Laidig v. GreatBanc Trust Co., No. 22-cv-1296, 2023 WL 1319624 (N.D. Ill. Jan. 31, 2023) (Judge Mary M. Rowland)

At first blush, employee stock ownership plans (“ESOPs”) sound like a great deal for employees. ESOPs can make companies more democratic, by giving employees equity, and they often have financial advantages, such as deferred compensation and favorable tax treatment.

However, these plans often are not what they seem. Equity can be a mirage, because employees rarely get voting rights with their shares, and they have no realistic influence over how the company is managed. Furthermore, a significant part of employees’ compensation is wrapped up in one asset – company stock – which leaves them vulnerable to ill-timed market swings.

Perhaps most importantly, ESOPs are vulnerable to abuse. ERISA requires employers and administrators to fulfill fiduciary obligations when conducting ESOP transactions, including the duty to ensure that “adequate consideration” is paid/received for the company stock. However, many employers – especially in privately held companies where it is easier to conceal the details of transactions – try to skirt ERISA’s rules in order to take financial advantage. A classic example is a company that is performing poorly, so its owners try to cut their losses by selling the company stock to the ESOP at an inflated price. In doing so, the owners are able to cash out at a substantial markup and saddle the employees with the losses.

Because of these problems, lawsuits under ERISA challenging ESOP administration have been on the rise. This week’s notable decision is yet another example. The plaintiffs are employees of Vi-Jon, LLC, a health and beauty care company, who are participants in an ESOP established by Vi-Jon. They initiated this putative class action on behalf of the plan against (1) Berkshire Fund, a private equity investment firm which owned the majority of Vi-Jon stock prior to the ESOP transaction, (2) GreatBanc Trust Company, the plan trustee responsible for authorizing and negotiating the ESOP transaction, and (3) John Brunner, the previous controlling shareholder of Vi-Jon.

Plaintiffs contended that these defendants caused and participated in a prohibited transaction under ERISA by selling 100% of the Vi-Jon stock to the plan at an inflated stock valuation. Plaintiffs allege that Berkshire acquired a majority stake in Vi-Jon in 2006, but by 2020 was anxious to sell Vi-Jon. At the time Vi-Jon was one of Berkshire’s top-five longest-held investments without an impending deal. Berkshire had been attempting to sell the company for its desired price of $400 million, but could not do so because of Vi-Jon’s high debt load and a lack of pricing flexibility.

Things changed in 2020, however. One of Vi-Jon’s products is hand sanitizer, which provided the company a surge in profits as demand skyrocketed at the beginning of the COVID-19 pandemic when there were few competitors. Plaintiffs alleged that this profit surge was temporary, and that defendants knew this surge would be temporary as more competitors entered the space.

Plaintiffs alleged that defendants took this opportunity to dump Vi-Jon’s stock at the price they wanted by a new method – selling it to the ESOP. In doing so, defendants could “create the buyer (the Plan) on their own terms and choose the agent that would sit on the other side of the table (GreatBanc).” Plaintiffs alleged that defendants colluded in artificially and knowingly inflating the price of the stock, which saddled the new employee participants of the plan with unsustainable debt. Plaintiffs further alleged that the ESOP’s financial condition and debt load is so dire that “Plan participants will not fully own the company until well after its youngest employees pass retirement age.”

After plaintiffs filed suit, defendants filed a motion to dismiss, which was the subject of this decision. Defendants first argued that plaintiffs lacked standing to bring their action. The court rejected this argument, holding that plaintiffs, who expressly pled concrete pecuniary harm to their shares in the ESOP resulting from the overvaluation of the sale price, adequately stated an injury conferring them with Article III standing.

The court then turned to the merits of the action, which were also challenged by defendants. The court concluded that plaintiffs had adequately stated a claim that GreatBanc engaged in a prohibited transaction under ERISA Section 409. In doing so, the court rejected GreatBanc’s “single argument – that Plaintiffs speculate that the company was overvalued but do not state a cognizable loss redressable under Section 409.” The court deemed this argument to be “essentially a repackaging of its standing arguments and has no merit.” Plaintiffs’ allegations “raise an inference that the company was overvalued and that GreatBanc, as the Plan fiduciary, is liable for any losses as a result.”

