Your ERISA Watch has a skeleton crew this week, so there are fewer summaries and they are lighter on detail than usual. As always, we have included links to all of our decisions in case any of these summaries whet your appetite and you want to dive in and get more detail.
The notable decision this week comes out of the Big Apple in Chung v. Provident Life & Cas. Co., No. 21 CIV. 9344 (AKH), 2023 WL 5928529 (S.D.N.Y. Sept. 12, 2023) (Judge Alvin K. Hellerstein). The plaintiff, Edward Chung, is a 56-year-old attorney who was a partner in the mergers and acquisitions practice of the venerable white-shoe New York firm Simpson Thacher & Bartlett, LLP. Plaintiffs who are attorneys often find a sympathetic judicial ear in disability cases, and this one was no exception.
For several years, Chung suffered from pain in his neck and upper back, with numbness and tingling to his extremities. These issues steadily grew worse, and eventually Chung was forced to wind down his practice in 2018. His last day of work was December 31 of that year.
Chung was insured under two ERISA-governed long-term disability employee benefit plans. The first was the firm’s standard group plan. The second was a supplemental plan, exclusively for partners, with coverage of $20,000 per month. Both were insured by subsidiaries of the Unum group of insurance companies. Chung submitted a claim for benefits under both plans, which Unum approved.
Unum continued to pay under the group plan. However, it terminated Chung’s benefits under the supplemental plan, contending that Chung was no longer disabled under the specific terms and conditions of that plan because he was able to perform the duties of his occupation on a part-time basis. Chung appealed, but Unum upheld its decision.
Chung filed suit, and the case proceeded to a bench trial, the results of which were detailed in this order. The parties agreed that the appropriate standard of review was de novo. Under this standard, the court first resolved the question of Chung’s occupation because the policy required Chung to be disabled from his “occupation” and not his particular job. The court determined that “attorney” was the appropriate occupation, and not something more specific, such as “M&A partner at a major international law firm.”
In doing so, the court noted that the Dictionary of Occupational Titles, on which Unum relied, has not been updated since 1991. The court observed that “requirements of attorneys in the national economy have changed since 1991, particularly regarding increased reliance on computer and keyboard usage.” Thus, the court “declines to limit its view of Chung’s occupational requirements to those specified by the DOT.”
Using the occupation of “attorney,” the court determined that Chung had demonstrated by a preponderance of the evidence that he was disabled under the terms of the supplemental plan. The court found that the record showed Chung was “unable to sit at a desk or in meetings for prolonged periods or keep his neck in a static position for prolonged periods while viewing a computer screen. He also cannot type for prolonged periods. Finally, he is unable to perform the high-level cognitive demands of his occupation, including substantial document review, multitasking, and sustaining concentration and focus for extended durations. Chung cannot perform these duties even on a part-time basis.” These conclusions were “supported by Chung’s subjective reports of pain as well as objective medical evidence.”
The court rejected Unum’s arguments to the contrary. It noted that Unum’s physician only examined Chung for twelve minutes, his findings “cannot be reconciled with the findings of other examining physicians,” and his report was belied by an “IME Watchdog” that had accompanied Chung to the exam. Furthermore, Unum’s physicians only relied on radiological reports and did not review the MRI films, unlike Chung’s physicians, whose opinions the court gave “particular weight.”
As a result, the court issued judgment in favor of Chung. It awarded Chung back benefits to the date of judgment, and declared Unum liable for attorney’s fees and costs under ERISA, the amount of which will be determined at a later date.
Below is a summary of this past week’s notable ERISA decisions by subject matter and jurisdiction.
Alves v. Hewlett-Packard Comprehensive Welfare Benefits Plan, No. 22-55621, 2023 WL 5973108 (9th Cir. Sept. 14, 2023) (Before Circuit Judges M. Smith, Friedland, and Miller). This is a case brought by plaintiff Michael Alves for ERISA-governed disability benefits. The district court ruled that the claim administrator did not abuse its discretion in denying Alves’ claim for short-term and long-term benefits, and Alves appealed. The Ninth Circuit affirmed the short-term denial but remanded for further consideration of the long-term claim. The administrator denied again, and the district court upheld that decision. (Your ERISA Watch covered this ruling in its May 12, 2021 edition.) Alves filed a motion for attorney’s fees, limiting his request to those fees he incurred through his success on appeal. However, the district court denied the motion. (Your ERISA Watch covered this ruling in its July 6, 2022 edition.) In this decision, the Ninth Circuit affirmed, ruling that the district court did not abuse its discretion in denying the fee motion. The court agreed with Alves that he had achieved “some success on the merits,” making him eligible for fees, but upheld the district court’s discretionary application of the Ninth Circuit’s five-factor Hummell test in which the court considered Alves’ overall lack of success in the case.
