Curtis v. Aetna Life Ins. Co., No. 3:19-cv-01579-MPS, 2023 WL 34662 (D. Conn. Jan. 4, 2023) (Judge Michael P. Shea)

In this week’s notable decision, Judge Michael P. Shea applied a “somewhat-novel doctrine of ‘class standing’” to significantly limit claims in an ERISA healthcare coverage class action against Aetna Life Insurance Company. This application of class standing as a hurdle separate and above Article III standing and outside the bounds of Federal Rule of Civil Procedure 23 analysis strikes us as a topic worthy of our readers’ attention.

Plaintiff Dennis E. Curtis, a beneficiary of a Yale University ERISA group medical benefits plan, brought suit on behalf of himself and a class of similarly situated participants and beneficiaries of ERISA healthcare plans administered by Aetna challenging Aetna’s use of medical necessity criteria for physical and rehabilitative therapies not set forth in the plans or their provisions. According to the complaint, these internal “Clinical Policy Bulletins” relied upon by Aetna “modify and limit, to the plan members’ detriment, the plans’ definition of ‘medically necessary.’” Thus, Mr. Curtis alleges that Aetna has violated ERISA by failing to administer the claims for medical benefits in accordance with the language of the plans.

Before Mr. Curtis obtained discovery and moved for class certification under Rule 23, Aetna filed a motion for partial dismissal. Aetna argued that Mr. Curtis, who was denied coverage for physical therapy services, never submitted claims for coverage for additional types of rehabilitation services benefits and therefore lacked class standing to bring these claims. Aetna, however, took a clear position that it was not challenging Mr. Curtis’s Article III standing.

The court found that, despite having Article III standing, Mr. Curtis’s challenges to physical therapy denials were too dissimilar to denials received by other potential class members for the five other therapies – speech, pulmonary rehabilitation, cognitive rehabilitation, occupational, and voice – for Mr. Curtis to have class standing to litigate claims related to these services on behalf of the class. The court reasoned that the evidence Mr. Curtis will need to prove his individual claims for physical therapy benefits will be different from the proof needed to prove the other class members’ claims pertaining to the other challenged therapies. This was so, the court concluded, because the Clinical Policy Bulletins contain unique definitions of medical necessity for these six sub-categories of therapies and it could only decide whether Aetna’s actions violated ERISA by individually analyzing the relevant Clinical Policy Bulletin for each therapy.

Despite Mr. Curtis’ allegation that Aetna’s practice of limiting the definition of medically necessary beyond those of the plans was general to all class members, the court found that under Second Circuit precedent Mr. Curtis did not have a “sufficiently personal and concrete stake in proving [the] other, related claims against” Aetna. Thus, the court focused on the differences between the putative class members rather than Aetna’s challenged common practices.

Finally, the court disagreed with Mr. Curtis’s position that Aetna’s challenge to his class standing should be decided on a Rule 23 motion for class certification and not on a motion to dismiss. The court acknowledged that courts within the Second Circuit are not consistent about when they choose to analyze class standing. However, as the court saw it, Mr. Curtis’s individual claims for physical therapy gave him no incentive to develop medical evidence necessary to prove entitlement to different therapies for which he was never denied coverage. The court concluded that this justified analyzing class standing at the motion to dismiss stage, without the benefit of discovery, or the protections and protocols of Rule 23. For these reasons, the court granted Aetna’s motion, “leaving only (Mr. Curtis’) claims on behalf of a class related to… physical therapy benefits for which he sought coverage.”