As for Berkshire and Brunner, plaintiffs alleged that they violated ERISA Section 502(a)(3) through their knowing participation in the prohibited transaction. The court denied defendants’ motion to dismiss this claim as well. The court noted that Berkshire “had three members on Vi-Jon’s board, and thus, had direct control of the ESOP valuation process,” and that Brunner “also sat on the Vi-Jon board and had similar control and knowledge of the valuation process.” As a result, Plaintiffs had properly stated breach of fiduciary duty claims against them.

As for remedies, the court also rejected defendants’ argument that plaintiffs could not obtain equitable relief, holding that plaintiffs had properly demanded rescission and disgorgement of ill-gotten gains as allowed under ERISA. The court also found that plaintiffs had adequately “traced” those gains under the Federal Rules of Civil Procedure’s lenient pleading standards.

The court did grant defendants’ motion to dismiss a portion of the Section 502(a)(3) claim. The court noted that plaintiffs sought a declaration that defendants had engaged in a prohibited transaction. However, declaratory relief is only appropriate if “threatened injury is certainly impending, or there is a substantial risk that the harm will occur.” Plaintiffs’ allegations, on the other hand, “are requests for the Court to declare violations of a transaction that already occurred, which is not appropriate.” Plaintiffs’ “vague and non-specific” request for “other equitable relief” beyond disgorgement and recission was also dismissed. These were minor successes for defendants, however, as plaintiffs notched a significant victory to open their litigation.

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

Attorneys’ Fees

Ninth Circuit

Lundstrom v. Young, No. 18-cv-2856-GPC, 2023 WL 1120867 (S.D. Cal. Jan. 27, 2023) (Judge Gonzalo P. Curiel). In this action, plaintiff Brian Lundstrom sued his ex-wife, defendant Carla Young, along with his former employer and his 401(k) Plan, challenging the validity of a court-issued qualified domestic relations order (“QDRO”) which granted 100% of the 401(k) assets to Ms. Young and a court-issued stock domestic relations order (“DRO”) which transferred stock options under Mr. Lundstrom’s stock incentive plan to Ms. Young. Although Mr. Lundstrom maintained that he was not notified about the QDRO or the stock DRO, this would prove to be untrue. Ultimately, the court would rule that the claims against Ms. Young were little more than an attempt by Mr. Lundstrom “to revisit rulings made by the Texas courts.” On October 27, 2022, the court issued an order dismissing Carla Young from this action. (Your ERISA Watch covered that decision in the November 2, 2022 issue.) In that order the court held that Mr. Lundstrom’s ERISA and state law claims against his ex-wife were barred by collateral estoppel as they “necessarily relied on arguments that were considered and rejected by Texas state courts.” Ms. Young has since moved for an award of attorneys’ fees under ERISA’s fee and costs-shifting provision, Section 1132(g). First, the court held that Ms. Young’s motion for fees and costs was timely because interim awards of attorneys’ fees under ERISA are allowed in the Ninth Circuit. Next, the court concluded that Ms. Young’s success in this lawsuit was not “trivial” or “purely procedural,” and she accordingly achieved success on the merits to make her eligible for attorneys’ fees under Section 502(g)(1). Thus, the court moved to evaluating whether a fee award was justified under the Ninth Circuit’s Hummell factors. The court concluded it was. First, the court stated that Mr. Lundstrom’s action was carried out in bad faith, as he was rehashing a dispute already brought and rejected in Texas state court. The court also found that Mr. Lundstrom can satisfy a fee award and thus the second factor too weighed in favor of awarding fees. Regarding deterrence, the court wrote that “[a]n attorneys’ fee award in this action would deter an ex-spouse from challenging the validity of a state court order in federal court on superficial ERISA grounds. Although Plaintiff’s action is not the typical ERISA action brought against a plan administrator, the Court finds this type of action is worth deterring…The Court rejects the use of ERISA as a means for ex-spouses to drag each other through endless litigation in federal court at great expense to all involved.” This favor thus also weighed in favor of granting Ms. Young fees. The only factor the court decided weighed against a fee award was the fourth Hummell factor pertaining to whether an award of fees would benefit other plan participants or whether the action involves a significant legal question. Neither scenario, the court concluded, was applicable here. Finally, because the court did not rule in Mr. Lundstrom’s favor on any issue relating to Ms. Young, the court found that Ms. Young had the greater relative success on the merits. Considering all these factors, the court found that a fee award was warranted. However, Ms. Young’s requested fee award of $135,234.20 for a total of 263.32 hours of work performed was reduced by the court “by 50% to reflect the degree of success Defendant Young has achieved throughout the course of this litigation.” Despite the fact that the court dismissed all of the claims against Ms. Young, it highlighted the fact that many of her arguments raised throughout the course of litigation were not successful or relevant to her ultimate victory on the grounds of collateral estoppel. Consequently, the court concluded that a fee award of $67,617.10 was appropriate. Finally, the court granted Ms. Young’s request for recovery of $1,246.58 in costs.

