Messing v. Provident Life & Accident Ins. Co., No. 21-2780, __ F.4th __, 2022 WL 4115873 (6th Cir. Sept. 9, 2022) (Before Circuit Judges Clay, Rogers, and Kethledge)

ERISA provides that a plan participant, beneficiary, or fiduciary can sue to obtain “appropriate equitable relief.” 29 U.S.C. § 1132(a)(3). One of the thorniest issues in ERISA litigation is what this provision means. Who is allowed to obtain equitable relief, and what kind of relief can they get? In this published decision, the Sixth Circuit circumscribed the ability of a plan fiduciary to use ERISA’s equitable relief provision to claw back benefits it had previously paid to a participant. At the same time, it overturned that fiduciary’s denial of benefits to the participant.

The plaintiff is Mark Messing, an attorney in Traverse City, Michigan, who unfortunately began struggling with depression in 1994. His condition worsened over the ensuing years to the point that he was eventually hospitalized in 1997. He returned to work, but never full-time, and filed a claim for long-term disability benefits under his ERISA-governed employee benefit plan, which was insured by defendant Provident.

Provident initially approved his claim, but terminated it after a few months. In 1999, Messing sued Provident, who eventually agreed to reinstate his claim. Provident continued paying benefits until 2018, at which time it reviewed updated records from Messing’s physician. After examining these records, and referring the case for further medical review, Provident concluded that Messing could return to work and terminated his claim.

Messing filed suit against Provident, and Provident counterclaimed. Provident’s counterclaim was based on evidence it had uncovered during its investigation that Messing had performed some legal services while receiving benefits. Provident contended that it should be allowed to recover overpaid benefits from Messing under ERISA’s equitable relief provision.

The district court upheld Provident’s termination of benefits, but rejected Provident’s argument that it was equitably entitled to recover overpayments. Both parties appealed.

The Sixth Circuit first tackled the issue of whether Provident was justified in terminating Messing’s benefits. Because the benefit plan did not grant Provident discretionary authority to determine benefit eligibility, the court reviewed Provident’s decision de novo. In doing so, the court addressed two categories of evidence: the physicians’ reports and attorney affidavits.

There were three physician reports, and the Sixth Circuit determined that one was equivocal, one was unhelpful to Messing (indeed, Messing had told the doctor “I’m not” in response to the question of how he was impaired), and the third favored Messing. The court noted, however, that all three doctors “acknowledged the fragile state of Messing’s mental health and that he should be mindful to avoid stressful environments to prevent a relapse into a worse state of depression.” Furthermore, only the third doctor “directly addressed the question at issue: whether Messing could return to work. He squarely stated Messing could not.”

As for the affidavits, they attested that “lawyering is a stressful occupation, that Messing lacks the ability to deal with stress, and that Messing has lost the skills to return to the practice of law after a 20-year hiatus.” The court found that these affidavits were only marginally helpful, as the court was already aware that practicing law is stressful, and testimony regarding Messing’s lost skills “is a separate problem that goes to his employability as a lawyer, not Messing’s disability.” However, the affidavits did provide “some support” for Messing’s argument that he continued to suffer from depression, which was relevant to his claim.

Taking all this evidence together, the Sixth Circuit determined that this was a sufficient showing by Messing, by a preponderance of the evidence, to demonstrate that he “remains unable to return to work as an attorney. Because the district court has held otherwise, we reverse.”

The court then turned to Provident’s claim for equitable relief. Provident asserted that it was entitled to either a lien for restitution or a lien by agreement. The Sixth Circuit agreed with the district court that Provident was not entitled to relief under its restitution theory. The district court had held that Provident “needed to prove that Messing’s statements ‘induced’ it into making payments it otherwise would not have made.” Provident argued that it did not need to show inducement, and that the restitution remedy “simply exists to ‘restore the status quo.’”

However, the Sixth Circuit consulted the Restatement of Restitution and Unjust Enrichment, which “is clear that Provident must prove that the transfer of benefits to Messing was induced by fraud.” Provident had learned that Messing had done part-time legal work, but it could not prove that it would have terminated his claim if it had known about that work. The evidence only showed that Provident would have reevaluated Messing’s claim, and “a review of Messing’s claim does not necessarily mean it would have terminated his benefits earlier.” Because Provident had not introduced satisfactory evidence of inducement, it could not prevail on its restitution theory.