In reaching this determination, the district court relied on Second Circuit precedent, including the decision in NECA-IBEW Health & Welfare Fund v. Goldman Sachs & Company, 693 F.3d 145 (2d Cir. 2012). However, in NECA-IBEW, the Second Circuit seemed to use class standing to expand Article III standing, not as a limitation, acknowledging that NECA did not have Article III standing to challenge the misrepresentations made with respect to securities it did not invest in, but that it could nevertheless assert those claims on behalf of the class if the challenged conduct implicated “the same set of concerns” as the misrepresentations that NECA did have Article III standing to challenge. Whether the district court’s decision in this case can be squared with that view of class standing is as “murky” as the “line between traditional Article III standing and so-called ‘class standing.’” Ret. Bd. of the Policemen’s Annuity & Benefit Fund of the City of Chicago v. Bank of N.Y. Mellon, 775 F.3d 154 (2d Cir. 2014). 

In any event, this tension between traditional Article III standing, class standing, and class certification under Rule 23 is a compelling topic and perhaps a noteworthy new trend, made particularly interesting in this decision by Aetna’s clear position that it was not challenging the named plaintiff’s Article III standing.

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

Breach of Fiduciary Duty

Ninth Circuit

Lehr v. Perri Elec., No. 19-17199, __ F. App’x __, 2023 WL 21466 (9th Cir. Jan. 3, 2023) (Before Circuit Judges Thomas, Bennett, and Sung). A former employer, trustee, and plan participant, Colleen Lehr, was criminally prosecuted for embezzling funds from the Perri Electric Inc. Profit Sharing Plan and Profit Sharing Trust Fund. The judgment in the criminal case and bankruptcy proceedings ordered restitution payments in the amounts Ms. Lehr embezzled from the plan. In this ERISA breach of fiduciary duty action against the Perri Electric Inc. company and the plan, Ms. Lehr and her husband Paul argued that the restitution payment she paid to Perri Electric should have been put back into the plan, rather than used by the company to cover business expenses. The district court granted summary judgment in favor of defendants, determining that the Lehrs lacked standing. Plaintiffs appealed. On appeal, the Ninth Circuit affirmed, holding “the district court correctly concluded that Ms. Lehr lacked standing to assert an ERISA breach of fiduciary duty claim” under Parker v. Bain, 68 F.3d 1131 (9th Cir. 1995), which held that “a plaintiff lacks standing under ERISA where they breach their fiduciary duty to the plan by embezzling funds in excess of their claimed account balance.” Although the particulars of this action were mostly not addressed in the Ninth Circuit’s decision, it did state that here “the money allegedly owed to the Plan by Ms. Lehr far exceeds her claimed account balance.” Additionally, the appellate court stated that the judgment in the criminal case against Ms. Lehr ordered payment to the Perri Electric company, not the plan, and a debtor in bankruptcy “cannot designate to which liability its payments will be allocated.” Accordingly, the Ninth Circuit found no error in the lower court’s finding that no mandate in the criminal case or the bankruptcy proceedings required the payment to the company be remitted to the plan. However, this view was not shared among all three judges on the panel. Judge Bennett dissented, finding the Lehrs “established a genuine dispute of material fact as to whether Ms. Lehr’s restitution payment constituted a Plan asset.” Judge Bennett argued that a factfinder could interpret the restitution payment as being intended to compensate the plan rather than the company. The majority’s view was flawed, in Judge Bennett’s opinion, because “by finding that the Lehrs lack statutory standing because the restitution payment was unambiguously not a Plan asset, the majority effectively precludes other Plan participants from challenging defendants’ use of the restitution payment under ERISA.” Judge Bennett reasoned that the criminal and bankruptcy judgments “could have been ordered to Perri Electric in its capacity as a fiduciary of the Plan.” This was supported, Judge Bennett concluded, by the fact that Ms. Lehr’s embezzlement was from the plan and not directly from the company, and the ordered restitution was the “exact amount” stolen by Ms. Lehr from the plan. Thus, looking at the facts favorably to the Lehrs, the dissenting opinion concluded that the purpose of the restitution payment was to remediate the plan for its losses, and therefore the Lehrs in their action are “simply seeking to enforce the bankruptcy judgment and not usurp Perri Electric’s supposed sole and unfettered discretion.” Although Ms. Lehr may not be an innocent party, participants who are, Judge Bennett stated, “are left with no recourse against defendants under the statute,” because the majority’s conclusion essentially finds that defendants didn’t violate any fiduciary duty in using the payment to cover business expenses rather than reimburse the plans.

