Wit v. United Behav. Health, No. 20-17363, 2023 WL 5356640 (9th Cir. Aug. 22, 2023) (Before Circuit Judges Christen and Forrest, and District Judge Michael M. Anello)

As the title indicates, this is the third time the Ninth Circuit has wrestled with this long-running class action alleging that insurance giant United Behavioral Health (“UBH”) improperly denied benefit claims and breached its fiduciary duties under ERISA by using mental health guidelines that are unreasonable and inconsistent with generally accepted standards of medical care (“GASC”).

In its initial decision, which Your ERISA Watch discussed in its March 30, 2022 edition, the Ninth Circuit dealt a blow to the plaintiffs’ case in an eight-page unpublished memorandum decision. That decision overturned a judgment in plaintiffs’ favor and an accompanying $20 million award of attorneys’ fees that were awarded after a ten-day bench trial.

In that ruling, the Ninth Circuit agreed that the plaintiffs had standing to bring their claims, and that they could bring them on a class-wide basis. It also agreed that they could seek reprocessing of claims as a class-wide remedy, and that this approach “avoided the individualized nature” of ERISA’s benefits remedy.

However, none of that mattered because the court also ruled that the district court misapplied the abuse of discretion standard of review “by substituting its interpretation of the Plans for UBH’s.” The court held that UBH’s interpretation of the benefit plans was reasonable, and that the benefit plans at issue “do not require consistency with the GASC.” Specifically, the court stated, “The Plans exclude coverage for treatment inconsistent with the GASC; Plaintiffs did not show that the Plans mandate coverage for all treatment that is consistent with the GASC.”

The plaintiffs requested rehearing, and the Ninth Circuit responded by issuing a new published opinion on January 26, 2023. (Your ERISA Watch analyzed this second decision in its February 1, 2023 edition.)

In its new ruling, the court again agreed that the plaintiffs had standing. However, it walked back its conclusion regarding the reprocessing of claims. This time, the court ruled that plaintiffs’ request for reprocessing violated the Rules Enabling Act, which provides that procedural rules “shall not abridge, enlarge or modify any substantive right.”

The court ruled that reprocessing was not a proper remedy under ERISA, but was instead only “a means to the ultimate remedy,” i.e., the payment of benefits. As a result, the district court had erred by certifying a class around the concept of seeking reprocessing. The court further ruled that reprocessing was not an available remedy under ERISA’s equitable relief provision either.

The Ninth Circuit went on to reiterate that UBH’s interpretation of the plans was reasonable, and also added that the district court had not properly enforced ERISA’s requirement that claimants exhaust their internal appeals. Specifically, the court agreed with UBH that the district court improperly allowed an exception to that requirement and violated the Rules Enabling Act in doing so by abridging UBH’s affirmative defenses and expanding absent class members’ rights.

Dismayed that this second decision turned out even worse than the first one, plaintiffs once again petitioned for rehearing, and this week’s notable decision is the result.

The court began by agreeing, for the third time, that the plaintiffs had standing. The court then turned to the class claims seeking reprocessing. Implicitly acknowledging that its prior decision had created some confusion by suggesting that reprocessing could never be an appropriate remedy under ERISA, the court clarified that reprocessing “may be an appropriate remedy in some cases where an administrator has applied an incorrect standard.”

However, the Ninth Circuit ruled that the district court’s class certification order in this case could not be upheld because it was based on a “determination that the class members were entitled to have their claims reprocessed regardless of the individual circumstances at issue in their claims.”

The court found that the plaintiffs were required to show that all of the members of the class were prejudiced by UBH’s use of its guidelines in their particular circumstances, but had not met that burden. As a result, the court ruled that the district court had applied class certification rules “in a way that enlarged or modified Plaintiffs’ substantive rights in violation of the Rules Enabling Act.” The Ninth Circuit therefore reversed the court’s certification order.

Most of the rest of the decision was similar to the court’s second effort. The court again ruled that the plaintiffs could not seek reprocessing as a form of equitable relief pursuant to § 1132(a)(3), and also ruled once again that the district court erred in finding that the plans “require[d] coverage for all care consistent with GASC.”

As for exhaustion, the Ninth Circuit took a more measured approach. The court noted that because it was reversing and remanding as to the plaintiffs’ claim for benefits, the only remaining class claim was a statutory one for breach of fiduciary duty. The court admitted that exhaustion is not typically required for such claims, but might be required if the claim “is a disguised claim for benefits.” The court remanded for the district court to determine in the first instance if the exhaustion requirement applied, and if so, “whether that requirement was satisfied by the unnamed class members or should otherwise be excused in light of our decision.”

