Pharm. Care Mgmt. Ass’n v. Mulready, No. 22-6074, __ F. 4th __, 2023 WL 5218138 (10th Cir. Aug. 15, 2023) (Before Circuit Judges Phillips, Murphy, and Rossman)

Ah preemption, the thorniest of ERISA’s thorny issues. Like many courts before it, the Tenth Circuit last week addressed the effect of ERISA’s notoriously broad and amorphous preemption provision, concluding that ERISA preempts Oklahoma’s attempt to regulate pharmacy benefit managers (PBMs).

In 2019, Oklahoma enacted the Patient’s Right to Pharmacy Choice Act to regulate some of the practices of pharmacy benefit managers (PBMs), organizations that act as middle-men between pharmaceutical retailers and healthcare plans, both those governed by ERISA and those that are not. They do so in several ways: by contracting with manufacturers for drug rebates, by generally managing the prescription drug benefits offered by healthcare plans, by contracting with pharmacies to be in the PBMs’ networks, and by designing the structure of drug benefits and pharmacy networks for plans.

The Pharmaceutical Care Management Association (PCMA), a trade association for PBMs, brought suit challenging thirteen of the Oklahoma law’s provisions as preempted by ERISA and by Medicare Part B. The district court ruled against PCMA on all thirteen ERISA challenges but ruled in favor of the organization on its Medicare Part D challenges with respect to six of the thirteen provisions.

By the time the case reached the Tenth Circuit, only four provisions were at issue. Three of these provisions are aimed at the PBMs’ networks. The first requires that PBMs design their networks so that a fixed percentage of covered individuals in Oklahoma live close to a brick-and -mortar pharmacy. The second prohibits PBMs from refusing to contract with pharmacies that are on probation but who have not had their licenses revoked. The third of these provisions required PBMs to admit any pharmacy willing to agree to their terms into the network (a so-called “any willing provider” provision). The fourth provision under challenge prohibits the use of cost-savings and discounts aimed at incentivizing covered individuals to use only certain pharmacies.      

The Tenth Circuit decision starts from the premise that PBMs provide a valuable service because, in the court’s view, it would be “prohibitively expensive” for healthcare plans to simply allow plan participants and beneficiaries to obtain the drugs their doctors prescribe at any pharmacy. The Court touts  the “economic efficiencies and administrative savvy” of PBMs, apparently agreeing with PCMA’s assertion that PBMs provide cost savings for plans. Whether this is true or not, there is no disagreeing with that fact that PBMs now manage prescription drug benefits for most people, an estimated 270 million, “nearly everyone with a prescription drug benefit.” It would seem logical that, if you think you are paying too much, not too little, for prescription drugs, PBMs may bear some responsibility. In fact, according to Kaiser Family Foundation, Americans pay more for prescription drugs than citizens of any other peer nation.

But back to preemption. The court began this analysis with the familiar formulation of the scope of Section 514, 29 U.S.C. § 1114, noting that ERISA preempts state laws that have a ”connection with” or “reference to” ERISA plans. PCMA only challenged the provisions under the “connection with” prong. In deciding whether a state law is preempted under this prong, the Tenth Circuit naturally turned to the Supreme Court’s most recent preemption decision, Rutledge v. PCMA, 114 S. Ct. 474 (2020), which, not coincidentally, also involved a state law regulating PBMs and a challenge to that law brought by PCMA. In that case, however, the Supreme Court concluded that ERISA did not preempt an Arkansas PBM law.

The Tenth Circuit noted that Rutledge identified two categories of laws that are preempted as having a “connection with” ERISA plans: those that directly require plans to structure their benefits in a particular manner, and those that do so indirectly through acute economic effects. Distilled down, the court saw the issue as whether the challenged state law governs a central matter of plan administration or interferes with nationally uniform plan administration.

Having described the state of ERISA preemption, the court then dealt with what it saw as a threshold issue. Was the Oklahoma law even within ERISA’s purview given that, in its aim and effect, it only directly governs PBMs, not plans? The court had no trouble answering in the affirmative, referencing many cases in which the Supreme Court and other courts found that ERISA preempted state laws that regulate third parties in their dealing with ERISA plans.

Turning to the geographic access provision, the discount prohibition and the any willing provider provision, the court concluded that all three were preempted because they govern a central matter of plan administration by requiring that prescription drug benefits be structured in a particular way. “Together, these three provisions effectively abolish the two-tiered network structure, eliminate any reason for plans to employ mail-order or specialty pharmacies, and oblige PBMs to embrace every pharmacy into the fold.”

This conclusion, the court reasoned, “adheres to Rutledge,” because Rutledge concerned reimbursement-rate provisions of a state law that had a purely economic impact on plans, whereas the Oklahoma law regulates the network-structure through which plan beneficiaries obtain their prescriptions.

Thus, the court rejected all of Oklahoma’s arguments to the contrary and concluded that ERISA preempts all three of these network provisions. It probably did not help Oklahoma that the Department of Labor agreed with PCMA that these provisions had a “connection with” ERISA plans. Although the Department argued that the provisions were nevertheless “saved” from preemption as insurance regulations, the Tenth Circuit declined to address the insurance savings clause argument because it concluded that the state had not pressed this argument sufficiently either in the district court or on appeal.

The court then turned to the probation provision. The court reasoned that this provision, like the other three, dictated the composition of permissible networks and was likewise preempted. The Department of Labor supported Oklahoma’s position that this provision was not preempted because its effect on plan design was de minimis. But the Tenth Circuit rejected the application of what it saw as a “novel” de mimimis test, and also was unconvinced with the Department contention that the impact was slight. The Tenth Circuit did recognize that the Eighth Circuit had concluded that a similar North Dakota law was not preempted. PCMA v. Wehbi, 18 F.4th 956 (8th Cir. 2021). But the Tenth Circuit found that Wehbi “unhelpful” because its  reasoning “formulaic” and “limited.” 

