the administrative record, extrinsic evidence is allowed under certain circumstances. And finally, some courts have held that de novo review requires courts to consider all relevant evidence, regardless of whether it was before the administrator.

Here, plaintiff Virgil Harris sought approval of his claim for long-term disability benefits under an employee benefit plan insured and administered by defendant Lincoln National Life Insurance Company. At trial, Mr. Harris attempted to submit evidence in the form of an affidavit and updated medical records. However, the district court held that this evidence was inadmissible because it post-dated the denial of benefits and was not before Lincoln at the time it denied his claim.

The Eleventh Circuit reversed in a published opinion, concluding that the evidence should have been admitted. The court noted that its analysis was guided by two prior Eleventh Circuit cases, Moon v. American Home Assurance Co. and Kirwan v. Marriott Corp., in which the court held that parties were allowed to present evidence which was not before the administrator when it denied benefits. The court stated that these cases “have not been abrogated by the Supreme Court. Nor have they been overruled by an en banc opinion of this court. As a result, they remain binding precedent.”

In so holding, the Eleventh Circuit rejected several of Lincoln’s arguments. First, the court distinguished Lincoln’s citations to other Eleventh Circuit cases in which evidence outside the record was excluded, finding them inapposite because they were decided under the abuse of discretion standard of review.

Second, the court rejected Lincoln’s contention that the court’s multi-step analytical approach to deciding benefit cases, which was adopted after Moon and Kirwan, abrogated the holdings of those cases. The court held that its multi-step test was not relevant to the evidentiary issue because the test does “not speak to what evidence a district court can consider when review is de novo,” and even if it did, Moon and Kirwan would still control because they were decided earlier.

Finally, Lincoln contended that claimants should not have an “unfettered right to introduce new evidence,” and should have to make a showing “akin to good cause” before submitting that evidence. The Eleventh Circuit quickly dismissed this argument, stating, “We have never mentioned, much less demanded, a showing of good cause to present new evidence in ERISA benefit cases governed by the de novo standard.”

As a result, the Eleventh Circuit reversed the district court’s judgment in favor of Lincoln, instructed the district court to consider Mr. Harris’ new evidence, and remanded for further proceedings. The evidentiary door is now wide open in de novo cases in the Eleventh Circuit. One wonders if other Circuits will reconsider their approaches in light of this decision, or whether the Supreme Court will ultimately have to resolve this issue on a nationwide basis.

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


Ninth Circuit

Robertson v. Argent Tr. Co., No. CV-21-01711-PHX-DWL, 2022 WL 2967710 (D. Ariz. Jul. 27, 2022) (Judge Dominic W. Lanza). Plaintiff Shana Robertson brought this putative class action against the Argent Trust Company, claiming that the company breached its fiduciary duties and engaged in prohibited transactions with regard to administering the Isagenix Worldwide, Inc. Employee Stock Ownership Plan (ESOP). Argent moved to compel arbitration, arguing that the arbitration clause in the plan requires Ms. Robertson to arbitrate her claims, and to do so on an individual basis. The arbitration clause at issue specifically states “any claim by a Claimant that arises out of this Plan or the Trust Agreement, including… a claim for benefits… and any claim asserting a breach of, or failure to follow any provision of ERISA or the CODE, including…. a breach of fiduciary duty…shall be settled by binding arbitration.” The plan also provides that claims “must be brought solely in the Claimant’s individual capacity and not in a representative capacity or on a class, collective, or group basis.” Also worth noting, one week after Ms. Robertson commenced her lawsuit Argent amended the arbitration provision to include a statement clarifying that nothing in the provision precludes claimants from seeking injunctive relief. In evaluating the motion to compel arbitration, the court understood its role under the Federal Arbitration Act to be limited to assessing whether a valid agreement to arbitrate exists between the parties, and assuming it does, whether it encompasses the dispute at issue. Finding both requirements satisfied here, the court granted the motion to compel arbitration. The court was not persuaded by Ms. Robertson’s two arguments against granting the motion (1) that the provision was “unconscionable under Arizona law,” and (2) that it restricts ERISA statutory rights. First, the court concluded that “applying Arizona law to an ERISA arbitration provision would interfere with nationally uniform plan administration,” and therefore declined to do so. Even under federal law, the court concluded that the arbitration provision was not unconscionable. Ms. Robertson then argued that the arbitration procedure is void because it requires individual arbitration thereby obstructing participants ability to seek plan wide relief as required under ERISA. In her opposition, Ms. Robertson claimed that her position was supported by the Supreme Court’s decision in LaRue v. DeWolff. The court disagreed, “LaRue simply authorizes defined contribution plan participants to recover losses from their individual accounts using §502(a)(2) of ERISA. That is exactly what Plaintiff is allowed to do under the Plan.” In fact, the court decided that none of the cases Ms. Robertson cited suggest “that an ERISA §502(a)(2) plaintiff has an unqualified right to bring a collective action to recoup all of a fiduciary’s losses and gains at once…There is no indication that ERISA bars plan participants from choosing to waive collective action when an individualized remedy is still available.” The court also stressed that because the plan did not violate its own amendment procedure, it was allowed to make its amendment after Ms. Robertson had filed her lawsuit, and the amendment itself “is valid and applies to Plaintiff.” In the decision’s most novel dispute, the court addressed Argent’s motion for attorneys’ fees and costs. Argent argued that the plan contains a section requiring “in the event a Claimant makes an unsuccessful challenge to the validity, enforceability or scope of the Arbitration Procedure in any court, the Claimant shall…reimburse the defendants in that action for all attorneys’ fees, costs, and expenses.” Ms. Robertson countered that under Section 1132(g) Argent is not entitled to fees on their “purely procedural victory.” She also responded that the plan’s provision requiring plaintiffs to reimburse defendants in unsuccessful arbitration challenges “diminishes her statutory fee-shifting rights under ERISA.” This time the court agreed with Ms. Robertson and concluded that the “bespoke fee-shifting arrangement” was preempted by ERISA. Argent’s request for attorneys’ fees was thus denied. Finally, the court granted Argent’s request to stay the proceeding pending resolution of arbitration. 

