McCutcheon v. Colgate-Palmolive Co., No. 20-3225, __ F. 4th __, 2023 WL 2467367 (2d Cir. Mar. 13, 2023) (Before Circuit Judges Livingston and Sack, and District Judge Brian M. Cogan)

ERISA can be complicated. In part this is because ERISA and ERISA plans have their own intentionally obscure and technical language, especially when applied to cash balance pension plans. The Second Circuit in this case refers to this as the “argot of federal law governing employee retirement income plans.” Argot is an interesting word in this context, as its original meaning is “the jargon of Paris rogues and thieves for the purposes of disguise and concealment.”

Here, the court refused to allow this jargon to “obscure” what it saw as “a simple question of contract interpretation.” Thus, after years of “extensive litigation,” the appellate court determined that the interpretation of the Colgate retirement plan propounded by the plaintiffs, a class of former employees, was “unambiguously correct.” On this seemingly simple basis, the Second Circuit affirmed the final judgment and order of the district court granting summary judgment to plaintiffs on their claim for greater benefits.  

This case originated in 1989 when Colgate converted an ordinary defined benefit pension plan that based pension benefits on employees’ final average pay to a cash balance plan that uses a hypothetical account and an automatic fixed interest rate to calculate benefits. In 2005, Colgate amended the plan to account for participants who were entitled to a greater benefit under the cash balance plan than their accrued benefit under the old final average pay plan, and who elected to receive a lump sum payment of their accrued benefit. This amendment, referred to in the decision a Residual Annuity Amendment (“RAA”), was not discovered by counsel for plan participants until 2010.

In the meantime, in 2007, participants in the Plan filed a class action lawsuit against Colgate for cutting back on the accrued benefits of its employees in numerous other respects in converting to a cash balance plan. When the participants discovered the 2005 amendment, settlement discussions were already underway. Ultimately, most of the case settled with approval from the district court for $45 million (Colgate I), but with a carve-out for claims based upon the RAA.

As relevant here, after two years of discovery, plaintiffs filed for and ultimately won summary judgment on their claim that Colgate made two errors in calculating the RAA benefit, leading to an improper forfeiture of benefits. First, the district court agreed with plaintiffs that Colgate erred in determining eligibility and the amount of the residual annuity based on a comparison of the lump sum already paid to the participants to the grandfathered annuity. Instead, under what the district court referred to, without irony, as the “plain reading of the RAA,” it determined that “the amount of the Residual Annuity is determined by comparing the Age 65 [actuarial equivalent of the lump sum]…with the greater of the Grandfathered Benefit or the Member’s Accrued Benefit…plus Employee Contributions.” 

Second, the district court held that Colgate erred in applying a pre-retirement mortality discount in calculating the residual annuities because applying such a discount to a retirement benefit that “does not decrease if the participant dies” before reaching age 65 is obviously not proper.  

Finally, the district court ordered Colgate to use the 20-year Treasury bill rate plus 1% (20+1%) to project the equivalent annuity amount of the cash balance of a below-retirement age participant, and then to use the PBGC interest rate as the discount factor to convert that annuity amount to its present value.

The Second Circuit affirmed. With respect to the first calculation error, the appellate court agreed with the district court and the plaintiffs that the plan language “unambiguously” supported their interpretation. Luckily for the reader, I will not belabor that language. Suffice it to say that the court determined that the clear and unambiguous text of the plan provided that a residual annuity for participants such as the plaintiff is calculated by the difference between the amount of the lump sum payment expressed as an annuity and the larger of the grandfathered annuity and the cash balance annuity. In reaching this conclusion, the court rejected Colgate’s alternative reading of the plan language as unreasonable.

The court likewise was not persuaded that “ any allegedly unusual effects flowing from the RAA’s plain meaning” should change the “ambiguity analysis.” In fact, the court noted “that certain effects of our interpretation, which may seem odd at first, may not be so confounding upon closer review.” To the court, whatever Colgate’s preferred construction of the RAA, both when it settled Colgate I and during the RAA litigation, it made “perfectly good sense to conclude that while Colgate was in the process of fixing an issue relating to the forfeiture of grandfathered benefits, it would use the same mechanism to partially remedy a contemporaneous whipsaw violation [at issue in Colgate I], inflicted upon those same grandfathered participants.”

The court then turned to the interest rate issues. The Second Circuit agreed with the district court that Colgate was required to use the PBGC rate as the discount rate to calculate the actuarial equivalent of the lump sum payment expressed as an annuity, not because that interest rate was required under the Internal Revenue Code, but because it was required under the plan itself. In this regard, the Second Circuit noted that Colgate, through a committee that determined benefits under the plan, adopted a resolution to apply the PBGC rate in calculating residual annuities. This resolution was a binding part of the plan.

The court next concluded that the 20+1% rate was applicable for the purpose of projecting a participant’s cash balance account forward and converting it to an age 65 annuity. Again, the court found this was required under “the plain text of the plan,” which contained a section requiring the use of the 20+1% rate “for purposes of converting a Member’s Account into a single life annuity payable for the life of the Member starting at Normal Retirement Date.” The court noted that, even if it were to determine that this provision was ambiguous, Colgate’s reading had to be rejected because it would mean that the plan did not state how to project a cash balance account to age 65, thus rendering the benefit not “definitely determinable” and making the plan illegal. 

