Rose v. PSA Airlines, Inc., No. 21-2207, __ F.4th __, 2023 WL 5839282 (4th Cir. Sept. 12, 2023) (Before Circuit Judges Richardson, Quattlebaum, and Heytens)
One of the thorniest issues in ERISA litigation is what ERISA § 502(a)(3) means when it says a benefit plan beneficiary can sue for “other appropriate equitable relief.” What kind of relief counts as “equitable”? And when is it “appropriate” to award that relief? Almost 50 years after ERISA was enacted, we still do not have good answers to these questions, despite numerous Supreme Court decisions. This opinion from the Fourth Circuit grapples once again with the issue, and while two of the judges think they have it figured out, a third is not so sure.
The plaintiff, Jody Rose, was the mother of Kyree Devon Holman, who worked as a flight attendant for PSA Airlines. Kyree had medical benefit coverage through his employment with PSA. Unfortunately, at the age of 26, on Christmas Eve of 2018, he discovered he had severe myocarditis. His doctors determined that he needed a heart transplant to survive and prepared to proceed with surgery as soon as his benefit claim was approved.
However, defendants denied Kyree’s request, asserting that the treatment he sought was experimental. When Kyree asked for a reevaluation, defendants denied his claim once again, this time contending that he did not meet certain alcohol-abuse criteria – which were not actually in his benefit plan. Kyree’s doctors appealed again, stressing that Kyree would not survive without a heart transplant, but his claim was once again denied.
Kyree then submitted a request for an external expedited review, which under ERISA regulations should have been completed within 72 hours. However, defendants treated the claim as a standard, non-expedited, review instead. The completed review eventually determined that Kyree was correct, but it was too late: Kyree died before the review was completed.
Rose sued PSA Airlines and its benefit claim administrators and reviewers on behalf of Kyree’s estate, alleging claims under ERISA § 502(a)(1)(B) (for failure to pay plan benefits) and § 502(a)(3) (for equitable relief). A magistrate judge would have allowed Rose’s equitable claim to proceed, but the district court rejected the magistrate judge’s recommendation and granted defendants’ motion to dismiss the entire action. (Your ERISA Watch covered the magistrate judge’s report as its case of the week in its March 31, 2021 issue, and the judge’s rejection of the report in its September 29, 2021 issue.)
Ultimately, the district court concluded that Rose could not obtain relief under § 502(a)(1)(B) because “money was not one of the ‘benefits’ that her son was owed ‘under the terms of his plan.’” As for her § 502(a)(3) claim, the court ruled that the monetary relief she requested as equitable relief was too similar to money damages and thus was not “equitable.” Rose appealed to the Fourth Circuit.
The Fourth Circuit began by briefly discussing, and upholding, the district court’s decision regarding Rose’s (a)(1)(B) claim. The court stated that (a)(1)(B) allows a beneficiary “either ‘to recover benefits due to him under the terms of his plan’ (i.e., seek reimbursement – ‘recovery’ – of out-of-pocket expenses), or ‘to enforce his rights under the terms of the plan’ (i.e., seek an injunction).” However, “§ 502(a)(1)(B) does not authorize a plaintiff to seek the monetary cost of a benefit that was never provided.” The court admitted that while (a)(1)(B)’s choice of remedies “may leave plan beneficiaries like Kyree in a bind, we must do what the statute commands.” Thus, Rose was not entitled to relief under (a)(1)(B).
The remainder of the opinion addressed Rose’s (a)(3) claim for equitable relief. The court began by engaging in a deep-dive into the historical distinction between “legal” and “equitable” remedies. The court observed that there were once separate courts for law and equity. Courts of equity sometimes had “concurrent” jurisdiction over matters, while in other cases, where courts of law did not authorize any relief, they had “exclusive” jurisdiction. This meant that courts of equity could offer broader relief when they had exclusive jurisdiction because there was no limit placed on them by law. But, when courts of equity had concurrent jurisdiction, they were limited by legal principles.
This brought the Fourth Circuit to the question of money. The court stated that while the two types of courts “created a dividing line between themselves for claims involving money, that division, like everything in this field, is nuanced.” For example, although we typically think of legal relief as monetary relief, and equitable relief as non-monetary relief, there have traditionally been non-monetary legal remedies (such as writs of mandamus, habeas corpus, replevin, and ejectment), as well as monetary equitable remedies (such as surcharge or unjust enrichment).
However, the court noted that surcharge – “a remedy essentially equivalent to money damages” – was typically available only in exclusive jurisdiction cases, where a court of equity had more power. Unjust enrichment, on the other hand, was typically available in concurrent jurisdiction cases, but because of the overlap in jurisdiction, the remedy was “more constrained.” In order to obtain unjust enrichment, a plaintiff would have to “identify the specific property (funds) that the defendant wrongfully possessed and that rightfully belonged to the plaintiff.”
With this background in mind, the court turned to ERISA and examined several Supreme Court cases discussing equitable relief, including Mertens v. Hewitt Associates, Great-West Life & Annuity Ins. Co. v. Knudson, and Montanile v. Board of Trustees. From these cases the Fourth Circuit concluded that in order for a plaintiff to obtain relief under (a)(3), such relief had to be “typically available in equity,” i.e., the type of relief available in concurrent jurisdiction cases. Furthermore, a plaintiff seeking unjust enrichment can only obtain a monetary remedy “if she seeks specific funds that are wrongfully in the defendant’s possession and rightfully belong to her. Courts cannot award her relief that amounts to personal liability paid from the defendant’s general assets to make the plaintiff whole.”
The Fourth Circuit admitted that the Supreme Court’s decision in Cigna Corp. v. Amara threw a wrench in this approach because it authorized “make-whole,” loss-based, monetary relief on the ground that it was “analogous to ‘surcharge,’ an ‘exclusively equitable’ remedy under the law of trusts.” However, the Fourth Circuit concluded that this part of Amara was dicta, and that Montanile, which post-dated Amara, had rejected this holding as too broad.