Breach of Fiduciary Duty

Third Circuit

Wright v. Elton Corp., No. C. A. 17-286, 2023 WL 1112022 (D. Del. Jan. 25, 2023) (Judge Joseph F. Batallion). This case involves a pension plan that was established as a trust in 1947 by Mary Chichester duPont to provide pensions to her employees and to the employees of her children and grandchildren. The suit, like the trust itself, has a long and complicated history. But, by the time it was tried in a four-day bench trial before Judge Batallion in April of 2022, plaintiff T. Kimberly Williams, a former employee of one of the grandchildren and a plan participant, was the one remaining plaintiff in the case. Among other things, the court held that the pension plan is covered by ERISA, and that the current and former trustees and the duPont grandchildren breached their fiduciary duties by failing to operate the plan in compliance with ERISA, which caused the plan to become severely underfunded. The court wrote that the trustees and the duPont employers “breached their fiduciary duties by “failing to comply with funding, vesting, notice and other requirements of ERISA.” The court found the trustees and duPont employers liable both for the plan underfunding and for failing to provide proper notices to potential beneficiaries. The court fully credited the testimony of the plaintiff’s expert, noting that he was well qualified to determine the funding liability of a defined benefit pension plan, his conclusions were based on actuarial sciences and reliable, and his testimony was uncontroverted because the defendants chose not to put on their own expert. The court credited the expert’s testimony that the plan’s estimated current funding needs were $38 million and the plan, at the time of the trial, only had $2.7 million in assets. The court found that the defendants’ criticism of the expert’s opinion as being based on incomplete evidence was a problem of their own making in failing to keep complete employment records and failing to bring the plan into compliance with ERISA. The court held that his “report and conclusions can be used as a starting point,” and the “database [he] built can be used as a base for future plan administration by an appointed independent fiduciary to finally administer the plan in accordance with ERISA.” With that in mind, the court ordered the appointment of a special master, to be paid by the current trustee, First Republic, who is tasked, among other things, with retaining a qualified trustee to replace First Republic, identifying and notifying all potential plan participants about the plan, and calculating an adequate funding figure. Ms. Williams is represented in this matter by Your ERISA Watch editor, Elizabeth Hopkins and Susan Meter of Kantor & Kantor.