Thus ended the Ninth Circuit’s third effort at deciding this appeal. However, the most ominous part of the court’s ruling came in the order accompanying the opinion, in which the court expressly stated, “Subsequent petitions for rehearing or rehearing en banc, if any, are permissible.” In other words, this appeal is likely not over yet. Stay tuned to Your ERISA Watch to see if we are graced with Wit IV (or V or VI…)

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


Sixth Circuit

Parker v. Tenneco Inc., No. 23-10816, 2023 WL 5350565 (E.D. Mich. Aug. 21, 2023) (Judge George Caram Steeh). Defendants moved to compel plaintiffs Tanika Parker and Andrew Farrier to submit their dispute to arbitration in this matter alleging fiduciary breaches regarding two ERISA-governed retirement plans, the DRiV 401(k) Retirement Saving Plan and the Tenneco 401(k) Investment Plan. In line with several similar decisions Your ERISA Watch has reported on recently (see Henry v. Wilmington Trust NA, No. 21-2801, __ F.4th __, 2023 WL 4281813 (3d Cir. June 30, 2023), Smith v. Board of Directors of Triad Mfg., Inc., 13 F.4th 613 (7th Cir. 2021), and Harrison v. Envision Mgmt. Holding, Inc., 59 F.4th 1090 (10th Cir. 2023)), the court here denied the motion to compel arbitration. It concluded that the “Group, Class, or Representative Action” waiver in the arbitration procedure is invalid and in direct conflict with statutorily authorized remedies under ERISA. The court stated clearly that arbitration agreements such as this one are not enforceable when they have “the effect of altering, limiting, or precluding a party from pursuing her substantive rights or remedies under a federal statue.” Such was the case here, as the waiver at issue prohibits participants from bringing suit in a representative capacity on behalf of the plan and limits their relief to individual account losses as opposed to plan-wide remedies. The court held that “[t]hese rights and remedies provided to plans under ERISA may not be taken away by agreement.” Moreover, it agreed with plaintiffs that because the waiver could not be severed from the arbitration provision as a whole, the arbitration provision itself was rendered null and void. Thus, the court determined that the arbitration procedure does not apply to the pending action, and plaintiffs cannot be compelled to arbitrate. 

Attorneys’ Fees

Sixth Circuit

Messing v. Provident Life & Accident Ins. Co., No. 1:20-cv-351, 2023 WL 5497946 (W.D. Mich. Aug. 25, 2023) (Judge Hala Y. Jarbou). Plaintiff Mark M. Messing succeeded in his long-term disability benefit action against Provident Life and Accident Insurance Company. In this order the court ruled on Mr. Messing’s motion for an award of attorneys’ fees, costs, interest, a sum certain money judgment, and an order requiring Provident to satisfy the judgment and continue to pay benefits owed. The decision began with Mr. Messing’s requests for costs. Plaintiff sought costs of $8,875.93 which included expert fees, filing fees, mediation fees, deposition transcript fees, travel expenses, copying and postage costs, and research and technology expenditures. The court awarded $3,533.34 in costs which were made up of filing fees, mediation fees, and deposition costs. The court declined to award the remaining requested costs, concluding they were not recoverable and beyond what is allowed under 29 U.S.C. § 1920. Next, the court assessed Mr. Messing’s requested attorneys’ fees under Section 502(g)(1). As an initial matter, the court was satisfied that Mr. Messing’s results in this action constituted success on the merits making him eligible for a fee award. Nevertheless, the court declined to grant Mr. Messing fees after employing the Sixth Circuit’s five-factor test. It determined that Provident did not act in bad faith, that its conduct was not highly culpable or in need of deterring, that no significant legal question was resolved, and that recovery of fees would only benefit Mr. Messing. Significantly, the court concluded that although Mr. Messing proved by a preponderance of the evidence that he is disabled and qualifies for benefits under his plan, it also found Provident’s position to not be entirely meritless and therefore did not weigh the fifth factor – the relative merits of the parties’ positions – in favor of granting fees. In fact, the only factor the court felt weighed at all in favor of a fee award was Provident’s ability to satisfy such an award. The court pointed out that this factor is relevant “more for exclusionary than for inclusionary purposes.” For these reasons, the court did not award attorneys’ fees. Such a decision is very unusual for plaintiff-side victories in ERISA benefit actions, particularly one where, as here, the plaintiff was awarded benefits outright rather than having their claim remanded to the defendant for reconsideration. The court then addressed Mr. Messing’s request for make-whole relief in the form of a payment for tax neutralization. Absent direction from the Sixth Circuit on the issue, the court followed the path of its sister district courts within the Circuit and declined to award this requested gross-up award. Moving on to an award of pre-judgment interest, the court agreed with Mr. Messing that district courts have discretion to grant prejudgment interest on unpaid benefits recovered under ERISA. Here, the court exercised that discretion and awarded the requested 3.5% interest rate on the unpaid benefits. Additionally, the court agreed with Mr. Messing that he “is entitled to [any outstanding] benefits as well as interest on the amount of benefits that has accrued as owing between January 26, 2023, and the date of judgment.” Finally, the court granted Mr. Messing’s motion for an order requiring Provident to pay the amounts owed to him at present and to continue to pay him benefits under the plan so long as he remains disabled under the policy terms and the facts.

