Amara v. Cigna Corp., No. 20-202, __ F. 4th __, 2022 WL 16842742 (2d Cir. Nov. 10, 2022) (Before Circuit Judges Livingston, Kearse, and Lee)
ERISA practitioners are familiar with the Supreme Court’s 2011 decision in CIGNA Corp v. Amara, a seminal case in which the Court discussed, among other things, the contours of ERISA’s equitable remedies under 29 U.S.C. § 1132(a)(3).
The case involved a class action challenge by Cigna employees to the way Cigna calculated benefits under its pension plan. The Supreme Court ruled that federal courts are not allowed to reform benefit plans under 29 U.S.C. § 1132(a)(1)(b), but ERISA’s (a)(3) equitable provision does allow for such a remedy. The Court remanded the case for further proceedings.
And further proceedings there were. The case went down to the district court, and then back up to the Second Circuit, which in 2014 affirmed the district court’s final judgment ordering Cigna to reform its pension plan. The Second Circuit then sent the case back to the district court, where the parties wrangled over how benefits should be calculated under the newly reformed plan. The district court resolved these disputes in a series of four orders issued in 2016 and 2017.
Under these “methodology orders,” Cigna began calculating the new benefits in 2018, and by February of 2019, it had paid nearly $30 million in past-due benefits to over 8,900 class members.
However, this was not the end of the story. In April of 2019, plaintiffs moved to enforce the methodology orders and to hold Cigna in contempt and impose sanctions. In their motions, plaintiffs contended that Cigna had not properly complied with the court’s orders. The district court denied these motions, and plaintiffs appealed.
After appealing, plaintiffs moved for an equitable accounting of Cigna’s efforts to satisfy the judgment, which the district court also denied. Plaintiffs appealed this decision as well, and the two appeals were consolidated by the Second Circuit.
Cigna filed a motion to dismiss the first appeal, which the Second Circuit addressed first. Cigna argued that the court did not have jurisdiction over plaintiffs’ challenge to the methodology orders because the orders became final more than 30 days before plaintiffs appealed. The Second Circuit noted that post-judgment orders such as the district courts’ orders in this case are ordinarily appealable, but determining when they are “final” for the purposes of appealability can sometimes be difficult. After surveying relevant case law, the court concluded that “a district court’s postjudgment order is final when it ‘has finally disposed of [a] question, and there are no pending proceedings raising related questions.’”
Under this rule, the court agreed with Cigna that plaintiffs’ challenge to the methodology orders was untimely. The court noted that Cigna began calculating and paying benefits immediately after the issuance of the methodology orders, and relied on those orders to do so. Thus, “from a practical perspective, it was therefore essential for Plaintiffs (or Cigna, if it so chose) to appeal promptly.”
Plaintiffs argued that the methodology orders were not final, and thus were still appealable, until plaintiffs moved to enforce. However, the court rejected this argument because “it implies that they could have challenged the Methodology Orders…at ‘some nebulous time in the future,’” and further implied that the orders “were immune from appellate review (because they were non-final) unless Plaintiffs chose to move for further relief.” Neither implication made sense to the court.
The Second Circuit arrived at a different result regarding plaintiffs’ motion for sanctions, finding it was timely and appealable. However, the court limited its review “only to whether the district court properly interpreted the Methodology Orders in the Sanctions Order, not whether the Methodology Orders were correctly decided in the first instance.” On this issue, the court quickly found no reversible error, concluding that the district court reasonably interpreted its prior orders.
As for plaintiffs’ second appeal, regarding the denial of their motion for an equitable accounting, the Second Circuit again affirmed, finding no clear error. The court stated that plaintiffs “largely rehash[ed] factual arguments” that allegedly showed “substantial issues” with Cigna’s implementation of the relief. However, Cigna provided “acceptable explanations” to the district court for the compliance issues plaintiffs raised. Based on these explanations, which were supported by declarations from Cigna detailing its efforts to satisfy the judgment, the district court “made a factual finding that Cigna had adequately complied with the final judgment. That finding was not clearly erroneous.” As a result, the district court’s orders were affirmed in their entirety.
Janet Amara filed this action more than 20 years ago, in 2001, and it has survived through two district court judges, three appeals to the Second Circuit, and one appeal to the Supreme Court. Is it finally over? It sure seems that way, but stay tuned to ERISA Watch to find out…
Below is a summary of this past week’s notable ERISA decisions by subject matter and jurisdiction.