Provident fared no better with its lien by agreement theory. Provident argued that the Individual Disability Status Updates Messing signed from 2010 through 2017 created such an agreement because they included a condition that Messing would repay any overpayments. However, the Sixth Circuit rejected this argument because the language Provident sought to enforce was not in the plan itself: “[A]n equitable lien by agreement for the reimbursement of overpaid benefits under § 502(a)(3)’s equitable relief clause requires that the ERISA-qualified plan contain a promise to repay overpaid benefits.” No such requirement existed in Messing’s benefit plan and thus Provident could not pursue a lien by agreement.

Finally, the court emphasized that “to allow Provident to obtain [equitable] relief…would be illogical in light of our separate holding that Messing remains disabled.”

In short, the appeal was a total victory for Messing, whose benefits will now presumably be reinstated. Attorney claimants often fare well with the courts in ERISA disability disputes, and this case was no exception.

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

Breach of Fiduciary Duty

Third Circuit

Perrone v. Johnson & Johnson, No. 21-1885, __ F.4th __, 2022 WL 4090301 (3d Cir. Sep. 7, 2022) (Before Circuit Judges Jordan, Restrepo, and Smith). Health care industry behemoth Johnson & Johnson has made the headlines a lot recently. This February the company agreed to a $26 billion opioid settlement for its role in contributing to the drug epidemic as one of the country’s largest pharmaceutical distributors. The company is of course also responsible for making one of the country’s COVID-19 vaccines, and administering hundreds of millions of doses worldwide, although the FDA has recently limited its approved use in the U.S. due to rare but serious side effects. And, as relevant to this Employee Stock Ownership Plan (“ESOP”) ERISA class action, the company has faced a major scandal regarding one of its best-selling products, Johnson’s Baby Powder. Over the years, Johnson & Johnson has faced thousands of lawsuits in which plaintiffs alleged that its talc-based baby powder contains asbestos, a carcinogen that is linked to ovarian and other cancers. In late 2018 Reuters published an article, J&J Knew For Decades That Asbestos Lurked In Its Baby Powder, in which the news outlet described how Johnson & Johnson knew that its product likely contained asbestos but kept that information from regulators and consumers by taking actions like influencing scientific research and U.S. regulations. This article created such a splash that other news sources picked it up and Johnson & Johnson’s stock declined over 10% immediately after its publication. As a result of the revelations about Johnson’s Baby Powder and the company’s actions, two major lawsuits are currently pending in the U.S. District Court for the District of New Jersey, a “Products Liability Action” about personal injuries caused by the talc-based products, In re Johnson & Johnson Talcum Powder Prod. Mktg., Sales Pracs. & Prod. Liab. Litig., and a “Securities Fraud Action” alleging senior executives at the company failed to comply with federal securities disclosure laws, Hall v. Johnson & Johnson. In light of all of this, plaintiffs in this lawsuit, participants in the Johnson & Johnson ESOP, allege that the ESOP’s fiduciaries violated their duties by failing to take actions that could have protected the ESOP from the stock market ramifications of these scandals. Specifically, plaintiffs asserted that defendants could have taken one of two actions to ward off the steep stock price drop. First, they claim that defendants could have made corrective public disclosures that may well have prevented such significant stock price declines, and therefore protected the participants. Second, they argued that defendants could have stopped investing in J&J stock altogether and chosen instead to hold the ESOP contributions in cash. Defendants moved to dismiss the complaint in the district court, and the district court granted their motion, agreeing that plaintiffs’ proposed alternative actions failed the Supreme Court’s Fifth Third Bancorp v. Dudenhoeffer test, because a reasonable fiduciary would view the proposed disclosures or cash holdings as “being likely to do more harm than good to the ESOP.” Plaintiffs appealed the dismissal. In this order, the Third Circuit affirmed the lower court’s ruling agreeing that neither proposed course of action outlined in plaintiffs’ complaint passed the Dudenhoeffer test because both “would do more harm than good.” The Third Circuit recognized that this standard, requiring a plaintiff to propose an alternative course of action that is so clearly beneficial as to satisfy this requirement, “is a high bar to clear, even at the pleadings stage, especially when guesswork is involved.” Nevertheless, the Third Circuit held that this is the standard required, and plaintiffs failed to meet it. As the Third Circuit pointed out, only one post-Dudenhoeffer decision, a case in the Second Circuit, “has held that a plaintiff plausibly alleged that corrective disclosures were so clearly beneficial that no prudent corporate-insider fiduciary could have concluded that earlier corrective disclosures would have done more harm than good.” As ESOPs already exist within an exemption to ERISA’s typical diversification requirements, the post-Dudenhoeffer world poses a doubly difficult position for ESOP participants bringing these types of suits who are naturally concerned with the stability of their retirement investments. This decision then is typical and demonstrative of these difficulties, whether or not one agrees with its conclusions.