Breach of Fiduciary Duty

Second Circuit

Carfora v. Teachers Ins. Annuity Ass’n of Am., No. 21 Civ. 8384 (KPF), 2023 WL 5352402 (S.D.N.Y. Aug. 21, 2023) (Judge Katherine Polk Failla). Last year, the court dismissed this fiduciary breach action asserted against the Teachers Insurance Annuity Association of America (“TIAA”). Broadly, the court decided therein that TIAA was not acting as a fiduciary in using participant data or soliciting participants to roll over their plan assets into its own proprietary portfolio advisory program, behavior referred to as cross-selling. As a result, it found that TIAA’s actions did not render it a functional fiduciary and that plaintiffs therefore could not state their fiduciary breach claims against TIAA. Plaintiffs, the court found, “failed to allege that TIAA owed any fiduciary duties to them.” That decision was Your ERISA Watch’s case of the week on October 5, 2022. After concluding that amendment would be futile, the court not only granted the motion to dismiss the complaint, but also closed the case. Now, nearly a year later, the case has been resurrected, thanks to this decision granting in part plaintiffs’ motions under Federal Rules of Civil Procedure 59(e) and 15. The decision began by acknowledging the “numerous hurdles” plaintiffs faced in submitting their proposed amended complaint (“PAC”). “First, this case has been closed. In consequence, Plaintiffs must argue that judgment should be vacated to allow them to file the PAC. Second, Plaintiffs face a potential untimeliness and delay argument, inasmuch as the December 14, 2021 scheduling order required any amended pleadings to be filed within 21 days of the motion to dismiss. Third, and perhaps most significantly, Plaintiffs must demonstrate that the PAC would not be futile, meaning that the claims in it would survive a motion to dismiss.” In part, at least, plaintiffs were able to overcome these hurdles. Importantly, the court did not change its mind regarding the fiduciary status of TIAA. The court felt that plaintiffs were simply relitigating their arguments that participant-level advice is plan-level advice, and that TIAA provided this advice on a regular basis. Both of these arguments were already considered and rejected by the court in its original order. In addition, the court rejected plaintiffs’ allegations about post-rollover interactions, finding that the actions taken following the rollovers were outside the scope of fiduciary analysis. Although plaintiffs disagreed with the court’s reading of the Supreme Court’s decision in LaRue v. DeWolff, the court said that such a disagreement was not grounds to grant their reconsideration motion. Accordingly, it found no reason to disturb its prior conclusions regarding TIAA’s status as a non-fiduciary, and therefore held that “claims seeking relief on that basis would be futile.” Nevertheless, the court decided to vacate judgment to allow plaintiffs to replead a violation of Section 502(a)(3), “which extends liability for ERISA violations to certain non-fiduciaries.” In their proposed amended complaint, plaintiffs make clear that they believe their plan sponsors breached their fiduciary duties under ERISA and that TIAA knowingly participated in those breaches. Therefore, even though the court has found that TIAA is not a fiduciary, it “remains subject to [the equitable remedies of] restitution, disgorgement, or a constructive trust.” Although plaintiffs maintained originally that their complaint sought liability premised on TIAA’s fiduciary status, the court felt it was in the interest of justice to allow plaintiffs to bring this new theory not originally pleaded because their amended complaint includes “sufficient factual content with respect to a non-fiduciary theory.” And although these new theories about TIAA’s actions cross-selling revenues and self-serving use of plan data may not ultimately be successful, the court found that defendants’ attack of them at the pleadings stage “misse[d] the mark.” Thus, the court was satisfied that plaintiffs made an adequate showing that this portion of their complaint is not futile, and therefore allowed them to carry this case, still in its infancy, forward. As such, this action has remarkably been revived and TIAA may ultimately be held responsible for its actions, regardless of whether it was donning its fiduciary hat at the time.

Third Circuit

Nunez v. B. Braun Med., No. 20-4195, 2023 WL 5339620 (E.D. Pa. Aug. 18, 2023) (Judge Edward G. Smith). In this order, the court entered its final judgment following a three-day bench trial in this class action involving allegations of imprudence regarding the fiduciary handling of the B. Braun Medical Inc. defined contribution plan’s investments and expenses. The plaintiff participants argued that the retirement committee had breached its duty of prudence by failing to investigate and select well-performing low-cost investment options for the plan and by failing to monitor and control the plan’s direct and indirect recordkeeping expenses. The court found the testimony of the committee’s expert “highly credible” and persuasive. Plaintiffs’ story, their version of events, and the views of their experts were not present in this decision and therefore did not sit as any sort of counter-narrative to the defendant’s telling, making for slightly strange reading. At bottom, the court agreed with the committee and its expert that it had acted prudently in arriving at its choice of investment options and in selecting its recordkeepers. Moreover, the court agreed with defendant that the investment options and fees were themselves prudent and reasonable. Specifically, the court highlighted how the committee met regularly, solicited the advice of third-party consultants, utilized watchlists to scrutinize the performance of the investment lineup, and approached its investment decision-making with nuance and care. With regard to the performance of the challenged funds, the court determined they were objectively prudent because Morningstar had identified the funds as “especially strong performers,” and because the plan’s offerings as a whole performed in the top half of all comparable funds more than half of the time. As for the plan’s recordkeeping costs, the court wrote that the committee had a “pattern of lower[ing] recordkeeping fees,” by routinely conducting benchmarking studies and responding to the information gleaned through those results. This cycle of evaluating fees and renegotiating them was seen by the court as a fiduciary best practice and thus not a breach of any fiduciary duty. Additionally, the court noted that the committee was an early adopter of “fee-leveling” – the industry’s term for a fixed per-participant fee – switching to this option within a year of it first becoming available. Finally, the court agreed with defendant that the plan’s “recordkeeping fees were routinely below average,” and that it had not violated any duty by engaging in revenue sharing practices. Based on these above findings, the court concluded that the committee had not violated its duty of prudence during the class period, and therefore granted judgment in its favor and against plaintiffs.