Nolan v. Detroit Edison Co., No. 18-13359, 2022 WL 16743866 (E.D. Mich. Nov. 7, 2022) (Judge David M. Lawson). In this order, the court granted final approval of a class action settlement in a suit challenging the implementation of and transition to a new cash balance retirement plan. As the court summarized it, “the core question in this case is whether the DTE Retirement Plan – or the Retirement Choice Decision Guide that the defendants provided to certain DTE employees – promised an ‘A+B Benefit’ to participants who, in 2002, elected to move from the Traditional Pension Plan to the Cash Balance Plan.” The court conducted a fairness hearing on October 25, 2022, during which no objections were made. Assessing the $5.5 million settlement, and its proposed individual distributions of up to $69,207.17 to the 466 class members, the court was satisfied that the settlement was the product of informed and fair negotiations and was thus reasonable and adequate. This was especially true, the court held, because the settlement will secure a significant recovery for the members of the class and plaintiffs’ prospect of success on the merits was an uncertain thing. Additionally, named plaintiff Leslie Nolan’s request for a $15,000 incentive payment was granted, as the court considered the payment “just compensation for time and effort spent on bringing this action to a successful conclusion.” Regarding the class itself under Rule 23(a) and (b)(1)(A), the court stuck to its analysis during its preliminary settlement approval order and reaffirmed that the class met all requirements of Rule 23 given the commonality between the members, defendants’ systematic actions, and the fact that class resolution will avoid inconsistent adjudications and incompatible standards of conduct for the defendants. Accordingly, the court certified the class unconditionally. Finally, the court evaluated class counsel’s motion for $1,833,333.33 in attorneys’ fees and $72,707.08 in expenses. The court reduced the requested attorneys’ fee award from 33.33% of the entire common fund to 33.33% of the fund after litigation expenses were subtracted from the total. From this calculation, the court awarded attorneys’ fees in the amount of $1,804,097.64, which the court felt adequately compensated the attorneys for their work done and the results they achieved. The expense reimbursement was awarded at the amount requested. Having made these decisions, the court granted the motion and dismissed the claims with prejudice, bringing this suit to its conclusion.
C.P. v. Blue Cross Blue Shield of Ill., No. 3:20-cv-06145-RJB, 2022 WL 16835839 (W.D. Wash. Nov. 9, 2022) (Judge Robert J. Bryan). In this decision, the court granted a motion to certify a class of transgender individuals who allege their claims for medical care to treat gender dysphoria were denied under self-funded ERISA plans administered by defendant Blue Cross Blue Shield of Illinois in violation of the anti-discrimination provision of the Affordable Care Act (“ACA”). The court certified a class defined as all individuals who are participants or beneficiaries of ERISA self-funded group health plans administered by Blue Cross containing categorical exclusions of gender-affirming healthcare services and whose claims were denied or will be denied pre-authorized coverage of treatment within those exclusions. Evaluating the class under Rule 23(a), the court held that class of upwards of 1,740 individuals satisfied the numerosity requirement. Blue Cross’s arguments for why the class did not satisfy the commonality and typicality requirements failed to persuade the court against certifying the class. Contrary to Blue Cross’s assertions, the court disagreed that the varying language of each of the plans defeated commonality. Rather, the court agreed with plaintiffs that Blue Cross’s actions and the steps it took in denying the claims were common to all members regardless of the language of the individual plans. Furthermore, the court found the applicability of the Religious Freedom Restoration Act (“RFRA”) and Blue Cross’s possible defense under RFRA to be “in doubt.” As for typicality, the court found the claims of the class members to be similar enough to warrant certification. The court found the relief plaintiffs seek – an order declaring Blue Cross’s actions violated the rights of these individuals under the ACA – and the opportunity to have their claims reprocessed to be appropriate for class-wide restitution. Finally, regarding certification under Rule 23(a), Blue Cross did not challenge the adequacy of the named plaintiff or class counsel, and the court affirmed that they were adequate representatives of the interests of the class. Regarding Rule 23(b), it was clear to the court that independent adjudications of whether Blue Cross is subject to the anti-discrimination provision when acting as a third-party plan administrator “would be dispositive of the interests of the other members not parties to the individual adjudications or would substantially impair or impede their ability to protect their interests.” For these reasons, the court certified the class.