Finally, the court turned to the question of whether a pre-retirement mortality discount could be applied to calculate the residual annuity, as required under the plan. In this instance, the court did not simply follow the plan language, Instead, the court agreed with the logic of a number of other court decisions that had concluded that it would be an impermissible forfeiture to apply such a mortality discount to reduce the present value of a lump sum distribution when the death benefit is not reduced but is equal to the participant’s accrued benefit. The court was not persuaded that the supposedly “incidental” nature of the death benefit permitted application of such a discount, or that a proposed but never adopted IRS regulation required application of a pre-retirement mortality discount in this context.

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

Breach of Fiduciary Duty

Seventh Circuit

Daly v. West Monroe Partners, Inc., No. 21 C 6805, 2023 WL 2525362 (N.D. Ill. Mar. 15, 2023) (Judge Ronald A. Guzman). A participant of the West Monroe Partners Employee Stock Ownership Plan (“ESOP”), plaintiff Matthew Daly, filed a breach of fiduciary duty class action complaint outlining the ways in which he believed a series of related stock transactions violated ERISA. First, in September of 2021, West Monroe bought approximately 28,000 shares of the company stock from the plan at a price of $515.18 per share. According to Mr. Daly, this price was “grossly undervalued.” Then, about three weeks later, West Monroe took what it had just bought low and sold high, selling a 50% stake in the Company to a third-party investor, MSD, at a price per share over three times higher than what it had just paid to the plan participants. “According to Plaintiff, the share price paid to MSD ‘did not come out of thin air’ and ‘long before the sale [to MSD], the West Monroe Defendants had received bids from potential buyers and reviewed more recent valuations’ but did not disclose them to Plaintiff or the putative class members prior to buying their shares in September 2021.” Thus, by allegedly manipulating the valuations in this way, Mr. Daly argued that the selling shareholders were able to enrich themselves to the detriment of the participants of the plan. Defendants moved to dismiss. The court denied the motion, except with regard to the claims asserted against the individual board or committee members. Those claims were dismissed without prejudice. Specifically, the court declined to resolve the issue over whether Mr. Daly’s failure to exhaust administrative remedies precludes his ability to bring suit. Mr. Daly argued that an administrative appeal under these circumstances would have been futile. For pleading purposes this was deemed sufficient to withstand dismissal on exhaustion grounds. Next, the court held that it could infer from the complaint that defendants breached their duties, engaged in a prohibited transaction, failed to monitor co-fiduciaries, and failed to produce plan documents. However, with regard to the individual committee and board members, the court held that Mr. Daly failed to make allegations as to these specific individual members sufficient to establish they were acting as fiduciaries, meaning “none are currently implicated in the breach-of-fiduciary-duty claim.” In all other respects, the motion to dismiss was denied and plaintiff’s claims were found to be plausible.

Ninth Circuit

Thomson v. Caesars Holdings Inc., No. 2:21-cv-00961-CDS-BNW, 2023 WL 2480673 (D. Nev. Mar. 13, 2023) (Judge Cristina D. Silva). Participants of the Caesars Entertainment Corporation Savings & Retirement Plan, on behalf of a proposed class, filed this breach of fiduciary duty action against Caesars Holdings Inc., the plan’s committees, and Russell Investments Trust Company in connection with alleged self-serving actions which resulted in an investment portfolio made up of costly and underperforming proprietary funds. According to the complaint, after Russell assumed control of the plan’s investment menu in 2017, it replaced all of the plan’s old investment options with its own proprietary collective investment trusts and thus three-quarters of the plan’s $1.6 billion in assets ended up invested in Russell’s age-based funds. Plaintiffs alleged that this outsourcing of control over the administration of the plan was the result of a leveraged buyout of Caesars Palace by private equity firms following the 2008 financial crisis. Plaintiffs compared the plan’s prior investment options with the Russell replacement funds to demonstrate the disparity between the old funds’ consistent track record of success and the new funds’ underperformance. Finally, plaintiffs contend that the decision to replace the old investment menu with the proprietary funds was made to offset the losses that Russell was experiencing outside the plan in the open market and that the decision was therefore made to benefit Russell because it provided Russell with a direct infusion of much needed cash. Defendants moved to dismiss. The court began its analysis by stressing that the “‘crucible of congressional concern was misuse and mismanagement of plan assets by plan administrators,’ and ‘ERISA was designed to prevent these abuses.’” To that end, the court drew inferences in favor of the participants and was satisfied that their allegations were facially plausible violations of imprudence and disloyalty. However, the court held that co-fiduciary claims against the Caesars defendants could not proceed because “§ 1105(d) extinguishes bases for their liability for [Russell’s] alleged breaches, except to the extent that the Caesars defendants were aware of such breaches but failed to take reasonable efforts to remedy them.” Nevertheless, the court concluded that plaintiffs’ claim against the Caesars defendants for imprudent selection of Russell and failure to survey the proprietary investment lineup could proceed. Thus, only the co-fiduciary claim against Caesars defendants was dismissed, and in all other respects the motions to dismiss were denied.

