Nothing exceptional caught your editors’ eye this week, but there were several interesting decisions nonetheless. Read on to learn about a nearly $1 million award in a termination gone wrong (Beryl v Navient), a deep dive into what constitutes a top hat plan (Kramer v. AEP), and a Third Circuit decision informing us that yes, New Jersey Transit is a governmental entity, and thus not subject to the whims and caprices of ERISA (Pue v. New Jersey Transit), among others.

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

Breach of Fiduciary Duty

Third Circuit

Board of Trs. of the UAW Grp. Health & Welfare Plan v. Acosta, No. 14-6247 (JXN) (CLW), 2023 WL 2945896 (D.N.J. Apr. 14, 2023) (Judge Julien Xavier Neals). The UAW Group Health & Welfare Plan, its board of trustees, and several participating unions brought this lawsuit for breaches of fiduciary duties in connection with the allegedly fraudulent administration of health insurance benefits to ineligible participants under the Plan. As relevant here, the plaintiffs sued two individuals, Lawrence Ackerman and Sergio Acosta, who allegedly conspired to embezzle plan funds. While this case was ongoing, there was a parallel criminal case underway arising out of the same facts as the civil litigation. The criminal case “ultimately resulted in the indictment of Defendants Acosta and Ackerman on January 9, 2017.” Mr. Acosta pled guilty to embezzlement from the plan and admitted to withholding the premiums the Union owed to the UAW healthcare plan for the union enrollees. In response to the claims brought against him for breach of fiduciary duties and breach of trust agreement, Mr. Acosta filed a counterclaim seeking indemnification and contribution from the plaintiff trustees with respect to any damage award the court might grant. Additionally, Mr. Acosta brought a third-party complaint asserting a claim against the Union, again seeking “to recover contribution, indemnification, or both, in the event the Court determines that he is in any way liable to the Plan.” The court previously dismissed both Mr. Acosta’s counterclaim against the plaintiffs and his third-party complaint against the Union. The court agreed with plaintiffs that ERISA contains no implied right of contribution or indemnification and that there was no evidence they knew of or engaged in any of the wrongdoing alleged. Mr. Acosta responded by filing a motion to reconsider. In this decision the court mostly denied the motion, granting it only to the extent that it altered its order of dismissal from one with prejudice to one without prejudice as to Acosta’s third-party complaint against the Union, allowing Mr. Acosta the opportunity to amend his complaint. First, the court affirmed its earlier position regarding the trustee plaintiffs, once again finding that they had no involvement in the scheme and that this is therefore not an appropriate case in which to engraft upon ERISA the remedies of contribution and/or indemnification. Regarding the Union, though, the court found that Mr. Acosta should be given the opportunity to amend his pleading to include allegations regarding any facts to support his position that the Union participated in the illegal scheme. “To deny Acosta this right would be prejudicial.” Therefore, the court granted the motion to reconsider in this regard.

Ninth Circuit

Baker v. Save Mart Supermarkets, No. 22-cv-04645-WHO, 2023 WL 2838109 (N.D. Cal. Apr. 7, 2023) (Judge William H. Orrick). Four non-union retirees of the grocery store chain Save Mart Supermarkets filed a putative class action asserting breaches of fiduciary duties under ERISA. The plaintiffs alleged that Save Mart misrepresented to them that the non-union medical benefits provided upon retirement to them and their spouses would be as good as those of their union co-workers. They also maintained that defendants led them to believe that if they retired before December 31, 2017, they would retain part of their healthcare benefits, those regarding their health reimbursement accounts, for life. According to the complaint, Save Mart made these statements to them in order to convince its employees not to join the union. Save Mart moved to dismiss, arguing that plaintiffs’ claims were untimely, and that regardless of the statute of limitations, they had failed to adequately state their claims. The court wrote, “the statute of limitations poses no issue, as the plaintiffs filed their claim within three years of receiving actual notice of the alleged breach when Save Mart announced it would terminate the benefits at issue in April 2022.” Moreover, the court found that the complaint presented a short and plain statement of the facts to sufficiently put Save Mart on notice, as the complaint detailed with specificity the who, when, and where of the misrepresentation. It thus concluded that plaintiffs had alleged affirmative misrepresentations made to them that they had relied upon to their detriment, thereby plausibly stating a claim for breach of loyalty. Not only did the court find that plaintiffs “plausibly alleged the remediable wrong that Save Mart breached its fiduciary” duties in the manner alleged, but it also concluded that plaintiffs “showed that they may be entitled to appropriate equitable relief in the form of reformation and surcharge.” Accordingly, the court denied the motion to dismiss. Thus, the retirees, who worked for the company for many decades, were allowed to proceed with their putative class action past the pleadings.