In short, the Fourth Circuit concluded that ERISA plaintiffs cannot seek “merely personal liability upon the defendants to pay a sum of money” under ERISA § 502(a)(3) because such a remedy is purely legal. However, “plaintiffs that seek to strip away defendant’s unjust gains might have better luck.” Such a remedy is equitable under Montanile “so long as the plaintiff can trace those unjust gains to ‘specifically identified funds that remain in the defendant’s possession or against traceable items that the defendant purchased with the funds.’”
Of course, the ultimate question in this case was whether Rose’s allegations met this test. The Fourth Circuit declined to answer, ruling that because the district court had not applied this test in the first instance, the case should be remanded so the district court could have that opportunity.
Judge Heytens penned a separate opinion, concurring in part and dissenting in part. He agreed that the district court correctly dismissed Rose’s (a)(1)(B) claim and that the (a)(3) claim should be remanded for further proceedings. However, he disagreed that plaintiffs like Rose were required to “show the fruits of a defendant’s wrongdoing are traceable to particular funds remaining in that defendant’s possession to state a claim under ERISA.” Instead, following Amara, Judge Heytens would only require a plaintiff to plead that “the defendant was a fiduciary and that any money sought represents ‘make-whole relief’ for a ‘violation of a duty imposed upon that fiduciary.’”
Judge Heytens stated that Amara was still controlling precedent, despite the majority’s criticisms of it, and noted that two prior Fourth Circuit panels had applied Amara in allowing for equitable surcharge under ERISA. Judge Heytens further argued that the majority had placed too much emphasis on Montanile, which did not expressly reject Amara and only discussed it in a footnote. Moreover, Judge Heytens contended that it was possible to reconcile Amara with Montanile because Amara involved claims against a fiduciary, whereas the claims in Montanile (and in the other Supreme Court cases cited above) were against non-fiduciaries. As a result, Judge Heytens concluded that the majority had gone too far in imposing limitations on plaintiffs like Rose.
In the end, the Supreme Court’s cases discussing ERISA § 502(a)(3) are certainly unsatisfying, and it is not surprising that the panel diverged on how to interpret them properly. The majority believes it has synthesized the proper approach based on its review of those cases and its understanding of law and equity. As the dissent points out, however, that approach runs afoul of not only Amara but prior opinions from the Fourth Circuit, and thus the majority may have overstepped its bounds. It certainly appears that more guidance will be required from the Supreme Court in order to resolve this issue.
As for the parties, even though Rose successfully obtained a reversal and remand, it is unclear whether she will be able to prevail back in district court under the Fourth Circuit’s test – or whether any of the parties will ask for rehearing on the ground that the Fourth Circuit got it wrong. As always, stay tuned to Your ERISA Watch for updates.
Below is a summary of this past week’s notable ERISA decisions by subject matter and jurisdiction.
Breach of Fiduciary Duty
Matney v. Barrick Gold of N. Am. Inc., No. 22-4045, __ F. 4th __, 2023 WL 5731996 (10th Cir. Sep. 6, 2023) (Before Circuit Judges Tymkovich, Moritz, and Rossman). Participants of the Barrick Gold of North America, Inc. 401(k) plan brought this putative class action against the plan’s fiduciaries for breaching their duties of prudence, loyalty, and monitoring under ERISA. Specifically, the plaintiffs alleged that the fiduciaries failed to prudently operate and administer the plan which resulted in too-high investment management and recordkeeping fees. The district court dismissed plaintiffs’ complaint with prejudice. It agreed with the fiduciaries that the participants had failed to provide like-for-like comparators of the fees and funds, and that they therefore did not state viable claims. The district court also found that plaintiffs’ duty of loyalty claim was not separate or distinct from their imprudence claim. Finally, it determined that the duty to monitor claim could not proceed because it was derivative of the other fiduciary breach claims, which it found lacking. Plaintiffs appealed. The Tenth Circuit affirmed in this decision. Noting that the it had not yet considered a plaintiff’s pleading burden for breach of fiduciary duty claims under ERISA, the Tenth Circuit looked to its sister circuits for guidance. It took a particular liking to the approach of the Eighth Circuit, including its “meaningful benchmark” pleading standard. Like the Eighth Circuit, the Tenth decided that plaintiffs would need to “show that a prudent fiduciary in like circumstances would have selected a different fund based on the cost or performance of the selected fund” by providing a sound basis for comparison. What that meant, the Tenth Circuit clarified, was a showing by the plaintiff that funds had similar investment strategies, objectives, and risk profiles to the challenged plan investment options and that fees charged were for the same quality, quantity, and basket of recordkeeping services as those the plan received. Applying these newly established principles here, the Tenth Circuit agreed with the lower court that plaintiffs did not meet either standard. It concluded that their comparator funds were too dissimilar and that their comparator fee averages lacked details about the services provided. Accordingly, the Tenth Circuit found no error in the district court’s holdings that plaintiffs failed to plausibly state fiduciary breach claims, and affirmed.
McAlister v. Metropolitan Life Ins. Co., No. 18-CV-11229 (RA), 2023 WL 5769491 (S.D.N.Y. Sept. 7, 2023) (Judge Ronnie Abrams). This is an action brought by former employees of Metropolitan Life Insurance Company who alleged that their retirement benefits were calculated improperly. Specifically, they contend that the plan allows participants to choose a single life annuity (SLA) or a joint and survivor annuity (JSA) as retirement benefit options, but that defendants calculated the JSA in a manner that was not actuarially equivalent to the SLA, in violation of ERISA. Three of the employees filed a motion to certify a class of plan participants who elected to receive their retirement benefits in the form of a JSA. Magistrate Judge Ona T. Wang issued a report and recommendation that the motion be granted. Defendants objected to the report on three grounds: (1) Judge Wang improperly concluded that she did not need to resolve defendants’ challenge to plaintiffs’ methodology at the class certification stage; (2) Judge Wang did not consider that the class “improperly excludes Plan participants who have claims for relief under Plaintiffs’ theory”; and (3) a subclass recommended by Judge Wang did not satisfy class action requirements because the subclass members had signed releases. The court responded to each argument. First, the court ruled that defendants’ methodology argument was “fundamentally a merits question, not a class certification question,” and thus could not defeat certification. The court noted that the plaintiffs had proposed a unified and consistent calculation method that applied equally to the class, and that defendants were free to challenge that method on the merits at the appropriate time. Second, the court disagreed that the class was “improperly gerrymandered” by omitting certain employees. The court noted that “neither ERISA nor Rule 23 requires the certification of a class that includes all plan participants,” and that plaintiffs’ class definition was uniform in that it included members with “the same benefit structure and had their benefits calculated using the same formula and, because of that formula, did not receive an actuarially equivalent benefit.” Finally, the court agreed that a subclass was appropriate for employees who had signed releases because the releases were virtually identical with carveouts for “any benefits or rights that vested prior to your execution of this Agreement under employee benefit plans governed by ERISA.” As a result, the court rejected defendants’ arguments, adopted Judge Wang’s conclusions, and certified the proposed class.