Disability Benefit Claims

Second Circuit

Baribeau v. Hartford Life & Accident Ins. Co., No. 3:20-CV-01290 (KAD), 2022 WL 4095778 (D. Conn. Sep. 7, 2022) (Judge Kari A. Dooley). Cardiovascular/thoracic surgeon Yvon Baribeau stopped working in 2019 due to a hand deformity called Dupuytren’s Disease, which he developed in both hands, and which affected his ability to safely perform surgery. Mr. Baribeau is a participant in his employer’s employee welfare benefit plan, the Catholic Medical Center long-term disability plan. He submitted a claim for benefits in February 2020. His claim was approved. However, the plan’s administrator, defendant Hartford Life and Accident Insurance Company, decided to offset Mr. Baribeau’s $15,000 in gross monthly benefits not only by the amount he was receiving from the Social Security Administration, but also by the gross monthly benefits of $10,000 he was receiving as a participant in another long-term disability income plan which was sponsored by the American Medical Association (“AMA”). This suit followed, after Hartford upheld its determination on appeal. The parties each moved for summary judgment on the issue of whether Hartford correctly offset the monthly benefits by the amount Mr. Baribeau was receiving from the AMA Plan. As the Catholic Medical Center’s plan includes a discretionary clause, the parties agreed that abuse of discretion review was applicable. Under this review standard the court concluded that Hartford’s interpretation of the plan language was rational and in keeping with the plain words of the plan. In fact, Mr. Baribeau’s explanation of how the AMA Plan could fall outside the plan’s definition of “Other Income Benefits” was, in the court’s view, the more convoluted reading of the plan which would require the court to read additional terms and requirements into the phrase “as a result of,” which the court disfavored doing. Accordingly, the court entered summary judgment in favor of Hartford.

Sixth Circuit

Alvesteffer v. Howmet Aerospace, No. 1:20-cv-703, 2022 WL 4077838 (W.D. Mich. Sep. 6, 2022) (Magistrate Judge Phillip J. Green). This February, Your ERISA Watch summarized Magistrate Judge Green’s summary judgment decision in this long-term disability benefit suit wherein plaintiff Thomas Alvesteffer challenged the termination of his benefits by his employer defendant Howmet Aerospace. The court granted in part and denied in part Mr. Alvesteffer’s motion for summary judgment. Specifically, the court concluded that the denial was arbitrary and capricious and vacated the termination decision. However, the court went on to state that Mr. Alvesteffer had failed to establish his entitlement to benefits and therefore decided to remand to defendant for reconsideration. The court expressed that it was beyond its expertise to weigh medical and vocational evidence pertaining to disability, and therefore relied on Sixth Circuit precedent supporting remand as an appropriate remedy when a court identifies problems with the decision-making process rather than when it draws the conclusion that a claimant is obviously entitlement to benefits. Mr. Alvesteffer moved for reconsideration pursuant to Federal Rule of Civil Procedure 59(e), asking the court to reconsider its decision that this matter should be remanded to defendant for further assessment of whether Mr. Alvesteffer is disabled under the plan terms. In his motion, Mr. Alvesteffer stressed that he was “not asking the Court to become a medical or vocational expert, but only to review the expert opinions already provided by (him), and if it deems those opinions to be competent and valid, to reconsider and alter or amend its opinion accordingly and award benefits.” As before, the court was unwilling to perform this function, again concluding that “it lacks the experience and expertise to evaluate such opinions or otherwise evaluate medical or vocational evidence.” The court rejected “Plaintiff’s assurances that he is ‘not asking the Court to become a medical or vocational expert,’” stating to the contrary, “this is precisely what Plaintiff is requesting.” As before, the court declined to survey the evidence of disability, and thus denied Mr. Alvesteffer’s motion for reconsideration.