Eighth Circuit

Schave v. CentraCare Health Sys., No. 22-cv-1555 (WMW/LIB), 2023 WL 1071606 (D. Minn. Jan. 27, 2023) (Judge Wilhelmina M. Wright). Plaintiff Angi Schave commenced this putative class action against her employer CentraCare Health System, the CentraCare board of directors, and the other fiduciaries of two defined contribution plans offered by the company, CentraCare’s 403(b) and 401(k) plans, for breaches of fiduciary duties. Ms. Schave alleged that defendants’ administrative and monitoring processes were in violation of ERISA in several ways. Specifically, Ms. Schave alleged that defendants failed to invest in an available cheaper institutional share class instead of an otherwise identical but costlier retail share class, that defendants invested in funds that charged excessively high management fees, that defendants failed to replace high-cost underperforming funds with similar lower cost funds with better performance histories, and that defendants engaged in improper revenue sharing practices. “As a result of these alleged breaches of fiduciary duties, Schave maintains, Defendants are liable under ERISA,  29 U.S.C. §§ 1105(a), 1109(a) and 1132(a)(2).” Defendants moved to dismiss for lack of Article III standing and for failure to state a claim. As a preliminary matter, the court denied the motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(1) for lack of constitutional standing. The court held that under Eighth Circuit precedent participants of ERISA defined contribution plans have “standing to challenge an entire retirement plan, even if the plaintiff did not enroll in all of the challenged investment options.” The court then addressed defendants’ motion to dismiss for failure to state a claim. The motion was granted in part and denied in part. First, the court denied the motion to dismiss Ms. Schave’s breach of fiduciary duty claims predicated on defendants’ failure to select a lower cost share class. The court stated that it could plausibly infer from Ms. Schave’s complaint that a lower cost institutional share class was available to defendants and their failure to invest in that class, to the detriment of the plan participants, could potentially be a breach of a fiduciary duty. However, the remainder of the breach of fiduciary duty claims based on fees, investment performance, and improper revenue sharing were dismissed by the court. It held that Ms. Schave did not offer appropriate comparisons adequately comprised of actively managed funds with similar investment strategies and risk profiles. Without these like-for-like comparisons, the court could not infer that the plans’ fees were excessively high, that the challenged funds performed poorly, or that the revenue sharing was in and of itself inappropriate. Accordingly, defendants were largely successful in their motion to dismiss. Lastly, the court denied Ms. Schave’s informal request for leave to amend.

Disability Benefit Claims

Third Circuit

Hocheiser v. Liberty Mut. Ins. Co., No. 21-1533, __ F. App’x __, 2023 WL 1267070 (3d Cir. Jan. 31, 2023) (Before Circuit Judges Ambro, Restrepo, and Fuentes). Plaintiff-appellant David Hocheiser appealed a district court order granting summary judgment in favor of defendant Liberty Mutual Insurance Company in this ERISA long-term disability benefits action. On appeal, the Third Circuit affirmed the holdings of the lower court, agreeing with the district court that Liberty Mutual’s denial was supported by substantial evidence in the administrative record. Given the discretionary clause granting Liberty Mutual authority to determine benefits eligibility, the court of appeals also upheld the district court’s application of the arbitrary and capricious review standard. Ultimately, the appeals court concluded that Mr. Hocheiser did not meet his burden of proving that he was disabled from performing sedentary work. Even without an independent medical examination, the Third Circuit held, “there was ample evidence in the record to deny benefits.” Finally, because multiple physicians found Mr. Hocheiser capable of performing sedentary work, the Third Circuit agreed with the district court that under the applicable deferential review “Liberty Mutual appropriately exercised its discretion and that Liberty Mutual’s denial of LTD benefits was supported by the evidence.” As a result, the Third Circuit affirmed the district court’s order.

Fourth Circuit

Zahariev v. Hartford Life & Accident Ins. Co., No. 22-1209, __ F. App’x __, 2023 WL 1519520 (4th Cir. Feb. 3, 2023) (Before Circuit Judges Wynn, Rushing, and Keenan). Plaintiff-appellant Kiril Zahariev sued Hartford Life & Accident Insurance Company seeking reinstatement of long-term disability benefits. Shortly after the complaint was filed, a meditator was appointed to assist the parties to reach a settlement. A settlement was reached, Mr. Zahariev cashed his settlement check, and the parties jointly filed a stipulation of dismissal with prejudice. Several months later, in early 2021, Mr. Zahariev moved to reopen the case and set aside the previous judgment pursuant to Federal Rule of Civil Procedure 60(b). He argued that the case should be reopened because the mediator pressured him into settling by heavily insinuating that not settling would lead to further intrusive surveillance conducted by Hartford. Additionally, Mr. Zahariev argued that Hartford submitted fraudulent responses during discovery which infected the mediation process. “Specifically, he asserted that Hartford’s supplemental discovery responses included items ‘inadvertently’ left out of its initial responses and falsely stated that ‘there are no written performance evaluations of the vendors.’” The court recommended denying Mr. Zahariev’s Rule 60(b) motion both on the merits and as untimely. Mr. Zahariev appealed that decision, and the Fourth Circuit vacated and remanded, concluding that the district court failed to consider the discovery fraud issue. On remand, the district court addressed and rejected the discovery fraud issue. Mr. Zahariev again appealed. This time, the Fourth Circuit affirmed. In this order, the appeals court concluded that because Mr. Zahariev had knowledge of both the mediator’s alleged improper conduct and Hartford’s alleged discovery fraud, but chose to cash his settlement and dismiss the case, “he has failed to show extortionary or exceptional circumstances meriting Rule 60(b) relief. Moreover, even if we believed that extortionary or exceptional circumstances exist, the district court did not abuse its discretion in finding to the contrary.” As a result, Mr. Zahariev was unable to overcome the high bar to reopen a settled case. Finally, Mr. Zahariev’s assertion of judicial bias based on an adverse judicial ruling was swiftly concluded by the Fourth Circuit to be without merit. Accordingly, the district court’s order was affirmed.