Harmon v. Shell Oil Co., No. 3:20-CV-00021, 2023 WL 5758889 (S.D. Tex. Sept. 6, 2023) (Magistrate Judge Andrew M. Edison). The plaintiffs in this case are current or former employees of Shell Oil Co. and beneficiaries of Shell’s defined contribution 401(k) retirement plan. They contend that Shell, the trustees of the plan, and various Fidelity entities breached their fiduciary duties under ERISA by (1) incurring unreasonable recordkeeping fees, (2) unwisely investing plan funds, (3) incurring unreasonable managed account fees, and (4) engaging in prohibited transactions. Plaintiffs moved to certify two classes, one which included “All participants and beneficiaries of the Shell Provident Fund 401(k) Plan from January 21, 2014, through the date of judgment, excluding the Defendants,” and one which included “All participants and beneficiaries of the Shell Provident Fund 401(k) Plan who utilized the Plan’s managed account services from January 21, 2014, through the date of judgment, excluding the Defendants.” Defendants did not oppose the second class, but opposed the first on several grounds. First, defendants argued that plaintiffs did not have standing to be class representatives. The court rejected this argument, ruling that only one of the named plaintiffs was required to have standing, and plaintiffs satisfied this requirement because plaintiff David Lawrence invested in several of the relevant funds during the class period. Second, defendants argued that “the proposed class definition encompasses ‘huge blocks’ of absent class members who lack standing,” specifically participants who did not invest in “Tier III” funds or made money investing in Tier III funds. However, the court noted that the administration of Tier III funds affected the fees imposed on other tiers. Thus, “Plaintiffs have adequately alleged that those who did – and did not – invest in Tier III suffered an Article III injury as a result of the mere existence of the Tier III funds.” The court added that under Fifth Circuit precedent it was still permitted to certify a class including participants who actually had invested in Tier III funds but suffered no losses. In short, “The fact that Plaintiffs’ proposed class definition may encompass some absent class members without standing does not preclude class certification.” Having addressed the standing issues, the court then proceeded to rule that plaintiffs’ classes satisfied Rules 23(A), 23(B)(1), and 23(G). Defendants’ only objection regarding these requirements was that the proposed class was inadequate under 23(A) because it was “rife with intra-class conflict” between members who invested in different tiers. The court ruled that this argument was inaccurate and speculative, and that there was no fundamental conflict between the class members, as they all “share[d] a common goal of establishing the liability of the Shell Defendants.” The magistrate judge therefore recommended that plaintiffs’ class certification motion be granted.
Disability Benefit Claims
Aucoin v. LifeMap Assur. Co., No. 2:22-CV-01876, 2023 WL 5836035 (W.D. La. Sept. 8, 2023) (Judge James D. Cain, Jr.). Plaintiff Claude Aucoin worked for Greenberry Industrial, LLC as a project manager, and hit his head on a piece of metal while vacuuming his truck at a car wash in 2019. In 2021, Aucoin stopped working, contending that he suffered from traumatic brain injury, headaches with migraines, mild neurocognitive disorder due to TBI, tinnitus, imbalance, emotional lability, and insomnia, which he attributed to his accident in 2019. Defendant LifeMap approved Aucoin’s claim for short-term disability benefits under Greenberry’s ERISA-governed disability benefit plan, but denied his claim for long-term benefits, concluding that he did not meet the policy’s definition of disability. Aucoin sued, and the parties filed cross-motions for judgment. In this order, the court ruled in favor of LifeMap under the de novo standard of review. The court noted that although Aucoin had the support of his doctor, his complaints of intractable headaches and tinnitus were “inconsistent within the administrative record.” The court stated that a more likely diagnosis was somatic symptom disorder, but Aucoin’s doctor had not explained why that diagnosis was disabling. The court was also troubled by Aucoin’s gaps in treatment. As a result, the court ruled that Aucoin “has not met his burden to prove by a preponderance of the evidence that he is unable to perform all the material and substantial duties of a Plant Manager,” and thus granted LifeMap’s motion for judgment, and denied Aucoin’s.
