This week we could not play favorites among the many interesting ERISA decisions. Keep reading to hear about two “meritless goat” decisions, the latest update in the du Pont family pension saga, and a case in which fiduciaries to a multi-employer pension plan allegedly engaged in much wrongdoing, including charging for services after they were terminated.
Below is a summary of this past week’s notable ERISA decisions by subject matter and jurisdiction.
Abrams v. Unum Life Ins. Co. of Am., No. C21-0980 TSZ, 2023 WL 2241996 (W.D. Wash. Feb. 27, 2023) (Judge Thomas S. Zilly). A successful disability plaintiff, William Abrams, moved for an award of attorneys’ fees and costs pursuant to ERISA Section 502(g)(1). The court granted in part Mr. Abrams’ motion in this decision. As an initial matter, the court wrote that Mr. Abrams “has achieved considerable success on the merits,” and thus was eligible for an award of fees. The court then weighed the Ninth Circuit’s Hummell factors. Although the court agreed with Unum that it did not act in bad faith, it nevertheless felt that “an award of fees could deter other plan administrators from denying coverage based on a lack of a unifying diagnosis, rather than focusing on the question of whether the plaintiff is sick.” Further supporting an award of fees were Mr. Abrams’ success on the merits and Unum’s ability to satisfy a fee award. Thus, the court concluded that on balance Mr. Abrams deserved an award of attorneys’ fees, especially given ERISA’s remedial purposes designed to protect participants of employee benefit plans. Nevertheless, the court did decide to give the fee award a slight “haircut,” finding the trim appropriate here given Unum’s lack of bad faith and the fact that Mr. Abrams “only carried his burden by a small margin.” With these preliminary conclusions out of the way, the court proceeded to analyze Mr. Abrams’ requested lodestar. Mr. Abrams sought a fee award of $243,958 based on an hourly rate of $715 and 314.5 hours spent. The court felt an hourly rate of $715 was too high and rejected the arguments of Mr. Abrams’ counsel that this rate was justifiable given Unum’s counsel’s hourly rate of $930. Instead, the court concluded that an hourly rate of $550 was reasonable for experienced ERISA practitioners in the Seattle area. However, the court did not reduce the requested 314.5 hours. It stated that the complexities of the case justified the time spent. After applying the reduced hourly rate and the 10% overall trim, the court reached a fee award totaling $166,650 and awarded Mr. Abrams this amount. It also awarded him his requested $2,353.75 in costs. Finally, the court granted Unum’s request to stay the fee award pending appeal upon its filing of a supersedeas bond of 125% of the total fee and cost award.
Breach of Fiduciary Duty
Ruilova v. Yale-New Haven Hosp., No. 3:22-cv-00111-MPS, 2023 WL 2301962 (D. Conn. Mar. 1, 2023) (Judge Michael P. Shea). Two participants of a 403(b) defined contribution plan – the Yale-New Haven Hospital and Tax Exempt Affiliates Tax Sheltered Annuity Plan – have brought this action against the Yale-New Haven Hospital, the hospital’s board of trustees, plan’s committees, and individual Doe defendants for breaches of fiduciary duties of loyalty, prudence, and monitoring in connection with the administration of the plan. Specifically, plaintiffs alleged that the fiduciaries of the plan violated their duties by paying excessively high administrative and recordkeeping fees, maintaining an imprudent suite of actively managed target date funds and other imprudent investment options, offering an overall excessively expensive investment menu, and not acting in the exclusive and best interest of the plan participants. Defendants moved to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). They challenged plaintiffs’ standing as well as the sufficiency of their asserted claims. As an initial matter, the court concluded that the named plaintiffs had Article III standing to assert their claims, even with regard to the specific investment vehicles they never personally invested in. “Regardless of whether they would have standing on their own to assert claims about funds in which they did not invest, they may assert class claims regarding such funds on behalf of absent class members if the conduct that injured them implicates the same set of concerns as the conduct that injured the members of the proposed class.” The court was satisfied that plaintiffs had alleged that they were harmed by the same conduct as all of the proposed members of the class, and that requiring more in an ERISA class action would stymie participants’ ability to exercise ERISA-protected rights to challenge fiduciary misconduct. Having established that plaintiffs had standing to bring their claims, the court turned to analyzing whether plaintiffs had sufficiently stated their claims. The court came to a mixed conclusion. First, it found that plaintiffs had not stated a claim for breach of prudence related to the plan investments. It agreed with defendants that plaintiffs took the position that actively managed funds were per se imprudent based on their higher associated costs and greater associated risks. Active management, the court stressed, does not create an inference of imprudence. And because plaintiffs’ comparisons were for relatively short periods of time and were comparisons of passively managed funds to the challenged actively managed ones, the court concluded that even accepting plaintiffs’ allegations it could not decipher what defendants knew when or whether similarly situated fiduciaries would have acted differently. For much the same reason, plaintiffs’ claims predicated on the plan’s overall expense ratios were also determined by the court to be insufficiently pled. “As noted above, ERISA plans may offer actively or passively managed funds… Plaintiffs have failed to plead any facts supporting their allegation that the Plan’s (total plan cost) resulted from an imprudent process and is not just a consequence of its investment in actively managed funds.” However, plaintiffs’ claims of imprudence based on the excessive fees for services were not dismissed. There, the court held plaintiffs plausibly alleged that defendants paid too much for the services it received when compared to similar sized plans receiving similar services, stating that “[c]ourts in this Circuit have consistently found that allegations of this kind are sufficient to state a claim.” Nevertheless, the court did dismiss plaintiffs’ breach of duty of loyalty claim also premised on the same fees. In that regard it found that plaintiffs had not alleged facts indicating that defendants were acting in their own self-interest, but rather that defendants were negligent. Lastly, the court denied the motion to dismiss the derivative claims to the extent that it denied the dismissal of the underlying claims but granted the motion to dismiss all claims pled in the alterative. For these reasons, defendants’ motion was granted in part, and plaintiffs will be allowed to proceed with at least some of their class action.