Raya v. Barka, No. 19-cv-2295-WQH-AHG, 2023 WL 27358 (S.D. Cal. Jan. 3, 2023) (Judge William Q. Hayes). On March 19, 2019, the Department of Labor informed the Calbiotech, Inc. 401(k) Profit Sharing Plan that it was opening an investigation into its operations. The Department’s letter informed the plan that it had found that Calbiotech and the other plan fiduciaries failed to timely remit employee contributions and loan payments and failed to make mandatory safe harbor employer contributions into the accounts of the eligible participants in violation of ERISA. Despite this conclusion, the Department of Labor informed the plan that it had decided not to take legal action. Nevertheless, the plan and its fiduciaries did face legal action, when on December 2, 2019, pro se plaintiff Robert Raya filed this ERISA lawsuit challenging defendants’ conduct in administering the plan. In addition to a claim for benefits and claims for breaches of fiduciary duties, Mr. Raya also included a retaliation claim, arguing that defendants unlawfully terminated him in retaliation for requesting plan documents. The court previously granted summary judgment to defendants on plaintiffs’ claim for benefits, leaving Mr. Raya’s claims for equitable relief pertaining to defendants’ breaches of fiduciary duties pursuant to Sections 502(a)(2) and (a)(3), along with his Section 510 retaliation claim. Defendants moved for summary judgment. The court addressed the breach of fiduciary duty claims first. To begin, the court agreed with defendants that the plan’s phrase about matching contributions describing “‘an amount…as determined by the Board,’ expressly gives the Board of Calbiotech discretion to set the amount of matching contribution and does not preclude the Board from setting the amount to zero.” Accordingly, the plan documents allowed the board not to allocate matching contributions, and thus the court found no breach of fiduciary duty on this basis. Thus, defendants were granted summary judgment on the breach of fiduciary duty claims to the extent they were based on defendants’ failure to make matching contributions to the plan. Next, the court found that uncontroverted evidence established that defendants remitted Mr. Raya’s loan payments to his account in their entirety. Although the Department of Labor had found wrongdoing by defendants for failing to remit loan payments to other participants, the remittance schedule the Department provided demonstrated that Mr. Raya’s account was unaffected because the first unremitted payment occurred after Mr. Raya’s loan was fully repaid. Accordingly, defendants were granted summary judgment on the loan payment remittances claims as well. However, the court determined that the final basis for Mr. Raya’s breach of fiduciary duty claims – that defendants failed to make safe harbor matching contributions to the plan – raised a genuine dispute of material fact precluding an award of summary judgment. Additionally, the court found Mr. Raya had standing to assert this claim as a plan participant. Nevertheless, the court permitted Mr. Raya to proceed only with his breach of fiduciary duty claim asserted under Section 502(a)(2), concluding that his Section 502(a)(3) claim was duplicative and without a distinct remedy. Finally, the court denied defendants’ summary judgment motion on Mr. Raya’s retaliation claim. The court concluded that this claim may be timely, as Mr. Raya provided evidence which could indicate fraudulent concealment justifying tolling the statute of limitations. For these reasons, defendants achieved mixed success and their summary judgment motion was granted in part and denied in part as described above.