Card v. Principal Life Ins. Co., No. 5:15-139-KKC, 2023 WL 5706202 (E.D. Ky. Sep. 5, 2023) (Judge Karen K. Caldwell). Since May 17, 2015, plaintiff Susan Card has been seeking short-term disability benefits, long-term disability benefits, and life insurance coverage in the courts pursuant to ERISA. Defendant Principal Life Insurance Company is the insurer and administrator of the disability policy provided by Ms. Card’s former employer. Principal has been denying benefits to Ms. Card, a licensed nurse suffering from blood and bone marrow cancer, for nearly ten years. This case has a long procedural history, one which is unlikely to end even after this latest decision. The following is a brief overview of the case’s history. In 2018, the court granted summary judgment in favor of Principal. It found that arbitrary and capricious review applied and concluded that the denial was not an abuse of discretion as it was supported by substantial evidence. Ms. Card appealed, and the Sixth Circuit reversed the court’s summary judgment order. It determined that Principal’s denial was arbitrary and capricious because, among other things, it did not provide explanations for why it disagreed with Ms. Card’s treating physicians’ opinions, it failed to consider the physical requirements of nursing, and it disregarded Ms. Card’s subjective complaints of pain. The court of appeals remanded to Principal to reevaluate her claim in light of and consistent with its ruling. (That decision was the case of the week in Your ERISA Watch’s November 6, 2019 edition.) Following the Sixth Circuit’s remand order, the parties differed over whether Ms. Card was required to provide Principal with more documents or whether Principal could evaluate only the material it had up until that point. Regardless of who was correct, Principal did not issue a ruling during the 45-day window permitted by ERISA claims handling regulations. Left without an answer, Ms. Card moved to reopen her case. In addition, she filed a separate motion to recover attorneys’ fees under Section 502(g)(1) for the success she achieved in her appeal to the Sixth Circuit. Both motions were then denied by the district court. It found that it lacked jurisdiction to consider the motions because the Sixth Circuit had remanded the matter directly to Principal. Ms. Card appealed for a second time. On appeal, the Sixth Circuit vacated the district court’s order. It held that district courts retain jurisdiction over ERISA benefit cases while administrators reassess benefit decisions on remand. The district court then reconsidered Ms. Card’s motions and on October 27, 2022, granted them both. (A summary of that decision is included in Your ERISA Watch’s November 2, 2022 newsletter.) This brings us to the present day, where Principal has moved pursuant to Rule 59(e) to alter and amend that order, and Ms. Card has moved for judgment reversing Principal’s denials of her claims. The court began its decision with Principal’s reconsideration motion. As a preliminary matter, the court held that Principal’s motion was timely, finding that it was not required to file its motion on the Friday after Thanksgiving, because this day is considered a legal holiday in the state of Kentucky. As for the merits of the motions, the court disagreed with Principal’s objections. Principal, the court held, knew both that it was supposed to start its review on remand, and that the Department of Labor’s 45-day deadline applied to determinations on remand. Thus, the court denied the motion to alter and amend its order. The court then determined which standard of review applies. Ultimately, it agreed with Principal that the 2002 version of the Department of Labor’s guideline for failure to issue timely claims decision applied because Ms. Card filed her claim for benefits before the 2018 version was in effect. Accordingly, the court reviewed the denials under the arbitrary and capricious review standard. At this point, the court finally discussed the grounds for Principal’s denials. Because Principal only had medical information from Ms. Card through January 1, 2015, the court split its review of Principal’s benefit denials before and after that date. The court began with the claims through January 1, 2015. With regard to these claims, it found that Principal’s denials were an abuse of discretion, as it failed to meaningfully rectify the problems that the Sixth Circuit already deemed to be arbitrary and capricious. “Due to the failure of Principal’s remand review to comport with the Sixth Circuit’s directives, the court finds that its subsequent denial was arbitrary and capricious to the extent that the determination denied Card’s LTD and LCDD claims through January 1, 2015. The Court grants judgment in favor of Card as to those claims.” Nevertheless, the court reached a different conclusion with regard to the claims beyond January 1, 2015. It held that Ms. Card was required to provide satisfactory proof of her disability and her failure to provide the information Principal requested meant that she failed to meet her burden to prove entitlement to benefits. By not fulfilling this duty, the court stated that “Principal reasonably denied her claims beyond January 1, 2015.” Ms. Card’s motion for judgment was thus denied for benefits covering the period beyond that time. Finally, the decision ended with the court determining the appropriate remedy for the pre-2015 benefits. Remarkably, rather than award Ms. Card these benefits, the court gave Principal a whole new bite at the apple, and remanded to it for the umpteenth time. Because of this, Ms. Card still does not have a benefit payment for denials that have been twice overturned as unreasonable. One wonders whether the Sixth Circuit will see this case a third time.
Higgins v. The Lincoln Elec. Co., No. 5:22-cv-88-BJB, 2023 WL 5672846 (W.D. Ky. Sep. 1, 2023) (Judge Benjamin Beaton). In July 2017, plaintiff Jerry Higgins received a benefit statement from his then employer, defendant The Lincoln Electric Company, informing him that he was covered for $92,260.80 in annual disability benefits under the company’s ERISA-governed long-term disability employee benefit plan insured by MetLife. However, when Mr. Higgins applied for and then began receiving long-term disability benefits he was informed that he would only receive $60,000 in benefits per year. Mr. Higgins attempted to receive the larger benefit amount he was allegedly promised, but his attempts proved fruitless. Accordingly, he commenced this action against both MetLife and Lincoln hoping to do just that, alleging ERISA violations for material misstatement/estoppel, breach, statutory damages for documents not provided upon request, a claim under 502(c) for failure to respond to his claim for benefits in a timely manner, and a claim for attorneys’ fees. The court previously granted MetLife’s motion to dismiss the claims against it. Now, Lincoln has moved for the same relief pursuant to Federal Rule of Civil Procedure 12(b)(6). The court granted the motion. It held that Mr. Higgins’ claims failed because the terms of the plan provide only for the maximum benefit amount that he is receiving, and the misstatement Lincoln made in the Benefit Election Form it sent to him does not alter the terms of the plan or entitlement him to benefits in that amount. “Higgins hasn’t pointed to anything indicating that Lincoln tried to trick him or that Higgins relied to his detriment on the July mailing.” Failure to honor the Benefit Election Form, the court held, “does not breach the plan agreement.” The court emphasized repeatedly that terms of the plan clearly allow for only $60,000 in annual disability benefits and that Mr. Higgins therefore should have been aware of the true facts. Thus, the court concluded that reliance on the inaccurate benefit statement was neither reasonable nor justified. Moreover, the court viewed Mr. Higgins’ assertion that he might have bought more coverage had he known that the higher amount was inaccurate as conclusory and “purely speculative.” With regard to the claim for failure to provide documents upon request, the court stressed that Mr. Higgins requested the administrative record, not plan documents, and “only a failure to provide plan documents triggers statutory penalties under § 1132(c).” The court also held that Mr. Higgins was not entitled to damages under Section 502(c) based on Lincoln’s alleged violation of claims handling regulations that require plan administrators to provide claimants with notifications of adverse benefit determinations, the specific reasons for the adverse decision, and additional material necessary to perfect the claim on appeal. The court wrote that these subsections “implement 29 U.S.C. § 1133, not § 1132,” and violations of Section 1133 by the plan administrator do not “impose liability on the plan administrator pursuant to section 1132(c), because duties of the ‘plan’ as stated in section 1133 are not duties of the ‘plan administrator’ as articulated in section 1132(c).” Finally, the court rejected Mr. Higgins’ request for a jury trial, finding no right to a jury trial, as well as his derivative claim for attorneys’ fees. Thus, all of the claims against Lincoln were dismissed, and this decision terminated the case.