Class Actions

Second Circuit

Vellali v. Yale University, No. 3:16-cv-1345(AWT), 2023 WL 2552719 (D. Conn. Mar. 17, 2023) (Judge Alvin W. Thompson). Three participants of the Yale University 403(b) Retirement Account Plan, individually and on behalf of a class of plan participants and beneficiaries, brought this action on behalf of the plan against Yale University, Michael A. Peel, and the retirement plan committee for breaches of fiduciary duties and prohibited transactions. Defendants moved to strike plaintiff’s jury demand. Their motion was denied in this order. Although the court found that breach of fiduciary duty claims would have historically been within the jurisdiction of equity courts in 18th century England, it stated that the greater matter of importance to its analysis was whether the remedy sought is legal or equitable in nature. And on this point, the court held the prayer for relief in the complaint included not only requests that were equitable, but also a request for make whole relief, a claim for compensatory damages for which defendants will be personally liable that is therefore legal in nature. When, as here, a legal claim is joined among equitable claims, the court stated that the right to the jury trial “remains intact.” Accordingly, the court permitted plaintiffs to proceed with their action in front of a jury because all of their claims seek legal money damages.

Eleventh Circuit

Roll v. Enhanced Recovery Co., No. 6:20-cv-212-RBD-EJK, 2023 WL 2535081 (M.D. Fla. Mar. 16, 2023) (Judge Roy B. Dalton Jr.). In this class action a group of terminated employees sued their former employer, Enhanced Recovery Co., alleging that it failed to notify them of their right to continued healthcare coverage under the Consolidated Omnibus Budget Reconciliation Act (“COBRA”). The parties agreed to settle the claims on a class-wide basis. The court previously issued an order preliminarily approving the settlement agreement. Now plaintiffs have moved for attorneys’ fees and final approval of class action settlement. The court granted the motion for final settlement approval and granted in part the fee motion. As a preliminary matter, the court reaffirmed its earlier findings, concluding that “there is no question that the Rule 23(e)(2) and Bennett factors are met,” and the settlement was fair, reasonable, and adequate given the equitable treatment of the class and the developed record post-discovery. The court then continued by scrutinizing the requested fee award of $65,000 “which is 49% of the settlement fund,” and the $2,500 requested to cover the costs. Magistrate Judge Kidd issued a report recommending the awards be reduced to a total of $61,987.50 for attorneys’ fees, or 45% of the settlement fund, and $472.85 for costs. The court adopted Magistrate Kidd’s recommendation, agreeing that it was a more reasonable fee recovery and a fairer percentage of the common fund. The court ended its decision by acknowledging the complexity of the novel issues in the case. Due to that complexity, the court agreed with plaintiffs that this case may have been viewed by other attorneys as undesirable, and there was undoubtably a risk of no recovery. Accordingly, “class counsel achieved a significant settlement providing monetary relief to all class members despite the inherent risk of no recovery.” Thus, with the class and settlement granted final approval, and with the fee award designated, the action was dismissed.

Disability Benefit Claims

Second Circuit

Nall v. Hartford Co., No. 22-49, __ F. App’x __, 2023 WL 2530456 (2d Cir. Mar. 16, 2023) (Before Circuit Judges Raggi, Wesley, and Menashi). Plaintiff-appellant Ashley Nall filed for long-term disability benefits in 2019 based on her allegedly disabling symptoms of Meniere’s disease. The plan’s insurance provider, Hartford Life and Accident Insurance Company, denied the claim, finding Ms. Nall’s symptoms not so severe as to render her unable to perform the essential functions of her occupation as an intake coordinator. In the district court, summary judgment was granted to Hartford under arbitrary and capricious standard of review. Ms. Nall subsequently appealed that ruling to the Second Circuit. In this unpublished decision the Second Circuit affirmed the ruling of the district court. The court of appeals concluded that “Hartford’s denial of Nall’s claim for benefits under the Plan was not without reason, was supported by substantial evidence, and was not erroneous as a matter of law.” In particular, the Second Circuit highlighted how Hartford relied on medical records of at least five medical professionals, including Nall’s own treating physician, to reach its conclusions. Even Ms. Nall’s own testimony regarding her symptoms, the court found, could be construed as bolstering Hartford’s position that she could perform sedentary tasks. The appeals court also held that objective test results further supported a finding that Ms. Nall was not totally disabled as defined by the plan. Finally, the Second Circuit disagreed with Ms. Nall’s position that Hartford failed to consider the episodic character of the vertigo her disease caused. In sum, the court of appeals felt that it could not disturb Hartford’s conclusions because the insurance company had reasonable bases for its conclusion, regardless of whether evidence in the record supported the conclusion that Ms. Nall is disabled, and for that reason the district court’s order was affirmed.