Seventh Circuit

Riskus v. United Emp. Benefit Fund, No. 1:23-cv-60, 2023 WL 5348766 (N.D. Ill. Aug. 21, 2023) (Judge Elaine E. Bucklo). Plaintiff George Riskus brings this action against the United Employee Benefit Fund and several individual plan fiduciaries/parties-in-interest for breaches of fiduciary duties, failure to comply with reporting and disclosure obligations, and engaging in self-dealing and prohibited transactions. Mr. Riskus’s lawsuit stems from the termination of his death benefit and defendants’ failure to inform him of the opportunity to maintain the benefit by purchasing the life insurance policy that funded the benefit. In his suit, Mr. Riskus seeks equitable relief in the form of restoration of the death benefit, accounting, and the replacement of the Fund’s trustees. The Fund moved to dismiss all claims against it. Its motion was granted by the court in this order. To begin, the court addressed the plan’s jurisdictional challenge that Mr. Riskus lacked standing to sue because his benefits were not vested. In response, the court wrote, “As I understand Riskus’s theory, he does not claim that his death benefit was ‘vested’ in the sense that [the Fund] could not terminate the benefit if Riskus or his employer ceased being a Plan participant; his theory is instead that the terms of Section 7G of the Summary Plan Description created a vested right by promising participants like Riskus the ability to purchase the insurance policies that funded their benefits. [The Fund] breached that duty, Riskus claims, by terminating his death benefit without giving him that opportunity. This claim is not frivolous, so my jurisdiction is secure.” Having addressed standing, the court then moved on to the Fund’s arguments for dismissal under Rule 12(b)(6). Here, the court agreed with the plan that Mr. Riskus had not stated viable claims for relief. First, the court agreed with defendant that 29 U.S.C. § 1023(e) does not create a private right of action for individuals to sue to enforce violations of ERISA’s reporting and disclosure requirements. Second, the court held that the Fund could not be a fiduciary because it does not control, administer, or render advice concerning the plan; it “is the Plan, and ‘plans cannot be fiduciaries of themselves.’”  Accordingly, the court found that Mr. Riskus could not bring fiduciary breach claims against the plan. Furthermore, the court held that Mr. Riskus failed to plausibly allege that the loss of his death benefit was caused by defendants’ failure to inform him that his eligibility for benefits would terminate when his employment ended. Finally, the court held that Mr. Riskus’s prohibited transaction and self-dealing claims were conclusory and lacking in meaningful factual allegations. These claims, then, the court determined did not rise “above the speculative level.” Accordingly, the court granted the Fund’s motion and dismissed the claims against it.

Eighth Circuit

Fritton v. Taylor Corp., No. 22-cv-00415 (ECT/TNL), 2023 WL 5348834 (D. Minn. Aug. 21, 2023) (Judge Eric C. Tostrud). Former employees of Taylor Corporation bring this action against the fiduciaries of the company’s 401(k) and profit-sharing plan for breaches of their duties of prudence, loyalty, and monitoring. Plaintiffs allege that the fiduciaries mismanaged the plan by (1) authorizing it to pay unreasonably high recordkeeping fees, (2) including investment options with excessive management fees, (3) investing in costly share classes when cheaper options of identical funds were available, and (4) by allowing the plan to retain an underperforming fund. Defendants moved to dismiss the complaint for failure to state a claim. Their motion was granted in part and denied in part by the court. Mostly, the court agreed with defendants that plaintiffs lacked sound comparators and meaningful benchmarks with which to compare the challenged fees and investments. The one exception to this general finding was plaintiffs’ claims of imprudence and monitoring based on the costly share class. Because the share classes are identical to one another in all ways other than cost, the court agreed with plaintiffs that one was a sound comparator for the other, and that plaintiffs therefore stated  plausible claims based on their expensive share class theory. In all other respects, however, the court saw plaintiffs’ complaint as containing bare allegations of costs being too high, returns being too low. Such “labels and conclusions” about fees and performance do not colorable claims make, the court held. “Plaintiffs cite no authority relaxing the pleading standard for ERISA breach-of-fiduciary-duty claims or permitting a sue-now-discover-later approach.” As a result, the court held that plaintiffs failed to plausibly allege facts to back up these allegations of imprudence and disloyalty regarding excessive fees, unnecessary expenses, and underperformance. Therefore, the majority of plaintiffs’ complaint was dismissed. To the extent the court granted the motion to dismiss, dismissal was without prejudice.