Wright v. Elton Corp., No. C.A. 17-286-JFB, 2023 WL 2351822 (D. Del. Mar. 3, 2023) (Judge Joseph F. Bataillon). The trustees and qualified employers of the Mary Chichester duPont Clark Pension Trust filed motions to reconsider the court’s January 5, 2023 decision in which it determined that the plan was severely underfunded and was not being operated in compliance with ERISA. Plaintiff T. Kimberly Williams opposed the motions, and the trustees and the qualified employers each opposed the other’s motion. The qualified employers argued that they should not be deemed fiduciaries of the plan and that the court erred by defining them as plan sponsors. The trustees in their motion argued that the court erred by determining that they were plan administrators, and challenged that they could be held liable for the underfunding “because the legal obligation under ERISA to make minimum required contributions to the trust belongs to the employers, not the trustee of the trust.” Moreover, the trustees argued that they could not be held liable for failing to send ERISA-mandated notices to beneficiaries. In opposing, Ms. Williams argued that both the employers and the trustees could be deemed plan administrators based on their actions administering the plan. Further, she argued that because the plan did not designate an administrator, all entities that performed plan administration functions can be held liable for penalties as the plan administrator. Finally, Ms. Williams maintained that there was no clear error that the trustees were jointly and severally liable along with the qualified employers for the underfunding “because that holding is a straightforward application of two of ERISA’s civil enforcement provisions,” Sections 502(a)(2) and (a)(3). As an initial matter, the court expressed that “[f]or the most part, the issues raised in the reconsideration motions were exhaustively briefed by the parties previously and…addressed and rejected by the Court in earlier orders.” Additionally, the court stated that it need not adopt defendants’ “hyper-technical application of ERISA concepts and standards to the pension trust at issue as if the instrument at issue were originally set up as an ERISA plan. Rather, in this action, the Court has endeavored to observe and follow the spirit and structure of ERISA in fashioning an equitable remedy, in light of ERISA and common law duties and powers of trustees and employers.” In that spirit, the court stood by its previous findings of fact and conclusions of law. Thus, the court remained resolute in its previous positions, and disagreed with defendants that there were any clear errors in its earlier holdings. Accordingly, the motions for reconsideration were both denied.
Tullgren v. Hamilton, No. 1:22-cv-00856-MSN-IDD, 2023 WL 2307615 (E.D. Va. Mar. 1, 2023) (Judge Michael S. Nachmanoff). In this decision the court concluded that a plan participant’s amended complaint in a putative breach of fiduciary duty class action was a “meritless goat,” and granted the fiduciaries’ motion to dismiss before it with prejudice. Plaintiff Michael Tullgren filed this action on August 1, 2022. He alleged that the fiduciaries of the Booz Allen Hamilton Inc. Employees’ Capital Accumulation Plan – defendants Booz Allen Hamilton Inc., the board of trustees of Booz Allen Hamilton Inc., and the administrative committee of the plan – employed a flawed process overseeing and managing the plan by selecting, retaining, and failing to monitor or remove a suite of costly and poorly performing BlackRock Target Date Funds, to the detriment of the participants. The case was dismissed by the court last October. It held then that the complaint was circumstantial and conclusory, and lacking in meaningful comparisons “from which the Court may reasonably infer that the decision to retain BlackRock was the product of a flawed decisionmaking process.” Mr. Tullgren was then given the opportunity to amend his complaint to address the identified deficiencies. Mr. Tullgren subsequently filed an amended complaint, adding the S&P Target Date Indices and Sharpe ratio as additional benchmarks demonstrating the target date fund suite’s severe underperformance. Defendants once again moved to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). The court then heard oral argument on the motion on February 3, 2023. In this order the court dismissed the action. It stated that all Mr. Tullgren alleged was underperformance of the funds. “Plaintiff has provided no factual allegations from which the Court may reasonably infer that the choice of the BlackRock TDFs was imprudent from the moment the administrator selected it, that the BlackRock TDFs became imprudent over time, or that the BlackRock TDFs were otherwise clearly unsuitable for the goals of the fund based on ongoing performance. The addition of the Sharpe ratio and S&P Index to the Amended Complaint does not alter this analysis, as these are merely additional measurements of investment performance. That the Sharpe ratio is alleged to analyze performance on a risk-adjusted basis is therefore immaterial. ERISA simply does not provide a cause of action for fiduciary breaches based solely on a fund participant’s disappointment in the fund’s performance.” Thus, the court concluded that selecting and maintaining the challenged suite fell within the range of reasonable judgments that a fiduciary overseeing a plan may make, and accordingly found that Mr. Tullgren had not stated any facially plausible claims of imprudence, disloyalty, failure to monitor, or knowing participation in a breach of trust.