Chacko v. AT&T Umbrella Benefit Plan No. 3, No. 2:19-CV-01837-DAD-DB, __ F. Supp. 3d __, 2023 WL 5806455 (E.D. Cal. Sept. 7, 2023) (Judge Dale A. Drozd). This long-running action for ERISA-governed long-term disability benefits, which has been the subject of multiple discovery orders, was finally decided on the merits in this published decision. Plaintiff Ruby Chacko was a software engineer who began working for AT&T in 1997. Twenty years later, Ms. Chacko began experiencing “severe pain/ache in her eyes, neck, shoulders, and both arms, as well as blurred vision.” She stopped working on October 30, 2017. AT&T’s disability claim administrator, Sedgwick Claims Management Services, Inc., approved Ms. Chacko’s claim for short-term disability benefits. Ms. Chacko continued to treat with her physicians, reporting worsening pain which was corroborated by physical exam findings. Because her symptoms persisted, she submitted a claim for long-term disability benefits, which Sedgwick initially approved. However, Sedgwick terminated those benefits just three months later, contending that the medical evidence did not support ongoing disability. Sedgwick denied Ms. Chacko’s appeal, and this action followed seeking payment of benefits under ERISA Section 1132(a)(1)(B). Following discovery, the parties filed cross-motions for summary judgment. At the outset, the court addressed the issue of whether the record should be expanded to admit the file from Ms. Chacko’s workers compensation claim. The court agreed with Ms. Chacko that the evidence should be admitted because Sedgwick also administered her workers compensation claim, had the file in its possession, and relied on that file in denying her disability claim. Next, the court agreed with the parties that the abuse of discretion standard of review applied because the plan conferred discretionary authority on Sedgwick to determine benefit eligibility. This meant that the court was required to consider what level of deference it should give Sedgwick in evaluating its denial. The court rejected Ms. Chacko’s argument that Sedgwick had a conflict of interest, but agreed that the track record of Sedgwick’s reviewing physician, Dr. Howard Grattan, “suggests that Dr. Grattan harbored a bias in favor of the Plan” which “warrants a low-to-moderate level of skepticism.” The court also agreed that Sedgwick’s review was plagued with procedural problems, including (a) failing to consider the physical requirements of Ms. Chacko’s job, including “the significant need to use a keyboard,” (b) relying on transferrable skill assessments that failed to consider keyboard/mousing limitations, even though Sedgwick previously approved Ms. Chacko’s claim based on similar limitations, and (c) failing to request Ms. Chacko’s Social Security file or “engage in a meaningful review of the rationale underlying the SSA’s approval of plaintiff’s SSDI benefits claim.” Based on its conflict of interest and procedural error review, the court determined that it would apply “a moderate level of skepticism in evaluating whether there was an abuse of discretion in the denial of plaintiff’s LTD benefits claim.” Under this framework, the court proceeded to determine if Sedgwick abused its discretion in denying Ms. Chacko’s benefit claim, and concluded that it did. In particular, the court found that Sedgwick did not adequately consider Ms. Chacko’s job description and did not acknowledge that her position was computer-based when it denied her claim. Instead, Sedgwick simply considered whether Ms. Chacko could do “sedentary” work. Furthermore, the court found that Sedgwick’s denial letter contained inaccurate and misleading facts, Dr. Grattan’s “pure paper report” was inadequate, and Sedgwick “did not properly consider the SSA’s approval of plaintiff’s SSDI benefits claim.” For these reasons, the court concluded that “the Plan abused its discretion when it terminated plaintiff’s LTD benefits and denied her appeal.” It thus granted Ms. Chacko’s summary judgment motion, denied the plan’s, and ordered that benefits be paid through the date of judgment. (Ms. Chacko was represented by Michelle Roberts of Roberts Disability Law PC and Glenn Kantor and Zoya Yarnykh of Kantor & Kantor LLP.)
In re Fresenius GranuFlo/NautraLyte Dialysate Prod. Liab. Litig., No. 13-2428, __ F. Supp. 3d __, 2023 WL 5810004 (D. Mass. Sept. 7, 2023) (Judge Nathaniel M. Gorton). This was originally an action filed by the State of Louisiana in Louisiana state court against Fresenius Medical Care Holdings alleging that Fresenius engaged in unfair and deceptive practices in the sale of its dialysis treatment products. Why, you may ask, is this in the federal District of Massachusetts and what on earth does this have to do with ERISA? Well, shortly before trial in state court, Blue Cross Blue Shield of Louisiana intervened, seeking to recover payments it made to Fresenius on behalf of members of its health plans for treatment using Fresenius’ drugs. Fresenius immediately removed the case to federal court, at which time it was reassigned to Judge Gorton in Massachusetts as part of ongoing multi-district litigation against Fresenius. Fresenius’ removal was based on the contention that BCBS’ state law claims were preempted by ERISA. In this order, the court rejected this argument and granted plaintiffs’ motion to remand the case back to Louisiana state court. The court observed that because BCBS was a plan fiduciary, it could technically bring a claim for equitable relief under ERISA § 1132(a)(3). However, the court held that “the claims in this case are not of the kind that § 1132(a)(3) was designed to address, and, therefore, are not within the realm of ERISA enforcement claims meant to be completely preempted.” The court ruled that the tort laws invoked by plaintiffs had “only a tangential connection to ERISA” and thus Fresenius’ argument failed the first prong of the Supreme Court’s preemption test in Aetna Health Inc. v. Davila. In short, “just because BCBS is an ERISA fiduciary does not render this an ERISA dispute.” The court declined to award fees and costs to plaintiffs, however, noting that ERISA’s preemption provision is “extremely broad” and Fresenius “made a colorable argument as to why this dispute should fall into that category.”