Disability Benefit Claims

Eighth Circuit

Diaz v. Metropolitan Life Ins. Co., No. 21-cv-679 (MJD/JFD), 2023 WL 112586 (D. Minn. Jan. 5, 2023) (Judge Michael J. Davis). Plaintiff Raul Diaz worked as a flight attendant for American Airlines for over 30 years until he experienced a tragic accident falling off a roof in 2017, which left him injured and disabled. The fall resulted in a calcaneal fracture of his right foot and the injury required four surgeries. Eventually, Mr. Diaz was diagnosed with avascular necrosis, or the death of bone tissue due to lack of blood supply. Mr. Diaz was never physically the same afterwards and was left with debilitating symptoms, including an inability to walk or stand for extended periods of time. In this action he sought a court order overturning defendant Metropolitan Life Insurance Company’s decision to terminate his long-term disability benefits after 24 months, the plan’s limitation for certain musculoskeletal disorders. The parties cross-moved for summary judgment. In this order the court concluded that MetLife abused its discretion and granted summary judgment in favor of Mr. Diaz. In particular, the court concluded the medical record supported Mr. Diaz’s avascular necrosis diagnosis, and MetLife therefore acted arbitrarily and capriciously in finding Mr. Diaz not disabled due to any nonlimited condition. The court found MetLife’s reviewing doctor’s conclusion that “there remains no evidence of imaging to support” the diagnosis of avascular necrosis problematic, especially since the doctor failed to request any additional imaging or medical records and did not attempt to speak to or consult Mr. Diaz’s treating physicians for further clarification. Had MetLife’s reviewers sought evidence of imaging to support the diagnosis rather than simply stating their conclusion to the contrary they would have found it. The court wrote, “the record is filled with evidence of medical imaging to support the claim of Diaz and his treating physicians that Diaz suffers from avascular necrosis. This includes a March 2019 CT Scan, a June 2019 MRI, a November 2019 CT Scan, a bone density test, and x-rays.” Confronted with this objective medical evidence that MetLife failed to address, the court found that MetLife had not satisfied its duties under ERISA as the plan’s administrator. In sum, the court felt that MetLife’s review of Mr. Diaz’s claim was not a quality review, and “MetLife cannot rewrite the administrative record now.”

Ninth Circuit

Veronica L. v. Metropolitan Life Ins. Co., No. 3:21-cv-01260-HZ, 2022 WL 18062830 (D. Or. Dec. 28, 2022) (Judge Marco A. Hernandez). Plaintiff Veronica L. worked for Google for twelve years as a Senior UX Writer until she became disabled in the summer of 2017. At that time, Veronica became unable to carry on working, describing how she “used to be able to push myself through at will and got to a point that I couldn’t push through anymore. I didn’t have the capability anymore.” From 2017 onward, Veronica explained that her mental and physical health problems led her to lead “an entirely different life.” Defendant Metropolitan Life Insurance Company (“MetLife”) approved Veronica’s long-term disability benefit claim but did so for her psychiatric and mental health symptoms, limiting her eligibility for benefits to the plan’s 36-month limitation period. 36 months later, MetLife informed Veronica that it would be terminating her benefits. Following an unsuccessful administrative appeal, Veronica commenced this ERISA suit seeking reinstatement of benefits. She argued that her severe chronic fatigue syndrome, a non-limited condition under her plan, has left her unable to work and that she is therefore entitled to benefits beyond the limitation period. As support, Veronica included medical records from her treating physicians, and all of these health care professionals opined that Veronica’s reports of her symptoms were entirely credible and the level of fatigue she was experiencing could not be attributed to her mental health conditions. MetLife’s reviewing doctor of osteopathy agreed that Veronica suffered from chronic fatigue syndrome but found that no objective evidence supported a finding that the disease was severe enough to be disabling on its own. On de novo review of the administrative record under Federal Rule of Civil Procedure 52, the court ultimately faulted MetLife for conducting a paper-only review of a condition which can only be diagnosed upon subjective symptoms and a physician’s in-person credibility assessment of those self-reported symptoms. Additionally, the court stated that MetLife’s blanket statement of a “lack of objective evidence” was inappropriate because “[f]atigue, like pain, is an inherently subjective condition.” To the court, MetLife’s failure to conduct an independent medical evaluation failed to develop the record such that “the Court cannot definitively determine whether Plaintiff is disabled due to a non-limited condition under the Plan.” To rectify this inadequate review, the court concluded that remand to the plan administrator to further develop the incomplete record was the proper recourse in this instance and declined to award judgment to either party at this time.