Third Circuit

Stein v. Paul Revere Life Ins. Co., No. 21-3546, 2023 WL 2539004 (E.D. Pa. Mar. 16, 2023) (Judge Juan R. Sanchez). Dr. Eric Stein is a physician who specialized in interventional radiology. Given the nature of his practice, Dr. Stein wore heavy leaded personal protective apparel daily. Either as a result of donning these weighted lead vests, or at least exacerbated by them, Dr. Stein began experiencing pain in his back and legs and started having severe mobility issues. Although he had been experiencing back pains and spinal problems since 2009, he did not seek treatment for these issues until 2011. From that time on, Dr. Stein’s physical ailments progressively worsened. By summer 2018, Dr. Stein was left unable to continue working. His treating physicians scheduled spinal surgery and diagnosed him with permanent musculoskeletal conditions. These doctors highlighted the occupational hazard of the lead vests he had worn throughout his career. Dr. Stein applied for disability benefits under his ERISA plan insured by defendant Paul Revere Life Insurance Company. Paul Revere approved the benefits for losses due to sickness and began issuing Dr. Stein monthly benefits of $6,480. Importantly, by designating Dr. Stein’s disability the result of illness, rather than injury, Paul Revere was able to decrease the benefits on October 15, 2020, to a monthly benefit of $648 under the policy’s lifetime payment of benefits rider which entitled claimants to only 10% of their original benefit for a sickness after an initial 30-month period. Under this same rider, disability caused by an injury allows for the full monthly disability benefits for life. Dr. Stein appealed this decision, and ultimately filed this action seeking a court order reversing Paul Revere’s classification. He got just that in this decision wherein the court granted summary judgment in his favor and determined that the cause of his permanent disability “was an accidental bodily injury.” The court agreed with Dr. Stein that his spinal conditions were the result of repetitive stress injuries from wearing the lead apron during procedures for over 30 years, and that “Paul Revere’s interpretation of the LTD policy (was) fundamentally flawed because it excludes repetitive trauma injuries from the definition of ‘injury.’” Finally, the court denied Dr. Stein’s request for attorneys’ fees under Section 502(g)(1). It determined, “The merits of the parties’ positions here were relatively balanced and the Court recognizes other courts, including in the Third Circuit, may disagree with this decision.” As the other factors it analyzed did “not counsel in favor of an award of attorneys’ fees and costs,” the fee request was denied.

Fourth Circuit

Krysztofiak v. Boston Mut. Life Ins. Co., No. DKC 19-879, 2023 WL 2537537 (D. Md. Mar. 16, 2023) (Judge Deborah K. Chasanow). Last September, the court issued an order and opinion granting in part defendant Boston Mutual Life Insurance Company’s motion for summary judgment in this ERISA disability benefits action. The court relied on precedent in the Fourth Circuit in Gagliano v. Reliance Standard Life Ins. Co., 547 F.3d 230 (4th Cir. 2008), to decide that Boston Mutual may rely on a basis other than the one it initially applied to the denial when evaluating plaintiff Dana Krysztofiak’s long-term disability benefit claim on remand. Here, that new basis was a Special Conditions Limitation Rider, which did not even exist at the time of the benefit termination. Nevertheless, the court held that under Gagliano ERISA’s focus on the written plan document requires a remand to the insurance company so that a plaintiff may not obtain benefits through the judicial system that he or she would otherwise not be entitled to under the terms of the policy. Represented by new counsel from Kantor & Kantor following the death of her previous legal representative in this action, Ms. Krysztofiak moved for reconsideration under Rule 54(b). Her motion was denied in this order, under much the same reasoning as used in the court’s September 16th order. Once again, the court concluded that it was bound by Gagliano, no matter how many bites at the apple the insurance company has taken to date. Simply put, a court may not order an insurance company to pay benefits under an ERISA plan if that payment is contrary to the terms of the plan, even as here, when those terms are shifting. Accordingly, Boston Mutual will now once again evaluate Ms. Krysztofiak’s claim for disability benefits on remand.

Sixth Circuit

Masevice v. Life Ins. Co. of N. Am., No. 1:22CV223, 2023 WL 2534042 (N.D. Ohio Mar. 16, 2023) (Judge Christopher A. Boyko). Plaintiff Rebecca Masevice filed this action after defendant Life Insurance Company of North America (“LINA”) terminated her long-term disability benefits when her policy’s definition of disability transitioned from unable to perform the essential functions of her own occupation to any occupation. Ms. Masevice is disabled from neurological and cardiological conditions, including postural orthostatic tachycardia syndrome (“POTS”), migraine, and cluster headaches. The parties filed cross-motions for judgment on the administrative record. Ultimately, the court denied both motions and remanded to LINA for additional fact-finding. In particular, the court concluded that an in-person independent medical examination (“IME”) needed to be conducted and that an IME was crucial in order to fully develop the record and to establish whether Ms. Masevice remains disabled under the policy’s broader definition of “any occupation” disability. This was true, the court emphasized, because the review standard here was de novo under which “a court’s review is limited to the administrative record as it existed when the plan administrator made its final decision.” Simply put, the court found the record currently underdeveloped for Ms. Masevice to be able to prove by a preponderance of evidence that she met her plan’s definition of disabled. “The Court is not a medical specialist and the disability determination is not the Court’s to make.”