Life Insurance & AD&D Benefit Claims
Dindinger v. Hartford Life & Accident Ins. Co., No. CV-22-00508-TUC-EJM, 2023 WL 5723401 (D. Ariz. Sep. 5, 2023) (Magistrate Judge Eric J. Markovich). Decedent Jacob Dindinger was shot and killed while on assignment working as an EMT in an ambulance. After Mr. Dindinger’s death, his family members applied for life insurance benefits under his ERISA-governed policy insured by defendant Hartford Life & Accident Insurance Company. Hartford denied their claim and this action followed. In this motion the plaintiffs moved to preclude Hartford from introducing new positions and documents before the court to defend its denial. The court agreed with plaintiffs that it is well-established law “that a plan administrator undermines ERISA and its implementing regulations when it presents a new rationale to the district court that was not presented to the claimant as a specific reason for denying benefits during the administrative process.” Moreover, the court concurred that Hartford was attempting to do just that. It found that Hartford was trying to add a new justification about whether Mr. Dindinger died while working at his regular place of business or while taking a “trip.” The court held that Hartford did not explicitly provide this ground for denying the claim during the administrative process and that plaintiffs should not have to guess at “the reason that they believe Defendant is relying upon.” In further support of this finding, the court stressed that plaintiffs’ counsel gave Hartford “the opportunity to clarify its position, and it declined the invitation. Now that the administrative process has ended and litigation begun, Defendant cannot now assert this post hoc rationale as a basis for denying Plaintiffs’ claim.” Thus, plaintiffs’ motion to preclude Hartford from adding new arguments before the court was granted. As for their request to preclude documents from the administrative record that were not provided to them prior to litigation, the court allowed the inclusion of only one of these documents – a hazard rider – which was reproduced “almost in its entirety” in the denial letter. It decided that inclusion of this additional page would not prejudice plaintiffs. Hartford agreed to withdraw the other documents. The remaining pages of claims notes were therefore precluded by the court.
Zaharopoulos v. Taylor, No. 5:22-CV-348 (MTT), 2023 WL 5751480 (M.D. Ga. Sept. 6, 2023) (Judge Marc T. Treadwell). This case involves ERISA-governed life insurance benefits. The decedent, Dominique Bowers, was survived by two sons, one of which renounced any claim to the benefits because he allegedly caused her death. This left two potential beneficiaries: her other son, Nasir Taylor, and her fiancé, Nicholas Zaharopoulos. The plan provides an order of preference for payment, listing “spouse or domestic partner” first, followed by children. Zaharopoulos contended that he was a “domestic partner” for the purposes of the plan, and filed a claim for benefits with the plan’s insurer, MetLife. Taylor also submitted a claim. Zaharopoulos initiated litigation, after which MetLife interpleaded the life insurance funds and was dismissed from the action. The competing beneficiaries then cross-moved for summary judgment. In this order, the court ruled in favor of Taylor. The court noted that the plan allows two methods for proving a domestic partnership. The insured employee can either “(1) register the domestic partnership with a government agency or (2) demonstrate a ‘mutually dependent relationship so that each has an insurable interest in the life of the other.’” The second option requires the employee to submit a “domestic partner declaration” to the plan. It was undisputed that there was no government-registered domestic partnership, and Bowers had not submitted a declaration to the plan administrator. As a result, the court ruled that because Zaharopoulos could not satisfy either condition, he was not Bowers’ domestic partner for the purposes of the plan and was not a beneficiary. Thus, the court concluded that Taylor was entitled to the life insurance proceeds and granted his motion for summary judgment, denying Zaharopoulos’.
Medical Benefit Claims
Failali v. East Coast Performance LLC, No. 5:22-cv-2038, 2023 WL 5671937 (N.D. Ohio Sep. 1, 2023) (Judge Sara Lioi). Husband and wife Ismail Failali and Soukaina Moussa brought this ERISA action against Mr. Failali’s former employer, East Coast Performance LLC, asserting a claim for breach of fiduciary duty seeking to redress harm the family suffered as a result of inaccurate information the company provided to them regarding their health insurance plan. The complaint alleges that when Mr. Failali resigned from his position in early May 2022, he was told in writing by the owner of the company that his health insurance coverage would remain in effect through the end of the month. Relying on this representation, the family did not obtain alternative health coverage for the month of May. And, as it would turn out, the family needed their health insurance that month. On May 22, Ms. Moussa had a medical emergency and received care at a hospital. Plaintiffs were billed $9,567.41. Once billed, they realized that East Coast Performance had actually terminated their health insurance coverage on May 8. The family attempted to have the plan and its insurer cover the hospital bill, but thus far have received no contact or response to their letters of inquiry. Accordingly, they commenced this lawsuit under ERISA Section 1104(a)(1) for breach of the duty of providing accurate and truthful benefit disclosures and plan coverage, claiming defendant failed in this regard causing them an injury in the form of the hospital costs, for which they are entitled to relief. To date, East Coast Performance has failed to move or otherwise respond to plaintiffs’ complaint. On February 27, 2023, the clerk entered default against defendant and a copy of the entry was mailed to it. Still, East Coast Performance did not respond in any way. As a result, plaintiffs have now moved pursuant to Federal Rule of Civil Procedure 55(b)(2) for default judgment. Their motion was granted in this order. “Taking as true the undisputed factual allegations in the complaint, the law entitles plaintiffs to a judgment of liability against defendant East Coast Performance LLC on plaintiffs’ claim under ERISA that defendant breached its fiduciary duty to plaintiffs.” The court addressed the appropriate awards of monetary damages, attorney’s fees, and court costs. First, it awarded plaintiffs recovery in the amount of their hospital charges. The court was satisfied that plaintiffs proved their entitlement to this recovery as they attached their hospital bills to their motion which backed up their claims of monetary harm. Next, the court awarded plaintiffs’ counsel his requested fee award of $2,762.50, finding an award appropriate under Section 502(g) given their success. Plaintiffs’ attorney has close to 30 years of experience practicing law. The court thus considered his requested hourly rate of $325 reasonable and in line with the market rate. Moreover, the court found the 8.5 hours of billed work “reasonable under the circumstances.” Finally, the court awarded $402 in costs to plaintiffs to recover their filing fee. Accordingly, plaintiffs’ motion for default judgment was granted and the couple was awarded $12,731.91 in total damages.