Class Actions

Ninth Circuit

Schuman v. Microchip Tech., No. 16-cv-05544-HSG, 2023 WL 5498065 (N.D. Cal. Aug. 23, 2023) (Judge Haywood S. Gilliam, Jr.). Plaintiffs are a certified class of 220 former employees of defendant Atmel Corporation who were terminated without cause following a merger that took place in the spring of 2016 between Atmel and defendant Microchip Technology, Inc. Plaintiffs contend that they are entitled to benefits under the Atmel Corporation U.S. Severance Guarantee Benefit Program, which was created in the event of just such a merger or acquisition. The plan was designed to ease employee concerns over job security which might arise from a potential change of control at the company. However, plaintiffs were not awarded benefits under the plan. Defendants decided that the plan had expired before the merger took place. As a result, they did not honor its terms, and denied the submitted claims for benefits. The new CEO of the company in fact told employees that they “would have to fight him in court if they wanted to challenge him on their entitlement to benefits under the Plan.” But to help ensure that employees could not actually challenge them in court, defendants had terminated employees sign releases in exchange for a much smaller portion of severance benefits than what was provided for by the plan. 215 of the 220 class members signed these waivers. In their operative complaint, plaintiffs bring claims for benefits and breach of fiduciary duty, and also seek injunctive relief preventing defendants from enforcing the releases they obtained or from soliciting new releases. Defendants moved for summary judgment. They contend that the releases signed by almost all of the plaintiffs are valid as plaintiffs knowingly and voluntarily signed away their rights in exchange for the reduced severance payments. Defendants also argued that plaintiffs do not state valid claims for breach of fiduciary duty and their requests for equitable relief fail. In response, plaintiffs claimed that defendants waived their ability to rely on the release as a defense to bar their right to pursue their benefit claims because the plan administrator did not base the denials on the existence of the releases, but rather on a statement that the plan had expired. Starting off, the court stated that it was “not persuaded” by plaintiffs’ waiver argument. In this case, the releases were not part of the merits of plaintiffs’ claims for benefits, the court said, instead they are an affirmative defense that needs to be addressed to determine whether they can pursue ERISA benefit claims at all. Therefore, the court concluded that defendants had not waived their right to rely on the releases, and thus turned to whether the releases, which preclude ERISA actions in federal court, are enforceable. In the end, the court determined they were. The court was convinced that, at least as to the two named plaintiffs, the overwhelming evidence plainly establishes that their decisions to sign the releases were knowing and voluntary. The court therefore granted defendants’ summary judgment motion as to the two named plaintiffs. However, the court denied the summary judgment motion as to the rest of the class members. Instead, it ordered briefing to show cause why the class should or should not be decertified “based on the individualized inquiry necessary to assess the validity of the releases signed by the majority of the class members.” Also, the court denied defendants’ motion to dismiss on their second basis – that plaintiffs failed to state fiduciary breach and equitable relief claims. To the contrary, the court agreed with plaintiffs that they raised at least one fact of material dispute regarding whether defendants knew or should have known that the plan had not in fact expired.

Disability Benefit Claims

Fifth Circuit

Lewis v. Unum Life Ins. Co. of Am., No. 3:22-cv-00067, 2023 WL 5401873 (S.D. Tex. Aug. 22, 2023) (Magistrate Judge Andrew M. Edison). Plaintiff Roy Lewis brought suit against Unum Life Insurance Company to challenge its denial of his claim for long-term disability benefits. Mr. Lewis applied for disability benefits more than two years after a motorcycle accident which left him with physical and neurocognitive impairments, including a traumatic brain injury. Prior to his accident, Mr. Lewis worked as a senior accountant for an energy company. His position, while physically sedentary, required him to perform complex analysis of financial data “working to precise, accurate standards.” His claim for benefits was denied after Unum’s reviewing physicians determined that “the available medical records do not appear to support that Lewis lacked the functional capacity to perform the physical and/or cognitive demands of his occupations.” The parties cross-moved for judgment. They agreed that the appropriate review standard was de novo. The court therefore independently weighed the administrative record. In the end, the court determined that Mr. Lewis did not meet his burden of proving by a preponderance of the evidence that he met his policy’s definition of disabled. In particular, the court highlighted the fact that Mr. Lewis “was able to work for two and a half years after his motorcycle accident,” which it viewed as “persuasive evidence that the motorcycle accident did not cause him to suffer from a debilitating neurocognitive condition that precluded him from working.” The court did not find the stated opinion from Mr. Lewis’s treating physician that he was cognitively impaired from performing the essential duties of his occupation to be credible. “Although Dr. Haider takes the position that Lewis suffered from a debilitating neurological disorder as a result of the 2018 motorcycle accident, I am not convinced. The overwhelming medical evidence supports the view that Lewis is able to work.” The court therefore did not accord special weight to Mr. Lewis’s treating medical professionals. Instead, the court decided the administrative record demonstrated that Mr. Lewis had at the least the ability to perform part-time work in his regular occupation, and that Unum’s decision to deny benefits was therefore correct. Thus, the court granted judgment in favor of Unum and against Mr. Lewis.