Thus, the court concluded that ERISA preempts all four challenged provisions in their application to ERISA plans. The Tenth Circuit likewise concluded that the Medicare Part D preempts the any willing provider provision as applied to Medicare Part D plans.  

Another day, another circuit split. So stay tuned for further developments as states continue to attempt to regulate PBMs and PCMA, we predict, will continue to challenge those law. And speaking of ERISA developments, the Ninth Circuit panel in Wit v. United Behavioral Health, just issued yet another decision, which came out too late for this edition.  We’ll analyze it next week.       

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

Breach of Fiduciary Duty

Ninth Circuit

Bracalente v. CISCO Sys., No. 5:22-cv-04417-EJD, 2023 WL 5184138 (N.D. Cal. Aug. 11, 2023) (Judge Edward J. Davila). Two participants of the Cisco Systems, Inc.’s 401(k) Plan brought this putative class action against the plan’s fiduciaries to challenge their behavior administering the plan. Specifically, plaintiffs allege that Cisco and the retirement committee imprudently maintained a suite of BlackRock LifePath target date Index Funds as the plan’s default investment options, despite the funds long-term and significant underperformance of similar target date fund investment options which were available. Defendants moved to dismiss the complaint for failure to state a claim. Their motion was supported by two amicus curiae briefs, one from the American Benefits Council, American Retirement Association Committee on Investment of Employee Benefit Assets, Inc., and the ERISA Industry Committee, and the other from the U.S. Chamber of Commerce. Defendants and amici maintained that case law makes clear that underperformance alone cannot sustain a plausible claim for breach of fiduciary duty under ERISA. The court agreed. It found the complaint focused too heavily on underperformance while ignoring other factors about the BlackRock funds like their investment strategy, cost, and risk. The court expressed that it therefore could not infer that just because the target date fund suite was underperforming, even for an extended period of time, that Cisco’s decision to continue offering these investment options fell outside the range of reasonable fiduciary judgments, especially given the difficult tradeoffs fiduciaries must make when designing investment portfolios. Therefore, the court granted the motion to dismiss the complaint. However, dismissal was without prejudice, and plaintiffs were granted leave to amend to cure the court’s identified deficiencies. The court cautioned though that further evidence of underperformance would not in and of itself cure the problems, regardless of the comparators that plaintiffs selected.

Class Actions

Third Circuit

Wolff v. Aetna Life Ins. Co., No. 22-8056, __ F. 4th __, 2023 WL 5082238 (3d Cir. Aug. 9, 2023) (Before Circuit Judges Jordan, Shwartz, and Smith). Plaintiff Joanne Wolff commenced this action on behalf of a nationwide class to challenge defendant Aetna Life Insurance Company’s allegedly coercive practices of recouping a portion of disability payments from disabled plan participants who received third-party personal injury recoveries for their disabling injury causing event, despite the plans’ language which do not contemplate any such reimbursement. Ms. Wolff moved for class certification under Rule 23(b)(3). On May 25, 2022, the court granted her motion and certified a class. Eighty-four days later, on August 17, 2022, Aetna filed a motion to reconsider the class certification order. Its arguments were two-fold. First, and primarily, it argued that a Third Circuit decision which had recently been issued updated the precedent on how district courts need to analyze the requirements of Rule 23 class certification. Second, Aetna argued that the class definition created an impermissible “fail-safe” class, the membership of which hinged on answers to merits issues. On November 22, 2022, the district court granted in part and denied in part Aetna’s motion for reconsideration. Specifically, the district court rejected Aetna’s assertions that new authority from the Third Circuit required it to alter its precertification order. Instead, the court reaffirmed its prior analysis regarding the differences among the class members and their plans. The district court did, however, revise its class definition to address the potential fail-safe issues, and reworded its definition slightly, creating a simpler class definition wherein membership could be determined without resolving any merits of the case. Following the district court’s decision, Aetna filed a 23(f) petition with the Third Circuit seeking interlocutory review of the district court’s class certification order from November 22. Ms. Wolff opposed the petition, as “patently untimely,” arguing that the November 22 order did not materially change the status quo and that Aetna was therefore required to file a Rule 23(f) petition within fourteen days of the original May 25, 2022, class certification order, which it failed to do. In this decision, the Third Circuit agreed with Ms. Wolff. The appeals court stated that Rule 23(f)’s time limit “is strict and mandatory…[and] purposefully unforgiving.” This petition, the court of appeals found was untimely and could not be considered. It agreed with Ms. Wolff that nothing in the November 22 order had any practical effect on the class or materially changed the class definition. Instead, the district court was “merely reaffirm[ing] its prior ruling,” through clarifying changes. As a result, the Third Circuit stated that it could not view the November 22 decision as an order granting or denying class-action certification, and therefore agreed with Ms. Wolff that, under Rule 23(f)’s time limitation, Aetna had been required to file an interlocutory appeal within 14 days of the original order. As that deadline came and went without Aetna filing a 23(f) petition, the court held that this petition was untimely and therefore denied it without considering its merits. 