Attorneys’ Fees

First Circuit

Glover v. Hartford Life & Accident Ins. Co., No. 20-cv-358-LM, 2022 WL 2987130 (D.N.H. Jul. 28, 2022) (Judge Landya McCafferty). Plaintiff Sarah Glover brought this ERISA suit against Hartford Life & Accident Insurance Company seeking to have the court overturn Hartford’s denial of disability benefits. After she filed her suit, Hartford reevaluated Ms. Glover’s claim and reversed its denial, agreeing to pay her $174,597 in back benefits. Ms. Glover moved for attorneys’ fees and costs. Hartford objected, arguing Ms. Glover is not entitled to attorney fees as she only obtained her relief through its reversal. In this order, the court granted the motion for attorney’s fees and costs, but not at the amounts Ms. Glover had requested. As a preliminary matter, the court agreed with Ms. Glover that she had achieved “some degree of success on the merits” by causing Hartford to agree to provide the relief she sought in her lawsuit. In addition to Ms. Glover’s success on the merits, the court also acknowledged that Hartford has the ability to satisfy the award. Thus, although the court did not find Hartford’s actions in bad faith warranting deterrence, or that an award of fees would have an impact on any other beneficiaries, the court nevertheless was satisfied that the balance of factors weighed in favor of awards fees and costs. The court then turned to determining what amounts to award. Ms. Glover sought to recover $49,121.25 for 280 hours of work performed by two attorneys, Anne Rice and Hugh Rice, and three paralegals. First, the court determined that Counsel Anne Rice’s billed hourly rate of $325 an hour to be reasonable given her experience in employment law and that she has been a practicing attorney since 1997. The court was also satisfied with retired attorney Hugh Rice’s hourly rate of $140. Finally, the court concluded the rates for the three paralegals of between $95 – $140 per hour to also be appropriate given that all three had at least 15 years of experience as paralegals. Where the court reduced the award was for the hours spent. Hartford argued that the 280 hours of the lodestar were unreasonable. Hartford contended that Ms. Glover cannot recover any fees she expended during the administrative remand. In addition, Hartford protested that many of the remaining hours were excessive. Agreeing with Hartford, the court declined to award the 53.50 hours of work counsel submitted related to the administrative remand because plaintiffs are barred from recovering fees incurred at the administrative level. The court also agreed with Hartford that the remaining 226.50 hours counsel spent on the case was excessive and “disproportionate to the amount of work involved and the amounts courts have awarded in comparable cases.” Overall, the court reduced the number of hours from the requested 280 hours to only 90.5 hours. Accordingly, the lodestar reduced from the requested $49,121.25 to an award of $17,312.50. In addition, Ms. Glover sought reimbursement of $581.31 in costs. The court reduced the requested costs by $174.31 which related to obtaining medical records from Ms. Glover’s physicians during the administrative remand. These costs were excluded for the same reasons the court gave for excluding attorneys’ fees related to the administrative remand. Thus, the court awarded $407 in costs. 

Breach of Fiduciary Duty

Third Circuit

Corman v. The Nationwide Life Ins. Co., No. 17-3912, 2022 WL 2952219 (E.D. Pa. Jul. 26, 2022) (Judge Wendy Beetlestone). Spokane v. Nationwide Life Ins. Co., No. 14-5287, 2022 WL 2974711 (E.D. Pa. Jul. 27, 2022) (Judge Wendy Beetlestone). In two orders this week, Judge Beetlestone ruled on summary judgment motions in cases both addressing the actions defendant Nationwide Life Insurance Company took as the insurer of life insurance policies which lost substantial amounts of money thanks to the large and complicated scheme run by John Koresko in which he swindled tens of millions from welfare benefit plans before finally being brought to justice by the Department of Labor. In the first case, plaintiffs James Corman, Energy Alternative Studies, Inc., and Energy Alternative Studies Inc. Health and Welfare Benefit Plan brought claims under ERISA and RICO against Nationwide for its role in changing the plan ownership and issuing a policy loan to Mr. Koresko, as well as for facilitating the corrupt activities of Koresko’s scheme. In the second case, plaintiffs David Spokane and David C. Spokane Orthodontic Associates, P.C. brought largely the same causes of action against Nationwide premised on extremely similar circumstances. In addition to asserting ERISA and RICO violations, the second case also alleged common law claims of fraud, breach of fiduciary duty, knowing participation in breach of fiduciary duty, breach of an obligation of good faith, and negligence. Generally speaking, the court ruled the same way in each of the two cases, with the main exception being its granting of summary judgment in favor of Nationwide in Spokane on the common law causes of action which were found to be untimely, and which were not asserted in the Corman suit. Another instance in which the court decided differently in the two lawsuits had to do with Nationwide’s statute of limitations defense for the Section 502(a)(2) ERISA claims. In Corman the court held Nationwide failed to meet its burden to prove that the statute of limitations had run and therefore did not grant summary judgment on the basis of untimeliness. However, in Spokane, the court was satisfied that Nationwide proved the statute of limitations had run on the Section 502(a)(2) claim in so far as that claim was premised on two changes of the ownership of the policy which occurred in 2002 and in 2006.  The court reasoned that plaintiffs had actual knowledge of the changes by 2005 and 2009 “respectively-more than three years before the instant suit was filed.” In contrast, in the Corman case, plaintiffs were granted summary judgment with regards to the 2002 ownership change of that plan because Nationwide did not challenge the position that the change request was not taken at the direction of an authorized person and Nationwide therefore acted as a fiduciary with respect to that change. However, with regard to the second change of ownership in the Corman suit, which occurred in 2006, the court found that plaintiffs failed to prove, in that instance, that Nationwide exercised undirected control over the policy, and therefore concluded that a genuine dispute of material fact precluded awarding summary judgment for either party. Similarly, in both Corman and Spokane the court declined to award summary judgment to any of the parties with regard to the issuing of the policy loans. This was also true for both cases with respect to the Section 502(a)(3) fiduciary breach claims. The court held that genuine issues of fact as to whether Nationwide had constructive knowledge of the circumstances regarding the unlawfulness of the loans and whether they constituted prohibited transactions meant that awarding summary judgment was inappropriate. Finally, the court granted Nationwide summary judgment in both cases with respect to claims under Section 1962(c) of RICO because the court held necessary elements to state a claim for liability under this section were lacking. However, no party was granted summary judgment in either case with respect to claims under RICO Section 1962(d). Thus, as explained above parties were each granted in part and denied in part summary judgment. 