Breach of Fiduciary Duty
Board of Trustees of the IUOE Local 4 Pension Fund v. Alongi, No. 21-CV-10163-FDS, 2023 WL 5984520 (D. Mass. Sept. 14, 2023) (Judge F. Dennis Saylor IV). This is an action by multiple pension funds against Gina Alongi, accusing her of breaching her fiduciary duty to those funds while she was the administrator of them. The funds essentially complain that “Alongi diverted pension-plan assets for her own benefit and the benefit of an entity unrelated to the Funds, neglected her work, and otherwise breached her duties as plan administrator.” In response, Alongi contended that she had been discriminated against and was the victim of retaliation, and filed a complaint with the Massachusetts Commission Against Discrimination. Previously, the court denied Alongi’s motion to stay the case while her discrimination complaint proceeded, and allowed her to amend her answer and assert counterclaims in exchange for dropping that complaint. The funds have now moved for partial summary judgment regarding Alongi’s liability for breach of fiduciary duty. In this order, the court denied the funds’ motion. The court ruled that there were disputed issues of fact as to whether Alongi (1) was a functional fiduciary with respect to the activities alleged by the funds, (2) was required to maintain time sheets, (3) performed work for another entity whose interests were adverse to the funds, (4) failed to work sufficient hours, (5) directed office staff to perform work adverse to the funds, and (6) took too much vacation. These disputes required fact-finding and thus the funds were not entitled to summary judgment.
Trauernicht v. Genworth Fin. Inc., No. 3:22CV532, 2023 WL 5961651 (E.D. Va. Sept. 13, 2023) (Judge Robert E. Payne). Plaintiffs, participants in Genworth Financial, Inc.’s employee retirement and savings benefit plan, filed this class action alleging that Genworth breached its fiduciary duty under ERISA by selecting, retaining, and ratifying the selection and retention of poorly-performing investments in the plan. Genworth filed two motions to dismiss, one under Rule 12(b)(1) arguing that plaintiffs did not have standing to pursue prospective injunctive relief, and another under Rule 12(b)(6), arguing that plaintiffs failed to state a valid claim for relief. The court granted the first motion, noting that the named plaintiffs were no longer participants in the plan and thus were no longer invested in the funds at issue. As a result, prospective injunctive relief would not affect them and they could not seek such relief. Genworth had less success with its second motion on the merits, which the court denied. On plaintiffs’ claim for breach of the duty of prudence, Genworth argued broadly that it had a sufficient monitoring process and that the complaint did not adequately plead loss causation. However, the court ruled that the plaintiffs had alleged sufficient facts to show that Genworth did not properly monitor its plan and that any disputes to the contrary could not be resolved on a motion to dismiss. The court pointed out that plaintiffs were not simply alleging underperformance in general but had identified meaningful comparator benchmarks, as well as a trend of underperformance over time, and had alleged losses over $100 million. As for plaintiffs’ second claim for failure to monitor the plan’s investment committee, the court noted that “more detailed information is lacking,” but plaintiffs’ allegations were nonetheless factual, not legal, and thus survived the pleading stage.
R.B. v. United Behavioral Health, No. 1:21-CV-553, 2023 WL 5977234 (N.D.N.Y. Sept. 14, 2023) (Judge David N. Hurd). Plaintiff R.B. is an employee of General Electric and a participant in its ERISA-governed health plan. R.B.’s son was admitted for residential mental health treatment, but defendant United Behavioral Health denied coverage for that treatment, contending that the treatment center had “service components not consistent with Guidelines and are considered unproven.” R.B. filed suit, and sought to certify a class consisting of “All persons covered under ERISA-governed health care plans, administered or insured by United Behavioral Health, whose requests for coverage for mental health and substance abuse treatment services received at a licensed residential treatment center were denied in total based on its determination that a component of such services is considered experimental, investigational, or unproven.” The court granted plaintiff’s motion in this order. The court found that R.B. had standing because he was a participant in the plan and had paid $68,417.99 to cover his son’s services. The court further ruled that R.B. satisfied Rule 23’s requirements. Specifically, there was “a single overarching issue defining this case: whether UBH’s coverage protocol, which voices all coverage obligations where a provider offers a service that defendant believes is ‘experimental, investigational or unproven’ is in parity with its coverage protocols for skilled nursing services.” The court further found that R.B.’s claims were typical of the class, that he would adequately represent the class, and that class counsel was adequately qualified and experienced. The court also ruled that the proposed class satisfied Rule 23(b)(1)’s requirements because there was a risk of inconsistent adjudications and plan provisions are required to be applied consistently with respect to similarly situated claimants. The court thus granted R.B.’s motion and certified the requested class.