Seventh Circuit

Snapper v. Unum Life Ins. Co. of Am., No. 1:21-cv-02116, 2023 WL 2539242 (N.D. Ill. Mar. 16, 2023) (Judge Elaine E. Bucklo). Although plaintiff Joseph Snapper had a history of back and leg problems dating back to as early as 2008, a car accident in 2016 was really the straw that broke his already strained back. Two years later, Mr. Snapper, an attorney at Mayer Brown LLP, started taking leaves of absence from work to try and address his pain, and by the following year, 2019, Mr. Snapper stopped working altogether and applied for disability benefits under his plan administered by Unum Life Insurance Company of America. Unum initially granted the claim and began issuing monthly benefits in August 2019. Meanwhile, Mr. Snapper underwent an exhaustive series of spinal surgeries, pain treatments, physical therapy sessions, and medical testing and exams. Nothing improved his condition, and several of the attempted treatments had the opposite effect. However, looking at this same medical history, Unum’s hired reviewer, a family medicine doctor, concluded that Mr. Snapper could meet the essential requirements of his occupation, and on July 17, 2020, Unum terminated Mr. Snapper’s benefits. This litigation followed an unsuccessful administrative appeal. With the record fully developed, the parties cross-moved for summary judgment. In this order the court granted Mr. Snapper’s summary judgment motion and denied Unum’s cross-motion under de novo review. The court found the medical record proved by a preponderance of evidence that Mr. Snapper was disabled from performing the functions of his legal career and was therefore disabled as defined by his plan. The court particularly focused on the cognitive abilities necessary to practice law and wrote, “Unum devotes virtually no attention to the evidence pertaining to Snapper’s inability vel non to perform the cognitive aspects of his occupation.” Regardless, the court found “ample evidence in the record supporting the conclusion that Snapper’s pain prevented him from performing the cognitive functions listed in Mayer Brown’s job description.” The court also held that substantial evidence within the medical record demonstrated that Mr. Snapper could not perform the physical aspects of his work as an attorney, including “sitting, standing, and walking to the degree demanded by his work.” In sum, the court found the record painted a clear and consistent picture of a man whose quality of life was upended by his pain. Thus, the court granted summary judgment in Mr. Snapper’s favor and restored the status quo by reinstating benefits.

Eighth Circuit

Radle v. Unum Life Ins. Co. of Am., No. 4:21CV1039 HEA, 2023 WL 2474509 (E.D. Mo. Mar. 13, 2023) (Judge Henry Edward Autrey). On May 4, 2016, plaintiff Michael Radle suffered a head injury when he fell while he was out running and hit his head on a concrete sidewalk. As is often the case with traumatic brain injuries, Mr. Radle did not really begin to suffer any adverse neurological symptoms or effects from the fall until a few days later, on May 8, at which time he went to the emergency room. At the ER Mr. Radle was diagnosed with “conversion disorder,” a psychological condition, which the court noted is “most often seen in women and people who had a previous psychiatric diagnosis.” Mr. Radle’s symptoms would only worsen over the coming year, and his original diagnosis was determined to be a mis-diagnosis. Several neurologists treating Mr. Radle would later attest that Mr. Radle’s neurological and cognitive symptoms were the result of post-concussive syndrome from his traumatic brain injury caused by his May 2016 fall. By August 15, 2017, Mr. Radle was disabled to the extent that he could no longer work, and on August 25, 2017, he submitted a claim for long-term disability benefits with Unum. His claim was approved by Unum on March 12, 2018. However, Unum limited Mr. Radle’s benefits to 24 months under his plan’s limitation for mental illnesses, and on May 12, 2020, Unum terminated Mr. Radle’s benefits for exhausting the payable benefits under the mental illness limitation. Mr. Radle appealed. During the appeals process, Unum relied on information that was not provided to Mr. Radle and upheld its determination. Mr. Radle subsequently initiated this lawsuit, asserting claims under ERISA Sections 502(a)(1)(B) and (a)(3). Unum moved for partial summary judgment on Mr. Radle’s breach of fiduciary duty claim pursuant to Section 502(a)(3), in which Mr. Radle argued he was denied a full and fair review under the Department of Labor’s updated 2018 regulation mandating that insurers provide claimants with the materials and evidence used to make the determination so that they may comment on the documents relied upon. Unum argued that “these subsections of the Regulations cannot provide the basis for Plaintiff’s breach of fiduciary duty claim since they were not in effect at the time Plaintiff filed his claim for benefits.” The court agreed, writing, “[u]nder ERISA, the date that a claimant requests benefits is the applicable date to determine what procedures apply.” Thus, the court held that the pre-2018 regulations were applicable to Mr. Radle’s appeal of his benefit denial, and under those he “was not entitled to receive, and be given an opportunity to comment on, the additional evidence considered in the appeal.” Accordingly, the court found that Unum was entitled to judgment on the claim.