Exhaustion of Administrative Remedies

Ninth Circuit

Schmidt v. Employee Deferred Comp. Agreement, No. CV-22-01464-PHX-ROS, 2023 WL 35027 (D. Ariz. Jan. 3, 2023) (Judge Roslyn O. Silver). Widow Patricia Schmidt sued her late husband’s employer, the Temprite Company, its deferred compensation top hat plan, and the plans’ fiduciaries, seeking a lifetime monthly benefit of $4,583.33, to which she believes she is entitled under the terms of the plan. Following her husband’s death, the company took actions to frustrate Ms. Schmidt’s claim, at first outright denying the existence of the plan before Ms. Schmidt was able to locate plan documents among her husband’s possessions. Once she had done so, Ms. Schmidt attempted to apply for the benefits. At that point, the company changed gears, stating that Ms. Schmidt was not entitled to both shares of Temprite stock and plan benefits. Unable to exhaust the administrative appeals process, Ms. Schmidt pursued legal action. Defendants moved to dismiss and alternatively moved to transfer. To begin, the named plan administrator, defendant Bob Brown, moved to dismiss for lack of personal jurisdiction. Mr. Brown argued that, contrary to plan documents produced by Ms. Schmidt naming him as the plan administrator, he could not be deemed the plan administrator because “he never performed the work of plan administrator.” The court disagreed, holding Mr. Brown’s argument “does not prove what Brown thinks it does. Construed in the light most favorable to Patricia, Brown’s statement that he has not acted as the plan administrator is evidence he has not performed tasks he should have performed.” Thus, at least at this stage of litigation, the court was satisfied that Mr. Brown is the plan’s administrator and thus subject to “ERISA’s nationwide service of process statute.” Next, the court addressed defendants’ position that Ms. Schmidt failed to exhaust administrative remedies. The court construed defendants’ position as paradoxical because they were simultaneously claiming the top hat plan did not exist while also arguing Ms. Schmidt was required to comply with its claim procedures. Given the allegations in Ms. Schmidt’s complaint, the court found that there was no reasonable procedure to exhaust, stressing that, while top hat plans are excepted from some ERISA requirements, they are not exempt from the requirement that they follow a reasonable procedure for handling benefit claims. “In simple terms, it would not have been reasonable to require Patricia send an administrative claim to Brown, an individual who disavows any role in the administration of the top hat plan.” Furthermore, there was evidence Ms. Schmidt made a reasonable attempt to comply with the claims procedure. For these reasons, the motions to dismiss were denied. Finally, the court also denied defendants’ undeveloped motion to transfer.

Pension Benefit Claims

Second Circuit

Maddaloni v. Pension Tr. Fund, No. 19-cv-3146 (RPK) (ST), 2023 WL 22633 (E.D.N.Y. Jan. 3, 2023) (Judge Rachel P. Kovner). Plaintiff Mark Maddaloni sued the Pension Trust Fund of the Pension, Hospitalization and Benefit Plan of the Electrical Industry and its board under Section 502(a)(1)(B), arguing defendants’ denial of his application for disability pension was an abuse of discretion. Mr. Maddaloni claimed defendants’ reliance in their denial on a plan term that required participants receiving workers’ compensation or disability benefits to apply for disability pension within two years of the date of disability onset was arbitrary and capricious because he was not receiving either. Thus, Mr. Maddaloni argued that under the terms of the plan his application was timely. Defendants responded that the plan was silent on the issue of whether participants who were not receiving workers’ compensation or disability benefits had to apply for disability pension benefits, and they were therefore able to rely on the summary plan description and their own “broad discretion” to impose this limitation. The court rejected defendants’ argument, concluding it “misunderstands the power of ERISA trustees.” Instead, only three requirements were necessary, the court held, for Mr. Maddaloni to be eligible for disability pension: (1) being permanently disabled; (2) having at least 10 pension credits; (3) and being employed by contributing employers for 10 years immediately prior to disability onset. The court concluded defendants failed to meet their burden of establishing that Mr. Maddaloni, who was receiving Social Security disability benefits, did not satisfy these requirements. Furthermore, the court held that Mr. Maddaloni complied with the application requirements in place at the time when he submitted his application. Accordingly, the court granted summary judgment in favor of Mr. Maddaloni, and denied in part defendants’ motion for summary judgment, granting summary judgment in favor of defendants only on Mr. Maddaloni’s alternative claim asserted under Section 502(a)(3), which Mr. Maddaloni did not object to. However, because the court felt it could not “conclude that plaintiff is entitled to benefits,” it opted to remand to the board for further proceedings consistent with its ruling here.