Disability Benefit Claims

First Circuit

Hughes v. The Lincoln Nat’l Life Ins. Co., No. 2:22-cv-00098-NT, 2023 WL 5310611 (D. Me. Aug. 17, 2023) (Judge Nancy Torresen). Before the onset of symptoms from a mysterious gastrointestinal illness, plaintiff Benjamin Hughes worked as a systems engineer for the Lincoln National Life Insurance Company. In 2021, Mr. Hughes stopped working after abdominal pain, nausea, vomiting, and diarrhea became debilitating. Originally, Lincoln approved and paid for Mr. Hughes’ disability benefits. However, by a letter dated August 31, 2021, Mr. Hughes was informed that his long-term disability benefits were being terminated, as Lincoln determined that he no longer met his policy’s definition of disability for his own occupation. Following an unsuccessful administrative appeal, Mr. Hughes commenced this ERISA lawsuit under Section 502(a)(1)(B), seeking to recover his disability benefits. The parties filed cross-motions for judgment on the administrative record. The court in this order granted defendant’s motion for judgment. The court disagreed with Mr. Hughes that he was denied a full and fair review of his benefits claims thanks to Lincoln’s failure to provide him with a copy of its vocational expert’s analysis with which to respond to. To the contrary, the court held that this failure to turn over relevant records did not constitute a denial of a full and fair review because the procedural irregularity here did not prejudice Mr. Hughes in the end. This was so, the court stated, because Mr. Hughes could not identify “any evidence that he contends he would have provided to Lincoln to further develop the administrative record if given the opportunity to respond to [the] analysis.” The failure to provide this type of evidence, the court wrote, “seriously undercuts his argument that the procedural irregularity was prejudicial.” Nor did the court identify any problem with Lincoln’s timeliness in issuing its denials under ERISA’s claims procedural regulations. The court agreed with Lincoln that there were special circumstances present which justified its extension of the usual 45-day window. Accordingly, the court moved on to evaluating the merits of the adverse benefit decision. Under abuse of discretion review, the court upheld the denial. It found that there was substantial evidence to support Lincoln’s reasonable conclusion that Mr. Hughes’ gastrointestinal problems did not render him unable to perform the material and substantial duties of his occupation. For these reasons, the court granted judgment in favor of Lincoln and denied Mr. Hughes’ claim for judgment.

Fourth Circuit

Pifer v. Lincoln Life Assurance Co. of Bos., No. 1:22-cv-186, 2023 WL 5208111 (M.D.N.C. Aug. 14, 2023) (Judge William Lindsay Osteen Jr.). Back in 2011, plaintiff Rebecca Pifer was diagnosed with an inherited disorder called, Ehlers Danlos Syndrome, a disease which affects and weakens a person’s connective tissues. The disease has left her with osteoarthritis and pain in her cervical spine, shoulders, hands, and feet. Shortly after her diagnosis, Ms. Pifer stopped working and applied for disability benefits. She received long-term disability benefits from 2011 until 2021, at which time her monthly benefits were terminated. The claims administrator and payor of the policy, defendant Lincoln Life Assurance Company of Boston, terminated Ms. Pifer’s benefits determining that she could perform a sedentary occupation. Following an unsuccessful administrative appeal, Ms. Pifer brought this ERISA benefits action to challenge that decision. The parties cross-moved for judgment in their favor. In this order the court entered judgment in favor of Ms. Pifer under arbitrary and capricious review standard and remanded to Lincoln for further decision-making. The court identified several major flaws with Lincoln’s decision. These shortcomings included Lincoln’s failure to provide its reviewing doctors with all of the relevant medical records, its decision to ignore evidence within the record favorable to Ms. Pifer, its shaky grounds for terminating benefits that it had been paying for years without any significant change or improvement in the medical records, and its failure to consider Ms. Pifer’s subjective accounts of her pain and the severity of her symptoms. These failures, the court wrote, were “not harmless,” and therefore it found the decision to terminate the long-term disability benefits not supported by adequate evidence, and not the result of a reasoned and principled decision-making process. Accordingly, concluding the adverse benefit determination was an abuse of Lincoln’s discretion, the court granted summary judgment in favor of Ms. Pifer. Nevertheless, the court declined to award benefits outright. Instead, it chose to remand to Lincoln. According to the court remand was the proper course of action here, as the Fourth Circuit directs district courts to “reverse and remand” an unreasonable ERISA benefit decision to allow the administrator to correct its findings and reconsider after reviewing all available evidence “that has been developed since the original denial…and to make a new determination.”

Sixth Circuit

Jordan v. Reliance Standard Life Ins. Co., No. 22-5234, __ F. App’x __, 2023 WL 5322417 (6th Cir. Aug. 18, 2023) (Before Circuit Judges Cole, Clay, and Kethledge). Plaintiff/appellant Beth Nichole Jordan appealed a district court order upholding defendant Reliance Standard Life Insurance Company’s denial of her long-term disability benefits. In this Sixth Circuit decision, the court of appeals reversed the district court’s judgment, and awarded benefits to Ms. Jordan. The court of appeals found Ms. Jordan’s medical records compelling evidence that the symptoms of Lyme disease and a history of breast cancer left her unable to continue working as a nurse anesthetist. Reliance Standard’s findings to the contrary were determined by the court of appeals to be “conclusory…[and] not sufficiently supported by credible medical evidence.” The appeals court stated that Reliance Standard’s denial letters failed to adequately explain their reasoning and inappropriately selected from the medical records. Moreover, it found “the medical opinions utilized by Reliance Standard [to be] riddled with errors.” Accordingly, the Sixth Circuit determined that Reliance Standard acted arbitrarily and capriciously and so overturned the denial of benefits.