Eleventh Circuit

Prolow v. Aetna Life Ins. Co., No. 9:20-cv-80545, 2022 WL 4080743 (S.D. Fla. Sep. 6, 2022) (Magistrate Judge William Matthewman). This suit is a class action pertaining to wrongfully denied coverage for a cancer treatment known as Proton Beam Radiation Therapy. The court’s order granting summary judgment in favor of the two named plaintiffs on their individual claims for benefits was our notable decision in Your ERISA Watch’s February 2, 2022 issue. Following that order, this case has proceeded as a putative class action. The parties have engaged in numerous discovery disputes. In this order, the court denied Aetna Life Insurance Company’s motion to compel plaintiff’s two engagement letters with their counsel. Plaintiffs opposed producing their engagement letters and argued that under Eleventh Circuit case law “class representatives’ engagement letters with counsel are not discoverable, absent a showing by the defendant that a conflict of interest exists” between the class representatives and their counsel. They argued that contrary to Aetna’s belief, the engagement letters do not promise or in any way speak to incentive payments to Plaintiffs, nor do they contain any information about counsel’s hourly rate. Rather, plaintiffs attested, the engagement letters requested are standard contingency fee agreements. In support of this, plaintiffs produced the two letters for the court to review in camera. Having reviewed the engagement letters, the court confirmed the truth of plaintiff’s assertions. Furthermore, the court agreed with plaintiffs that defendant did not show that a conflict of interest exists between the two plaintiffs and their attorneys. Instead, Aetna had argued that a potential conflict exists between plaintiffs and the putative class, which the court stated is not grounds to require production of engagement agreements in the Southern District of Florida. Finally, the court held that it has not yet certified the class or made any determination on class damages, meaning the engagement letters between plaintiffs and their legal counsel is not yet “relevant under Rule 26(b)(1) at this stage of the litigation.” Accordingly, the court denied defendant’s motion due to lack of relevancy at this time but did so without prejudice. For readers interested in more information about Proton Beam Radiation Therapy litigation, be on the lookout for an article in the upcoming fall edition of the American Bar Association TIPS Newsletter, written by our colleagues at Kantor and Kantor, Anna Martin and Tim Rozelle.

Medical Benefit Claims

Second Circuit

Connecticut Gen. Life Ins. Co. v. Ogbebor, No. 3:21-cv-00954 (JAM), 2022 WL 4077988 (D. Conn. Sep. 6, 2022) (Judge Jeffrey Alker Meyer). In May 2020, Cigna Health and Life Insurance Company opened an investigation into a healthcare provider, Stafford Renal LLC, which offered dialysis treatments for end stage renal disorder (“ESRD”), believing the provider’s prices for these treatments were “significantly inflated.” During that investigation, Cigna learned that Stafford lacked a required ESRD license, as its old license had expired in 2016, and that the provider was therefore operating in violation of Texas medical licensing requirements. Additionally, Cigna claimed that it interviewed patients receiving treatment at Stafford and discovered that many of the claims for dialysis treatment that Stafford had billed for were not actually performed. Accordingly, Cigna commenced this lawsuit against the provider and its owner, Mike Ogbebor, under Section 502(a)(3) of ERISA, and also brought claims for fraudulent misrepresentation, negligent misrepresentation, and violations of the Connecticut Unfair Trade Practices Act, the Connecticut Health Insurance Fraud Act, and for civil theft. Cigna also sought to pierce the corporate veil and requested the court hold Mr. Ogbebor personally liable for the actions of his company. Mr. Ogbebor had answered Cigna’s complaint on behalf of both defendants. The court previously struck this answer with respect to Stafford because Mr. Ogbebor is a non-lawyer, and the court held that he could not represent his company in this suit. Cigna then moved for a default entry against Stafford. The court granted the default due to Stafford’s failure to appear. Cigna also moved for discovery seeking medical records, information regarding Mr. Ogbebor’s role in Stafford’s ownership and management, and Mr. Ogbebor’s legal and criminal record pertaining to past fraud. Mr. Ogbebor, despite repeated warnings from the court, failed to respond to Cigna’s discovery requests. In this order, the court granted Cigna’s motion for default judgment against both defendants based on their actions to date and awarded declaratory judgment stating that Cigna has no obligation to honor past or future claims submitted by Stafford for ESRD services, and treble monetary damages for the ESRD claims Cigna already paid Stafford, totaling $14,371,384.95 as Cigna adequately stated a claim for civil theft under insurance-friendly Connecticut law which requires such tripling. However, because Cigna was found to be entitled to legal relief in the form of damages, the court did not award anything under Cigna’s claim for equitable recoupment under Section 502(a)(3) of ERISA. Finally, the court agreed to pierce the corporate veil, finding that Cigna provided sufficient evidence for it to infer that Stafford was functioning as Mr. Ogbebor’s corporate alter-ego. The court therefore held Mr. Ogbebor personally liable for the entirety of the damages awarded to Cigna.