Class Actions

Seventh Circuit

Placht v. Argent Tr. Co., No. 21 C 5783, 2023 WL 2895738 (N.D. Ill. Apr. 11, 2023) (Judge Ronald A. Guzmán). In this order the court granted plaintiff Carolyn Placht’s unopposed motion for class certification and appointment of class counsel in an action involving allegations of fiduciary breaches and prohibited transactions in connection with an October 31, 2015, transaction in which the Symbria Inc. Employee Stock Ownership Plan purchased all outstanding shares of Symbria stock from the former shareholders at an allegedly inflated price. The court found the proposed class of plan participants, about 1,200 individuals, sufficiently numerous to satisfy the numerosity prong of Rule 23(a). In addition, the court stated that common questions “as to whether and how Argent breached its fiduciary duties to the Plan through the ESOP Transaction, whether Argent’s indemnification agreement with Symbria was void, and whether the Plan participants were thereby damaged” united the class members. Further, the court held that Ms. Placht’s claim arose under the same legal theories and stemmed from the same events as the claims of all other class members. Thus, the typicality requirement was satisfied. Finally, under Rule 23(a)’s analysis, the court established that Ms. Placht and her counsel were adequate representatives of the class, and that there was no conflict between Ms. Placht and her fellow plan participants. With the requirements of Rule 23(a) met, the court proceeded to analyze the proposed class under Rule 23(b). The court certified the class under Rule 23(b)(1). It concluded that individual lawsuits would run the risk of creating incompatible and inconsistent adjudications, and that “adjudications with respect to individual class members…would be dispositive of the interests of the other members not parties to the individual adjudications.” Finally, under Rule 23(g), the court appointed Ms. Placht’s counsel as class counsel. It found the attorneys “possess the necessary experience, competence, drive, and resources to effectively litigate on behalf of a class, and they have collectively litigated on behalf of classes in complex litigation, including ERISA claims.” For these reasons, plaintiffs’ motions were granted, and the proposed class was certified.

Disability Benefit Claims

First Circuit

Abi-Aad v. Unum Grp., No. 21-CV-11862-AK, 2023 WL 2838357 (D. Mass. Apr. 7, 2023) (Judge Angel Kelley). In this disability benefit claim, plaintiff Daniel Abi-Aad filed suit to challenge Unum’s termination of his long-term disability benefits under his policy’s 24-month cap for disabilities caused by mental illnesses. Mr. Abi-Aad argued that he was entitled to continued benefits because he was disabled from performing the essential duties of his occupation both because of mental illnesses and concurrent chronic physical pain, possibly resulting from arthritis or radiculopathy. Mr. Abi-Aad’s treating physicians offered opinions supporting his position. Mr. Abi-Aad and Unum cross-moved for summary judgment on the administrative record under de novo review. The court granted judgment to Unum. Although the court stated that it did not doubt that Mr. Abi-Aad has chronic physical pain, it nevertheless noted that under the terms of the policy, “Abi-Aad is not only required to provide objective medical evidence of the existence of his chronic pain, Abi-Aad must also show that chronic pain rendered him unable to perform a job for which he was reasonably fitted by education, training, or experience.” The court concluded that Mr. Abi-Aad had not done so here. The court agreed with Unum that he therefore was unable to demonstrate his entitlement to continued benefits. Furthermore, the court was persuaded by the opinions of Unum’s reviewing physicians and the evidence they offered to sow doubt and discredit the contrary conclusions held by Mr. Abi-Aad’s doctors and the physical residual functional capacity assessment that Mr. Abi-Aad underwent as a part of his administrative appeal. The court further held that “Abi-Aad’s treating physicians did not provide sufficient explanations to prove that Abi-Aad is not able to perform a gainful occupation.” Finally, the court was satisfied that Unum’s reviewing doctors “were health care professionals that had the appropriate experience and training to provide a recommendation for Abi-Aad’s LTD claim.”