Sixth Circuit

Ramsey v. Boilermaker-Blacksmith Nat’l Tr. Pension, No. 3:21-CV-410-TRM-JEM, 2022 WL 2921002 (E.D. Tenn. Jul. 25, 2022) (Magistrate Judge Jill E. McCook). Plaintiff Michael Ramsey became disabled in May of 2016. In July 2016, Mr. Ramsey called the Boilermaker-Blacksmith National Trust Pension requesting a disability pension application. The representative for the Plan informed Mr. Ramsey that he could not apply for benefits until after he received a notice of disability award from the Social Security Administration. Not only was this information incorrect, but the representative also failed to tell Mr. Ramsey that the Plan was soon to adopt an amendment that would substantially reduce benefits for participants and the date to apply for unreduced pre-amendment benefits was August 14, 2017. Relying on the misrepresentation made by the representative of the Plan, Mr. Ramsey waited until after the Social Security Administration awarded him benefits on November 16, 2018, to submit his application for disability retirement benefits to the Plan. Mr. Ramsey was awarded benefits, but the Plan determined that Mr. Ramsey was entitled to a disability start date of January 1, 2019, and not May 17, 2016, the date the Social Security administration had determined to be Mr. Ramsey’s date of disability. The date the Plan chose meant that Mr. Ramsey’s benefits were subject to the reduced amount via the Plan’s amendment. Mr. Ramsey sued the Plan under Section 502(a)(1)(B) seeking the court’s declaration that he is entitled to disability retirement benefits beginning May 17, 2016. If the facts of this case seem familiar to any readers, that’s because they are strikingly similar to another decision Your ERISA Watch recently summarized earlier this year. In Smarra v. Boilermaker-Blacksmith Nat’l Pension Tr., No. 2:20-cv-860, 2022 WL 377432 (W.D. Pa. Feb. 8, 2022), the court granted summary judgment to plaintiff on his breach of fiduciary duty claim against the Plan for engaging in the same behavior alleged here (i.e., misinforming participants that they had to wait for an award of SSA benefits before submitting applications to run out the clock for eligibility of pre-amendment unreduced benefits). Mr. Ramsey also saw the similarities between his case and Mr. Smarra’s. This May, Mr. Ramsey moved to amend his complaint to add a breach of fiduciary claim similar to Mr. Smarra’s. In this order, the court denied Mr. Ramsey’s motion to amend holding amendment would prejudice the Plan by opening up discovery and frustrating the court. According to the court, Mr. Ramsey knew of the factual basis of this proposed claim in 2019, and therefore failed to explain why he was only asserting a breach of fiduciary duty claim at this point in time. 

Class Actions

Second Circuit

Vollmer v. Xerox Corp., No. 20-CV-6979 (CJS), 2022 WL 2948982 (W.D.N.Y. Jul. 26, 2022) (Judge Charles J. Siragusa). Plaintiff Paul Vollmer elected to participate in the Xerox Corporation’s Enhanced Early Retirement Program in 1987. By so choosing, at age 50, Mr. Vollmer retired from Xerox and was awarded lifetime medical coverage under the Xerox Medical Care Plan for Retired Employees. From the date of his retirement until 2019, Xerox paid the full cost of Mr. Vollmer’s premiums. But in 2019, Xerox began requiring plan participants to pay 50% of their monthly medical and dental premiums if they wished to continue their healthcare coverage under the plan. In 2020, Mr. Vollmer and his wife filed this putative class action alleging Xerox’s new requirement that participants contribute to premium payments “constituted a breach of its fiduciary duties under (ERISA), and improperly denied vested plan benefits to (the Enhanced Early Retirement Program) participants.” This February the court awarded summary judgment to Xerox on the breach of fiduciary duty claim. The court did not grant either party summary judgment on the denial of benefits claim. Now plaintiffs move for class certification pursuant to Federal Rule of Civil Procedure 23.  Plaintiffs proposed a class of all Xerox retirees and beneficiaries who participated in the Enhanced Early Retirement Program and who were receiving retiree health benefits from Xerox as of December 31, 2018. The court first examined the class under Rule 23(a). As the class consists of approximately 900 members, the numerosity requirement was satisfied. The large debate between the parties was over the requirements of commonality and typicality. Plaintiffs argued that the core question of whether Xerox’s contribution requirement violates the terms of the plan is common to all class members and affects all class members including the Vollmers uniformly. Xerox argued that in fact there are two classes of retirees, those who were 52 or younger when the Enhanced Early Retirement Program was offered and those who were 53 and older, with only the participants 53 or older being those who had already vested in the old plan independent of the Enhanced Early Retirement Program. Plaintiffs pushed back on this argument and stated that Xerox actually treated participants in both of these supposed groups uniformly, requiring participants in both groups to make premium contributions. This evidence persuaded the court that commonality and typicality were satisfied by the proposed class. Finally, Rule 23(a)’s adequacy of representation requirement was not challenged by Xerox and was satisfied as the named plaintiffs have the same interest in enforcing their right to lifetime non-contributory health coverage as all the members of the class, and their attorneys are qualified and experienced in this type of ERISA class action. Last, the court certified the class under Rule 23(b)(1)(A), because the risk of inconsistent rulings if two courts came to different conclusions about the terms of the plan could saddle Xerox with incompatible standards of conduct. For these reasons, the court granted the motion for class certification, named the Volmers class representatives, and appointed their counsel, David R. Pfalzgraf and Matthew D. Miller of Rupp, Baase, Pfalzgraf, Cunningham & Coppola LLC and Tybe A. Brett and Joel R. Hurt of Feinstein Doyle Payne & Kravec, LLC, as class counsel. 