Ninth Circuit

Sund v. Hartford Life & Accident Ins. Co., No. 21-cv-05218-JST, 2023 WL 5181624 (N.D. Cal. Aug. 11, 2023) (Judge Jon S. Tigar). Plaintiff David F. Sund was employed with Amazon working as a global commodity manager, a position which required extensive travel both domestically and internationally, including to Asia and Europe. While away on one such business trip to China, Mr. Sund unfortunately severely injured his spine after slipping on wet marble, falling backwards. He immediately received treatment in hospitals in China and was diagnosed with a significant traumatic compression fracture of his lumbar. The doctors in Hong Kong and Kaiser recommended that Mr. Sund wait to undergo vertebrae plasty surgery. However, by the time Mr. Sund returned to the U.S. and saw doctors here, he was informed that it was too late to have the procedure done and was instead provided with other treatments for his chronic pain and back injury. Mr. Sund attempted to return to his position at Amazon, but was unable to work his scheduled hours, or to perform even modified duties to continue with his occupation. Accordingly, Amazon formally terminated him, after which Mr. Sund applied for disability benefits under Amazon’s ERISA-governed disability policy insured by defendant Hartford Life & Accident Insurance Company. Ultimately, Mr. Sund’s claim for long-term disability benefits was denied by Hartford, which concluded that his occupation was sedentary in nature and that he could perform sedentary-level work with his back conditions. Mr. Sund appealed the denial, and after the denial was upheld, commenced this action under Section 502(a)(1)(B) of ERISA to challenge de novo the adverse benefit decision. The parties cross-moved for judgment under Federal Rule of Civil Procedure 52.  Giving no deference to Hartford’s denial, the court reviewed the medical records and concluded that the insurer incorrectly denied benefits. As a result, the court concluded that Mr. Sund was entitled to the full 24 months of benefits payable under the plan to participants, like him, who have reached the age of 65. The court stated that whether it viewed Mr. Sund’s occupation as “sedentary” or “light,” Mr. Sund would still qualify for benefits, as his condition has left him unable to sit for more than one-third of the workday, and because he cannot stand, walk, or travel for any extended period of time, nor can he lift, push, or pull objects weighing more than 5lbs. Moreover, the court reasoned that Mr. Sund’s attempt to return to work for four months after the accident, and Amazon’s inability to accommodate him even with modifications, supported a finding that Mr. Sund was disabled. Finally, the court decided to give greater weight to Mr. Sund’s treating physicians, rather than to Hartford’s reviewing doctor who never personally examined Mr. Sund. Based on the foregoing, the court concluded that Mr. Sund proved by a preponderance of the evidence that he was disabled under the policy terms and therefore entitled to benefits. Thus, the court entered judgment in favor of Mr. Sund and denied Hartford’s cross-motion for judgment.


Sixth Circuit

Kramer v. Am. Elec. Power Exec. Severance Plan, No. 2:21-cv-5501, 2023 WL 5177429 (S.D. Ohio Aug. 11, 2023) (Judge Sarah D. Morrison). Plaintiff Derek Kramer served as Chief Digital Officer of American Electric Power Service Corporation for two years from 2018 to 2020. In 2020, American Electric terminated him. Following his termination, Mr. Kramer applied for severance benefits under the company’s EIRSA-governed severance plan. His claim was denied on the grounds that his termination was “for cause.” Mr. Kramer unsuccessfully appealed the denial and later commenced this ERISA action to challenge it. The court allowed Mr. Kramer to conduct discovery into allegations regarding American Electric’s conflict of interest, and the ways in which bias may have adversely affected his benefit decision. In response to this discovery order, American Electric produced certain documents. However, many others were withheld on the basis of attorney-client and work product privileges. These withheld documents were identified in a privilege log American Electric provided to Mr. Kramer. Mr. Kramer subsequently filed a motion to compel production of the documents withheld on the basis of attorney-client privilege. He argued that these documents are discoverable under the fiduciary exception to attorney-client privilege under ERISA. The matter was assigned to a magistrate judge. The Magistrate issued an opinion in April of this year denying Mr. Kramer’s discovery motion, concluding that the plan qualifies as a “top hat” plan and that it is therefore exempted from ERISA’s fiduciary duty provisions. As a result, the Magistrate Judge held that the fiduciary exception to attorney-client privilege did not apply here, and that the documents were thus not discoverable. Mr. Kramer objected to the Magistrate’s rulings. In this order the court overruled his objections. It found no clear error with the Magistrate’s findings that the plan qualifies as a top-hat executive plan. The court agreed that the plan was established primarily for providing deferred compensation because it provides future compensation for past work. Additionally, the court stated that because the plan is a top-hat plan, it was not required to file annual reporting and disclosure documents with the Department of Labor, and the fact that it did not file these documents was further support that it qualified as an exempted top-hat plan. For these reasons, the court affirmed the position of the Magistrate and overruled Mr. Kramer’s objections. And because the court reached this conclusion putting an end to the discovery period, it also ordered Mr. Kramer to respond to American Electric’s pending summary judgment motion within fourteen days of this order.

Eighth Circuit

Wessberg v. Unum Life Ins. Co. of Am., No. 22-0094 (JRT/DLM), 2023 WL 5311509 (D. Minn. Aug. 17, 2023) (Judge John R. Tunheim). Attorney Ann D. Wessberg brings this action to challenge defendant Unum Life Insurance Company of America’s denial of her long-term disability benefit claim. Ms. Wessberg moved to expand the administrative record, compel discovery, and amend the scheduling order. Her motions were assigned to Magistrate Judge Leo I. Brisbois. Judge Brisbois denied the motions, concluding that special circumstances did not warrant expanding the record or opening up discovery. Specifically, Judge Brisbois felt that Ms. Wessberg was “improperly attempting to present ‘better evidence’ than she did during the claim administration.” Ms. Wessberg appealed the Magistrate’s order denying her motions. In this decision the court held that there was no clear error with the Magistrate’s conclusion that Ms. Wessberg could not show good cause to justify expanding the administrative record. The court agreed with Judge Brisbois that the evidence and medical records Ms. Wessberg sought to include in the administrative record were available to her during the administrative claims review process, and that there was no reason why she could not have included them at the time. Accordingly, the court denied Ms. Wessberg’s appeal and affirmed the order of the Magistrate.