ERISA Preemption

Eleventh Circuit

Surgery Ctr. of Viera v. Cigna Health & Life Ins. Co., No. 6:22-cv-393-JA-LHP, 2023 WL 5353461 (M.D. Fla. Aug. 21, 2023) (Judge John Antoon II). Plaintiff Surgery Center of Viera, LLC sued Cigna Health and Life Insurance Company for breach of contract, unjust enrichment, and quantum meruit challenging a significantly unpaid claim for medical services it provided to a patient insured under an ERISA-governed health plan administered by Cigna. The court previously granted a motion to dismiss by Cigna, but without prejudice. In response, the surgery center amended its complaint. Once again, Cigna sought dismissal of the action pursuant to ERISA preemption. For the second time, the court granted the motion to dismiss, agreeing with Cigna that the state law claims are inextricably intertwined with the ERISA plan. “As with the original complaint, the Court agrees with Cigna that there is no way to determine what [plaintiff] is owed under the contract without examining the patient’s ‘co-pay, deductible, co-insurance, and non-covered amounts’ under the ERISA plan.” The court thus found that it was clear from the face of the complaint that all three state law causes of action relate to the ERISA plan in the same way and are therefore defensively preempted. Accordingly, the court granted the motion to dismiss, and because plaintiff repeatedly failed to cure its deficiencies through two previous amendments the court dismissed the action with prejudice.

Life Insurance & AD&D Benefit Claims

Ninth Circuit

Hartford Life & Accident Ins. Co. v. Kowalski, No. 21-cv-06469-RS, 2023 WL 5418749 (N.D. Cal. Aug. 22, 2023) (Judge Richard Seeborg). In this decision the court ruled on cross-claimants’ cross-motions for summary judgment in this interpleader action brought to determine the proper beneficiary of the proceeds of a life insurance policy belonging to decedent Marc Kowalski. Defendant Marilyn Valois moved for summary judgment arguing that she was entitled to the benefits as the policy’s named beneficiary. However, defendant Haili Kowalski, in her cross-motion for summary judgment, argued that her minor son had superior rights to the funds under the terms of a Qualified Domestic Relations Order (“QDRO”). The court agreed with Ms. Kowalski’s position and entered judgment in her favor. It expressed that the Legal Separation Agreement between Mr. and Ms. Kowalski met ERISA’s requirements to qualify as a QDRO, especially given “the congressional purposes underpinning the QDRO provisions” to provide security to former spouses and dependent children. To find otherwise “would require elevating form over substance,” the court held. Under the QDRO’s clear and unambiguous terms Mr. Kowalski was required to “maintain a life insurance policy of $800,000 and to name [their son] as the sole beneficiary and to not borrow, assign, or otherwise encumber said policy.” Thus, the court agreed that the minor son had the right to the life insurance proceeds, and so granted Ms. Kowalski’s motion for summary judgment and denied Ms. Valois’.