Ninth Circuit

RJ v. Cigna Health & Life Ins. Co., No. 5:20-cv-02255-EJD, 2022 WL 4021890 (N.D. Cal. Sep. 2, 2022) (Judge Edward J. Davila). Participants in ERISA-governed healthcare plans have brought a putative class action suit against Cigna Behavioral Health Inc. and MultiPlan, Inc. for failure to reimburse covered out of network mental health provider claims at usual, customary, and reasonable (“UCR”) rates. Plaintiffs claim that defendants engaged in a conspiracy to artificially underprice claims, wherein the insurer played an active role in collaborating and instructing MultiPlan on its “target rate” for each claim it desired to reprice, and MultiPlan utilized these instructions when designing its Viant methodology, giving the arbitrarily low prices the appearance of legitimacy. Plaintiffs asserted claims of RICO violations and RICO conspiracy against both defendants, an ERISA claim for underpayment of benefits against Cigna, and claims for breach of fiduciary duties of loyalty and duty of care against each of the two defendants under Section 502(a)(3) seeking declaratory and injunctive relief. Defendants moved to dismiss. Cigna sought dismissal of the RICO claims, and as part of its Rule 12(b)(6) motion also argued that claims of one of the named plaintiffs (“LW”) must be brought in the Western District of Tennessee in accordance with her plan’s forum selection clause. MultiPlan also sought dismissal of the RICO claims and the ERISA Section 502(a)(3) claim asserted against it. As far as the RICO claims were concerned, the court was satisfied that plaintiffs adequately pled a “violation of RICO based on the predicate acts of mail and wire fraud, but not based on the predicate act of money laundering.” Therefore, the court granted defendants’ motions for the RICO claims to the extent they were based on money laundering. MultiPlan’s motion to dismiss the ERISA claim brought against it was denied. The court was convinced that the complaint sufficiently alleges that MultiPlan is a fiduciary under ERISA, and that the same allegations that support plaintiffs’ RICO claim also support a breach of fiduciary duty claim. The court also rejected MultiPlan’s argument that plaintiffs are not entitled to equitable relief. Plaintiffs, the court held, may seek equitable relief in the alternative and it would be premature at the pleading stage “to engage in a battle over whether or not a specific equitable remedy is appropriate.” Finally, the court held that plaintiff LW’s forum selection clause was valid, and a forum selection clause could be enforced during a Rule 12(b)(6) motion to dismiss. Accordingly, the court dismissed LW’s claims from the case, holding that she must bring her claims in the Western District of Tennessee. Thus, as explained above, the motions to dismiss were granted in part and denied in part.