ERISA Preemption

Tenth Circuit

Huff v. BP Corp. N. Am., No. 22-CV-00044-GKF-SH, 2023 WL 1433908 (N.D. Okla. Feb. 1, 2023) (Judge Gregory K. Frizzell). In 2021, plaintiff Roland Huff filed a lawsuit against Metropolitan Life Insurance Company alleging two state law claims, breach of contract and bad faith, challenging the sharp increase in the premiums of his group life insurance policy administered by MetLife and sponsored by BP Corporation. That case was dismissed on October 25, 2021. The court held that the plan is an employee benefit plan governed by ERISA, that the state law claims related to the plan and were thus preempted by ERISA, and that Mr. Huff could not state an ERISA claim against MetLife. A summary of that decision is available in Your ERISA Watch’s November 3, 2021 newsletter. Rather than file an amended complaint, Mr. Huff filed a new lawsuit, this time against his former employer, BP, again alleging state law claims. BP moved to dismiss. Its motion was granted by the court, which reaffirmed its earlier holdings in the first lawsuit that the plan is governed by ERISA and the state law claims are preempted. Mr. Huff subsequently moved for reconsideration. He argued the plan is not governed by ERISA because it falls under ERISA’s safe harbor provision and because the life insurance policy is a conversion policy no longer subject to ERISA. Despite Mr. Huff’s untimeliness in moving for reconsideration, the court courteously addressed each of his arguments. Ultimately, the result was unchanged. The court disagreed with Mr. Huff’s position that the policy fell under the safe harbor provision. To the contrary, the court noted that Mr. Huff’s life insurance policy was part of broad company-provided basic life and accidental death and dismemberment coverage to which BP contributed premiums, and that BP took other actions including determining eligibility for coverage, directing the start and end dates of converge, and selecting the insurer. The court also reaffirmed its stance that because the plan is established by an employer for the purpose of providing benefits to participants and beneficiaries it is an EIRSA plan. The court also addressed Mr. Huff’s conversion argument. While the court acknowledged that there is a Circuit split over the issue of whether ERISA applies to a conversion policy after the conversion, the court explained that resolution of that issue was irrelevant here because the plan expressly provides, “you cannot convert your GUL coverage to individual coverage.” Thus, pursuant to plan language, conversion could not and did not occur. Finally, the court found no clear error in its prior analysis that the state law claims were preempted by ERISA as they could not be resolved without reliance on the plan and therefore naturally relate to the ERISA plan. For these reasons, the court denied Mr. Huff’s motion for reconsideration.

Life Insurance & AD&D Benefit Claims

Fifth Circuit

Metropolitan Life Ins. Co. v. Robles, No. C. A. 4:21-CV-00714, 2023 WL 1437710 (S.D. Tex. Feb. 1, 2023) (Judge George C. Hanks, Jr.). Metropolitan Life Insurance Company commenced this interpleader action to determine the proper beneficiary of decedent John Robles’s life insurance policy. The two defendants were Mr. Robles’s ex-wife, Carolyn Bell, and his wife at the time of his death, Anna Lisa Robles. Following a bench trial in the case, the court issued this order comprised of its findings of fact and conclusions of law. The court concluded that Mr. Robles’s change of beneficiary form designating his wife Anna as the beneficiary of his life insurance benefits was invalid and void as it directly conflicted with the express language of a Qualified Domestic Relations Order between Mr. Robles and Ms. Bell. Accordingly, the court held that “Ms. Bell is the sole beneficiary designated in the Policy and is entitled to receive the life insurance benefits at issue in this interpleader action for the benefit of the children that she shared with Mr. Robles.”