Medical Benefit Claims

Tenth Circuit

Doe v. Intermountain Healthcare, Inc., No. 2:18-cv-807-RJS-JCB, 2023 WL 5395526 (D. Utah Aug. 21, 2023) (Judge Robert J. Shelby). Plaintiff Jane Doe is a physician. As a child, Ms. Doe experienced sexual abuse by a family member. This trauma has caused her problems that have followed her into adulthood. In late 2016, during a stressful period in her life and career, Ms. Doe’s mental health issues began to escalate rapidly. Following several hospitalizations for attempted suicide, Ms. Doe was admitted to a residential treatment facility in Massachusetts called Austen Riggs Center. There, she was diagnosed with major depressive disorder, post-traumatic stress disorder, schizoid personality disorder, and an unspecified feeding and eating disorder. Ms. Doe stayed at Austen Riggs twice, first in 2017 and again in 2018 after another involuntary psychiatric hospitalization. Her ERISA healthcare plan’s failure to pay for her treatment at Austen Riggs is at the center of this action, wherein Ms. Doe, individually and on behalf of a class, has sued Intermountain Health, Inc. and SelectHealth, Inc. for violations of ERISA. Ms. Doe asserts seven causes of action; (1) a claim for individual recovery of benefits under Section 502(a)(1)(B); (2) an individual claim for injunctive relief under Section 502(a)(3)(A) for violations of the Mental Health Parity and Addiction Equity Act; (3) an individual claim for equitable relief under Section 502(a)(3)(B) for Parity Act violations; (4) an individual claim for statutory penalties under 502(c); (5) a class claim for recovery of benefits and to clarify future benefits under 502(a)(1)(B); (6) a class Parity Act claim for injunctive relief under Section 502(a)(3); and (7) a class claim for equitable relief under Section 502(a)(3), also related to the Parity Act. Before the court here was Ms. Doe’s motion for summary judgment on counts 1-4 (the individual claims). Before evaluating the Parity Act claims and the request for statutory penalties, the court started its analysis with Ms. Doe’s denial of benefits. Her claims for her two stays at Austen Riggs were denied because the services allegedly did not meet the plan’s medical InterQual criteria, which focuses on managing care at lower levels and requires a patient to present certain acute symptoms at all times during their treatment. Additionally, Ms. Doe’s plan requires participants to be treated at residential treatment centers “provided in reasonable proximity to a member’s community or resident.” Austen Riggs, located in Massachusetts, was not in close proximity to Ms. Doe in Utah. As a result, this plan criterion was also cited as an additional reason for denial. The court evaluated the denials under de novo review, despite the fact that SelectHealth had discretionary authority to interpret plan terms and determine benefit eligibility. The court agreed with Ms. Doe that defendants fell “short in communicating the basis for denial in a reasonably clear manner as required.” In addition, the court considered defendants’ reliance on a single medical reviewer at each stage of the claims process to be “a serious procedural irregularity,” which denied Ms. Doe the opportunity to “receive an unbiased, impartial review by an unrelated and qualified medical professional,” that deprived her of full and fair review. For these reasons, the court concluded that Ms. Doe was entitled to de novo review of her denial of benefits. However, even without deferential review, the court denied Ms. Doe’s motion for judgment on her benefits claim. It found that issues of fact precluded Ms. Doe “from establishing by a preponderance of the evidence that [her] claim for benefits is covered under the Plan.” These unresolved issues included whether her treatment as Austen Riggs was “in reasonable proximity” to her and her community, whether facilities recommended by defendants in Utah could have provided the care necessary to treat Ms. Doe, and whether Austen Riggs was medically necessary under the InterQual criteria. Because the court could not answer these questions at this time, it denied Ms. Doe’s summary judgment motion. It then turned to her Parity Act claims. With regard to these claims, the court analyzed whether the plan violates the Parity Act by imposing a geographic limitation for mental health services that it does not apply to medical or surgical services, and whether the plan fails to ensure an adequate network of residential treatment centers. The court opined that Ms. Doe failed to identify medical/surgical analogs necessary to show parity violations. “By failing to identify and compare the analogous care limitations, the court is unable to determine as a matter of law whether the criteria” were applied more stringently for mental healthcare coverage for similar medical or surgical healthcare benefits. Thus, Ms. Doe was also denied summary judgment on her two individual Parity Act claims under Section 502(a)(3). Finally, the court denied Ms. Doe’s motion for summary judgment on her statutory penalties claim. It held that there was a genuine issue of material fact as to whether the documents Ms. Doe requested that were not produced by defendants were documents which Ms. Doe was entitled to under ERISA. In sum, the court denied Ms. Doe’s summary judgment motion for all four of her individual claims, and the action will therefore continue.

Pension Benefit Claims

Ninth Circuit

Erickson v. Hillsboro Med. Ctr., No. 3:22-cv-01208-HZ, 2023 WL 5382856 (D. Or. Aug. 22, 2023) (Judge Marco A. Hernandez). Upon retiring from her career as a registered nurse with defendant Hillsboro Medical Center, plaintiff Maritta Erickson wrote to her former employer and defendant Transamerica Retirement Advisors asserting that her monthly retirement benefits had been miscalculated when the old defined-benefit plan froze and transitioned to a cash balance plan. Specifically, Ms. Erickson alleged that defendants failed to properly credit her with four years of benefit service during the late 1990s and early 2000s. Defendants looked into the matter. Ultimately, they agreed with Ms. Erickson that they had indeed miscalculated her benefits, but not that she was receiving too little in monthly pension benefits. Instead, defendants insisted that she was being overpaid. Defendants stated that the four years in question did not count for years of benefit service because Ms. Erickson did not meet the threshold requirement of 1,000+ hours of service in those years. However, they maintained that an internal audit revealed that a systems error had resulted in a “portion of your Normal Retirement Benefit derived from your employment through December 31, 1987, was incorrectly applied as an annual value instead of a monthly value, causing your overall benefit to be overstated.” Consequently, defendants began reducing Ms. Erickson’s future monthly benefit payment to the “corrected amount.” Having exhausted her administrative appeals procedures, Ms. Erickson brought this action against Hillsboro Medical and Transamerica Retirement Advisors asserting claims under ERISA Sections 502(a)(1)(B) and (a)(3) for payment of benefits, enforcement of the terms of the retirement plan, and clarification of future benefit rights. The parties filed competing motions for judgment under abuse of discretion review. In this decision the court granted in part and denied in part Hillsboro’s motion for entry of judgment, granted in part and denied in part Ms. Erickson’s motion for entry of judgment, and granted Transamerica Retirement Advisors’ motion for entry of judgment. To begin, the court addressed Hillsboro’s dual responsibilities deciding and paying claims, and the conflict of interest this created. Because Hillsboro “consistently provided the same reasons for denial…obtained and reviewed the evidence necessary to evaluate Plaintiff’s claims, and considered Plaintiff’s evidence including employer contributions to her 403(b) plan and pay stubs,” and as there was no “evidence in the record the [it] repeatedly denied benefits to plan participants or acted with malice,” the court decided to give little weight to Hillsboro’s structural conflict of interest upon its review of the adverse benefit decision. As a result, the court stated that it would uphold Hillsboro’s decisions so long as they were reasonable. Before assessing the reasonableness of the benefit calculations though, the court turned to defendant Transamerica Retirement Advisors. The court granted judgment in its favor after the court concluded that Transamerica was not a proper defendant in this ERISA matter. The court found that Transamerica was merely a non-fiduciary recordkeeper that was not responsible for denying the claim for benefits. Ms. Erickson’s motion for summary judgment was therefore denied as to the issue of Transamerica’s liability and Transamerica was granted judgment in its favor. The court then focused on Hillsboro. Having reviewed the documents, the court concluded that Hillsboro’s decision regarding Ms. Erickson’s hours of service “was not illogical, implausible, or without support in the record. In fact, [Hillsboro’s] decision is supported by the terms of the Frozen Plan, the SPD, Plaintiff’s time records, and Plaintiff’s statements that she frequently volunteered to take low census hours so that other nurses would not have to take mandatory low census hours.” Accordingly, the court granted judgment in favor of Hillsboro on the issue of Ms. Erickson’s years of benefit service calculation, agreeing that she did not have 1,000 hours of service for the four years in question. However, on the issues of Hillsboro’s computation of Ms. Erickson’s average monthly compensation using her highest average annual earnings and its calculation of her pre-1988 monthly accrued benefit, the court sided with Ms. Erickson. It agreed that the employer had ignored the language of the frozen plan and that these calculations were not supported by the evidence in the record. Therefore, the court held that Hillsboro had abused its discretion in this regard and granted judgment in favor of Ms. Erickson on these two matters.