Disability Benefit Claims

Third Circuit

Cato v. Unum Life Ins. Co. of Am., No. 21-10056 (SDW) (ESK), 2022 WL 3013085 (D.N.J. Jul. 29, 2022) (Judge Susan D. Wigenton). Plaintiff Jennifer Cato went on long-term disability benefits for her fibromyalgia, sleep disorder, anxiety, depression, and migraines. Her insurer Unum Life Insurance Company of America terminated her long-term disability benefits after 24-months, citing the policy’s time limitation for disabilities caused by mental illness. After an unsuccessful administrative appeal, Ms. Cato initiated this ERISA lawsuit. Parties filed cross-motions for summary judgment. As the plan confers Unum with discretionary authority, the court applied abuse of discretion review. Reviewing the evidence of the administrative record, the court held that Unum did not abuse its discretion in terminating benefits. “Unum’s final determination that Plaintiff was not eligible for continued benefits beyond the expiration of the 24-month mental illness benefit period because the Record did not evince that Plaintiff was disabled from a physical condition resulting in a loss of functional capacity precluding her from performing the substantial and material acts of her usual occupation is unequivocally supported by the record.” The court did not factor in Ms. Cato’s award of Social Security disability benefits as the Social Security Administration had made its decision after Unum had terminated benefits and therefore the award was not considered by Unum when it made its determination. The court thus granted Unum’s motion for summary judgment and denied Ms. Cato’s motion for judgment. 

Seventh Circuit

Claybrooks v. Eaton Corp., No. 21-C-752, 2022 WL 3010145 (E.D. Wis. Jul. 29, 2022) (Judge William C. Griesbach). In 2019, plaintiff Dennis Claybrooks was injured at work when he was struck in the head by a falling piece of metal. Following two emergency room visits, Mr. Claybrooks was tentatively diagnosed with a traumatic brain injury. Initially, Mr. Claybrooks’ claim for short-term disability benefits was approved by the plan. However, nine days before Mr. Claybrooks would have satisfied that 26-week requirement for eligibility of long-term disability benefits, Mr. Claybrooks’ short-term disability benefits were terminated. Although the plan reversed its decision to terminate the short-term disability benefits, it denied and upheld on appeal its denial of Mr. Claybrooks’ application for long-term disability benefits leading to this suit. Under arbitrary and capricious review, the court concluded that the plan’s denial of long-term disability benefits was an abuse of discretion and remanded to the plan to afford Mr. Claybrooks a full and fair review. First, the court stated that it was unreasonable for Sedgwick to conclude that Mr. Claybrooks was not absent from work for over six months, the plan’s required waiting period, when it denied his claim for long-term disability benefits. In fact, Mr. Claybrooks had satisfied this requirement because he had stopped working in May and had not returned to work as of the date the plan rendered its initial denial that November, more than six months later. Next, the court agreed with Mr. Claybrooks that Sedgwick had failed to the reference specific plan provision on which the denial was based in violation of ERISA. Sedgwick’s alternative reasons for its subsequent denials of the long-term disability benefits on appeal were also found to be improper. The court rejected the idea that Mr. Claybrooks was in violation of plan terms when he began temporary work after his denial. Requiring Mr. Claybrooks to get the plan to approve his part-time work after he had already been denied benefits would be “patently unfair” according to the court. Finally, Sedgwick’s argument that there was insufficient medical information on file to support an award of benefits was dismissed by the court because Mr. Claybrooks had not been afforded the opportunity to have a full and fair review of his claim or to respond to this “new rationale contained in the appeal determination.” Nevertheless, the court stressed that it could not conclude as a matter of law that Mr. Claybrooks was entitled to long-term disability benefits, and therefore determined that remand is the appropriate remedy for defendants’ actions. 

ERISA Preemption

Third Circuit

KN Elec. Contractor v. Int’l Bhd. of Elec. Workers, No. 21-20650 (RMB/MJS), 2022 WL 2980984 (D.N.J. Jul. 28, 2022) (Judge Renee Marie Bumb). Plaintiffs KN Electrical Contractor, Inc. and Dennis Kleiner brought a lawsuit in state court asserting state-law tort claims against defendants International Brotherhood of Electrical Workers, Local Union 351, and several named Union officials alleging defendants took actions including making defamatory and libelous statements in an attempt to actively lobby against plaintiffs and disrupt their current and future contractual relationships. In sum, plaintiffs alleged that defendants “actively interfered with and manipulated the bidding procurement process to undermine KN Electrical’s bid and chances of being awarded certain contracts.” Defendants removed the case to federal court asserting the claims were preempted by the Labor Management Relations Act (“LMRA”) and ERISA. Plaintiffs moved to remand the case back to state court, arguing the claims are not preempted. The court agreed, and granted the motion to remand. The court held that resolution of the claims does not require the court to construe the terms of the collective bargaining agreement so as to implicate LMRA preemption. As for ERISA preemption, the court disagreed with defendants’ contention that ERISA preempts defamation claims pertaining to statements made to employees concerning wages and benefits owed under an ERISA-governed plan. The decision ended with the court informing plaintiffs that they are judicially estopped from asserting related claims arising under LMRA or ERISA on remand. 

Exhaustion of Administrative Remedies

Ninth Circuit

Fealy v. ISP2 Oakland, Inc., No. 22-cv-02252-RS, 2022 WL 2988508 (N.D. Cal. Jul. 28, 2022) (Judge Richard Seeborg). Plaintiff Josephine Fealy sued her former employer, ISP2 Oakland Inc., its healthcare plan, and WageWorks, Inc. for violations of ERISA Sections 502(a)(1)(B) and (a)(3) after ISP2 failed to inform her that it had changed its healthcare coverage from Kaiser to Anthem while she was receiving coverage through COBRA, leaving her with tens of thousands of dollars of unpaid medical expenses. Defendants moved to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). The court agreed that Ms. Fealy’s complaint offered only “threadbare recitals” supported by “conclusory statements” insufficient at the pleading stage to state valid claims. First, the court agreed with the plan that Ms. Fealy had failed to address the issue of exhaustion. “If Plaintiff is indeed pursuing a theory of liability that would not require her to establish exhaustion, then she must plead such a theory against ISP2 Health Plan. If she is not pursuing such a theory, she must do more than offer the conclusory allegations about exhaustion that are currently present in the Complaint.” Second, the court articulated that as currently pled the complaint fails to allege that WageWorks is a fiduciary. Rather, the court held the complaint’s descriptions of WageWorks functions looked more like ministerial duties than the actions taken by a fiduciary with discretionary authority. For these reasons the motion to dismiss was granted. The dismissal was without prejudice however, allowing Ms. Fealy the opportunity to amend her complaint. 