Medical Benefit Claims

Eighth Circuit

BCBSM, Inc. v. GS Labs., No. 22-cv-513 (ECT/DJF), 2023 WL 1110453 (D. Minn. Jan. 30, 2023) (Judge Eric C. Tostrud). Faced with mounting costs of covering COVID-19 diagnostic testing, Blue Cross took to the courts in cases like this one where it alleges that defendant GS Labs is a “pandemic profiteer” charging excessively high prices for faulty and superfluous tests. In this lawsuit and in others like it, Blue Cross and other insurance companies have ceased making payments to labs which the insurance companies feel charge too much for COVID tests and have sued those providers for alleged misconduct seeking millions of dollars in damages and recoupment of payments. In response, GS Labs avers that its tests were important, medically necessary, high-quality, and mandated by the government’s COVID-19 policies. GS Labs argues that it provided diagnostic COVID tests to over 300,000 Minnesotans and that it did not require payment from those individuals directly. GS Labs answered Blue Cross’s complaint by asserting 21 counterclaims against the insurance company under the CARES Act, ERISA, the Lanham Act, the Sherman Act, and Minnesota state law. Blue Cross moved to dismiss, testing the sufficiency of the claims pursuant to Federal Rule of Civil Procedure 12(b)(6). Its motion was largely granted. To begin, the court dismissed GS Labs’ CARES Act claim, holding, as many other district courts have held, that the CARES Act does not provide for an express private right of action for healthcare providers. “Binding precedent today counsels caution in implying causes of action and directs that the focus be on statutory intent. The determination that § 3202 creates no private right of action is more faithful to the modern, controlling approach.” The court further held that Section 6001 of the FFCRA and Sections 3201 and 3202 of the CARES Act “do not say their COVID-testing-coverage requirements ‘amend’ or are incorporated by reference in non-ERISA health insurance policies or plans.” However, this was not the conclusion the court reached regarding ERISA plans. With respect to ERISA plans, the court ruled that FFCRA’s coverage requirement is included in ERISA and that the coverage-without-cost-sharing requirement of the CARES Act is therefore subject to ERISA Section 502(a)(1)(B) claims. Additionally, the court stated that the CARES Act requires, absent a negotiated rate between the insurance company and the provider, that an insurance company “shall reimburse the provider the in an amount that equals the cash price for such service as listed by the provider on a public internet website.” GS Labs’ ERISA claim for benefits was thus allowed to proceed. However, its equitable relief ERISA claim under Section 502(a)(3) was dismissed, as Eighth Circuit precedent does not convey to providers the right to sue for equitable relief. GS Labs was also allowed to proceed with its promissory estoppel claim as it met the pleading requirements by including an email dated March 31, 2021, from Blue Cross promising to pay GS Labs at the prices posted on its website as required by the CARES Act. The remainder of GS Labs’ counterclaims were dismissed for various reasons, including all of its antitrust claims which the court noted were economically implausible. Your ERISA Watch will continue to cover these disputes between insurance companies and healthcare providers over reimbursement of COVID-19 healthcare as they play out in the courts. Curious readers should stay tuned for further developments.

Pension Benefit Claims

Second Circuit

Fitzsimons v. N.Y.C. Dist. Council of Carpenters & Joiners of Am., No. 21 Civ. 11151 (AT), 2023 WL 1069808 (S.D.N.Y. Jan. 27, 2023) (Judge Analisa Torres). A retired union member, Peter Fitzsimons, along with his wife and adult children, sued the New York City District Council of Carpenters and Joiners of America union along with its pension and welfare funds under ERISA and the Labor Management Reporting and Disclosure Act (“LMDRA”) after the family’s pension payments and healthcare benefits were stripped following a union trial which found Mr. Fitzsimons had been improperly performing managerial and inspector work for a contributing employer, disqualifying him from benefits. In this action the Fitzsimons family asserted claims under Sections 502(a)(3) and 502(a)(1)(B) of ERISA and Sections 411(a), 412, and 529 of LMRDA. The union and fund defendants moved to dismiss for failure to state a claim. Their motion was granted in this order. To begin, the court speedily dismissed the ERISA breach of fiduciary duty claim, writing, “[t]he complaint does not contain sufficient factual allegations to state a claim for breach of fiduciary duty under ERISA…Plaintiffs’ conclusory allegations are insufficient to state a claim.” Plaintiffs’ claim for pension benefits under Section 502(a)(1)(B) was dismissed as untimely. The court upheld the pension plan’s one-year statute of limitation within which to sue and held that plaintiffs failed to sue within the allotted window. Although plaintiffs’ claim for healthcare benefits was not dismissed as untimely, the court nevertheless found the claim failed on the merits. Under arbitrary and capricious review, the court found defendants’ interpretation of plan language about disqualifying employment to be on its face reasonable and not erroneous as a matter of law. Finally, plaintiffs’ LMRDA violations were dismissed as the court concluded that Mr. Fitzsimons was afforded a full and fair union trial and that he therefore did not state a valid claim. Accordingly, the entire complaint was dismissed.