Pleading Issues & Procedure

Fourth Circuit

Int’l Painters & Allied Trades Indus. Pension Fund v. I. Losch, Inc., No. Civ. BPG-19-3492, 2023 WL 24247 (D. Md. Jan. 3, 2023) (Magistrate Judge Beth P. Gesner). A multi-employer pension fund and its trustees filed an ERISA lawsuit to collect withdrawal liability payments after a contributing employer ceased payments into the fund. Last September, the court granted plaintiffs’ motion for summary judgment and awarded withdrawal liability, interest, and liquidated damages. Defendants moved pursuant to Federal Rule of Civil Procedure 59(e) to alter or amend that judgment. In this order the court denied their motion. At bottom, the court held that defendants’ arguments amounted “to nothing more than a disagreement with the court’s conclusion,” and a rehashing of rejected arguments. Specifically, the court expressed that it considered and addressed defendants’ position that defendant Harry Yohn satisfied the requirements of the spousal attribution exception, reiterating how it had “discussed defendants’ argument at some length in its memorandum opinion.” As there was no intervening change in controlling law nor any new evidence not previously available, the court concluded that defendants needed to demonstrate the court’s ruling was a clear error of law. To the court, defendants here did not do so, and in fact did not even engage with the court’s conclusions regarding the spousal attribution exception. Mere disagreement, the court held did not suffice to clear the high bar necessary to overturn or revise the court’s judgment. Accordingly, all remains as before.

Provider Claims

Third Circuit

University Spine Ctr. v. Edward Don & Co., No. 22-3389, 2023 WL 22424 (D.N.J. Jan. 3, 2023) (Judge John Michael Vazquez). A healthcare provider given an assignment of benefits by its patient sued a healthcare plan, the Edward Don & Company, LLC plan, and its claims administrator, Cigna Health and Life Insurance, under ERISA Section 502(a)(1)(B) after the plan paid only $6,184.46 of a medically necessary spinal surgery for which they billed $340,316. Defendants moved to dismiss pursuant to Federal Rule 12(b)(6), arguing the provider failed to state a claim by failing to allege how the payment of $6,18.46 violates the plan. The provider had included in its complaint language from the plan that explains that the plan will pay for the lesser of either the provider’s normal charge, the Medicare allowable fee for the same service, or the 80th percentile of charges made by providers for the same service in the same geographic location. Although plaintiff’s complaint seemed to draw the conclusion that a payment of about $6,000 for spinal surgery must be in violation of the policy language, the complaint failed to explain what calculation defendants used to determine their rate of reimbursement, and precisely what about that calculation was incorrect. Because of this, the court agreed with defendants that Plaintiff failed to state a claim by “merely referenc[ing] the relevant provision without articulating how and why it entitles Plaintiff to additional compensation.” Dismissal, however, was without prejudice, and the provider may replead to address this stated deficiency.