Life Insurance & AD&D Benefit Claims

First Circuit

Ministeri v. Reliance Standard Life Ins. Co., No. 21-1651, __ F. 4th __, 2022 WL 2914068 (1st Cir. Jul. 25, 2022) (Before Circuit Judges Barron, Selya, and Howard). The doctrine of contra proferentem, which “teaches that unclear ‘terms must be construed in favor of the’ insured,” was in full force in this First Circuit decision. In this case, a participant of a life insurance policy died as a result of a brain tumor. The participant’s widow, the beneficiary of the plan, sought payment of basic as well as supplemental life insurance benefits from Reliance Standard Life Insurance Company. Reliance denied the claim. Reliance’s given reason for denying the claim in its letter was that the participant had stopped working his regular 20 hour scheduled work week because of his illness and was no longer performing his usual work duties, meaning his coverage under the policy had lapsed. After Reliance upheld its denial on appeal, the widow, Ms. Ministeri initiated this lawsuit. Ms. Ministeri was granted summary judgment in the district court and awarded $624,000 in basic life insurance, $468,000 in supplemental life insurance, $102,018.75 in attorneys’ fees, $426.83 in costs, and prejudgment interest at a rate of 7.5%. Reliance appealed the entry of summary judgment in favor of Ms. Ministeri. Ms. Ministeri also appealed, seeking to enhance her award of prejudgment interest to a rate of 12%, her best guess as to Reliance’s actual rate of return on its investments. “Discerning neither any reversible error nor any abuse of discretion, we reject both appeals and leave the parties where we found them.” First, the court evaluated Reliance’s appeal of the summary judgment decision. The court of appeals understood Reliance’s position to rely on answering three questions; “whether Ministeri was covered by his basic life insurance at the time of his death; whether Minister was covered by his supplemental life insurance at that time; and whether the amount of the supplemental life insurance benefit, if available at all, was obliterated by the application of the insurance policy’s so-called ‘cap.’” To begin, the court rejected Reliance’s contention that Minister was not qualified as an “Active…Part-time Corporate Vice President,” because he was not working regular hours or performing the typical duties of his job including traveling. Rather, the court understood “active” to mean “current employee.” The First Circuit held “the eligibility provision requiring Ministeri to work at least twenty hours ‘during his regularly scheduled work week’ could reasonably refer to his typical weekly workload before the chaos introduced by his medical condition.” Thus, the court foreclosed on Reliance’s eligibility arguments. Next, the court moved to the supplemental policy’s portability provision and whether Mr. Ministeri had satisfied its “enumerated requirements (to) allow supplemental coverage to be transported to the insured outside the usual eligibility criteria.” This dispute turned on whether Mr. Minister had notified Reliance in writing that he ceased being eligible for the plan when he left his employment shortly before his death. The district court had concluded that because Reliance had not raised this issue in its denial letter in, bringing it up during litigation was in violation of ERISA, and would prejudice Ms. Ministeri by making her address the issue in court when she could not do so during the administrative process. The court of appeals agreed. Finally, the court disagreed with Reliance’s interpretation of the supplemental life insurance proceeds’ cap. The court, again applying the doctrine of contra proferentem, read the policy’s cap to mean that the supplemental life insurance amount could not exceed $500,000, not that the amount of combined coverage with the basic and supplemental policies could not exceed $500,000. Satisfied with the lower court’s summary judgment ruling, the First Circuit turned to Ms. Ministeri’s prejudgment interest rate appeal. In essence, the appeals court decided that whether to provide prejudgment interest, and if so, at what rate “are questions that lie within the discretion of the district court.” Although the district court’s reasoning on selecting a rate 7.5% was a bit vague, the appellate court found its inclination to split the proverbial baby and select a rate between those requested by the parties was acceptable and reasonable. For all these reasons, the district court’s judgment was wholly affirmed. 

Second Circuit

Obegenski v. Sun Life Assurance Co. of Can., No. 3:20-cv-1408 (AWT), 2022 WL 2906754 (D. Conn. Jul. 22, 2022) (Judge Alvin W. Thompson). Bruce Obegenski was a participant in an employee welfare benefit plan insured by Sun Life Assurance Company of Canada. While employed, Mr. Obegenski fell ill, and was hospitalized several times from April 2019 to October 1, 2019, the date when he terminated his employment due to disability. Per the terms of his welfare benefit plan, Mr. Obegenski was eligible to apply for conversion of his group life insurance coverage to an individual life insurance plan, so long as he did so within 31 days of the termination date. On October 16, 2019, plaintiff Linda Obegenski had a phone call with Sun Life to discuss conversion. The representative on the call brought up the fact that Mr. Obegenski might be eligible for a waiver of premium, and suggested the Obegenskis fill out the application for waiver of premium. Based on that phone call, Mr. Obegenski applied for a waiver of premium, which was denied by Sun Life less than a week later due to the age Mr. Obegenski was at his date of disability. By the time Mr. Obegenski died on January 15, 2020, he had never submitted the required forms to finish the process of converting his individual life insurance policy and had not paid any of the premiums for the individual plan he wished to convert to. After Mr. Obegenski’s death, Ms. Obegenski attempted to convert Mr. Obegenski’s coverage retroactively, offering to pay the monthly premiums from November 2019 and January 2020. Sun Life denied Ms. Obegenski’s request and upheld the denial during the administrative appeal. Ms. Obegenski then sued Sun Life under Section 502(a)(1)(B). Parties cross-moved for summary judgment. As the plan grants Sun Life with discretionary authority, the court reviewed the denial under the abuse of discretion standard. The court granted summary judgment in favor of Sun Life finding that the “denial of benefits was supported by substantial evidence.” The court was not persuaded that the Sun Life representative had confused the Obegenskis during the October phone call by injecting the suggestion to apply for the waiver of premium, nor that Sun Life’s rejection letter for the waiver of premium could have been interpreted as a rejection for conversion of life insurance policy altogether. In fact, the court concluded that the language of the waiver of premium denial letter stating “you may have the option to convert your insurance to an individual policy,” clearly advised the Obegenskis that the option to convert was still undecided and unfinished. Thus, the court was satisfied that the Obegenskis were not misled about their conversion rights, and the benefit denial was therefore reasonable and not an abuse of discretion. The court ended its decision by stating that Ms. Obegenski failed to assert a fiduciary breach claim under Section 502(a)(3) and that it could therefore not weigh in on whether Sun Life had breached any fiduciary duty. 