Discovery

Sixth Circuit

Kramer v. American Elec. Power Exec. Severance Plan, No. 2:21-cv-5501, 2023 WL 2925117 (S.D. Ohio Apr. 13, 2023) (Magistrate Judge Kimberly A. Jolson). Plaintiff Derek Kramer is the former Chief Digital Officer of the American Electric Power Service Corporation. In this role, Mr. Kramer became a participant in the company’s Executive Severance Plan. Mr. Kramer was later terminated and then denied severance benefits under the plan. In this action, Mr. Kramer seeks those benefits. He asserted two causes of action against his former employer, a claim for severance benefits under Section 502 and a claim for interference with protected rights under Section 510. The court previously allowed limited discovery beyond the administrative record, persuaded that discovery was warranted because the facts alleged in Mr. Kramer’s complaint suggested the possibility that the company’s conflict of interest affected Mr. Kramer’s adverse benefits decision. As part of their response to the discovery order, defendants produced a privilege log made up of 340 documents they were withholding on the basis of attorney-client privilege and work product doctrine. Mr. Kramer challenged the privilege claims and argued that the fiduciary exception to attorney-client privilege under ERISA entitled him to those documents which related to the administration of the plan. The defendants disagreed. They argued that the severance plan is a “top-hat” plan exempt from ERISA’s fiduciary duties. As a result, defendants maintained that the plan does not trigger the exception to attorney-client privilege. Mr. Kramer subsequently brought a motion to compel seeking these withheld documents. Shortly after, he also brought a motion for extension of time, requesting that the court extend the discovery timeline after its ruling on his motion to compel. Defendants opposed both motions. The court stated that the motion to compel “turns on one question: Whether the Plan is a top-hat plan.” To answer this question, the court broke its analysis into two parts. In the first, the court held that the selectivity of the plan was clear, as it served less than one percent of all employees at the company, all of whom were high-level individuals receiving high compensation. The harder question, which the court took more time with, was whether the plan provided deferred compensation. Mr. Kramer argued that deferred compensation requires participants to make affirmative deferral elections throughout their employment, and that severance plans like the one at issue do not function in this way. Defendants, adopted a broader reading of deferred compensation, “defining it simply as compensation in the future for past work.” Naturally, under their definition the plan does provide for deferred compensation and therefore would qualify as a “top-hat” plan. The court looked to a Ninth Circuit decision in a case where this somewhat novel issue came up. There the Ninth Circuit ruled that “the policy behind the top-hat exception supports the broader view that ‘deferred compensation’ includes the retirement payments deriving from (the plaintiff’s) severance Agreement.” The court was persuaded by this logic, agreeing that “whether the Plan requires participants to make deferral elections does not help distinguish the Plan as one covering employee ‘capable of protecting their own pension expectations,’ from one covering those employees who cannot.” Accordingly, the court adopted defendants’ interpretation, and concluded that the plan is a “top-hat” plan, and that the fiduciary exception to the attorney-client privilege does not apply. Thus, the court denied Mr. Kramer’s motion to compel. Finally, the court denied Mr. Kramer’s motion for the extension, as it was denying the underlying discovery motion and because Mr. Kramer did not demonstrate good cause. More to the point, the court wrote that “reopening discovery at this time would thwart the ‘primary goal’ that ERISA actions be resolved ‘inexpensively and expeditiously.’” For the foregoing reasons, both of Mr. Kramer’s motions were denied.

ERISA Preemption

Fifth Circuit

Theunissen v. United Healthcare of La., No. 22-2812, 2023 WL 2913529 (E.D. La. Apr. 12, 2023) (Judge Susie Morgan). Two surgeons commenced this action against United Healthcare Insurance Company to challenge adverse benefits determinations for three related reconstructive breast surgeries performed on a cancer patient, N.T. Plaintiffs were assigned benefits from the insured patient. In their action they asserted three causes of action, a claim under ERISA Section 502, a claim for breach of contract under Louisiana state law, and another state law claim for detrimental reliance. The ERISA claim has been stayed. In this decision, the court ruled on United’s motion to dismiss the state law claims under Federal Rule of Civil Procedure 12(b)(6). United argued that the breach of contract and detrimental reliance claims were both completely preempted by ERISA. The court agreed. It applied the two-step Davila preemption test and concluded that both prongs were satisfied here. First, the court concluded that the assignment of benefits meant that the surgeons have derivative standing to sue under ERISA. Second, the court held that neither state law cause of action implicated an independent legal duty because they were both premised on pre-authorization letters which the court found to be “a reflection of, and not separate from, the Plan; rather, they implicate a right to benefits under the Plan.” In light of these terms which tie benefit eligibility to the Plan language, the court stated that it could not resolve the state law claims without consulting and analyzing the Plan itself to make a determination of benefits. Accordingly, the court dismissed the two state law claims. Finally, he court ended its decision by granting plaintiffs leave to amend their complaint to assert the preempted state law claims as federal claims, should they choose to do so.