Disability Benefit Claims
Bedwell v. Schlumberger Grp. Welfare Benefits Plan, No. 4:18-cv-04515, 2022 WL 16824813 (S.D. Tex. Nov. 8, 2022) (Magistrate Judge Andrew M. Edison). Plaintiff Barney Bedwell sued the Schlumberger Group Welfare Benefits Plan and its administrative committee after his long-term disability benefits were terminated when his plan’s definition of disability changed from being unable to perform the duties of one’s “own occupation” to “any occupation.” The parties filed cross-motions for summary judgment. Magistrate Judge Edison issued this order recommending the court deny Mr. Bedwell’s summary judgment motion and grant the committee’s motion. In the magistrate’s opinion, the plan’s reliance on the opinions of its reviewing doctors over those of Mr. Bedwell’s treating doctors was not an abuse of discretion, especially because the opinions of the two sets of doctors were not wholly inconsistent or incompatible interpretations of the medical record. Furthermore, Magistrate Edison did not agree with Mr. Bedwell’s assertion that the plan’s administrator failed to credit the opinions of his treating doctor. Instead, it was Magistrate Edison’s view that the reviewing doctors and the plan administrator evaluated the opinions of Mr. Bedwell’s doctor and simply disagreed with the doctor’s assessment. For these reasons, Magistrate Edison could not conclude that defendants’ actions were an abuse of discretion, and therefore recommended that their decision to terminate the benefits be upheld by the court.
Logan v. The Prudential Ins. Co. of Am., No. 2:20-cv-01742-KJM-JDP, 2022 WL 16836642 (E.D. Cal. Nov. 9, 2022) (Judge Kimberly J. Mueller). Plaintiff Tammy Logan sued The Prudential Insurance Company of America under ERISA Section 502(a)(1)(B) challenging the insurer’s denial of her claim for long-term disability benefits. Ms. Logan sought disability benefits after being diagnosed with osteoarthritis and radiculopathy, and after undergoing two surgeries on her ankle and knee. The court reviewed Prudential’s denial under de novo review and found Ms. Logan disabled for the entirety of the “own occupation” period of disability. The court stated that it found no reason to discredit Ms. Logan’s own attested pain, symptoms, and inability to work, stating, “Logan consistently sought treatment for her pain, including surgeries and physical therapy…[t]he evidence of this treatment… corroborates her claims of pain. It is unlikely she undertook this extensive, intrusive, and lengthy effort to treat an invented ailment.” The court additionally credited the opinions of Ms. Logan’s treating doctors over the opinions of Prudential’s reviewers who “faced an incentive to give an opinion in Prudential’s favor,” and whose opinions and analyses have been discounted by other courts. Finally, the court cited the Social Security Administration’s award of disability benefits to Ms. Logan as additionally bolstering her position. The court thus held that Ms. Logan was disabled between June 19, 2019 and July 2, 2021. As to whether Ms. Logan remains disabled under the “any occupation” definition of disability, the court felt it could not speak to the matter on the record currently before it and thus remanded the matter to Prudential for a decision on that question. Finally, the court held Ms. Logan is entitled to an award of attorneys’ fees and costs and directed the parties to confer over the amount of an appropriate award. Ms. Logan was also awarded prejudgment interest at the rate prescribed in 28 U.S.C. § 1961 to compensate her for the lost time of unpaid benefits.
RJ v. CIGNA Health & Life Ins. Co., No. 20-cv-02255-EJD (VKD), 2022 WL 16839492 (N.D. Cal. Nov. 9, 2022) (Magistrate Judge Virginia K. Demarchi). Plaintiffs in this putative class action are challenging defendant Cigna Health & Life Insurance Company’s failure to reimburse submitted mental health care claims at usual, customary, and reasonable rates, alleging the underpayments are a breach of plan provisions in violation of ERISA. Plaintiffs asked the court to allow them to take 16 depositions, six beyond the ten depositions automatically available to them under Federal Rule of Civil Procedure 30(a)(2). Upon consideration of the parties’ arguments, the court ultimately settled on granting plaintiffs leave to take two additional depositions, for a total of 12. Specifically, plaintiffs requested six additional depositions which included a current Cigna employee, a former Cigna employee, and four unidentified witnesses from four non-party benefit plan sponsors. As it is early and therefore difficult for the plaintiffs to make the particularized showing of need for additional depositions that is required, and because the testimony of the six requested individuals would likely contain overlapping information, the court held that the proper course of action would be to allow plaintiffs to take depositions of two additional party or party-affiliated witnesses and pick for themselves which two they wish to take.