Statute of Limitations

Second Circuit

Spillane v. N.Y.C. Dist. Council of Carpenters & Joiners of Am., No. 21 Civ. 8016 (AT), 2023 WL 22611 (S.D.N.Y. Jan. 3, 2023) (Judge Analisa Torres). Patrick and Deborah Spillane, a retired member of the New York City District Council of Carpenters and Joiners of America union and his spouse, brought an ERISA, LMRDA, and state law claims against the union, its pension and welfare funds, union leadership, and the funds fiduciaries after a union trial found that Mr. Spillane performed employment for a non-union contractor, and the trial “verdict” was subsequently used as grounds to terminate the Spillanes’ pension and healthcare benefits. Plaintiffs asserted ERISA claims under Sections 502(a)(1)(B) and (a)(3), for benefits and breaches of fiduciary duties respectively. Defendants moved to dismiss for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6). The court began its analysis by addressing the pension plan’s one-year statute of limitations. Plaintiffs argued that a 365-day window within which to commence legal action was unreasonably short. The court disagreed and referred to decisions by other courts in the Southern District of New York which have upheld “limitations provisions that afforded participants less than a year to file suit following a denial of benefits.” Accordingly, the court granted defendants’ motion to dismiss the Section 502(a)(1)(B) claim for pension benefits as untimely. Next, the court analyzed the claim for healthcare benefits. The relevant plan documents for the welfare plan conferred discretionary authority upon the fund’s trustees. Thus, the court held that the arbitrary and capricious standard of review applied. Plaintiffs’ assertion that the union trial verdict was flawed was found by the court not to “establish that the Fund Defendants’ actions were arbitrary and capricious. The Fund Defendants’ interpretation that…Spillane worked in disqualifying employment [and] was no longer eligible for benefits under the Welfare Plan, is supported by the plain language of the 2003 Welfare Plan SPD and the SMMs defining ‘disqualifying employment.’” Thus, the court held that plaintiffs failed to state a claim for benefits. Next, the court dismissed plaintiffs’ breach of fiduciary duty claim under ERISA as “conclusory.” Plaintiffs’ LMRA claims held up no better than their ERISA claims and were also dismissed under Rule 12(b)(6). The court also declined to exercise supplemental jurisdiction over the state law tort claim. Finally, the court denied plaintiffs’ motion for leave to amend their complaint, holding amendment would be futile.

Withdrawal Liability & Unpaid Contributions

Seventh Circuit

Trs. of the Chi. Reg’l Council of Carpenters Pension Fund v. Drive Constr., No. 19 C 2965, 2023 WL 22141 (N.D. Ill. Jan. 3, 2023) (Judge Virginia M. Kendall). Trustees of multi-employer ERISA pension funds sued an employer for unpaid contributions under collective bargaining agreements between the employer and the Chicago Regional Council of Carpenters union. In this order the court granted plaintiffs’ motion for leave to file a second amended complaint to add an additional defendant, a company they believe is under common control with the first employer, which they allege was created to avoid paying millions of dollars to the funds in contributions. Plaintiffs expressed in their motion that they discovered the existence of the alter ego of the first company thanks to an investigation by the Illinois Attorney General, and that defendant “deliberately concealed” this corporate relationship “throughout the litigation.” Furthermore, the trustees, relying on subpoena responses during the attorney general’s investigation, offered evidence that the employers failed to submit over $9 million to the pension funds and thus moved to file the second amended complaint to allege their original contribution claims against both companies as either alter egos or as a single employer. The court disagreed with the employer that permitting the amendment would be unduly prejudicial, holding that this “appears to be a bona fide change in circumstances,” as the relationship between the employers “was not available until (the) response to the AG’s subpoena in the separate investigation.” Finally, the court held “[i]f Plaintiff’s allegations prove to be true…denying the filing of the SAC would serve to shield Defendants from liability due to their own actions of concealing the ownership of the company,” and that the interest of justice would therefore be promoted by granting plaintiffs’ motion.