Statutory Penalties

Sixth Circuit

Higgins v. The Lincoln Elec. Co., No. 5:22-cv-88-BJB, 2023 WL 1072016 (W.D. Ky. Jan. 27, 2023) (Judge Benjamin Beaton). In July 2017, plaintiff Jerry Higgins was given a benefit statement from his employer, defendant The Lincoln Electric Company, informing him that he was eligible for $92,260.80 in total long-term disability benefits under the company’s ERISA-governed policy issued by defendant MetLife. Mr. Higgins became disabled the following month. While his claim for benefits was approved, he was informed that he would only receive $60,000. Several years later, in January 2022, Mr. Higgins, then represented by legal counsel, requested the administrative record from MetLife and demanded payment of the greater benefit amount listed in the July 2017 benefit statement. MetLife informed Mr. Higgins that he should submit his requests to his employer. Mr. Higgins did so, and his employer promptly sent him back to MetLife. This lawsuit followed. Defendant MetLife moved for dismissal. Mr. Higgins asserted two claims against MetLife, both pursuant to ERISA § 502(c), for failing to provide Mr. Higgins requested plan information and for failing to respond to his claim for increased benefits. In its motion, MetLife argued that it cannot be held liable for penalties under § 1132(c) because The Lincoln Electric Company is the named plan administrator and under Sixth Circuit precedent only the plan administrator, and not the claims administrator, is covered under the statute. The court agreed, writing, “claim administration is not the same thing as plan administration. The statute and precedent make this plain…And the statutory section under which Higgins sued covers the latter rather than the former.” Accordingly, even accepting all Mr. Higgins’s allegations as true and drawing reasonable inferences in his favor, the court held that Mr. Higgins could not assert § 502(c) claims against MetLife. Thus, MetLife’s motion to dismiss was granted.


Eleventh Circuit

Worldwide Aircraft Servs. v. Anthem Ins. Cos., No. 8:21-cv-456-CEH-AAS, 2023 WL 1069811 (M.D. Fla. Jan. 27, 2023) (Judge Charlene Edwards Honeywell). In this action, a plan participant, represented by an attorney-in-fact, is suing Anthem Insurance Companies, Inc. under ERISA Section 502(a)(1)(B) for under-reimbursement of medically necessary air ambulance services arising from a medical emergency that occurred while the participant was on vacation in Florida. Defendant moved to dismiss for improper venue pursuant to Federal Rule of Civil Procedure 12(b)(3). Anthem was able to persuade the court that venue in Florida was improper under ERISA’s venue provision, § 1132(e)(2), because it cannot be “found” in Florida and the plan participant is a resident of Indiana. Anthem submitted evidence to the court that it is an Indiana corporation, not authorized to do business in Florida, without any offices or building in Florida, not paying Florida taxes, not advertising in Florida, and without a Florida telephone number or mailing address. Although plaintiff was able to point to a Florida building showing the name “Anthem” on it, the court agreed with Anthem that this building beloved to a corporate subsidiary of Anthem and was therefore a separate business which had nothing to do with the named defendant here. Nevertheless, while the court determined venue to be improper in the Middle District of Florida, the court determined that the interests of justice favored transferring the case to the district where it should have been brought, the Southern District of Indiana. Accordingly, the case was transferred, and it will proceed going forward in the Southern District of Indiana.