Tenth Circuit

Betterton v. World Acceptance Corp., No. CIV-22-238-SLP, 2023 WL 2914287 (W.D. Okla. Apr. 12, 2023) (Judge Scott L. Palk). In April 2021, plaintiff Virgin L. Betterton, II (now deceased and substituted in this matter by the administrator of his estate) brought this action in state court asserting a claim of intentional infliction of emotional distress against his former employer and related defendants premised on what he believed was their intentional firing of him because of his cancer diagnosis. Mr. Betterton premised his claim on the company’s own policies and procedures in terminating him. In the state court proceeding, defendants argued that plaintiff’s rights relate to an employee medical benefit plan subject to ERISA and filed a motion to dismiss the action based on complete ERISA preemption. The court denied the motion to dismiss and found that the claim was not preempted. Then, ten months later, defendants removed the action to the federal district court, resurrecting their preemption arguments. Plaintiff moved to remand the action. Plaintiff argued that remand is proper because the removal was untimely filed, and because the state law claim is not preempted by ERISA and defendants therefore cannot establish subject matter jurisdiction. The court agreed and granted the motion to remand. The court was not persuaded by defendants’ argument that plaintiff’s discovery responses, deposition testimony, and other related representations made by plaintiff and plaintiff’s counsel at the state court hearing constituted “other papers” which established a right to removal based on complete ERISA preemption. “In the Court’s view, Plaintiff’s responses to the requests for admissions do not provide a basis for removal. Those responses refer directly back to the Complaint which expressly disavows any federal claim.” Analyzing defendants’ preemption argument under the Davila test, the court held that the intentional infliction of emotional distress claim was “centered on (Mr. Betterton’s) alleged wrongful termination because he had cancer. Such a claim is not preempted.” Resolution of this claim, the court found, would not require analyzing the terms of the ERISA medical plan. Thus, having found neither prong of the Davila test satisfied, the court agreed with plaintiff that the state law claim was not preempted and therefore granted the motion to remand the lawsuit to state court.

Eleventh Circuit

Sarasota County Pub. Hosp. Dist. v. Cigna Healthcare of Fla., No. 8:23-cv-263-KKM-TGW, 2023 WL 2867064 (M.D. Fla. Apr. 10, 2023) (Judge Kathryn Kimball Mizelle). Plaintiff Sarasota County Public Hospital District sued defendants Cigna Healthcare of Florida and Cigna Health and Life Insurance Company in state court, asserting state law causes of action, seeking reimbursement for emergency medical services it provided to a patient covered under an ERISA plan. The Cigna defendants removed the case to federal court, arguing that the state law causes of action are preempted by ERISA. Plaintiff moved to remand the action, and Cigna moved to dismiss the complaint for failure to state a claim. In this decision, the court granted the motion to remand and denied the motion to dismiss, concluding that it lacked subject-matter jurisdiction over the claims. The court analyzed the operative complaint under the Davila factors and concluded that it was not completely preempted. First, the court held that the healthcare provider was not bringing a claim under ERISA’s civil enforcement provisions and was not challenging a denial of benefits, but rather an underpayment under state law. Second, the court found the state law claims were grounded in independent legal duties, seeking “recovery of additional payment under Florida law.” Lastly, the court found this rate of payment action would not interfere with ERISA’s goal of providing a national uniform plan administration scheme. For these reasons, the court found that Cigna had not met its burden of establishing subject matter jurisdiction.

Plan Status

Fourth Circuit

Sherwood v. Valley Health Sys., No. 5:23-cv-00005, 2023 WL 2859126 (W.D. Va. Apr. 10, 2023) (Judge Thomas T. Cullen). Plaintiff James B. Sherwood sued his former employer, defendant Valley Health System, after his severance benefit payments were terminated pursuant to a non-compete provision. In this action, Mr. Sherwood asserted two alternate causes of action, seeking to overturn the termination of his benefits. First, Mr. Sherwood brought a claim seeking a declaration that the plan is in violation of Virginia common law, as the state of Virginia does not permit non-compete clauses. However, Mr. Sherwood also asserted a claim in the alternative under ERISA if the court determines that the severance plan is an ERISA-governed plan. Valley Health System moved to strike several paragraphs of Mr. Sherwood’s complaint, moved to dismiss Mr. Sherwood’s complaint completely for failure to state a claim, and finally moved for costs in connection to Mr. Sherwood’s voluntary dismissal of a state law action he filed before bringing this federal civil lawsuit. Much of this decision was focused on the status of the severance plan and whether it qualifies as an ERISA plan. Ultimately, the court concluded that it did. It highlighted the fact that the plan requires an ongoing administrative scheme to operate. The court found that this was true because the administrator needs to interpret plan provisions, administer and make several months’ worth of payments, and apply discretion to determine the continued eligibility of the 36 individuals who qualify as participants under the plan. Accordingly, the court found that the plan is an employee welfare benefit plan within the meaning of ERISA, and therefore granted the motion to dismiss Mr. Sherwood’s state law claim as preempted by ERISA. Nevertheless, the court denied the motion to dismiss Mr. Sherwood’s ERISA claim, believing that “disposition of this legal question is more procedurally appropriate for summary judgment with the benefit of a complete factual record.” Finally, the court declined to award defendant costs. It concluded that Mr. Sherwood’s dismissal of his state law action and subsequent filing of this federal action “were not pursued in bad faith, vexatiously, or for oppressive reasons.” And under ERISA Section 502(g)(1), the court stated that a fee award was not appropriate at this juncture because Valley Health System has not yet achieved any success on the merits.