Pleading Issues & Procedure
Cockerill v. Corteva, Inc., No. 21-3966, 2023 WL 5672833 (E.D. Pa. Sep. 1, 2023) (Judge Michael Morris Baylson). In this putative class action a group of DuPont workers allege that their early retirement benefits under their ERISA-governed plan were reduced following the DuPont-Corteva spin off. In anticipation of class certification, defendants filed two motions – a motion to reconsider the court’s order accepting plaintiffs’ filing of their second amended complaint and a motion to dismiss the operative complaint – in an attempt to defeat this lawsuit. Both motions were denied by the court in this order. The decision began with the court taking its “significant responsibilities” under ERISA seriously, writing that if the allegations in the complaint prove true “ERISA is the proper remedial statute,” and the court has the authority “to award broad equitable remedies.” Finding that plaintiffs pled facts that allowed it to infer that defendants are liable for the alleged conduct, the court declined to “intervene to disrupt the progression of this case or halt it altogether.” Broadly, the court found many of defendants’ arguments redundant to those they previously raised, which it had already rejected in a ruling from last August. The court declined to reconsider its order permitting the amended complaint. It stated that defendants exaggerated the burden that permitting the complaint created for them, and that no clear error of law nor manifest injustice flowed from allowing plaintiffs to file their amended complaint. As for the motion to dismiss, the court viewed the new arguments that defendants raised in their motion as “fail[ing] to move the needle.” First, it was satisfied that the new named plaintiff suffered the same concrete injury as the others– reduced early retirement benefits – and that he therefore had constitutional standing. Next, it held that discovery is necessary in order to determine whether fraudulent concealment and/or futility excuse plaintiffs’ failure to exhaust administrative remedies prior to filing this action. Additionally, the court declined to conclude as a matter of law that the named plaintiffs are not eligible for optional benefits. “That, too, would be premature. What the parties are essentially disputing here is the proper interpretation of the language of the plan and the scope of its coverage.” Therefore, the court would not resolve this dispute at the motion to dismiss stage. Finally, the court did not take up the issue of ERISA preemption of the state law promissory estoppel claim. Once again, the court stressed that this topic was premature, and that further discovery is necessary before it can be resolved properly. For these reasons, both of defendants’ motions were denied and this action will proceed. (Plaintiffs are represented in this matter by Kantor & Kantor attorneys Sue Meter, Jaclyn Conover, and Your ERISA Watch co-editor Elizabeth Hopkins, as well as Edward Stone of Stone Law PC, and Nina Wasow and Dan Feinberg of Feinberg Jackson Worthman & Wasow LLP.)
Davis v. Old Dominion Freight Line, Inc., No. 1:22CV990, 2023 WL 5751524 (M.D.N.C. Sept. 6, 2023) (Judge Thomas D. Schroeder). Plaintiff Harvey Davis brought this putative class action on behalf of the 401(k) retirement plan of his employer, Old Dominion Freight Lines, alleging that Old Dominion breached its fiduciary duties under ERISA in managing the plan. Specifically, Davis contended that Old Dominion pursued highly-priced and poorly performing share classes, and offered actively managed funds that charged more in fees and underperformed other funds. He also alleged that Old Dominion incurred excessive recordkeeping and administrative costs. Davis brought two claims for relief: one for breach of the fiduciary duty of prudence, and one for failure to adequately monitor other fiduciaries. Old Dominion moved to dismiss, arguing that the court lacked subject matter jurisdiction and that Davis failed to state an adequate claim. The court did not reach the second issue because it agreed with Old Dominion on the first issue, ruling that Davis lacked standing to bring his claims. The court noted that participants in defined contribution plans, like the one at issue here, are often permitted to bring suits on behalf of the plan. However, the court stressed that in order to do so, a participant must demonstrate that he has personally “suffered an injury that could be redressed by the court” in order to have standing. The court found that Davis could not do so because he had not invested in any of the challenged funds, and thus was unable to show that the alleged fiduciary breach negatively affected any of his accounts. Thus, the court granted Old Dominion’s motion to dismiss, without prejudice.