Medical Benefit Claims

Eighth Circuit

Duncan v. (1) Jack Henry & Assocs. (“JHA”), No. 6:21-cv-03280-RK, 2022 WL 2975072 (W.D. Mo. Jul. 27, 2022) (Judge Roseann A. Ketchmark). Plaintiff Sabrina Duncan is a transgender woman who has been diagnosed with gender dysphoria. To treat this condition, her physicians have determined that it is medically necessary for Ms. Duncan to undergo certain facial reconstructive surgeries. Ms. Duncan’s ERISA-governed healthcare plan denied precertification for the surgeries under the plan’s cosmetic treatment exclusion. After exhausting her administrative appeals, Ms. Duncan commenced this suit under ERISA, Title VII and the Americans with Disabilities Act (“ADA”). Ms. Duncan’s plan specifically provides for the treatment of “gender transition surgery,” although this term is not specifically defined. The cosmetic treatment exclusion does not allow participants to receive surgical procedures “that are primarily used to improve, alter, or enhance appearance, whether or not for psychological or emotional reasons.” In her complaint, Ms. Duncan alleges that the primary purpose for the surgeries she seeks is to treat her gender dysphoria, and under the terms of the plan she should therefore be entitled to such treatment. Defendants moved to dismiss six of the causes of action within the complaint for failure to state a claim. The court addressed each of the six challenged claims. First, defendants challenged Ms. Duncan’s claim that her precertification request was wrongfully denied. Defendants argued that the plan does not allow for facial recognition surgery and therefore Ms. Duncan cannot state a claim under Section 502(a)(1)(B). The court disagreed, holding the plan is ambiguous on whether it covers the surgeries at issue. Accordingly, the court denied the motion to dismiss the claim for benefits. In the next two challenged claims, Ms. Duncan sought remedies under Section 502(a)(3)(A). “While Count One seeks relief under § 1132(a)(1)(B) to enforce her rights under the terms of the Plan and clarify her rights to future benefits under the Plan, Counts Two and Three assert alternative claims for equitable and injunctive relief under § 1132(a)(3)….even to the extent the remedies are similar…this would not necessarily require dismissal at this early stage.” Thus, the court denied the motion to dismiss these two claims, holding they are appropriately alternative and not duplicative forms of relief. The court also denied the motion to dismiss the violation of the Mental Health Parity and Addiction Equity Act, concluding that the plan, as Ms. Duncan alleges, may facially discriminate against facial surgery for mental health purposes when it applies no such restrictions on physical reconstructive surgery. Reaching the fifth of the six challenged claims, the court addressed the ERISA claim under § 1132(c)(1)(B) seeking a statutory penalty for failure to provide the comparative analyses documents Ms. Duncan requested. Ms. Duncan was unable to persuade the court that the specific documents she requested fell “within the realm of ‘formal documents that establish or govern the plan,’” as interpreted by Eighth Circuit precedent. Accordingly, the court granted the motion to dismiss this cause of action. Finally, Ms. Duncan’s ADA claim was also dismissed, as Ms. Duncan’s gender dysphoria is not a disability under the ADA as a matter of law. Though the court pointed out that Congress could amend the ADA “to specifically encompass gender identity disorders like gender dysphoria. It has not yet chosen to do so.” For these reasons, the partial motion to dismiss was granted in part and denied in part. 

Ninth Circuit

Mull v. Motion Picture Indus. Health Plan, No. 20-56315, __ F. 4th __, 2022 WL 2912475 (9th Cir. Jul. 25, 2022) (Before Circuit Judges Clifton, Smith, and Watford). The issues of this case begin with a serious car crash which injured then plan participant, Lenai Mull, causing her to undergo several surgeries. The Motion Picture Industry Health Plan paid a portion of Lenai’s medical expenses. Under the terms of the plan, participants are required to reimburse the plan if they recover money from the liable third party. Lenai Mull received such a recovery, but did not reimburse the plan. After Lenai switched insurers, her father, plaintiff Norman Mull, also declined to reimburse the plan. To recoup its unreimbursed payments, the Motion Picture Industry Health Plan invoked its self-help “recoupment clause” and stopped making benefit payments to Mr. Mull and his covered dependents, effectively terminating their health insurance. The Mulls then brought this action to recover the withheld benefits and to force the plan to make future benefit payments pursuant to Sections 502(a)(1)(B) and (a)(3). The Plan then asserted a counterclaim under Section 502(a)(3) seeking to impose an equitable lien upon the proceeds of Lenai’s third party recovery. The district court dismissed the counterclaim because Lenai had dissipated her settlement funds. Following that decision, the district court granted summary judgment in favor of the Mulls reasoning that the Plan Description, within which the recoupment clause resided, was not part of the plan itself and any provision within the Description, including the recoupment clause, was therefore unenforceable. This decision was overturned in the Ninth Circuit. After that, the district court granted summary judgment for the Mulls on entirely new grounds. The ruling held that the Plan could not use the self-help measure to recoup overpayments when it could not prevail under Section 502(a)(3) without violating ERISA’s exclusive civil enforcement scheme. In addition, the court concluded that the recoupment clause “runs afoul of the equitable principles by imposing obligations on family members ‘who recovered nothing’ and cannot pay back the recovery.” Finally, the district court expressed that the Plan’s claim to unreimbursed benefit payments should be barred by res judicata as its counterclaim under Section 502(a)(3) was dismissed. Defendant appealed. In this decision the Ninth Circuit reversed the district court’s award of summary judgment in favor of the Mulls. First, the appeals court concluded that contractual defenses of illegality, impossibility of performance, and unconscionability could not defeat the Plan’s self-help remedy under the facts of the case. Next, the Ninth Circuit concluded the Plan’s inability to assert a claim under Section 502(a)(3) did not bar it from exercising the recoupment clause as an alternative means to seeking recovery of overpayment. The court of appeals, applying other courts’ logic allowing insurers to off-set Social Security disability benefits by implementing self-help remedies, held that the Plan’s actions were not undermining ERISA’s civil enforcement scheme. Finally, the court decided that the district court’s dismissal of the Plan’s counterclaim under Section 502(a)(3) had not decided the issue of fact of whether Norman is liable for reimbursement of overpaid benefits and if the Plan may therefore enforce its recoupment provision. Accordingly, the Ninth Circuit held that res judicata did not bar the Plan from using its self-help remedy. For these four reasons, the court of appeals reversed and remanded with instructions to the district court to enter summary judgment in favor of the Plan. Interestingly, the Affordable Care Act and the potential conflicts this decision may create was never discussed within the order. Nevertheless, allowing an insurer to cut-off health insurance benefits to a family of participants seems to be at odds with the ACA. 