Pension Benefit Claims

Eleventh Circuit

Southeastern Carpenters & Millwrights Pension Tr. Fund v. Carter, No. CV 621-046, 2022 WL 4098517 (S.D. Ga. Sep. 7, 2022) (Judge J. Randal Hall). Decedent Bruce C. Jeffers was a participant in an ERISA-governed pension plan, the Southeastern Carpenters and Millwrights Pension Trust Plan. This suit is an interpleader action brought by the plan to determine the proper beneficiary of Mr. Jeffers’ pension benefits. During his life, Mr. Jeffers had named several beneficiaries at different junctures, and the last two of his beneficiary designation forms were completed while he was married but lacked his then-wife’s signature. Because of this, Mr. Jeffers left a bit of a mess behind. The story begins in 2008, when his first designation occurred. At that time, Mr. Jeffers elected his then-fiancée, defendant Robin Handly, as his primary beneficiary. It seems Mr. Jeffers and Ms. Handly never married. Instead, two years later, in 2010, Mr. Jeffers married Grace Jeffers, and Mr. Jeffers accordingly changed his beneficiary designation card and designated Ms. Jeffers as the plan’s primary beneficiary, and his stepdaughter, defendant Victoria Thames, as the plan’s contingent beneficiary. In his 2013 designation form, Mr. Jeffers attempted to designate his sister, defendant Cynthia Gail Carter, as his primary beneficiary. At the time of the 2010 and 2013 designations, Mr. Jeffers was still married to Ms. Jeffers. This was the last designation form Mr. Jeffers completed. The Jeffers divorced in 2020. Unfortunately, the plan expressly requires a married plan participant to obtain their spouse’s signature if they wish to name a beneficiary other than their spouse, and neither the 2010 nor 2013 designation form included Ms. Jeffers’ signature. Per the plan, “if a spouse is designated as a Beneficiary, such designation shall be revoked automatically by a subsequent divorce.” Thus, the 2020 divorce revoked Ms. Jeffers’ status as a beneficiary. None of the parties disputed that the 2008 beneficiary designation form was valid at the time. The parties also agreed that the 2010 designation was valid insofar as it designated Ms. Jeffers. However, the parties disputed whether (1) the 2010 contingent beneficiary designation was invalid; (2) the 2013 beneficiary designation was invalid; (3) the 2010 beneficiary designation revoked defendant Handly’s 2008 designation as a beneficiary even after the divorce; and (4) the divorce revoked defendant Thames’ status as a contingent beneficiary. Each of the defendants moved for summary judgment. The court began its analysis with the claim for benefits of defendant Carter (the sister) and concluded that the 2013 designation form, which lacked Ms. Jeffers’ signature, was invalid. Accordingly, Ms. Carter was found not to be entitled to benefits and her motion for summary judgment was denied. Next, the court concluded that the 2010 contingent beneficiary designation, which also lacked Ms. Jeffers’ signature, was also invalid, meaning defendant Thames’s (the stepdaughter’s) motion for summary judgment was denied too. Finally, the court concluded that the 2010 beneficiary form, which was valid for its primary beneficiary designation of Ms. Jeffers, because a designation of a spouse does not require the spouse’s signature, had revoked defendant Handly’s (the ex-fiancée’s) designation as beneficiary. Therefore, her motion for summary judgment was also denied. Having found that none of the defendants had been effectively named and were therefore not entitled to the benefits, the court returned the funds to the plan, and instructed the plan to distribute the funds pursuant to Section 5.14, which provides for how to pay benefits when no beneficiary or contingent beneficiary has been effectively named.

Pleading Issues & Procedure

Sixth Circuit

Schmittou v. The Cincinnati Life Ins. Co., No. 1:21-cv-556, 2022 WL 4080143 (S.D. Ohio Sep. 6, 2022) (Judge Matthew W. McFarland). On July 22, 2021, defendant The Cincinnati Life Insurance Company filed an interpleader complaint in the Court of Common Pleas of Hamilton County, Ohio against Melissa Schmittou and Pamela Schmittou to determine the proper beneficiary of a group life insurance policy belonging to decedent Timothy Schmittou. Mr. Schmittou is plaintiff Melissa Schmittou’s ex-husband and was married at the time of his death to Pamela Schmittou. Plaintiff, both in her response in the interpleader action and in her complaint in this lawsuit, which she brought on August 27, 2021, alleges that she and not Pamela Schmittou is the beneficiary of the policy and therefore she is entitled to the policy’s benefits. It should be noted that after commencing this lawsuit in the federal district court, plaintiff voluntarily dismissed her counterclaim without prejudice in the state law interpleader case. Defendant nevertheless moved to dismiss Ms. Schmittou’s case, arguing that the court should abstain from exercising jurisdiction over the case pursuant to the Colorado River abstention guidelines outlined by the Supreme Court. In response, Ms. Schmittou claimed that the motion to dismiss is moot as she voluntarily dismissed her counterclaim in the state law case. As a preliminary matter, the court stated that despite Ms. Schmittou’s failure to address the Colorado River factors in her briefing, the court found that it should consider each in turn before reaching a decision on the appropriate course of action regarding the two parallel cases. First, the court held that because the state court has not assumed jurisdiction over res or property in the case, the first of the eight factors weighed in favor of it exercising jurisdiction. Next, the court concluded that the state and federal forums were each as convenient to the parties as the another and found the second factor therefore neutral. Third, the court weighed the avoidance of piecemeal litigation factor, concluding that this factor weighed strongly in favor of abstention as there is a potential for two outcomes that are in direct conflict with one another. The court also factored that the state law interpleader case was brought first, which again favored abstention. The governing law here is federal, but the state court action could adequately resolve the issues as it enjoys concurrent jurisdiction with federal courts in ERISA actions, so the fifth factor was found to be essentially neutral. The relative progress in the proceedings was also a neutral factor, as neither case had progressed much to date. Finally, the presence of concurrent jurisdiction, as previously mentioned, weighed in favor of abstention. Thus, the court concluded that the factors set forth in Colorado River favored the court abstaining from exercising its jurisdiction. However, the court declined to dismiss the case and instead determined that a stay of proceedings pending the conclusion of the state court case was the appropriate action. Accordingly, the court stayed the federal suit until the resolution of the state court interpleader action.