Pension Benefit Claims
Haslam v. McLaughlin, No. 22-11268-RGS, 2022 WL 16823011 (D. Mass. Nov. 8, 2022) (Judge Richard G. Stearns). After benefits from her late brother’s ERISA-governed retirement plan were paid to his ex-wife, defendant Wendy Sheppard, plaintiff Debra Haslam commenced this suit against the trustees of the retirement plan, the plan’s administrator, the plan’s insurer, and Ms. Sheppard. Ms. Haslam brought ERISA claims under Sections 502(a)(1)(B) and (a)(3), as well as state law breach of fiduciary duty, breach of trust, breach of contract, negligence, unjust enrichment, and conversion claims. Defendants moved to dismiss. The court granted the motion. The court agreed with defendants that the only relevant document was Mr. Sheppard’s beneficiary designation, made after the divorce, which designated Wendy Sheppard as his primary and sole beneficiary. Because Ms. Haslam did not prove the existence of any form involving the ERISA plan that listed her as her brother’s beneficiary prior to his death, the court held that Ms. Haslam did not state a valid claim under ERISA. Her state law claims, similarly predicated on whether she was the proper beneficiary under the benefit plan, were also dismissed as preempted by ERISA. Finally, the court declined to exercise supplemental jurisdiction over the claims against Ms. Sheppard, and so granted her motion to dismiss as well.
Withdrawal Liability & Unpaid Contributions
Careful Bus Serv. v. Local 854 Health & Welfare Fund, No. 21 Civ. 10472 (LGS), 2022 WL 16856270 (S.D.N.Y. Nov. 10, 2022) (Judge Lorna G. Schofield). Faced with looming insolvency caused by the COVID-19 pandemic, defendant Local 854 Health and Welfare Fund attempted to amend its trust declaration, and by extension its collective bargaining agreement, to provide for a termination premium for former contributing employers equal to each employer’s “incurred but not reported” expenses. Incurred but not reported expenses are claims made by participants while they were eligible for benefits, but which were not reported until after a given participant’s eligibility has ended. Plaintiffs Careful Bus Service Inc. and X-L Escort Services, Inc. are two such employers who had collective bargaining agreements with the union and were assessed termination premiums after they switched their healthcare coverage. They commenced this suit challenging an arbitration decision which found in favor of defendants. Plaintiffs moved for summary judgment seeking declaratory judgment that the trust declaration was not validly amended to add the termination premium. Their motion was granted. The court held that the undisputed facts showed the amendment did not follow the requirements outlined in the collective bargaining agreement and the “purported amendment adding the Termination Premium to the Trust Declaration is therefore invalid and not binding on Plaintiffs.” The court added that the amendment was also “not incorporated by reference in the CBA.” Accordingly, the court held that plaintiffs do not owe defendant a termination premium. Nevertheless, the court stated that neither party was entitled to an award of attorneys’ fees because defendants’ position was not meritless or made in bad faith and awarding fees to the employers would negatively impact the Fund and its participants which directly cuts against ERISA’s purposes.
Cent. States, Se. & Sw. Areas Pension Fund v. Oudenhoven Constr., No. 20 C 887, 2022 WL 16744280 (N.D. Ill. Nov. 7, 2022) (Judge Gary Feinerman). In March of 2016, defendant Oudenhoven Construction, Inc. permanently ceased its operations. That closure effected a complete withdrawal of the company from the Central States, Southeast and Southwest Areas Pension Fund. Accordingly, on January 11, 2017, the Fund sent the company a notice and demand for withdrawal liability assessed at $597,074.43. Despite engaging in a phone call with the Fund and sending a letter to the Fund requesting a review of the withdrawal liability determination, Oudenhoven Construction never formally demanded arbitration to contest the withdrawal liability determination. Maintaining that it was not required to respond to Oudenhoven’s request for review and having waited more than 120 days from the date of the company’s request for review, the Fund and its trustees commenced this action seeking a judicial order holding Oudenhoven and businesses under common ownership with it jointly and severally liable for the full amount of the assessed withdrawal liability to the Fund as well as attorneys’ fees, costs, damages, and interest. The Fund moved for summary judgment. As it was undisputed that defendants never demanded arbitration, and “MPPAA provides that an employer must timely demand arbitration even if a pension plan does not respond to a request for review,” the court concluded that the Fund in no way hindered defendants’ ability to timely demand arbitration and their failure to do so means the plan is entitled to collect the entire amount of withdrawal liability. For this reason, the court granted the Fund’s summary judgment motion, and gave the Fund until November 18 to file a motion to recover attorneys’ fees, costs, interest, and statutory damages.