ERISA Preemption

Tenth Circuit

Crawford v. The Guard. State Bank & Tr. Co., No. 2:22-CV-02542-JAR-GEB, 2023 WL 5222496 (D. Kan. Aug. 15, 2023) (Judge Julie A. Robinson). Plaintiff David Crawford worked for The Guaranty State Bank & Trust Company for 30 years from 1990 until his resignation with the bank in 2020. His career progressed from agricultural loan officer to senior vice president, with the majority of his work throughout his career dealing with cattle financing. Mr. Crawford though was not a model employee. Over the years, Mr. Crawford was embroiled in several escalating incidents involving personal side deals with borrowers and problematic loans he issued which involved at different points missing, dead, and even non-existent livestock. The search for some of these missing or stollen bovines eventually lead to an investigation headed by the Kansas Bureau of Investigations (“KBI”). That KBI investigation would not wrap-up until over a year after Mr. Crawford had resigned from his position. After receiving and reading the report, the bank determined that Mr. Crawford was ineligible for benefits under an ERISA-governed executive salary continuation plan. It pointed to plan language which provides that executives fired “for cause” shall forfeit all provided benefits. Following the termination of his benefits, Mr. Crawford brought this lawsuit under ERISA to recover them under Section 502(a)(1)(B). The defendants responded by asserting five counterclaims against Mr. Crawford for recoupment for fraudulent misrepresentation and omission, recoupment for conversion, recoupment for breach of fiduciary duty, recoupment for breach of the duty of good faith and fair dealing, and recoupment for negligence. Mr. Crawford moved to dismiss the counterclaims for failure to state a claim or in the alternative to stay consideration of the counterclaims pending resolution of an overlapping state court proceeding. The court addressed the motion to dismiss first. Mr. Crawford asserted that the state law counterclaims are preempted under both complete and conflict preemption. The court disagreed. Regarding complete preemption, it found that defendants’ counterclaims did not constitute an action for equitable relief and that they therefore could not have brought them under ERISA Section 502(a). With regard to conflict preemption, the court found that Kansas’s common law doctrine of recoupment was distinct from ERISA, as it applies to all contract disputes and does not have any impermissible connection with ERISA plans. “[I]n fact, the Court sees no specific connection between the common law doctrine of recoupment and an ERISA plan.” Accordingly, the court concluded that defendants’ counterclaims were not preempted by ERISA, and thus denied the motion to dismiss them. The court then turned to Mr. Crawford’s alternative motion to stay the proceedings of the counterclaims pending resolution of the similar state court civil action. As an initial matter, the court disagreed with Mr. Crawford that the two lawsuits were parallel. While some of the parties are the same, and so are some of the issues, the court pointed out that the overlapping issues have to do with defendants’ counterclaims, not plaintiff’s ERISA claims against defendants. “Therefore, what Plaintiff is requesting amounts to a partial stay; yet Plaintiff has not cited, and the Court has not found, ‘any authority that a federal district court can partially dismiss or stay a case under Colorado River, and it is not clear that Colorado River applies when only part of the case is parallel to a state court action.” For this reason, the court denied the novel request to stay part of the action pending the outcome of the state court case. Consequently, both of Mr. Crawford’s motions were denied.

Life Insurance & AD&D Benefit Claims

Fifth Circuit

Wicks v. Metro. Life Ins. Co., No. 4:21-CV-1275-O, 2023 WL 5216493 (N.D. Tex. Aug. 14, 2023) (Judge Reed O’Connor). Decedent Jackie Wicks underwent surgery on June 24, 2021, to treat morbid obesity. He died the next morning. The circumstances and causes of Mr. Wicks’ death are not entirely clear. However, his death seems to have been caused, at least in part, by a negative reaction to the opioid medications he was given in the hospital post-operation. Fonda Wicks, his widow and the plaintiff in this Accidental Death & Dismemberment (“AD&D”) action, viewed her husband’s death as a tragic accident, and therefore believes she is entitled to benefits under his AD&D plan. The policy does not define the term accident. However, her claim for benefits was denied by defendant Metropolitan Life Insurance Company (“MetLife”) pursuant to both the plan’s sole-cause clause, as well as its illness/treatment exclusion, which excludes coverage for deaths caused or contributed by a pre-existing physical or mental illness. In this decision the court issued its judgement under de novo review of the administrative record and affirmed the denial. The court concluded that Fifth Circuit precedent on the topic makes clear that Mr. Wick’s death “resulted from underlying illness, not accident, because it ‘occurred from the standard complications of standard medical treatment for a disease.’” Specifically, the court found that Mr. Wick died from the combined effects of surgery and post-surgery medication complications to treat morbid obesity. Furthermore, the court agreed with MetLife that Ms. Wicks could not prove that the “accident” – here the adverse reaction to the opioid medications – was the sole cause of her husband’s death. Even if she could though, the court maintained that Mr. Wicks’ medication reaction nevertheless falls under the umbrella of standard and proper medical care and the range of standard complication which can result from that care. Thus, the court found that Mr. Wicks died as a result of his obesity, and that his death therefore was not the result of an “accidental injury, independent other causes.” As a result, MetLife’s denial of benefits was affirmed.