Disability Benefit Claims
Johnson v. Life Ins. Co. of N. Am., No. 2:22-CV-933, 2023 WL 5951769 (S.D. Ohio Sept. 13, 2023) (Judge Edmund A. Sargus, Jr.). Plaintiff Jeffrey Johnson filed this action against LINA, arguing that LINA unlawfully calculated the amount of his long-term disability benefits. The parties filed cross-motions for judgment, which were decided in LINA’s favor in this order. The court was “inclined to find” that the benefit plan conferred discretionary authority on LINA to make its decisions, but noted that the standard of review was not dispositive because LINA would prevail even under de novo review. The court ruled that LINA had correctly calculated Johnson’s benefits, and that Johnson’s alternative interpretation of the term “Covered Earnings” was implausible, would rewrite the plan, and lead to a windfall. The court further ruled that LINA had correctly recovered an overpayment under the plan due to Johnson’s receipt of other benefits for his disability. The court noted, however, that LINA had not given Johnson an especially informative breakdown of how the overpayment recovery had been applied to his benefits, and recommended that LINA provide such a breakdown. Otherwise, “the Court reminds LINA that it may engender liability for refusing to comply with a participant’s request for information.”
Good Samaritan Hosp. L.P. v. Multiplan, Inc., No. 22-cv-02139-AMO, 2023 WL 6036838 (N.D. Cal. Sep. 15, 2023) (Judge Araceli Martinez-Olguin). Plaintiff Good Samaritan Hospital, L.P. is an acute care hospital in California with a state-of-the-art neonatal intensive care unit (NICU). In this state law action, originally filed in California state court, the hospital alleges that defendants MultiPlan, Inc., Trustmark Health Benefits, and Altimetrik Corporation failed to honor and properly apply the terms of a Network Agreement that it entered into with MultiPlan when it became a participating in-network provider. Specifically, Good Samaritan contends that defendants have failed to properly pay for the medically necessary services it provided to an infant patient at its NICU in excess of $970,000. Good Samaritan asserted ten contract-based state law claims against defendants related to the alleged breach of the Network Agreement. Defendants removed the action to federal court on the basis of diversity jurisdiction. Good Samaritan responded by moving to remand. It argued that diversity of citizenship is lacking because it is a corporate citizen of the state of Delaware. Defendants countered that the claims are completely preempted by ERISA and the case therefore should not be remanded because the court had federal question jurisdiction. In this decision the court found both federal question and diversity jurisdiction lacking and thus granted the motion to remand. With regard to preemption, the court evaluated the complaint under the Supreme Court’s two-part Davila test. It concluded that neither prong was satisfied. First, Good Samaritan is neither a participant nor beneficiary of an ERISA plan and the court wrote that this was “not a suit evaluating a plan participant’s entitlement to benefits, and Good Samaritan could not have brought such a claim.” Consequently, the court found that Good Samaritan could not have brought a claim for benefits under ERISA Section 502(a)(1)(B). Second, the court was satisfied that an independent legal duty exists independent of the ERISA plan because the breach of contract and interference claims are based on defendants’ obligations under the Network Agreement. Thus, the state law claims did not require a court to assess whether the care provided was covered under the terms of an ERISA benefit plan. “The Network Agreement is a service contract establishing Good Samaritan’s right to payment, not an ERISA plan document that grants Defendants discretion to determine coverage.” Accordingly, the court held that the state law causes of action were not preempted by ERISA and that it does not have federal question jurisdiction over the matter. Lastly, the court agreed with Good Samaritan that it is incorporated in Delaware, meaning it is not a citizen of California as defendants argued. Therefore, the court determined that complete diversity does not exist between the parties. As a result of these findings, plaintiff’s motion was granted, and the case was remanded to California state court.