Hall v. Capital One Fin. Corp., No. 1:22-cv-00857-MSN-JFA, 2023 WL 2333304 (E.D. Va. Mar. 1, 2023) (Judge Michael S. Nachmanoff). In a nearly identical decision to the one he issued in Tullgren v. Hamilton above, Judge Nachmanoff likewise dismissed with prejudice a suit by two participants in another plan challenging the selection and retention of the BlackRock Target Date Fund suite in the Capital One Financial Corporation Savings Plan. Here, exactly like in Tullgren, the court concluded that it could not infer a breach of any fiduciary duty and that this amended complaint too was conclusory, circumstantial, and premised solely on the BlackRock suite’s underperformance. Accordingly, with the same words and same logic as Tullgren, this putative class action was not allowed to proceed past the pleading stage.
Dale v. NFP Corp., No. 20-CV-02942, 2023 WL 2306825 (N.D. Ill. Mar. 1, 2023) (Judge John F. Kness). A defined contribution multi-employer pension plan, The Northern Illinois Annuity Fund and Plan, and its board of trustees on behalf of the Plan and its participants, sued NFP Corporation, the plan’s service provider until late 2017, and other related individuals and entities for breaching their fiduciary duties under ERISA during the time when they exercised control over the plan and its assets. Among other things, the trustees alleged that defendants engaged in so-called “churning” of bonds, a process referring to excessively trading bonds at a high volume for mark-ups, including by selling bonds before they mature, at losses. According to their complaint, defendants were identified by the Securities and Exchange Commission “as financial advisors who were selling structured products before maturity.” In addition to this practice, the plaintiffs allege that defendants failed to reveal and disclose relevant information about fees they were receiving and other financial incentives they had when recommending the plan invest in certain options. Nor did defendants adequately issue reports on investment performance, and according to the trustees, defendants actively misled them about whether some of the investments were liquid. In all, plaintiffs pled thirteen separate counts of breach of fiduciary duty against the defendants. Defendants moved to dismiss. They argued that many of the claims were barred by ERISA’s statute of limitations. Defendants also challenged the sufficiency of the claims. Finally, defendants argued that they were not fiduciaries or not acting as fiduciaries with regard to several of plaintiffs’ claims. Mostly, the court declined to dismiss the complaint as untimely. With a few small exceptions, the court adopted the Seventh Circuit’s “continuing-violation theory,” and found that the injuries were the result of repeated decisions each causing harm independent of one another. However, plaintiffs’ claims regarding defendants’ initial investment recommendations, which occurred between 2004 and 2009, were found to be untimely. For the remaining claims, the court evaluated whether they were sufficiently stated in a manner in which it could infer fiduciary breaches. The court dismissed some, but not all, of plaintiffs’ claims of fiduciary wrongdoing. Some claims, including those relating to related share classes, undisclosed fee arrangements with third parties, and the selection of multiple money managers, were dismissed because the court viewed them to be “bald assertions” without adequate comparisons or necessary establishing facts and details. However, the court found many of plaintiffs’ other allegations allowed it to infer imprudence, disloyalty, and prohibited transactions. These included plaintiffs’ claims relating to the bond churning, the false statements and material omissions about the investments, the fees defendants charged the plan after the trustees had terminated their relationship, and defendants’ alleged failure to properly maintain records relating to the plan and the plan participants. Finally, the court declined to partake in the fact-finding necessary to determine whether the defendants were fiduciaries, and if so at what times and for what actions. At the pleading stage, the court was satisfied that plaintiffs had sufficiently alleged that defendants were fiduciaries and their actions during the alleged breaches were fiduciary in nature. Thus, as explained above, the motion to dismiss was granted in part and denied in part.
Dover v. Yanfeng US Auto. Interior Sys. I, No. 2:20-CV-11643-TGB-DRG, 2023 WL 2309762 (E.D. Mich. Mar. 1, 2023) (Judge Terrence G. Berg). In Your ERISA Watch’s November 2, 2022 newsletter, we summarized Judge Berg’s October 25 decision granting preliminary approval of a class action settlement in this case alleging breaches of fiduciary duties regarding the management of the Yanfeng Automotive Interior Systems Savings and Investment 401(k) Plan. “The specific breaches of duties Plaintiff complained of included selection and retention of imprudent investment options; failure to investigate more prudent investment options; failure to prevent excessive record-keeping fees; failure to ensure that other fiduciaries managing the funds were qualified; failure to ensure the other fiduciaries had adequate resources; and failure to maintain adequate records.” In this decision, the court granted final approval of $990,000 class action settlement and dismissed the case. Relying on its previous analysis and following the class action settlement fairness hearing held last month, the court reaffirmed its holdings that the class satisfied the requirements of Rule 23. And once again, the court found the settlement itself was the product of informed good faith negotiations and was fair, adequate, and reasonable. In this instance, the court stated that not only were no objections voiced to the settlement, but dozens of class members “expressed approval of the settlement.” Additionally, the court found the requested attorneys’ fees in the amount of $330,000 or one third of the common fund, costs of just under $30,000, and incentive awards of $7,500 for each of the three named plaintiffs, to be standard, just, and fair compensation for the work done in this complex ERISA litigation undertaken on a contingent fee basis. The court also found that the settlement notice and distribution procedures were proper and compliant with all relevant regulations. Finally, the court approved the plan of allocation, and ordered the settlement administration to calculate and distribute the settlement proceeds in proportion to each class members’ balances as laid out in the agreement. In sum, the court wrote, “the settlement is in the best interest of the class as a whole.”