Medical Benefit Claims

First Circuit

Turner v. Liberty Mut. Ret. Benefit Plan, No. 20-11530-FDS, 2023 WL 5179194 (D. Mass. Aug. 11, 2023) (Judge F. Dennis Saylor IV). Plaintiff Thomas Turner sued the Liberty Mutual Retirement Benefit Plan, the Liberty Mutual Medical Plan, the Liberty Mutual Retirement Benefit Plan Retirement Board, Liberty Mutual Group, Inc., and Liberty Mutual Insurance Company under ERISA for benefits, equitable relief, failure to provide a full and fair review, and failure to disclose plan limitations in connection with his cost-share obligations for post-retirement medical benefits, which he believed were incorrectly calculated. Defendants previously moved for summary judgment on the benefits claim under Section 502(a)(1)(B). The court granted that motion. It concluded that the medical benefit was not a vested benefit and agreed with defendants that the unambiguous terms of the governing summary plan description “state that the plan does not provide cost-sharing credit for his years working with Safeco Insurance Company, a company acquired by Liberty Mutual.” Defendants subsequently moved for summary judgment on the remaining claims. In this decision the court granted in part and denied in part their summary judgment motion. In particular, the court found that a genuine issue of material fact exists with regard to whether Liberty Mutual and its representatives repeatedly misled Mr. Turner about whether his plan provided for a cost-sharing credit for his years working at Safeco pre-merger, and whether he reasonably relied on these misrepresentations to his detriment, including by turning down opportunities to work with other employers. The court expressed that the Supreme Court decisions in “Varity and Amara stand for the principle that plan administrators have a fiduciary duty not to mislead beneficiaries about plan benefits, and that at least in some circumstances, such misrepresentation can be remedied by equitable relief under § 502(a)(3), including through reformation and surcharge.” Thus, the court concluded that Mr. Turner may possibly succeed on this claim and that discovery needs to take place as to the specifics of the alleged misrepresentations and their context before the equitable relief claim can be resolved on summary judgment. Moreover, the court found that this claim was not duplicative of Mr. Turner’s claim for denial of benefits and that he was thus not relitigating the same benefits dispute already resolved in defendants’ favor. Accordingly, the court denied defendants’ motion as to the claim under Section 502(a)(3). However, defendants were granted summary judgment on both the full and fair review claim and the failure to disclose plan limitations claim, as the court concluded that these claims were foreclosed by its findings as to the benefit claim. Regarding the Section 503 full and fair review claim, the court held that the appropriate relief should Mr. Turner succeed – remand – is unavailable here. Therefore, even if the court found that procedural requirements were violated, given the unambiguous plan language which cuts against Mr. Turner, the court stressed that remand would be futile and is thus inappropriate given the circumstances. And as for the allegation that the summary plan descriptions failed to adequately disclose how the prior service with Safeco would be used to calculate benefits, the court found that an average plan participant would have been able to understand the SPD’s unambiguous language barring Safeco employees from receiving cost-sharing credit for their years of service prior to the merger. Therefore, the court found that Mr. Turner could not prevail on his failure to disclose limitations claim. For these reasons, defendants were granted in part and denied in part summary judgment as described above.

Fifth Circuit

Specialists Hosp. Shreveport v. Harper, No. 21-1748, 2023 WL 5309906 (W.D. La. Aug. 15, 2023) (Judge Elizabeth Erny Foote). In 2020, Tammy Harper took a leave of absence from her employment. She opted to continue her healthcare coverage during this time. Ms. Harper was informed of the requirements for continued coverage under COBRA. Principally, she needed to make contribution payments by the 15th day of each month in order to maintain coverage. At first, she did so, paying her first two premiums in a timely manner. After that though she stopped making her healthcare payments, and Blue Cross ultimately ended her coverage. On March 4, 2020, Ms. Harper’s husband underwent lumbar surgery that was previously scheduled and pre-approved by Blue Cross. By this time, however, the family’s COBRA coverage had lapsed, and they were ultimately left on the hook for the $140,273.92 in unpaid costs related to the surgery. In this action, the provider has sued Mr. Harper to recoup that payment. In turn, Mr. Harper brought an ERISA claim against Blue Cross alleging that it breached the terms of the plan by refusing to pay the expenses arising from the surgery. Blue Cross moved for summary judgment. It presented two arguments why the court should grant its motion. First, Blue Cross argued that it was not designated authority to determine eligibility or coverage under the plan and that it is therefore an improper party for a benefits claim. The court disagreed. Not only do the plan documents clearly list Blue Cross as the plan administrator, but the court also found that its actions preapproving the surgery, and then issuing the denial letters constituted the fiduciary actions of an entity with decision-making authority. Thus, the court proceeded to assess the merits to Blue Cross’s second argument – that the Harper family’s coverage was properly terminated. This time, the court agreed with Blue Cross. At bottom, the plan’s terms clearly required the Harpers to pay their premiums by the fifteenth day of every month in order to maintain coverage. Because they did not do so, the termination of their coverage was determined by the court not to be an abuse of discretion. Accordingly, the court granted Blue Cross’s motion and dismissed Mr. Harper’s claims against it with prejudice.