Pleading Issues & Procedure

Third Circuit

Pue v. N.J. Transit Corp., No. 22-2616, __ F. App’x __, 2023 WL 2930298 (3d Cir. Apr. 13, 2023) (Before Circuit Judges Hardiman, Porter, and Freeman). Pro se appellant Anthony Pue appealed a district court decision dismissing his action against his former employer the New Jersey Transit Corporation and denying his motion for a default judgment. The district court granted New Jersey Transit’s motion to vacate the default that the Clerk had previously entered after New Jersey Transit failed to appear in the action “for good cause.” The good cause identified by the court was its lack of subject matter and diversity jurisdiction over Mr. Pue’s claims. The district court interpreted Mr. Pue’s complaint to conclude that he was asserting three causes of action; (1) a breach of contract claim; (2) a claim for violation of a collective bargaining agreement under the Labor Management Relations Act (“LMRA”); and (3) a claim for disability pension benefits under ERISA. However, the district court wrote that because New Jersey Transit Corporation “is sufficiently intertwined with New Jersey such that it ‘is entitled to claim the protections of the Eleventh Amendment immunity,” Mr. Pue could not sue it under either federal statute. Specifically, the court stated that New Jersey transit is a political subdivision and Mr. Pue therefore could not bring a claim under LMRA. Regarding the ERISA claim, the court found that the collective bargaining agreement and the retirement plan are government plans exempt from ERISA. Finally, the district court stated that it lacked diversity jurisdiction, as both Mr. Pue and New Jersey Transit are New Jersey residents, and it declined to exercise supplemental jurisdiction over his state law claim. On appeal, the Third Circuit affirmed the district court’s judgment. The court of appeals first addressed the district court’s decision to grant New Jersey Transit’s motion to vacate the default. The Third Circuit expressed that as a general rule it does not favor entry of default judgments. Additionally, the appeals court wrote that “the District Court properly concluded that it lacked subject-matter jurisdiction over Pue’s claims. Thus, it correctly granted N.J. Transit’s motion to vacate the default and denied Pue’s motion for default judgment.” The Third Circuit went on to state that it agreed with the district court’s underlying analysis that New Jersey Transit is a political subdivision of the government as it is “allocated within the Department of Transportation,” and because it performs “public and essential governmental functions.” Finally, the Third Circuit noted that the members of the board are government officials including the Comissioner of Transportation, the State Treasures, and other members appointed by the Governor. In sum, to the extent that Mr. Pue’s complaint could be fairly construed as raising ERISA and LMRA claims, the court of appeals agreed with the district court that it lacks subject-matter jurisdiction over those claims.

Fourth Circuit

Chisholm v. Mountaire Farms of N.C. Corp., No. 1:21cv832, 2023 WL 2914929 (M.D.N.C. Apr. 12, 2023) (Magistrate Judge L. Patrick Auld). Plaintiff Robert Chisholm brought suit against his former employer, Mountaire Farms of North Carolina Corporation, for violations of the Americans with Disabilities Act (“ADA”), the Family and Medical Leave Act (“FMLA”), and ERISA in connection with Mountaire Farm’s decision to fire him. Defendant moved to dismiss the complaint in its entirety with prejudice. It argued that the ADA claim was time-barred, Mr. Chisholm was employed for too short a time to qualify for FMLA, and that all the claims were insufficiently pled. The court granted the motion to dismiss, but did so without prejudice, except for the FMLA claim, which Mr. Chisholm himself agreed was “erroneously pled.” Regarding the ADA claim, the court disagreed with Mountaire Farms that the claim was untimely. However, the court concluded that Mr. Chisholm failed to state both the ADA and ERISA claims, as the facts supporting them were “slim.” Despite the court dismissing the claims without prejudice, the court did not expressly grant Mr. Chisholm leave to amend his complaint to address the identified deficiencies. And then something odd happened. The Fourth Circuit, in another case, upended nearly 30 years of precedent and changed its rules regarding the appealability of dismissals at the pleading stage. Under the old rules, the Fourth Circuit would apply a case-by-case analysis to determine whether or not such a dismissal would be considered a final order that could immediately be appealed. Under the new rule, where the district court dismisses without providing leave to amend, the order is final and appealable. Thus, the Fourth Circuit admonished that “when the district court believes a deficiency in a complaint can be cured, it should say so and grant leave to amend.” Given this new standard, Magistrate Judge Auld issued this recommendation that the district court grant Mr. Chisholm’s motion to amend the judgment and authorize him to file an amended complaint under Rule 59(e). “[G]iven Plaintiff’s expressed desire to amend his Complaint,” and the fact the Fourth Circuit would almost certainly allow Mr. Chisholm to amend his complaint under the new standard, Magistrate Auld recommended the court grant the motion and permit Mr. Chisholm the opportunity to file an amended complaint.