Provider Claims

Second Circuit

Superior Biologics NY, Inc. v. Aetna, Inc., No. 20 CIVIL 5291 (KMK), 2022 WL 4110784 (S.D.N.Y. Sep. 8, 2022) (Judge Kenneth M. Karas). Healthcare provider Superior Biologics NY, Inc. sued a collection of ERISA-governed healthcare plans, Aetna, Inc., and its subsidiaries under Section 502(a)(1)(B) of ERISA and for promissory estoppel under New York law for underpayment of pharmacological intravenous immunoglobulin treatments it provided to covered patients. Defendants moved to dismiss pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). They argued that each of the plans at issue includes anti-assignment provisions that preclude plaintiff from suing. The court in its order found the provisions valid and not waived by Aetna, and therefore agreed with defendants that Superior Biologics lacked standing to sue under ERISA. Accordingly, defendants’ motion to dismiss pursuant to Rule 12(b)(1) was granted. The court therefore did not consider the motion to dismiss for failure to state a claim. As Superior Biologics was already given the opportunity to pursue discovery and had already amended its complaint, the court dismissed with prejudice.

Withdrawal Liability & Unpaid Contributions

Seventh Circuit

International Bhd. of Elec. Workers v. Great Lakes Elec. Contractors, No. 21 C 5009, 2022 WL 4109718 (N.D. Ill. Sep. 8, 2022) (Judge Elaine E. Bucklo). Defendant Great Lakes Electrical Contractors, Inc. was a participating employer in plaintiff International Brotherhood of Electrical Workers Local No. 150’s multiemployer pension plan. Pursuant to a collective bargaining agreement it was required to make contributions to the fund on behalf of covered employees. Great Lakes Electrical was owned by defendant Richard P. Anderson. On June 3, 2018, Great Lakes Electrical’s collective bargaining agreement expired, and its obligation to make new contribution to the fund ended. Under the Multiemployer Pension Plan Amendments Act (“MPPAA”) of ERISA, employers who cease contributions to a multiemployer pension fund incur withdrawal liabilities, but, as relevant here, employers in the construction and building industry are exempt from withdrawal liabilities unless the employer “continues to perform work in the jurisdiction of the collective bargaining agreement…or resumes such work within 5 years after the date on which the obligation to contribute under the plan ceases.” So, when Great Lakes Electrical resumed business operations well within 5 years of the expiration of the collective bargaining agreement, the fund assessed withdrawal liability against the employer in the amount of $263,390. The fund filed this suit after Great Lakes Electrical did not make its required payments. “On July 18, 2022, the parties stipulated that (Great Lakes Electrical) was responsible for the full withdrawal liability assessed by the Fund, plus interest, liquidated damages, and collection costs.” The question left for the court to decide in this order was the personal liability of defendant Anderson. The fund argued that Mr. Anderson, who continued operations as an unincorporated sole proprietorship in 2021, was under common control with Great Lakes Electrical, and the fund should therefore be able to recover the withdrawal liability jointly and severally against not only Great Lakes Electrical but also personally go after Mr. Anderson. The court agreed with the fund that under the plain text of the withdrawal exemption for the construction industry a withdrawal had occurred, and the fund may impose withdrawal liability against the new entity of the employer. Holding otherwise, the court expressed, “would frustrate ‘almost the entire purpose of the (MPPAA),’ which is ‘to prevent the dissipation of assets required to secure vested pension benefits.’” Thus, in accordance with MPPAA, Mr. Anderson’s sole proprietorship became jointly and severally liable thanks to its continued covered work, and the fund’s motion for summary judgment on this issue was accordingly granted.