Sixth Circuit

Sweeney v. Nationwide Mut. Ins. Co., No. 2:20-cv-1569, 2023 WL 2549549 (S.D. Ohio Mar. 17, 2023) (Judge James L. Graham). Participants of the Nationwide Mutual Insurance Company’s defined contribution plan brought this ERISA action alleging breach of fiduciary duty, prohibited transaction, and inurement of plan assets against Nationwide Mutual and other plan fiduciaries. The parties have been actively engaged in a discovery dispute. Although they were continuing to meet and confer, the parties informed the Magistrate Judge during a conference that they were at an impasse regarding three proposed Electronically Stored Information (“ESI”) search strings relating to the method by which defendants make determinations about the crediting rate for the challenged Nationwide guaranteed investment fund (“GIF”), the fund at the center of the action. Following briefing on the topic, and after hearing from the parties on the conference call, “the Magistrate Judge found that Plaintiffs satisfied the necessary threshold showing of relevance because the information related to the method by which Defendants determine the crediting rate of the GIF is relevant to Plaintiffs’ claims.” Accordingly, the court granted plaintiffs’ motion and ordered the parties to engage in the ESI process with these search strings. Defendants timely objected. In this order, the court overruled the objections and left the Magistrate’s discovery order undisturbed. It found nothing clearly erroneous in the Magistrate’s factual findings, and that defendants’ objections “lack[ed] merit.” The court found the requirements of Federal Rule of Civil Procedure 7(b)(1)(A), including its requirement that a motion be made in writing unless made during a hearing, “amply satisfied.” Finally, the court agreed with the Magistrate Judge that the proposed searches were relevant to the breach of duty of loyalty claims and Defendants’ statutory defenses.

ERISA Preemption

Second Circuit

Park Ave. Podiatric Care, PLLC v. Cigna Health & Life Ins. Co., No. 22 Civ. 10312 (AKH), 2023 WL 2478642 (S.D.N.Y. Mar. 13, 2023) (Judge Alvin K. Hellerstein). Plaintiff Park Avenue Podiatric Care, P.L.L.C., sued Cigna Health and Life Insurance Company asserting state law claims for breach of contract, unjust enrichment, promissory estoppel, and violation of New York’s prompt payment law seeking payment for foot surgeries it provided to a patient who was a beneficiary of an ERISA plan insured by Cigna. Cigna moved to dismiss the complaint. It argued that the state law claims were expressly preempted by ERISA section 514(a). The court agreed and granted the motion. Specifically, the court concluded that Park Ave. Podiatric Care’s right to converge derived directly from the terms of the ERISA plan, as Cigna informed the provider that under the plan it would pay 80% of the usual and customary rate. Moreover, the court held the $7,199 payment that was made to Park Ave. Podiatric Care was adjudicated under the terms of the plan and that it was therefore “clear on the face of the Complaint that Plaintiff’s claims derive from coverage determinations made pursuant to a health benefit plan regulated by ERISA.” Thus, the court ruled that the state law claims could not be decided without consulting and referencing the plan, and therefore fell within ERISA preemption’s broad borders.

Ninth Circuit

Stoddart v. Heavy Metal Iron, Inc., No. 2:22-cv-01532-DAD-DB, 2023 WL 2524313 (E.D. Cal. Mar. 14, 2023) (Judge Dale A. Drozd). Last May, plaintiff Michael Stoddard filed a lawsuit in state court against his former employer, Heavy Metal Iron, Inc., and several individual defendants for violations of California labor laws and the Private Attorneys General Act of 2004 (“PAGA”) on behalf of himself, the Labor Workforce Development Agency, and other employees employed by defendants who worked in non-exempt positions and also suffered a wage and hour violation. Based on the PAGA causes of action, defendants removed the complaint to federal court arguing that the Labor Management Rights Act (“LMRA”) and ERISA preempt the claims. Specifically, defendants argued that although Mr. Stoddard’s employment was not covered by a collective bargaining agreement, some of the employees he asserts these claims on behalf of are. Additionally, defendants argued that some of these employees were also part of a joint apprenticeship program which was governed by ERISA. Mr. Stoddard disagreed with defendants’ preemption arguments and moved to remand his action back to state court. The court agreed with Mr. Stoddard that it did not have federal jurisdiction over the complaint and granted the motion to remand. It found defendants’ preemption arguments misplaced as neither LMRA nor ERISA applied directly to Mr. Stoddard, especially as Mr. Stoddard was not subject to a qualifying collective bargaining agreement and because defendants did not “argue that plaintiff was a participant or beneficiary of an employee benefit plan.”

Medical Benefit Claims

Tenth Circuit

L.L. v. Anthem Blue Cross Life, No. 2:22CV208-DAK, 2023 WL 2480053 (D. Utah Mar. 13, 2023) (Judge Dale A. Kimball). Plaintiff L.L., on behalf of his minor daughter, filed this action against his employer, DLA Piper LLP, his healthcare plan, the DLA Piper Welfare Benefit Plan, and the plan’s claims administrator, Anthem Blue Cross Life and Health Insurance Company, after his daughter’s stay at a residential treatment program was denied as “investigational” under the plan’s policy addressing wilderness programs. In his complaint, L.L. asserted three causes of action: a claim for recovery of benefits under Section 502(a)(1)(B), a violation of the Mental Health Parity and Addiction Equity Act under Section 502(a)(3), and a claim for statutory penalties under Sections 502(a)(1)(A) and (c). Defendants moved to dismiss L.L.’s second and third causes of action. The court granted their motion in this order. First, the court concluded that L.L. had failed to plead a Parity Act violation because the policy designating wilderness programs investigational specifically applied to both medical conditions and behavioral health/mental health disorders. L.L.’s other theories about disparities within the plan between mental health exclusions and permitted analogous medical treatments were determined by the court to be irrelevant here because they were “not the basis for the denial of benefits in this case.” Finally, the court dismissed the claim for statutory penalties for failure to provide documents upon request because L.L. requested documents from Anthem, the claims administrator, and not from DLA Piper, the plan administrator. The court held that Anthem and DLA Piper are separate legal entities and Anthem is therefore not the agent of DLA Piper and not required to honor document requests from claimants. Accordingly, following these dismissals, plaintiff is left only with his claim for benefits.