Eighth Circuit

GS Labs LLC v. Medica Ins. Co., No. 22-cv-2988 (SRN/TNL), 2023 WL 2918021 (D. Minn. Apr. 13, 2023) (Judge Susan Richard Nelson). In October 2021, plaintiff GS Labs sued defendant Medica Insurance Company alleging it refused to fully reimburse it for the COVID-19 diagnostic testing that it had provided to thousands of Minnesotans insured by the company. In that first action, GS Labs asserted state law causes of action and a federal claim for violation of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). Medica moved to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). The court granted that motion, dismissing the CARES Act claim with prejudice, and dismissing the state law claims without prejudice as it declined to exercise supplemental jurisdiction. Like almost all of its sister courts, the court held that the CARES Act does not create a private right of action. GS Labs has appealed that decision, and an appeal is pending in the Eighth Circuit. Meanwhile, GS Labs filed a second lawsuit against Medica. Here, GS Labs has resurrected its state law claims, and has asserted a new cause of action under ERISA Section 502. Defendant Medica filed a motion to dismiss this second lawsuit, arguing that res judicata bars the claims for tortious interference, breach of contract, and underpayment of ERISA benefits. The court agreed in part. As an initial matter, the court stated that res judicata did not bar the state law causes of action that were dismissed without prejudice in the first lawsuit. The same, however, was not true of the ERISA claim. Regarding the ERISA claim, the court held that all four elements of res judicata were met and that GS Labs was therefore precluded from bringing this claim. The court was satisfied that Medica showed that the first suit dismissing the CARES Act with prejudice resulted in a final judgment on the merits applicable to the ERISA claim which it concluded “should have been brought together in GS Labs I.” Furthermore, the court concluded that the two suits involving the same parties were based upon a common nucleus of facts because the CARES act and ERISA claims arose from the same injury and the same conduct. Accordingly, the court dismissed the ERISA claim with prejudice. As for the state law causes of action, the court took the same path it chose for the first lawsuit and declined to exercise supplemental jurisdiction. Thus, these claims were once again dismissed without prejudice.

Ninth Circuit

Valley Pain Ctrs. v. Aetna Life Ins. Co., No. CV-19-05395-PHX-DJH, 2023 WL 2933475 (D. Ariz. Apr. 13, 2023) (Judge Diane J. Humetewa). Mental healthcare providers sued Aetna Life Insurance Company in this civil suit seeking payment of benefits. Aetna responded by filing thirteen counterclaims against the healthcare providers, arguing that they were engaged in a billing scheme designed to financially harm it. Those thirteen counterclaims included ERISA equitable relief claims, RICO claims, fraud claims, and other state law causes of action. Four of the counterclaim defendants were sued in their individual capacities – Greg Maldonado, Thomas Moshiri, Sean Maldonado, and James Allen. Last week, Your ERISA Watch reported on a decision granting in part and denying in part Greg Maldonado and Thomas Moshiri’s motions to dismiss the counterclaims asserted against them. In this decision, the court reached similar conclusions in its ruling on Sean Maldonado and James Allen’s motions to dismiss. Sean Maldonado is the Assistant Director of Operations at Pantheon Global Holdings, LLC. James Allen is the Executive Vice President of Advanced Reimbursement Solutions, LLC and Pantheon Global Holdings, LLC. Mr. Maldonado and Mr. Allen argued that neither of them were personally liable for the actions committed by the outpatient treatment centers, and that Aetna’s counterclaims did not contain sufficient factual allegations to demonstrate their personal involvement in the alleged scheme. In this decision which essentially paralleled the earlier decision, the court granted Sean Maldonado’s motion to dismiss the RICO claims, the ERISA claim, and the negligent misrepresentation claim. However, the court denied his motion to dismiss the tortious interference with contract, fraud, civil conspiracy, aiding and abetting, unjust enrichment, and money had and received counterclaims. With regard to James Allen’s motion, the court dismissed the fraud and negligent misrepresentation claims, the RICO claims, the civil conspiracy claim, the aiding and abetting claim, and the ERISA claim, and denied the motion to dismiss for all other claims. The ERISA claims specifically were dismissed because the court concluded that Aetna did not allege the funds in question were specific and identifiable and “remained in possession of the Counterclaim Defendants.”