Tenth Circuit

David P. v. United Healthcare Ins. Co., No. 21-4129, __ F. 4th __, 2023 WL 5209748 (10th Cir. Aug. 15, 2023) (Before Circuit Judges Carson, Baldock, and Ebel). A father and daughter, plaintiffs David P. and L.P., commenced this ERISA medical benefits action seeking reimbursement of costs incurred during L.P.’s year-long mental health and substance abuse treatment, which she received at two residential treatment centers. Plaintiffs sued the plan’s administrator, defendant Morgan Stanley, and its claims administrator, defendants United Healthcare Insurance Company and United Behavioral Health, under ERISA Section 502(a)(1)(B). Plaintiffs challenged both the substance and the sufficiency of the denials they received for L.P.’s treatment. And in the district court they found success. The court awarded plaintiffs summary judgment, benefits, and attorneys’ fees. It concluded that defendants’ claims processing fell short of ERISA’s “meaningful dialogue” mandate. As a result, the district court held that defendants had not provided plaintiffs will a full and fair review of their claims and that defendants therefore abused their discretion. Defendants challenged the district court’s decisions in this appeal to the Tenth Circuit. The appeals court affirmed the lower court’s ruling that defendants violated ERISA by circumventing the dialogue required between plan participants and the administrators processing their claims for benefits. The Tenth Circuit concurred that United Behavioral Health provided shifting and inconsistent bases for its denial rationales, and that these  rationales were also often inaccurate and easily refuted by the medical records. Moreover, the denial letters had statements that both the district court and the Tenth Circuit found “were conclusory and failed to refer to any of L.P.’s treatment records.” Three specific concerns both courts had with the denials were (1) their failure to address whether L.P.’s treatment for substance abuse provided an independent ground for coverage; (2) their failure to engage with the opinions of the treating providers who believed L.P. required care in a residential treatment center; and (3) the letters’ failure to fully explain why L.P.’s care was not medically necessary. The court of appeals stated plainly that defendants could not deprive claimants of a meaningful dialogue simply by having secret back-up reasons and internal notes as extra-justifications at the ready in case of litigation. “If [United Behavioral Health] thought Summit did not qualify as a [residential treatment center] it could have explained that to Plaintiffs. If [it] disagreed with the treatment recommendations made by L.P.’s treating health care providers, it could have said so and explained why. [United Behavioral Health] instead, abused its discretion by denying Plaintiffs the meaningful dialogue ERISA mandates.” The appellate court also specified that although an external reviewer also came to the same conclusion that the residential care was not medically necessary here, that external review could not cure the insufficiencies of the deficient claims handling, and that the external review therefore did not preclude reversing the denial of benefits. At this point in the decision, the Tenth Circuit and the district court’s paths diverged. Despite agreeing that reversing the denials was appropriate, the court of appeals determined that the district court had erred by awarding benefits outright. United Behavioral Health’s failure to adequately explain the grounds for its denials and its failure to make adequate factual findings were circumstances the Tenth Circuit held warranted remand rather than an award of benefits. The court went on to say that remand was appropriate because the record did not clearly show that father and daughter are entitled to their claimed benefits. Nevertheless, the court of appeals strongly warned defendants that “remand, however, does not ‘provide the plan administrator the opportunity to reevaluate a claim based on a rationale not raised in the administrative record,’…and not previously conveyed to Plaintiffs.” Finally, the Tenth Circuit reversed the district court’s award of attorneys’ fees in light of its ruling that defendants should have the claim remained to them for further consideration. The fee issue was thus remanded to the district court for reconsideration after defendants finished their fresh consideration of the benefits claim. At that time, the Tenth Circuit stated that the district court may redecide whether and in what amount to award plaintiffs’ counsel fees and costs. Overall, this decision from the Tenth Circuit has affirmed its conviction of late that one-sided conversations and soliloquies do not a dialogue make.

Pension Benefit Claims

Third Circuit

Miller v. Campbell Soup Co. Ret. & Pension Plan Admin. Comm., No. 1:19-cv-11397 (RBK/EAP), 2023 WL 5287816 (D.N.J. Aug. 17, 2023) (Judge Robert B. Kugler). During her tenure working at Campbell Soup Company, plaintiff Sherry L. Miller saw her retirement plan transform from a traditional defined-benefit plan into a cash balance plan. Ms. Miller’s employment with Campbell initially ended in the year 2000. This constituted her “first termination” for the purposes of benefits calculations under the retirement plan. “At that point in time, Plaintiff’s retirement benefits had been calculated under the traditional pension formula, and her retirement benefits under that formula froze at 15.333 years, which included her employment through August 12, 2000, as well as her severance period through February 16, 2001.” Shortly after leaving the company, Ms. Miller returned. In June of 2001, she was rehired by Campbell. This is where the dispute between the parties begins. At the time of the rehire, Campbell maintains that it had a policy in effect to bridge prior service for rehired employees for the purposes of calculating their retirement benefits. Under this policy, Ms. Miller’s retirement benefits continued to accrue from the date of her rehire under the new cash balance formula, rather than under the traditional pension formula it had previously been calculated under. Ms. Miller did not believe that this was correct. She felt that under the bridging policy she was entitled to 28.6 years of benefit service pursuant to the traditional pension formula. The question when Ms. Miller first brought this lawsuit in 2022 was whether Campbell used the correct formula to calculate Ms. Miller’s benefits by the time she retired anew in the fall of 2015 under Campbell’s Voluntary Separation Incentive Program. The answer, according to the court, was yes, and it dismissed Ms. Miller’s Section 502(a)(1)(B) claim on April 12, 2022, finding that she was not entitled to further benefits under the express terms of the plans. Nevertheless, Ms. Miller continued her ERISA action under claims of breach of fiduciary duty and equitable estoppel. Parties since filed cross-motions for summary judgment on those remaining claims. Here, the court granted defendant’s motion and denied Ms. Miller’s. It concluded that the release Ms. Miller signed as part of the voluntary separation program barred her remaining claims. “Plaintiff’s claims are premised on her detrimental reliance on Campbell’s misrepresentations of her pension plan benefits. Because the terms of the Release unambiguously waive misrepresentation, estoppel, and ERISA claims, Plaintiff’s claims are ‘foreclosed by the plain language of the contract,’ and Defendant is entitled to judgment as a matter of law.” Accordingly, Ms. Miller’s lawsuit anticlimactically resolved in favor of Campbell.

Provider Claims

Third Circuit

Metro. Neurosurgery on Assignment of Naazish S. v. Aetna Ins. Co., No. 22-0083 (JXN)(MAH), 2023 WL 5274611 (D.N.J. Aug. 16, 2023) (Judge Julien Xavier Neals). On December 4, 2019, patient Naazish S. was admitted to an emergency room and subsequently underwent emergency spinal surgeries, which were performed by plaintiff Metropolitan Neurosurgery Associates. At the time, Naazish was a participant in an ERISA-governed healthcare plan funded by his employer, defendant Deloitte LLP, and administered by defendant Aetna Life Insurance Company. Plaintiff was an out-of-network healthcare provider. It submitted a claim for reimbursement of the care. Eventually, the plan paid for the emergency surgical procedures, but only in the amount of $4,068.70, which represented a tiny fraction of the $138,192.00 billed by the provider. Metro. Neurosurgery filed this ERISA benefit action in response, to challenge that payment amount. Defendants moved to dismiss the complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). Their motion was granted by the court in this decision. It found that plaintiff failed to tie its claim to a plan provision showing it is entitled to the amount it seeks in this action. The court wrote that the complaint lacked details necessary to set forth an ERISA claim as it “does not point to any Plan provision from which the Court can infer that Plaintiff was entitled to the amount of reimbursement demanded for the out-of-network emergency medical services provided to the Patient.” Moreover, the court stated that the complaint failed to adequately allege that the billed amount constituted a “reasonable charge” as that term is defined by the plan. Accordingly, the court dismissed the benefit claim. Dismissal was without prejudice. Finally, because the court dismissed the complaint for failure to state a claim, it declined to address the merits of defendants’ exhaustion arguments. However, the court informed the parties that should plaintiff file an amended complaint, defendants would be free to raise the issue of administrative exhaustion anew.