Medical Benefit Claims
Mendoza v. Aetna Life Ins. Co., No. 23-22237-CIV, 2023 WL 5979822 (S.D. Fla. Sept. 14, 2023) (Judge Robert N. Scola, Jr.). Plaintiff Dina Mendoza sued her health insurer, contending that it wrongfully denied coverage of $420,269 in hospital bills associated with the birth of her twin daughters. Aetna denied her claim on the ground that Mendoza’s coverage was secondary to that of her husband. Aetna filed a motion to dismiss, arguing that (1) Mendoza failed to state a claim under Rule 12(b)(6), and (2) she had failed to join an indispensable party, i.e., her husband’s insurer. The court did not reach the second argument because it ruled in Aetna’s favor on the first, agreeing that Mendoza’s benefit plan contained coordination of benefit provisions “that require consideration of the father’s insurance plan before a determination can be made regarding dependent child coverage.” This was so because the plan uses the “birthday rule,” i.e., “the plan of the parent whose birthday falls earlier in the calendar year covers dependent children of parents who are married or living together.” Mendoza did not address the birthday rule but argued that her husband’s plan was a single-person plan, and that neither she nor her children were covered under it. However, the court ruled that Mendoza’s complaint was conclusory and had not pleaded enough information about her husband’s plan to survive Aetna’s motion. The court thus dismissed the complaint, without leave to amend.
Pleading Issues & Procedure
Deutsch v. IEC Grp., Inc., No. 3:23-CV-00436, 2023 WL 5917421 (S.D.W. Va. Sept. 11, 2023) (Magistrate Judge Cheryl A. Eifert). Plaintiff Daniel Deutsch filed this action for wrongful denial of medical benefits in state court against defendant IEC Group, also known as AmeriBen. IEC removed the case to federal court and filed a motion for more definite statement, contending that Deutsch’s complaint contained insufficient detail. The court agreed that Deutsch’s complaint was not ideal, but this was primarily because the state court had provided him with a “form complaint that left very little room for extrapolation.” Still, Deutsch’s complaint did contain the date, provider, and care, and even the claim number for his treatment. Thus, the court denied IEC’s motion. However, the court noted that federal pleadings require more factual detail. Thus, the court gave Deutsch “an opportunity to amend his complaint and include the factual basis for his claim as set forth his later filings.”
Anjani Sinha Med. P.C. v. Empire HealthChoice Assur. Inc., No. 21-CV-138(RPK)(TAM), 2023 WL 5935787 (E.D.N.Y. Sept. 12, 2023) (Judge Rachel P. Kovner). Plaintiff, an orthopedist, provided medical services to a patient covered by a health plan administered by defendant Empire HealthChoice Assurance, Inc. However, of the $79,252.34 in claims submitted, Empire only reimbursed plaintiff $1,312.64. This action followed. Empire moved to dismiss, arguing that several of plaintiff’s claims are “non-existent” under ERISA and plaintiff “fails to cite to a single Plan provision entitling it to relief.” The court mostly denied Empire’s motion in this order. The court admitted that plaintiff’s complaint “is not a model of clarity.” However, it construed the claims as arising under ERISA § 1132(a)(1)(B), which were “plausibly alleged.” Specifically, plaintiff pleaded a valid assignment of benefits, adequately identified the plan provisions Empire allegedly violated, alleged the procedure at issue was a covered benefit under the plan, and alleged that it was under-reimbursed, partly because Empire paid more for the physician’s assistant than for the surgeon. The court did grant Empire’s motion as to plaintiff’s fifth claim for “failing to pay at the in-network rate” because plaintiff did not identify any plan provisions that required Empire to do so. Empire’s motion was denied in all other respects.
Northern Jersey Plastic Surgery Ctr. v. 1199SEIU Nat’l Benefit Fund, No. 22-CV-6087 (PKC), 2023 WL 5956142 (S.D.N.Y. Sept. 13, 2023) (Judge P. Kevin Castel). Plaintiff, a healthcare provider, sued the 1199SEIU National Benefit Fund, an ERISA-governed medical benefit plan, alleging that the Fund failed to reasonably compensate it for services provided to a patient who was insured by the Fund. The Fund filed a motion to dismiss, which the court granted in this order. The order is practically a treatise on how plans should defend claims by providers, as it covers numerous issues, ruling in favor of the Fund on all of them. In summary, the court found that plaintiff (1) had not exhausted the administrative remedies provided in the plan, (2) did not properly allege which provisions in the plan entitled it to the relief it requested, (3) improperly requested equitable relief, (4) lacked standing because it was not a valid assignee of the patient’s claims, (5) improperly alleged breach of fiduciary duty against the plan, which was not a fiduciary, (6) could not allege a claim for self-dealing against the plan, and (7) could not allege a claim for statutory penalties for failing to provide plan documents because the Fund was not a plan administrator, and plaintiff did not have standing to bring this claim in any event. Furthermore, (8) all of plaintiff’s seven state law claims were expressly preempted by ERISA, and (9) the Fund did not violate New York’s Women’s Health and Cancer Rights Act, and even if it had, plaintiff did not explain how that statute allowed it to recover plan benefits under ERISA. The court thus granted the Fund’s motion to dismiss as to all claims, without leave to amend.