Disability Benefit Claims
Moseley v. Unum Life Ins. Co. of Am., No. 22-40079-RGS, 2023 WL 2324771 (D. Mass. Mar. 2, 2023) (Judge Richard G. Stearns). In this case Plaintiff Susan Moseley challenged Unum Life Insurance Company of America’s termination of her long-term disability benefits pursuant to her plan’s mental illness limitation. The court granted summary judgment to Ms. Moseley, concluding that Unum’s failure to provide Ms. Moseley with an independent medical examination upon her request was an abuse of discretion. The court referred to a regulatory settlement agreement between Unum and several states, including Massachusetts, which states that “an IME…should be sought whenever…the claimant or the AP requests an IME, either directly or through the claimant’s representative,” and concluded that Unum’s denial of Ms. Moseley’s request “constituted procedural error and rendered Unum’s benefits determination inherently arbitrary and capricious.” This was especially true because Unum did not contest that Ms. Moseley was disabled, but only that her disabling symptoms were not psychological in nature and not, as she claimed, a result of Lyme disease. For this reason, the court reversed the denial and remanded to Unum for further proceedings in light of this decision. Finally, the court allowed Ms. Moseley to move for an award of attorneys’ fees and costs.
Caudill v. The Hartford Life & Accident Ins. Co., No. 1:19-cv-963, 2023 WL 2306666 (S.D. Ohio Mar. 1, 2023) (Judge Susan J. Dlott). Plaintiff David Caudill sued the Hartford Life & Accident Insurance Company after the long-term disability benefits he was receiving were terminated. Mr. Caudill argued that Hartford’s decision was arbitrary and capricious. He also argued that he was denied a full and fair review because he was not provided with a copy of the medical reviewer’s report that Hartford relied upon in its 2019 termination. In this decision the court issued its judgment on the administrative record, granting judgment in favor of Mr. Caudill. First, the court held that the new amendment to the Department of Labor regulations, § 2560.503-1(h)(4)(i), was in effect at the time of the benefit termination and therefore governed the manner in which Hartford was required to handle Mr. Caudill’s claim. Thus, the court held that Mr. Caudill was entitled to a copy of the reviewer’s report and because Hartford did not automatically provide it to him, he was denied a full and fair review. Additionally, the court concluded that the termination itself was arbitrary and capricious. The court stated that Hartford’s disregard of information in the administrative record favorable to Mr. Caudill, including the results of a functional capacity examination, and notes of his treating physicians, coupled with Hartford’s conflict of interest, meant its “determination that Caudill could work in a sedentary capacity despite his respiratory issues [was] arbitrary and capricious.” Finally, the court wrote that in this case, because Hartford did not properly terminate Mr. Caudill’s benefits, the proper remedy was retroactive reinstatement of benefits, and because he “should have continued to receive these benefits, they were wrongly withheld.” Moreover, the court stated that an award of prejudgment interest was also appropriate. For these reasons, Mr. Caudill’s motion for judgment was granted, and Hartford’s motion for judgment on the record was denied.
Paparella v. Liddle & Robinson, LLP, No. 1:18-cv-09267 (JLR), 2023 WL 2344725 (S.D.N.Y. Mar. 3, 2023) (Judge Jennifer L. Rochon). Plaintiff Andrea Paparella commenced this action in state court in New York against her former employer, Liddle & Robinson, LLP, and individual defendants who were attorneys at Liddle & Robinson, alleging sex discrimination in connection with her time employed at the firm. Ms. Paparella asserted thirteen state law causes of action. Relying on a reference in Ms. Paparella’s complaint to Liddle & Robinson’s profit sharing plan, defendants removed the action to federal court, and argued that ERISA preempts Ms. Paparella’s state law claims. Defendants subsequently moved to dismiss. In response, Ms. Paparella said her brief allusion to the profit sharing plan was included only as an example of one of the myriad ways in which she claims to have experienced discrimination. She then amended her complaint, removing the reference. In light of Ms. Paparella’s amendment to her complaint, the court denied as moot defendants’ motion for dismissal. Ms. Paparella moved to remand the case to state court. She argued that removal was improper, and also requested that she be awarded attorney’s fees. In support of her position, Ms. Paparella argued that ERISA does not preempt her complaint because the claims could not be construed as colorable claims for benefits under the ERISA plan, and instead they implicate independent legal duties. “The Court agree[d] with Plaintiff on both points.” The court underscored that it was clear from the complaint that Ms. Paparella was not seeking relief in the form of plan benefits, but was instead seeking “several other forms of relief,” including “back pay, reinstatement of front pay, liquidated damages, and compensatory damages for severe emotional distress.” Ms. Paparella’s claims, the court stressed, “‘seek to do none of the things’ that an ERISA claim would seek to do.” Finally, the court held that liability for Ms. Paparella’s claims turn on state law “rather than rights and obligations established by the terms of the profit sharing plan.” For these reasons, the court agreed with Ms. Paparella that her causes of action were not preempted by ERISA. Thus, the court granted her motion for remand. However, the court declined to award attorney’s fees. It held that defendants’ basis for removal was not objectively unreasonable and that these circumstances did not warrant a fee award.