Provider Claims

Third Circuit

Hutchins v. Teamsters W. Region & Local 177 Health Care Plan, No. 22-04583 (SDW) (MAH), 2023 WL 2859803 (D.N.J. Apr. 10, 2023) (Judge Susan D. Wigenton). In the summer of 2021 an insured patient, Joseph Hutchins, underwent complex surgery on his cervical spine at an in-network hospital. During the procedure, Dr. Cynthia Tainsh provided “intraoperative neuromonitoring services.” Dr. Tainsh is an out-of-network provider. She was reimbursed only $579.23 for her services, which was a small fraction of her submitted bill of $32,860.70. Mr. Hutchins executed a limited Power of Attorney, appointing Dr. Tainsh his attorney in fact, and granting her the authority to pursue necessary means to receive her reimbursement from his healthcare plan, the Teamsters Western Region and Local 177 Healthcare Plan, and its administrator, Aetna, Inc. Unable to receive the difference in the billed rate and the reimbursed rate during the administrative appeals process, Dr. Tainsh pursued legal action, filing this one-count complaint under ERISA Section 502(a)(1)(B). Defendants moved to dismiss for failure to state a claim and for attorneys’ fees. The court began with the motion to dismiss. It agreed with defendants that the Power of Attorney was an improper attempt to work around the plan’s valid anti-assignment provision. “Dr. Tainsh…is not functioning as an agent on behalf of a principal; any recovery achieved will not benefit Mr. Hutchins in any way, as…he does not owe a debt to Dr. Tainsh, and she is not seeking to vindicate a right on his behalf. Plaintiff’s counsel concedes as much by admitting that ‘in this case, there is no dispute between the patient and his medical provider.’” Thus, the court found that the power of attorney here was functioning as an assignment of benefits, and because assignments are barred under the plan, concluded that Dr. Tainsh lacked derivative standing to pursue her claim. For this reason, the court granted the motion to dismiss. However, it declined to award attorneys’ fees to defendants under ERISA Section 502(g)(1).

Sixth Circuit

My Premier Nursing Care v. Auto Club Grp. Ins. Co., No. 21-cv-12657, 2023 WL 2839073 (E.D. Mich. Apr. 7, 2023) (Judge Matthew F. Leitman). A healthcare provider, plaintiff My Premier Nursing Care, sued two insurance companies – an auto insurer, defendant Auto Club Group Insurance Company, and a health insurer, defendant United HealthCare Insurance Company, seeking reimbursement for treatment it provided to an insured patient after he was involved in a car crash. United moved to dismiss the claims against it. The court started its analysis by stating that plaintiff’s brief in opposition to the motion to dismiss “makes no substantive arguments as to why its claims against United HealthCare are plausible. Instead, My Premier argues only that United HealthCare’s motion to dismiss should be denied because it is, in reality, one for summary judgment and because United HealthCare relies upon an ambiguous provision in the ERISA plan under which [the patient’s] health insurance policy was issued.” The court disagreed with plaintiff on both points. First, the court disagreed with My Premier’s assertion that it is an intended beneficiary of the ERISA plan. In fact, the Sixth Circuit has already expressly rejected the contention that healthcare providers qualify as beneficiaries of ERISA health insurance plans. Further, the court held that My Premier lacked derivative standing to bring its ERISA claim because it did not, and thanks to an anti-assignment provision could not, assert that it had been assigned benefits. The court also found the plan language, contrary to My Premier’s arguments, to be unambiguous. For these reasons, the court dismissed the ERISA cause of action. Finally, the court dismissed plaintiff’s declaratory judgment and “third party beneficiary” claims, finding both insufficiently pled. Additionally, like the ERISA claim, the court held that My Premier did not have standing to pursue these claims. Accordingly, United’s motion to dismiss was granted in its entirety.