Pleading Issues & Procedure

Third Circuit

Emami v. Aetna Life Ins. Co., No. 22-cv-6115 (KSH) (LDW), 2023 WL 5370999 (D.N.J. Aug. 22, 2023) (Judge Katharine S. Hayden). Dr. Arash Emami brought this ERISA action against defendants Aetna Life Insurance Company and Symrise, Inc. as attorney-in-fact for his patient to recover unpaid medical benefits from defendants. Defendants moved to dismiss the complaint for failure to state a claim. Their motion was granted by the court. The court agreed with defendants that Dr. Emami “has not pled or otherwise provided the Court with evidence that [the patient’s] power of attorney is sufficient to confer standing under New Jersey law,” as the power of attorney lacked a notarized signature of an attesting witness, which is required by the state. Although the dismissal of the complaint was without prejudice, the court did note that plaintiff had already filed three complaints seeking reimbursement of the surgery costs and “has yet to successfully meet pleading requirements.” Nevertheless, Dr. Emami may try, try, again.

Retaliation Claims

Seventh Circuit

Chung v. Arthur J. Gallagher & Co., No. 21-cv-01650, 2023 WL 5486954 (N.D. Ill. Aug. 24, 2023) (Judge Martha M. Pacold). Plaintiff Norbert Chung commenced this action against his former employer, Arthur J. Gallagher & Co., and the company’s compensation committee alleging that his termination from Gallagher & Co. in 2020 was done as part of an effort to cut costs of employees under the age of 62 who had large account balances in its Deferred Equity Participation Plan before their benefits vested. Mr. Chung, who was a high-level executive, had accrued more than $5 million in his plan account. In addition to alleging a claim of interference under ERISA Section 510, Mr. Chung also alleges that the plan itself did not meet ERISA’s top-hat plan requirements. He claims that the primary purpose of the plan is not to provide deferred compensation for the company’s top-level employees but that it was instead created to encourage the retention of key employees and align their financial interests with those of the stockholders. Accordingly, Mr. Chung maintains that “he is entitled to equitable relief under ERISA because the Plan was required to conform with the various ERISA requirements for ordinary plans that this Plan does not have.” Defendants moved to dismiss Mr. Chung’s complaint. The court denied their motions, holding that Mr. Chung met the low notice pleading threshold established under Rule 8. First, the court found that Mr. Chung’s allegations of interference with his ERISA rights “raise a plausible inference that Gallagher fired [him] to save the more than $5 million it would have owed him had it kept him employed until he turned 62,” and taking these allegations are true, Mr. Chung plausibly alleged that his termination was designed to interfere with his rights under ERISA. Second, the court concluded that Mr. Chung was not required to exhaust a claim that a plan violates ERISA’s top-hat plan requirements. Requiring exhaustion, the court said, was not appropriate here because Mr. Chung is challenging the legality of the plan and not a benefits decision. Finally, the court determined that Mr. Chung plausibly alleged that the plan does not qualify as a top-hat plan. The court wrote that the “plain text of the Plan document confirms Chung’s allegations.” The court emphasized how the plan document contains no statement attesting that its purpose is to provide deferred compensation for key employees. For the forgoing reasons, the court allowed Mr. Chung’s claims to proceed and entirely denied defendants’ motions to dismiss.