Princeton Neurological Surgery, P.C. v. Aetna, Inc., No. 3:22-cv-01414 (GC) (DEA), 2023 WL 2307425 (D.N.J. Feb. 28, 2023) (Judge Georgette Castner). An out-of-network healthcare provider, plaintiff Princeton Neurological Surgery, P.C., brought this suit to recover payment from defendants Aetna, Inc. and Aetna Life Insurance Company for cervical spinal surgery it provided to a patient insured under an ERISA-governed plan administered by defendants. Aetna paid only approximately $3,000 for the surgery, leaving an unpaid bill of over $300,000. Princeton Neurological asserted state law claims against defendants for breach of implied contract, breach of warranty of good faith, promissory estoppel, unjust enrichment, and negligent misrepresentation. Defendants moved to dismiss the complaint for failure to state a claim. Their motion was granted without prejudice in this order. The court held that the provider’s state law causes of action were preempted by ERISA Section 514. In particular, the court concluded that no “specific representations or express promises to pay Plaintiff [existed] that were independent of the terms of [the patient’s] Plan.” Thus, as the court saw it, Princeton Neurological’s claim for reimbursement was essentially a claim for benefits due under the ERISA plan. Relying on a transcript of the pre-authorization phone call between the parties, the court held that the Aetna representative made promises to Princeton Neurological which expressly referenced the terms of the patient’s ERISA plan. Accordingly, the court dismissed the state law causes of action. However, dismissal was without prejudice, and Princeton Neurological may replead its complaint under ERISA.
Vanguard Plastic Surgery, PLLC v. UnitedHealthcare Ins. Co., No. 22-60488-CIV-ALTMAN/Hunt, 2023 WL 2257961 (S.D. Fla. Feb. 27, 2023) (Judge Roy K. Altman). Plaintiff Vanguard Plastic Surgery, PLLC is a healthcare provider in a “shared savings network,” the Three Rivers Provider Network, which allows insurance companies including defendant UnitedHealthcare Insurance Co. to access these out-of-network providers and pay them a discounted rate of reimbursement, specifically outlined within the terms of the network agreement. However, according to Vanguard’s complaint in this action, United violated Florida law by reimbursing it only 1.98% of the billed charges for the treatment it provided to one of United’s insured patients. According to Vanguard, the charges it billed to United were what it was entitled to under the terms of the network agreement. Thus, it asserted claims of breach of implied-in-fact contract, unjust enrichment, and promissory estoppel against United in an attempt to receive reimbursement for the full amount of the billed charges. United moved to dismiss. It argued that the state law claims relate to an ERISA-governed plan and are therefore preempted. It further challenged the sufficiency of the state law claims pled. Magistrate Judge Patrick M. Hunt issued a report and recommendation recommending the motion to dismiss be granted in part and denied in part. Specifically, Magistrate Hunt concluded that ERISA did not preempt the state law claims. Magistrate Hunt, however, stated that for other reasons Vanguard did not sufficiently state a claim for breach of implied-in-law contract and as a result recommended that the unjust enrichment claim be dismissed. Untied filed objections to the Magistrate’s report, hoping to dismiss all of Vanguard’s claims, and once again stressing its conviction that ERISA preempts Vanguard’s causes of action. In this decision, the court overruled United’s objections, and adopted the report in full. As a result, Vanguard’s unjust enrichment claim was the only cause of action dismissed. Regarding ERISA preemption, the court wrote, “the question at the heart of the complaint is whether Defendant has contracted with (the Three Rivers Provider Network) to pay rates per the arrangement between plaintiff and (the network.)” Thus, in the court’s view, the complaint had nothing but a “tangential relationship” with the ERISA plan. “Indeed, in Vanguard’s view, the Defendant’s contractual obligation to (the patient) is entirely separate from its obligations to Vanguard.” This, the court held, was a classic example of a case where a healthcare provider was challenging the rate at which it was reimbursed by an insurance company and how that reimbursement was calculated, and not an instance where a provider was “challenging the scope or application of the ERISA policy’s benefit at all.” Simply put, the court wrote “the ‘mere fact’ that Vanguard treated a patient who happens to have an ERISA plan doesn’t mean that every legal issue concerning that treatment is now ‘related’ to that plan.” For these reasons then, the court agreed with Magistrate Hunt that ERISA did not preempt Vanguard’s state-law claims.