Pension Benefit Claims

Second Circuit

Guzman v. Bldg. Serv. 32BJ Pension Fund, No. 22-cv-01916 (LJL), 2023 WL 2526093 (S.D.N.Y. Mar. 14, 2023) (Judge Lewis J. Liman). In this decision the court granted the motion of Building Service 32BJ Pension Fund and the other individual defendants to dismiss pro se plaintiff Carlos Guzman’s ERISA lawsuit for failure to state a claim for relief. The court agreed with defendants that Mr. Guzman’s monthly pension benefits were calculated properly under defendants’ interpretation of terms of the plan. Furthermore, the court concluded that Mr. Guzman was given a full and fair administrative appeal hearing. Because he was given a full and fair review and the plan grants defendants discretionary authority, the court held that the abuse of discretion review standard applied here. Under deferential review, the court found that defendants’ calculation of benefits was based on a reasonable interpretation of plan language and therefore it could not be disturbed. This was true, the court concluded, because there “is no dispute here that Plaintiff continued to work in Disqualifying Employment after his Normal Retirement Age of sixty-five prior to the Required Beginning Date.” Accordingly, the motion to dismiss was granted.

Pleading Issues & Procedure

Fifth Circuit

Harmon v. Shell Oil Co., No. 3:20-cv-00021, 2023 WL 2474503 (S.D. Tex. Mar. 13, 2023) (Magistrate Judge Andrew M. Edison). Three current or former employees of Shell Oil Company who are participants of Shell’s defined contribution plan, the Shell Provident Fund 401(k) Plan, brought this lawsuit alleging breaches of fiduciary duties. As part of their action, plaintiffs demanded a jury trial. Shell moved to strike the jury demand. It argued that plaintiffs are not entitled to a jury trial under the Seventh Amendment because their claims and remedies are equitable in nature. Plaintiffs opposed the motion to strike. They argued that although their claims would have historically been decided in the courts of equity in 18th century England, they nevertheless have a right to a jury trial because their claim under Section 1132(a)(2) involves compensatory damages, which they asserted are “the classic form of legal relief.” Furthermore, plaintiffs argued that 29 U.S.C. § 1109(a) allows for appropriate “equitable or remedial relief,” which they argued meant that relief is not limited to equitable relief but also may include the “traditional legal remedy of ‘losses to the plan.’” The court, however, disagreed. It interpreted Supreme Court precedent to conclude that plaintiffs’ request for surcharge “(i.e., make-whole) relief” is equitable in nature. Thus, the court aligned itself with the majority of district courts who have weighed in on this issue and held that monetary remedies to remedy a breach of a fiduciary duty are equitable and not legal in nature. The court therefore granted Shell’s motion and struck plaintiffs’ jury demand.

Sixth Circuit

McClure v. K&K Ins., No. 6:22-CV-092-CHB-HAI, 2023 WL 2480728 (E.D. Ky. Mar. 13, 2023) (Judge Claria Horn Boom). At the beginning of the school year in 2016, former high school student Martina McClure was “assaulted by another student on school grounds, which caused her to ‘suffer severe and permanent injuries, including traumatic brain injuries.’” Martina incurred and continues to incur significant medical bills because of the assault. Her treatments were covered by her father’s ERISA-governed health insurance plan established by Central States Health & Welfare Fund. Plaintiff Donna McClure is a guardian for Martina. Attempting to hold the school responsible, Ms. McClure sued several school employees for the assault. Her claims were settled through payment by a casualty insurer. Central States then asserted a statutory lien against the settlement proceeds under the plan’s subrogation provision. Under the Central States plan, “any other policy providing specific risk coverage bears primary responsibility for the insured’s losses.” At the time of the assault, the school was insured by Zurich American Insurance Group through a blanket accident policy administered by K&K Insurance Group. Ms. McClure directed healthcare providers to bill K&K Insurance Group for the medical treatments they provided to Martina. However, K&K has not paid these costs, and has denied the claims. On April 28, 2022, Ms. McClure filed her complaint against Zurich and K&K under ERISA and state law. Defendants subsequently filed motions to dismiss the complaint. They argued that the state law claims are preempted by ERISA, that the claims are time-barred by a contractual limitations period, and that Ms. McClure otherwise failed to state her claims. To begin, the court disagreed with defendants that Ms. McClure’s state law claims were preempted by ERISA. The court wrote that while it was true that Ms. McClure referenced the Central States plan in her complaint in the counts other than her ERISA claim, she was “really challenging Zurich’s actions under the insurance policy…meaning the first step of the preemption test is not satisfied.” Additionally, the court stated that defendants could not show that no other independent legal duty existed because “Plaintiff alleges that the Defendants ‘breached a duty that stems from the insurance contract, not from the ERISA plan.’” Regardless, the court agreed with defendants that Ms. McClure’s claims were untimely. It observed that the complaint affirmatively showed that the claims were time-barred. The court stated that the insurance policy referenced in the complaint provided it with the relevant information necessary to determine that the claims were untimely. In other words, the court disagreed with Ms. McClure that it was premature to address whether the complaint was time-barred based on a contractual limitation provision, because the unambiguous terms of that provision made clear that she only had three years to bring a complaint. “Martina’s injury occurred on September 16, 2016, and because Plaintiff did not file in this Court until April 28, 2022, her claims are untimely.” Finally, the court found Ms. McClure’s dispute of the validity of the provision cursory, perfunctory, and “too underdeveloped to constitute a real challenge to the enforceability of the limitations period.” For this reason, the motions to dismiss were granted, and the complaint was dismissed with prejudice.