Tenth Circuit

J.W. v. BlueCross BlueShield of Tex., No. 1:21-cv-21, 2022 WL 2905657 (D. Utah Jul. 22, 2022) (Judge Howard C. Hielson, Jr.). Plaintiff J.W. sued Blue Cross Blue Shield of Texas under Section 502(a)(1)(B) and for violating the Mental Health Parity and Addiction Equity Act after Blue Cross denied claims to pay for treatment at two facilities where J.W.’s son was receiving care for mental health and substance use disorder, causing plaintiff to incur over $170,000 in damages. Blue Cross denied the claims asserting that the programs did not meet the plan’s definition of a residential treatment center and that plaintiff had failed to get pre-authorization. In the complaint, plaintiff argued that Blue Cross “failed to adhere to ERISA’s requirements (such as providing him with all documents required by law) and changed its denial rationale.” J.W. also claimed that the centers qualified as “behavioral health practitioner(s)’ under the plan,” and Blue Cross violated the Parity Act by imposing restrictions on mental health treatment that it did not impose on analogous medical/surgical treatments. Blue Cross moved to dismiss for failure to state a claim. First, relying on the plan which Blue Cross included with its motion to dismiss, the court concluded that plaintiff failed to state claim for payment of benefits under Section 502(a)(1)(B), because the “benefits in question do not arise under the terms of the plan.” Specifically, the court concluded that the two facilities in question did not meet the plan’s definition of residential treatment centers, because neither facility offered 24 hour onsite nursing services as the plan expressly requires. Accordingly, the court dismissed the claim for benefits. Next, the court addressed the Parity Act violation. The court first stated that plaintiff’s contention that Blue Cross applied “medical necessity criteria to claims for mental health care in a manner that deviates from generally accepted standards or is more stringent than how it applies medical necessity criteria to claims for medical or surgical treatment,” to be misplaced because the claims at issue in the suit “were not denied on medical necessity grounds.” Thus, according to the court, even if it were to find that Blue Cross had violated the Parity Act by its application of medical necessity criteria, “that ruling would not redress Plaintiffs’ injuries.” As for plaintiff’s other arguments with regards to a Parity Act violation (preauthorization requirements, requiring residential treatment centers to have 24-hour onsite nursing, and more onerous licensing requirements for residential treatment centers), the court concluded that all of these assertions were simply not supported by the terms of the plan. Therefore, the court concluded that J.W. failed to assert a claim for violation of the Parity Act, and dismissed the claim. As such, Blue Cross’s motion to dismiss was granted in its entirety. 

Pleading Issues & Procedure

Third Circuit

Genomind, Inc. v. UnitedHealth Grp., No. 21-0373, 2022 WL 2905173 (E.D. Pa. Jul. 22, 2022) (Judge Wendy Beetlestone). After plaintiff Genomind, Inc., an out-of-network medical provider, sued United Healthcare Insurance Company for assigned healthcare benefits, United brought a counterclaim against Genomind for violations of Section 502(a)(3) seeking equitable relief. Genomind moved to dismiss United’s counterclaim pursuant to Rule 12(b)(6). In this order, the court granted the motion to dismiss because the relief sought by United was determined to be legal rather than equitable. “Simply labeling a claim as equitable does not make it so,” said the court. Relying on Supreme Court precedent, the court held that United failed to allege that the amount in seeks “is clearly traceable to particular funds or property in Genomind’s possession.” As equitable restitution requires “some specific thing” and not “a sum of money generally,” the court agreed with Genomind that United had failed to state a claim. Moreover, the court rejected United’s request to pursue discovery “into whether a specific block of money containing the overpayment exists.” For this reason, the court granted Genomind’s motion to dismiss, and did so with prejudice.