Retaliation Claims

Fifth Circuit

Sibley v. Citizens Bank & Tr. Co. of Marks, No. 3:20CV282-GHD-JMV, 2023 WL 2899280 (N.D. Miss. Apr. 11, 2023) (Judge Glen H. Davidson). Approximately seventeen months after plaintiff Franklin Sibley began receiving retirement benefits, his former employer Citizens Bank and Trust Company allegedly rewrote history. According to Mr. Sibley’s complaint, the Bank, which was at that point facing financial stress due to a fraudulent loan and in need of immediate liquid capital, asserted the “termination for cause” clause in the Supplemental Executive Retirement Plan Agreement to stop issuing payments. In a letter dated January 20, 2020, Mr. Sibley was informed that the bank’s board of directors was immediately terminating the Supplemental Executive Retirement Plan Agreement and all future payments because Mr. Sibley had been “verbally terminated for cause.” One day after this letter was sent to Mr. Sibley, the board of directors sent a Consent Order Status Report to the Mississippi Department of Banking and the Federal Deposit Insurance Corporation asserting that “the Bank’s capital ratios remain above the minimums required by the Order,” and also that the termination of Mr. Sibley’s pension benefits “provided another $1,049,633 of capital to the Bank in January 2020.” Following an unsuccessful administrative appeal, Mr. Sibley commenced this lawsuit against the Citizens Bank and the chairman of its board of directors, defendant Payton MB Self III. In the operative complaint, Mr. Sibley asserted three causes of action under ERISA Sections 503, 502, and 510. Citizens Bank, Mr. Self, and Mr. Sibley each moved for judgment in their favor under Rule 56. The court denied judgment to all parties on the Section 502 and 510 claims, concluding that genuine issues of material fact precluded summary judgment. However, the bank was awarded judgment in its favor on Mr. Sibley’s Section 503 claim, as the court concluded that the termination letter was compliant with ERISA’s requirements and their underlying “goal being to explain the denial of benefits and ensure an adequate review of that denial.” Finally, with regard to Mr. Sibley’s claim for benefits, the court established that it would conduct abuse of discretion review given the plan’s discretionary clause. However, because there is conflict of interest present, and as the facts lead to a plausible inference that that conflict may have affected defendants’ decision, the court stated that it would “apply some skepticism to its review of Citizens Bank’s decision.” Nevertheless, as mentioned above, the court did not resolve the merits of the adverse benefit decision itself and denied the motions for summary judgment on the claim for benefits and the retaliation claim, concluding that genuine issues of fact exist.

Severance Benefit Claims

Ninth Circuit

Beryl v. Navient Corp., No. 20-cv-05920-LB, 2023 WL 2908805 (N.D. Cal. Apr. 11, 2023) (Magistrate Judge Laurel Beeler). Plaintiff Louis Beryl sued his former employer, Navient Solutions LLC. Mr. Beryl asserted two ERISA claims, a claim for severance benefit payments under Section 502(a)(1)(B), and a breach of fiduciary duty claim for the denial of benefits under ERISA Section 502(a)(3). In addition, Mr. Beryl asserted a breach of employment contract claim and a claim for waiting-time penalties under California’s Labor Code. The case proceeded to concurrent jury and bench trials. The jury returned a verdict in Mr. Beryl’s favor. In this decision the court issued its order under Rule 52 on the ERISA claims and the claim asserted under the California Labor Code. “Based on the evidence at trial and jury findings that bind the court, Navient Corporation wrongfully failed to pay Mr. Beryl his severance benefits and waiting-time penalties.” The court issued an award to Mr. Beryl in the amount of $920,666.33. Specifically, it held that Navient Corp. failed to establish that Mr. Beryl’s termination was “for cause,” and that he failed to perform any of his required responsibilities. Rather, the court stated that the evidence proved that “Mr. Beryl and his team worked very hard,” even “putting in long days over the holidays during a time when his wife gave birth.” Accordingly, under de novo review, the court was satisfied that Mr. Beryl met his burden of proof and was entitled to benefits under the ERISA severance plan. The court spent the remainder of the decision applying the terms of the plan to calculate the award of benefits and determine the amount of the bonus Mr. Beryl was entitled to, the applicable multiplier, and the amount which represented his lost healthcare, dental, and vision benefits. Because not all of these amounts were established by the terms of the plan, meaning there wasn’t direct recompense under ERISA Section 502(a)(1)(B) for some of the benefits, the court also decided to award equitable relief to Mr. Beryl under his second claim asserted under Section 502(a)(3). Finally, the court also established the appropriate penalties under California’s Labor Code. Tallying these amounts, the court was left with its final total, which it then awarded to Mr. Beryl. 

Venue

Seventh Circuit

Torre v. Nippon Life Ins. Co. of Am., No. 22 C 7059, 2023 WL 2868058 (N.D. Ill. Apr. 10, 2023) (Judge Rebecca R. Pallmeyer). Plaintiff Graciela Dela Torre brought suit against defendant Nippon Life Insurance Company of America to challenge its termination of her long-term disability benefits. Nippon Life moved to transfer the action to the Southern District of New York. The court began its decision by establishing that venue was proper in the Northern District of Illinois because “this is ‘where the breach took place’ – meaning, it is where Ms. Dela Torre was to receive the denied benefits – and Nippon can be found in this district, because it has a physical office in Schaumburg, Illinois.” On the other hand, the court also held that Nippon Life proved that venue would be proper in the Southern District of New York as well because that is where the plan is administered and where Nippon Life is located. However, the court placed the greatest emphasis on the fact that Ms. Dela Torre picked the Northern District of Illinois to file her complaint, which is her home district. The court found Nippon Life’s arguments concerning convenience not very convincing. Overall, the court ruled that the balance of factors did not strongly favor Nippon Life, and as such declined to disturb Ms. Dela Torre’s choice of forum. Accordingly, the court denied the motion to transfer.