Exhaustion of Administrative Remedies
Stampone v. Walker, No. 15-cv-6956, 2023 WL 2263596 (D.N.J. Feb. 28, 2023) (Judge Claire C. Cecchi). Pro se Plaintiff Frederick Stampone first initiated this action in 2015. At its simplest, this case revolves around a dispute between Mr. Stampone and his Taft-Hartley pension plan over how his pension credits were calculated. Mr. Stampone believes that vesting credits should have been calculated on a cumulative basis and that he should have earned credits for all of the total hours he worked while participating in the plan for over two decades. The Plan conversely maintained that calculations were computed annually, and that credits did not vest per the terms of the plan if a participant worked less than 300 hours in a single year. Furthermore, the Plan stated that participants did not earn full vesting credits until they met an 870-hour threshold within a calendar year. Since the commencement of this lawsuit, a lot has happened. First, the case was dismissed. However, the dismissal was then overturned by the Third Circuit. Then, following remand from the circuit court, the Plan provided Mr. Stampone with a pension application. And in spring of 2022 Mr. Stampone elected and subsequently began receiving monthly pension benefits. Nevertheless, Mr. Stampone continued pursuing his legal action. He still maintains that his benefits have not been calculated properly, and rather than engage in the administrative appeals process he has kept his civil suit alive. The parties subsequently cross-moved for summary judgment. Mr. Stampone moved for judgement in his favor on his claim under ERISA Section 502(a)(1)(B). The Plan moved for summary judgment, arguing both that Mr. Stampone’s claim required dismissal for failure to exhaust and that the benefit amount was correctly calculated under the written terms of the plan. The court found in favor of the Plan on both issues. It concluded that Mr. Stampone had improperly refused to exhaust his administrative appeals process following his first pension payment in May 2022, and that he could not demonstrate that exhaustion would have been futile. In addition, the court agreed with the Plan that its interpretation of the vesting credits calculation was not arbitrary and capricious, writing, “Defendant has undisputedly shown that it correctly applied the written terms of the Plan.” Thus, finding that Mr. Stampone offered no support for his position that his benefits were miscalculated, the court concluded there was no genuine issue of material fact to preclude awarding judgment in favor of the Plan.
Stout v. Liberty Life Assurance Co. of Bos., No. 8:20-cv-01675-FLA (KESx), 2023 WL 2266110 (C.D. Cal. Feb. 28, 2023) (Judge Fernando L. Aenlle-Rocha). Plaintiff Julie Stout worked for Dassault Systemes Americas Corp. for one year, until medical issues including multiple sclerosis left her unable to continue working and she submitted a claim for short-term disability benefits under Dassault’s self-insured short-term disability plan, administered by defendant Liberty Life Assurance Company of Boston. Liberty denied Ms. Stout’s claim for short-term disability benefits. Ms. Stout never submitted a claim for long-term disability benefits under the long-term disability plan, which was fully insured unlike the short-term disability plan. Also different from the short-term disability plan, the long-term disability plan included a pre-existing conditions exclusion. In 2020, Ms. Stout commenced two different lawsuits, one against Dassault for wrongful termination of her employment, and this present action against Liberty Life under ERISA Section 502(a)(1)(B) seeking a court order finding her entitled to short-term and long-term disability benefits. Ms. Stout’s action against Dassault ended in settlement. Under the terms of the settlement agreement, Ms. Stout agreed to a general release of all claims against Dassault including pertaining to the disability policies. However, the settlement agreement explicitly excluded Liberty Life from the released parties. On August 2, 2022, the court in this action held a bench trial. In this decision, the court issued its findings of fact and conclusions of law. It began with addressing the short-term disability benefit claim. The court found that Ms. Stout’s short-term disability benefit claim against Liberty failed because the plan is self-funded, meaning Liberty “is not obligated to pay STD benefits.” Thus, the court concluded that Ms. Stout settled and released her short-term disability benefit claim against the party responsible for paying benefits, Dassault. The court then addressed Ms. Stout’s claim for long-term disability benefits. That claim failed because Ms. Stout did not exhaust administrative remedies. Ms. Stout never applied for the benefits “as required, before filing the subject action… Because Plaintiff did not pursue a claim for LTD benefits through the plan, Liberty never evaluated whether she was disabled under the LTD benefit plan and did not issue a denial of LTD benefits. Without the benefit of an initial evaluation or administrative review, Plaintiff cannot establish she is entitled to LTD benefits. Likewise, the court is without a factual record it can evaluate in connection with a LTD claim. Thus, Plaintiff’s claim for LTD benefits fails.” Finally, the court was not persuaded that it would have been futile for Ms. Stout to pursue a long-term disability benefit claim because her short-term disability claim had already been denied. For these reasons, the court found both of Ms. Stout’s claims for disability benefits failed.
Pension Benefit Claims
Ford v. Pension Hospitalization & Benefit Plan of the Elec. Indus. Pension Tr. Fund Plan, No. 21-3142, __ F. App’x __, 2023 WL 2230280 (2d Cir. Feb. 27, 2023) (Before Circuit Judges Sack and Nathan, and District Judge Brown). In 2009, plaintiff-appellant Bernard Ford sent an application to the Pension Trust Fund of the Pension, Hospitalization and Benefit Plan of the Electrical Industry seeking a disability pension. The plan’s pension committee awarded Mr. Ford benefits with an effective date of October 1, 2006, concluding that Mr. Ford was ineligible for earlier benefits because he continued to work at least intermittently until that date. Mr. Ford appealed this determination, arguing that he had become disabled in 2002. He maintained that since the onset of his disability in 2002 he had only worked intermittently and therefore had not secured “gainful employment” in that time. The committee upheld its decision, which prompted Mr. Ford to take legal action. In the district court Mr. Ford alleged that the decision denying him earlier pension benefits was arbitrary and capricious under the plan language which states that eligibility for disability benefits requires a participant be “permanently incapacitated or disabled to such an extent that he can no longer secure gainful employment in the electrical industry, or any other line of business.” The district court did not agree with Mr. Ford on this point. It concluded that the decision could not be disturbed given the committee’s discretionary authority to interpret the relevant provision and the reasonableness of their interpretation. Accordingly, the district court granted summary judgment in favor of the defendants. The lower court’s holding was affirmed in this decision from the Second Circuit. The court of appeals stated that the committee’s determination that Mr. Ford was engaged in gainful employment until fall of 2006 “was neither ‘without reason’ nor ‘unsupported by substantial evidence.’” The Second Circuit also stated that Mr. Ford did not provide any support within the plan language or through any past practice for his interpretation of the plan provision. Thus, under the deferential review standard the Second Circuit would not overturn the benefits decision. Finally, the circuit court declined to give any weight to the conflict of interest present because there was no evidence “that the conflict actually affected the administrator’s decision.”