Retaliation Claims

Sixth Circuit

Murray v. City of Elizabethton, No. 2:21-CV-123-TAV-CRW, 2023 WL 2530936 (E.D. Tenn. Mar. 15, 2023) (Judge Thomas A. Varlan). At the end of 2020 and in early 2021 COVID-19 vaccines were a rare commodity. As a result, when the City of Elizabethton in Tennessee held a mass vaccination event on December 23, 2020, for eligible individuals employed by Carter County, Tennessee, there was a lot of tension over who received a vaccine that day. That tension is the center of this retaliation lawsuit wherein former Deputy Chief of Elizabethton’s fire department, plaintiff Aubrey Murray, alleges he was demoted and then forced to retire after he received criticism for his wife and son getting vaccinated at the event. Mr. Murray argued that his family did not receive preferential status to get vaccinated, as his son was also an employee of the county, and because he did not create or influence the list of eligible employees. Mr. Murray suspected his wife’s name got on the list as she had done years of volunteer work for the county. Regardless, he argued the adverse employment actions against him were motivated at least in part by a desire to interfere with and reduce his generous pension and was a violation of ERISA Section 510. Finally, Mr. Murray argued that his employer’s actions violated his First and Fourteenth Amendment rights, and that Elizabethton’s actions constituted common law retaliatory discharge. Defendants moved to dismiss and for summary judgment. Their motions were granted in part and denied in part. First, the court denied the motion to dismiss Mr. Murray’s First and Fourteenth Amendment claims. The court agreed with Mr. Murray that the public had an interest “as to how employers were investigating employees accused of wrongdoing in connection to the vaccines,” and construing the allegations as true the court stated that it could infer that Elizabethton’s actions violated Mr. Murray’s freedoms of speech and intimate association. However, Mr. Murray’s ERISA retaliation claim was dismissed because his pension plan is an exempt governmental plan and therefore not governed by ERISA. His common law retaliatory discharge claim was also dismissed. Finally, one of the individual defendants, Mr. Murray’s supervisor, was granted summary judgment because of qualified immunity.

Subrogation/Reimbursement Claims

First Circuit

Verizon Sickness & Accident Disability Benefit Plan for New Eng. Assocs. v. Rogers, No. 1:21-CV-00110-MSM-PAS, 2023 WL 2525208 (D.R.I. Mar. 15, 2023) (Judge Mary S. McElroy). A participant of Verizon, Inc.’s disability benefits plan, non-party Jacqueline Rogers, was struck in an automobile accident leaving her too injured to continue working. Ms. Rogers went on disability leave and was paid $44,962.50 in disability benefits. After she had been paid these benefits, Ms. Rogers settled with the insurer of the at-fault driver for a lump sum of $100,000. She was represented by attorney Richard M. Sands, and the settlement proceeds were disbursed to the Sands firm. Verizon filed this action against Mr. Sands seeking reimbursement of the disability benefits paid to Ms. Rogers pursuant to the summary plan description’s subrogation clause. In response, Mr. Rogers filed counterclaims against Verizon. The parties cross-moved for summary judgment. The court began by evaluating plaintiff’s Section 502(a)(3) claim against Mr. Sands. As a preliminary matter, the court was satisfied that the summary plan description was a part of the plan and that the subrogation clause within it created an automatic equitable lien. This was particularly true, the court held, because the clause was “written in language as intelligible to laypersons as insurance policies get.” Furthermore, the court agreed with plaintiff that the lien could be enforced against a non-participant attorney who collected settlements from a third party for the plan beneficiary who had received benefits. However, the court ultimately did not grant summary judgment in favor of either party on this claim because the issue of whether this action is an equitable or legal one can only be resolved by answering a question of fact, i.e., whether the settlement proceeds have been completely disbursed on nontraceable items. Therefore, both the plaintiff’s and defendant’s motions for summary judgment on this cause of action were denied. The court then analyzed Mr. Sands’ counterclaims for violation of § 1024(b)(4) and tortious interference with contract. It granted summary judgment in favor of Verizon on both counts, holding that “§ 1024 on its face does not require production of ‘employment records,’ which is what the Sands request sought,” and what both claims were ultimately premised on.