Severance Benefit Claims

Fifth Circuit

Lu v. Anadarko Petroleum Corp. Welfare Benefits Admin. Comm., No. H-22-709, 2023 WL 5254682 (S.D. Tex. Aug. 15, 2023) (Judge Lee H. Rosenthal). Data scientist, plaintiff Ping Lu started working at Anadarko Petroleum Corporation in 2017. Two years later, another company, Occidental Petroleum Corporation acquired Anadarko. Should such an acquisition occur, Anadarko had put in place a Change of Control Severance Plan, which would allow employees to resign for “good reason” and receive severance benefits. On November 1, 2019, Mr. Lu did just that, and completed his form claiming good reason on the basis of a material and adverse diminishment in his duties following the acquisition. His claim for benefits was denied, which ultimately led to this ERISA lawsuit. Parties have now filed competing motions for judgment in their favor. In this order the court granted judgment in favor of defendants. To begin, the court concluded that summary judgment under Rule 56, rather than judgment under Rule 52, is the more appropriate mechanism to apply to its review here to resolve the dispute. It reached this decision because “the plan itself extends broad discretion to the Committee and limits the court’s review,” and Rule 52 requires the court to issues its own findings of fact which would be different from those already issued by the committee. Therefore, the court concluded that its limited review would be more appropriately handled under Rule 56 summary judgment. The court then segued to its analysis of the denial under abuse of discretion review. Mr. Lu argued that the committed did not give the plan uniform construction as every other data scientist was approved severance benefits, while his claim was denied. In response, defendants maintained that these individuals had different circumstances, and their roles did experience diminished responsibilities entitling them to benefits, unlike Mr. Lu. “The Committee’s factual findings are entitled to deference, and nothing in the administrative record indicates that the Committee abused its discretion in finding that Berestovsky, Bayeh, and Cao’s circumstances different than Lu’s circumstances.” Therefore, the court did not find Mr. Lu’s uniform construction argument grounds for reversal. His procedural fairness argument fared no better. There, the court held that the committee gave Mr. Lu a full and fair hearing, thoroughly considered his claim, and complied with ERISA’s procedural requirements. Finally, the court upheld the merits decision itself. The court found that “the record shows that Lu simply disliked that his work environment had changed, not that he was negatively impacted.” In fact, the court was persuaded by defendants that there was ample work for Mr. Lu following the acquisition and that his responsibilities, if anything, were set to increase beyond those under Anadarko. Based on the forgoing, defendants’ decision was upheld, and judgment was entered in their favor.

Withdrawal Liability & Unpaid Contributions

Ninth Circuit

Unite Here Ret. Fund v. City of San Jose, No. 5:20-cv-06069-EJD, 2023 WL 5181633 (N.D. Cal. Aug. 11, 2023) (Judge Edward J. Davila). From 2003 to 2019, the City of San Jose owned a hotel and conference center known as the Hayes Mansion. To manage and operate the mansion, the City contracted with a company called Dolce International. The scope of Dolce’s role and the duties it was required to carry out on the City’s behalf were outlined in a Managed Agreement that was signed and executed in 2003. Pertinent here, the agreement discussed Dolce International’s role with regards to labor unions and their ERISA-governed plans, including by requiring the company pay pension contributions, negotiate for the best interest of the City with labor unions, and comply with all provisions and obligations under collective bargaining agreements. Throughout this period when Dolce International managed the facility, many of the employees working at the mansion were unionized and were subject to collective bargaining agreements between their local union and Dolce. Things came to a head in 2019 when the City decided to sell Hayes Mansion. The obligation to contribute to the multiemployer pension plan was terminated, and a withdrawal liability was triggered. A question then arose– who is the employer bound under the collective bargaining agreement and therefore responsible for paying the liability – the City, Dolce International, or both? The Fund commenced this withdrawal liability MPPAA action to get the court’s answer, and its liability payment. Each party filed its own separate cross-motion for summary judgment. The City moved for summary judgement that Dolce International is the employer responsible for paying the withdrawal liability. Dolce International moved for summary judgment that it is not responsible for paying. The Fund moved for judgment that Dolce International is responsible, or, in the alternative, that the City is responsible. To resolve the dispute, the court took a deep dive into the agency relationship between the City and Dolce. To begin, the court found that an agent can obligate its principal to a collective bargaining agreement under ERISA, such that the principal is responsible for any withdrawal liability. Having concluded that the City could be bound by an agent, the court looked to whether Dolce International in fact qualified as the City’s agent. In the end the court was satisfied that the managed agreement between the parties created an agency agreement, as it expressly outlined how Dolce International was to act on behalf of the City of San Jose. Furthermore, the scope of the agreement was such that the court was convinced signing the agreement on behalf of the City was within the authority granted to Dolce. Accordingly, the court found there was no genuine dispute that the City is an employer responsible for the withdrawal liability in this case. Nevertheless, the court stated that it could not resolve on summary judgment the issue of whether Dolce International was also an employer, at least not with the factual record currently developed. Whether Dolce International is jointly responsible for the liability “turns on the issue of disclose,” and it remains unclear whether Dolce ever informed the union that the City was the principal with regard to the collective bargaining agreements. Thus, the court did not grant summary judgment either for or against Dolce International, and the action will proceed to resolve this open issue. However, the court did grant summary judgment to the Fund on its claim against the City. The City’s motion for summary judgment for denied.