Huff v. BP Corp. N. Am., No. 22-CV-00044-GKF-JFJ, 2023 WL 2317291 (N.D. Okla. Mar. 1, 2023) (Judge Gregory K. Frizzell). On December 14, 2021, plaintiff Ronald Huff sued BP Corporation North America, Inc. in state court over a group life insurance policy. BP removed the case to federal court, contending the policy is governed by ERISA and that the state law claims were accordingly preempted. The court agreed with BP. It concluded that the policy was an ERISA plan, that it did not fall under ERISA’s safe harbor provision, and that the policy was never converted to an individual policy. Mr. Huff moved the court to reconsider. The court then “issued a fourteen-page Opinion and Order all entirely devoted to this single issue.” In that order it once again concluded that the group policy is governed by ERISA. Mr. Huff moved to vacate judgment and reconsider whether the insurance policy is subject to ERISA. Here, the court held that although Mr. Huff put greater emphasis on certain arguments, he was simply rehashing arguments he already raised in the prior briefing. The court denied the motion and reaffirmed its earlier conclusion. In sum, the court disagreed with Mr. Huff that there was clear error in its previous analysis or any manifest injustice. Thus, the court again concluded the policy is a qualifying employee benefit plan subject to ERISA.
Pleading Issues & Procedure
Williams v. Sedgwick Claims Mgmt. Servs., No. 1:22CV570, 2023 WL 2329698 (M.D.N.C. Mar. 2, 2023) (Judge Loretta C. Biggs). Pro se plaintiff Latonia Williams sued Sedgwick Claims Management Services, Inc. and UnitedHealth Group Inc. alleging discrimination under the Americans with Disabilities Act (“ADA”) and wrongful denial of a disability benefit claim under ERISA relating to both prenatal and postpartum pregnancy complications. Defendants moved to dismiss pursuant to Federal Rules of Civil Procedure 12(b)(1) and (b)(6). Their motion was granted in this decision. The court held that Ms. Williams could not state an ADA claim as she failed to exhaust her administrative remedies by not timely filing a charge with the Equal Employment Opportunity Commission. The court additionally expressed that it was unclear from Ms. Williams’ complaint whether she “was discharged or suffered any adverse employment action.” With regard to ERISA, the court did not dismiss for failure to exhaust administrative remedies prior to commencing legal action, pointing out that exhaustion is an affirmative defense, “making a Rule 12(b)(6) motion the improper vehicle for Defendants’ challenge.” Nevertheless, the court dismissed the ERISA claim for another reason: “Plaintiff has failed to state a claim.” The court found the complaint lacked details required to establish what the ERISA plan was, what the basis for the denial was, or what was wrong about the denial.
Juric v. USALCO, LLC, No. JKB-22-0179, 2023 WL 2332352 (D. Md. Mar. 2, 2023) (Judge James K. Bredar). In 2014, plaintiff John Juric was employed by USALCO, LLC as its chief financial officer. After a Florida corporation, H.I.G. Capital, LLC, acquired ownership in USALCO, Mr. Juric began to identify and raise legal and ethical issues relating to the company. In his lawsuit, Mr. Juric alleges that he was wrongfully terminated in 2021 in retaliation for his whistleblowing. He also asserts that his termination was motivated, at least in part, by a desire to interfere with his attainment of soon to be vested stock in the Project Aero Management, LLC Equity Incentive Plan, which he claims is an ERISA plan designed to defer compensation. Finally, following his termination, Mr. Juric claims that he was meant to continue as an enrolled participant in the company’s ERISA-governed health plan. He also maintains that he was never given plan documents upon request. Thus, in this action, Mr. Juric sued USALCO and H.I.G. Capital, along with individuals high up at USALCO, asserting claims under Maryland common law and wage and hour laws, and ERISA Sections 502(a)(1)(B), (a)(3), (a)(c), and 510. Defendants moved to dismiss. Their motion was granted by the court, which agreed that Mr. Juric did not adequately state his claims. To begin, the court concluded that Mr. Juric did not have a viable claim for benefits under the health plan, because the language of the plan clearly states that eligibility ends following an employee’s termination. Mr. Juric’s equitable estoppel claim similarly failed, as the court viewed it as a repackaging of his unsuccessful and nonviable claim for benefits. Next, the court stated that Mr. Juric did not allege a breach of fiduciary duty committed by defendants’ alleged misrepresentations about post-termination eligibility, because “Juric provides no allegations that USALCO was acting as a fiduciary in making any alleged misrepresentations.” Even more fundamentally, the court held that the complaint was devoid of facts establishing what the alleged misrepresentations were, who made them, when they occurred, or why Mr. Juric could have reasonably believed he was entitled to coverage post-termination. Regarding Mr. Juric’s Section 510 interference claim, the court expressed that upon review of the equity incentive plan it was clear that the plan does not qualify as an ERISA plan. The court reached this conclusion despite the fact the plan “could potentially result in post-termination income,” and “creates an ongoing administrative scheme or practice.” Finally, the court dismissed Mr. Juric’s claim for failure to provide plan documents, concluding that he was not a plan participant or a former participant with a valid claim, and therefore not entitled to the documents. For these reasons the court dismissed all of Mr. Juric’s ERISA causes of action. The remaining state law claims were also dismissed, as the court declined to exercise supplemental jurisdiction over them.