Fifth Circuit

Theriot v. The Bldg. Trades United Pension Tr. Fund, No. 18-10250, 2022 WL 2967439 (E.D. La. Jul. 27, 2022) (Judge Lance M. Africk). Robert A. Hamann was a retiree and participant in The Building Trades United Pension Trust Fund. After his death in 2016, his wife, Audrey L. Hamann, became entitled to post-retirement survival benefits per the plan terms. Ms. Hamann could elect to receive her survivor payments as either a lump sum or as a monthly annuity option. The plan also allowed for beneficiaries who elected monthly payments to switch to receive lump sum benefits “at any time in the future.” Although Ms. Hamann initially opted for monthly payments, she then decided to convert her monthly benefits into a lump sum payment. Ms. Hamann completed and returned the change form. The Fund received the conversion application on April 4, 2017. Ms. Hamann died the next day on April 5, 2017. Her daughter, plaintiff Deborah Theriot, contacted the Fund inquiring about the lump sum payment. Ms. Theriot was informed that she was not entitled to the lump sum payment because her mother was not alive on the date the payment was meant to be made, May 1, 2017. Ms. Theriot and her counsel administratively appealed the denial. During the administrative appeal the Fund did not comply with ERISA’s procedural requirements. This suit followed. Ms. Theriot asserted five claims: (1) a claim for benefits under Section 502(a)(1)(B), (2) a claim under Section 503 for failure to provide a full and fair review, (3) a claim for penalties under Section 502(c) for failure to produce plan documents, (4) a Section 502(a)(3) breach of fiduciary duty claim, and (5) a claim for interference with protected rights under Section 510. In 2019, the court dismissed the claim for benefits and the breach of fiduciary duty claim, and later that same year granted summary judgment for defendants on the failure to produce plan documents claim. Ms. Theriot appealed to the Fifth Circuit, which reversed, determining that Ms. Theriot had exhausted her administrative remedies. In response to the court of appeals’ reversal, the court remanded the claims to the Fund. On remand, the Fund once again denied Ms. Theriot’s claim. In response, Ms. Theriot filed an instant motion for leave to file a third amended complaint. Defendants opposed the amendments. The court first addressed defendants’ opposition to Ms. Theriot’s inclusion of post-remand actions to her claim for failure to provide a full and fair review and comply with procedural ERISA requirements. The court stated that the Fund’s remand denial letter did not need to inform Ms. Theriot of the time limits because the letter was not an initial denial notice. As for the Fund’s failure to comply with ERISA’s procedural requirements pre-remand, the court held that the remand itself was the remedy for these violations. Therefore, the court agreed with defendants, not only denying leave to amend with regard to the full and fair review claim, but dismissing that claim with prejudice. The court also dismissed with prejudice Ms. Theriot’s breach of fiduciary duty claim because, the court reasoned, she has a valid claim for benefits under Section 502(a)(1)(B) and therefore may not simultaneously plead a claim under Section 502(a)(3). With regards to Ms. Theriot’s Section 510 claim,  the court allowed Ms. Theriot the opportunity to respond to defendants’ assertion that she was not treated less favorably than other claimants because defendants broached this argument for the first time in their opposition. Finally, the court did not dismiss a challenged paragraph within the amended complaint because the paragraph was merely a recitation of the factual background and not a claim. As such, the court granted leave to file her third amended complaint as to the challenged paragraph. Accordingly, Ms. Theriot’s motion was granted in part and denied in part, and the causes of action under Sections 502(a)(3) and Section 503 were dismissed with prejudice. 

Ninth Circuit

Cherry v. The Prudential Ins. Co. of Am., No. 21-27 MJP, 2022 WL 2916573 (W.D. Wash. Jul. 25, 2022) (Judge Marsha J. Pechman). Plaintiff Andrew Cherry brought this suit against The Prudential Insurance Company of America after the insurer terminated Mr. Cherry’s disability benefits under the Microsoft employee benefit plan. Mr. Cherry asserted claims under Sections 502(a)(1)(B) and (a)(3). Parties cross-moved for judgment on the claim for benefits and reserved the fiduciary breach claim for trial. On May 2, 2022, the court granted summary judgment in favor of Mr. Cherry on his Section 502(a)(1)(B) claim and ordered Prudential to reinstate Mr. Cherry’s disability benefits and pay him unpaid benefits from the termination date plus interest. Prudential moved to stay the enforcement of judgment pending an appeal and asked that the bond requirement be waived. The court declined to waive the bond requirement, instead granting the portion of judgment pertaining to the award of past benefits upon the posting of a sufficient bond. The meat of the case had to do with whether the court should grant a stay as it applies to the portion of the judgment reinstating Mr. Cherry’s disability benefits going forward, and whether the obligation to provide these benefits “qualifies as an injunction that is not automatically stayed.” The court ultimately concluded that payment of ongoing benefits is injunctive in nature because it does more than order a lump sum payment by requiring Prudential to “continuously act to provide ongoing benefits.” Finally, the court turned to weighing whether it ought to grant Prudential’s request to stay this portion of the judgment, and concluded “the balance of hardships tips in favor of Cherry.” As the court saw it, Prudential has over a trillion dollars, whereas Mr. Cherry “would have to continue living without an income, something very few people can afford to do.” Thus, the court denied Prudential’s motion as it applied to the part of the judgment pertaining to the ongoing benefits. 

Provider Claims

Ninth Circuit

Southcoast Specialty Surgery Ctr., Inc. v. Blue Cross of Cal., No. SA CV 21-01944 TJH (KESx), 2022 WL 3009129 (C.D. Cal. Jul. 19, 2022) (Judge Terry J. Hatter, Jr.). Plaintiff South Coast Specialty Surgery Center, Inc., is a surgical weight-loss center, that sued Blue Cross of California under ERISA Section 502(a)(1)(B) seeking payment for services it provided to Blue Cross insureds. Blue Cross moved to dismiss for lack of standing. The court held that the assignments South Coast Surgery Center received from its patients only conveys the provider with the right to directly receive payment from Blue Cross, but “does not convey the patient’s rights to ERISA benefits or the right to sue to enforce those benefits.” Thus, because the assignments only give the provide the right to receive direct payment, the court concluded plaintiff lacks standing to sue under ERISA. Accordingly, the motion to dismiss was granted, with prejudice. 

Withdrawal Liability & Unpaid Contributions

Fourth Circuit

Bd. of Trs., Sheet Metal Workers’ Nat’l Pension Fund v. Four-C-Aire, Inc., No. 20-2181, __ F. 4th __, 2022 WL 2963188 (4th Cir. Jul. 27, 2022) (Before Circuit Judges Niemeyer, Agee, and Diaz). The Board of Trustees of the Sheet Metal Workers’ National Pension Fund sued seeking recovery of a delinquent $97,601.01 exit contribution from a former participating employer, defendant Four-C Aire, Inc. In its complaint, The Board of Trustees argued that Four-C’s obligation arose under a collective bargaining agreement between the Sheet Metal Workers’ International Association Local Union No. 58 and the Central New York Sheet Metal Contractors Association, which Four-C was a member of. Parties cross-moved for summary judgment, and the district court concluded that Four-C had adopted the agreement and therefore granted judgment in favor of The Board of Trustees. The district court awarded $166,958.07 in damages including the delinquent contribution, interest, and liquidated damages, and found that Four-C owned The Board of Trustees attorneys’ fees and costs. Four-C appealed the summary judgment order, arguing that the district court erred in holding that by signing a wage sheet it was signing a “me-too” agreement, and that Four-C was therefore bound to and had adopted the collective bargaining agreement of the Sheet Metal Contractors Association and that the incorporated trust documents within the collective Bargaining agreement required Four-C to pay an exit contribution. The Fourth Circuit in its decision stated, “because we agree with the district court that Four-C-Aire adopted the agreement by its conduct, we affirm.”