Severance Benefit Claims
Smith v. Lutheran Life Ministries, No. 21 C 2066, 2023 WL 2266144 (N.D. Ill. Feb. 28, 2023) (Judge Joan H. Lefkow). Plaintiff Lori Smith sued her former employer, Lutheran Life Ministries, and the company’s board of directors under state law and ERISA Sections 502(a)(1)(B), and (a)(3), alleging that defendants owe her severance payments. Specifically, Ms. Smith contends that Lutheran Life Ministries’ change of CEO and President constituted a “transition period” at the company, and that the new CEO’s decision to take away Ms. Smith’s managerial responsibilities constituted a “constructive termination” making her eligible for the 18-month severance pay outlined in the terms of her agreement with Lutheran Life. Additionally, Ms. Smith argued that she reasonably relied, to her determent, on the representations in her offer letter and severance agreement when deciding to accept employment with Lutheran Life, and that defendants are therefore equitably estopped from denying her the promised benefits now. Defendants moved to dismiss Ms. Smith’s claims pursuant to Federal Rule of Civil Procedure 12(b)(6). Their motion was granted in this decision. First, with regard to Ms. Smith’s claim under Section 502(a)(1)(B), the court stated that it would not dismiss Ms. Smith’s claim for failure to exhaust, as there were genuine issues of material fact about whether a claims procedure even existed at the time when Ms. Smith’s severance benefit claim was denied. However, the court found that Ms. Smith’s benefit claim failed for another reason. It concluded that she was not eligible for severance benefits under the severance agreement. The court decided, on the basis of the complaint alone, that the term “transition period” was meant to relate to a change of control. Further, the court stated that “[a]lthough the offer letter provides no definition of ‘change of control,’ such term is only capable of supporting one reasonable definition: a change in who has legal authority to manage and govern LLM.” Under this definition, the court held that that control ultimately resides with the board. Through this line of the thinking, the court held that the term “transition period” here could not be read to mean a change in Lutheran Life’s president and CEO. “In short, the complaint as written alleges that LLM acquired a new supervisor to oversee its operations but experienced no change of control. Absent any allegations that LLM experienced a change of control, Smith cannot satisfy the ‘during a Transition Period’ element of her claim for severance benefits. Accordingly, the court grants LLM’s motion to dismiss Smith’s ERISA enforcement count for failure to state a claim on which relief can be granted.” This same logic also ultimately doomed Ms. Smith’s ERISA estoppel claim. With regard to that claim, the court stated that because no transition period took place, “Smith cannot claim that LLM misrepresented what conditions would trigger the payment of severance benefits in the offer letter and Severance Agreement.” Thus, without a knowing misrepresentation, the court concluded that Ms. Smith could not state her promissory estoppel claim. Finally, the court declined to exercise supplemental jurisdiction over Ms. Smith’s state-law claim. Thus, Ms. Smith’s complaint was dismissed in its entirety.
Statute of Limitations
Trustees of the Nat’l Elevator Indus. Pension Fund v. CEMD Elevator Corp., No. 22-2304, 2023 WL 2309764 (E.D. Pa. Mar. 1, 2023) (Judge Harvey Bartle III). Trustees of three multiemployer Taft-Hartley plans and a labor-management cooperation committee sued an elevator contractor in New York and its owner for unpaid contributions and mishandling of plan assets. This is not the first legal action between these parties. Twice before, the plans have sued CEMD Elevator Corporation and its owner for similar allegations of problematic contribution practices. Those lawsuits “were both dismissed by joint stipulations and voluntary dismissal on May 22, 2019.” The stipulation also required defendants to submit to a payroll audit. That audit took place in 2021, and it revealed the problems which are the basis of this action. Defendants moved to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). They argued that plaintiffs’ claims are time-barred by the governing statutes of limitations. For the most part, the court disagreed, at least at the pleading stage. Until further progress has taken place in this action, including the benefit of discovery, the court held that all of plaintiffs’ claims are plausibly timely with the exception of the unpaid contributions for the months of May, June, and July 2016. That information, the court stated, was clearly available to plaintiffs and they were obviously aware of those unpaid contributions “because they previously sought damages in connection with these months” in the two earlier lawsuits. However, defendants’ motion was otherwise denied. The court stated that it would not find the claims untimely due to plaintiffs’ request for an audit of the months in question. The fact that plaintiffs sought an audit, the court stated, does not prove that they were aware of unpaid contributions, because plaintiffs have the right to demand an audit regardless of whether they think there is wrongdoing on the behalf of a contributing employer. “Defendants have cited no authority to the contrary. To hold otherwise would lead to absurd results. If a labor fund’s audit requested always demonstrated that it was aware of an underpaid contribution, then every audit request would end the tolling of the respective statute of limitations. An employer could simply delay its compliance with the efforts of the auditor until the statute of limitations ends, thereby avoiding liability.” And here, at least in this early stage of litigation, defendants could not use the statute of limitations to do just that.