Lysengen v. Argent Trust Co., No. 20-1177, 2023 WL 5806203 (C.D. Ill. Sept. 7, 2023) (Judge Michael M. Mihm). This case has spawned multiple orders, which Your ERISA Watch has diligently covered since 2020 (order denying motion to dismiss, order denying another motion to dismiss, order denying motion for class certification, order denying motion for summary judgment). The case involves Morton Buildings, Inc.’s employee stock ownership plan. Plaintiff Jackie Lysengen, a Morton employee, brought this suit alleging that the ESOP overpaid for the stock it purchased, asserting that the stock price rose suspiciously one month before the ESOP transaction and then plummeted drastically following the transaction, indicating it was overpriced. She amended her complaint to include as defendants the Estate of Virginia Miller, the Estate of Henry A. Getz, and the Getz Family Partnership, suing them for equitable relief under ERISA Section 502(a)(3) and alleging that these non-fiduciary shareholder defendants had constructive knowledge of the wrongdoing in the ESOP transaction. This order addressed whether plaintiff could bring her claims against these defendants in a representative capacity under Section 502(a)(3), and whether those claims survived summary judgment. The court ruled in plaintiff’s favor on the first issue, rejecting defendants’ argument that Section 502(a)(3) claims can only be brought in an individual capacity. The court noted that Section 502(a)(3) “admits of no limit” on possible defendants, including non-fiduciaries, and broadly provides for “redressing violations of any provision for ERISA, provided that such relief is ‘equitable.’” However, even though plaintiff was authorized to bring a Section 502(a)(3) claim, the court ruled that the relief she sought was not recoverable under equity. Plaintiff sought “disgorgement of any profits, accounting for profits, surcharge, having a constructive trust placed on any proceeds received…having the transactions rescinded, requiring all or part of the consideration to be restored to the Plan, or to be subject to other appropriate equitable relief.” The court found that plaintiff did not “ultimately identify any traceable funds, accounts, stock, or proceeds” in the possession of the shareholder defendants, as required by Supreme Court precedent in order to be eligible for equitable relief. Furthermore, the court stated that what plaintiff “ultimately seeks is a declaratory judgment that determines the amount of liability the Shareholder Defendants owe on account of the alleged overpayment of stock,” which is “akin to a monetary judgment that constitutes legal relief, not equitable relief.” As a result, the court granted the shareholder defendants’ motion for summary judgment, and denied plaintiff’s. Plaintiff’s claims against Argent Trust “remain pending before the Court.”
Miguel v. Salesforce.com, Inc., No. 20-CV-01753-MMC, 2023 WL 5836802 (N.D. Cal. Sept. 8, 2023) (Judge Maxine M. Chesney). The plaintiffs in this case are former Salesforce employees who participated in Salesforce’s 401(k) defined contribution retirement plan. They allege that the defendants breached their fiduciary duties to the plan and its participants in violation of ERISA. In 2021, the district court granted defendants’ motion to dismiss, and plaintiffs appealed. The Ninth Circuit agreed with the district court that “plaintiffs have not plausibly alleged that defendants breached the duty of prudence by failing to adequately consider passively managed mutual fund alternatives to the actively managed funds offered by the [P]lan.” However, the Ninth Circuit also found that “plaintiffs have stated a plausible claim that defendants imprudently failed to select lower-cost share classes or collective investment trusts with substantially identical underlying assets.” Thus, the Ninth Circuit reversed and remanded. (Your ERISA Watch covered this decision in its April 13, 2022 issue.) On remand, the plaintiffs moved to amend their complaint to add “allegations in support of [their] imprudent investment claims.” Specifically, plaintiffs wanted to include allegations about defendants’ heavy reliance on the advice of Bridgebay, which used deficient data. The district court noted that the deadline for amending pleadings had passed, and found that the new allegations were based on facts that plaintiffs previously had in their possession, and thus they were not diligent in amending their complaint. Furthermore, the district court stated that the Ninth Circuit had already found that plaintiffs had adequately alleged a claim for breach of the duty of prudence. Thus, “Plaintiffs essentially seek to bolster their claim for breach of the duty of prudence by belatedly proffering allegations that do not alter the substance of their claim. Such circumstances do not constitute good cause for amendment under Rule 16.” As a result, the court denied plaintiffs’ motion to amend their complaint.
Holland v. Cardem Ins. Co., No. CV 19-02362 (TSC), 2023 WL 5846673 (D.D.C. Sept. 11, 2023) (Judge Tanya S. Chutkan). The trustees of the United Mine Workers of America 1974 Pension Plan brought this action against Cardem Insurance Company, seeking to recover nearly $934 million in pension funds allegedly due to it pursuant to ERISA. Cardem was once a subsidiary of Walter Energy, a U.S.-based company, but now it is a Bermudan company with its principal place of business in Bermuda. As a result, Cardem filed a motion to dismiss, arguing that the court did not have personal jurisdiction over it. A magistrate judge agreed, and plaintiffs objected. In this order the court overruled plaintiffs’ objections and granted Cardem’s motion to dismiss. The court noted that Cardem received reinsurance proceeds from non-U.S. entities and insured properties in the United Kingdom and Bermuda, which undercut plaintiffs’ argument that Cardem’s contacts were concentrated in the U.S. Plaintiffs also tried to draw connections between Cardem and U.S.-based Walter Energy, but the court ruled that agency tests do not control the personal jurisdiction analysis. Cardem’s financial support from Walter Energy was also insufficient to establish jurisdiction. In sum, the court, citing Supreme Court precedent, stated, “It would be ‘an exceptional case’ if a corporation is ‘at home’ in a forum ‘other than its formal place of incorporation and principal place of business.” This case was not such an exception, so the court dismissed the action.
Lone Star 24 HR ER Facility, LLC v. Blue Cross Blue Shield of Tex., No. SA-22-CV-01090-JKP, 2023 WL 5729947 (W.D. Tex. Sep. 5, 2023) (Judge Jason Pulliam). A privately-held emergency care facility, plaintiff Lone Star 24 Hour ER Facility, on behalf of itself and 882 patients, has sued Blue Cross Blue Shield of Texas for violating Texas’ insurance laws which require health insurance providers to reimburse out-of-network emergency service providers for “at a minimum, at the usual and customary charge for the service.” Lone Star alleges that Blue Cross has grossly underpaid it for services it provided. It maintains that the reimbursement rates paid by Blue Cross “are less than a Medicare allowable, less than in-network rates for hospital ERs for the same services, and far less than FAIR Health data that is utilized and was adopted by the Texas Department of Insurance as a benchmark to determine appropriate payment for emergency care providers.” In its complaint, Lone Star asserts state law causes of action for breach of contract, bad faith insurance practices, and negligent misrepresentation. In addition, Lone Star asserts a cause of action under ERISA for recovery of benefits. Blue Cross moved to dismiss for lack of subject matter jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(1) and for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6). Its motion was granted in part and denied in part. To begin, the court considered Blue Cross’ jurisdictional challenge. The court determined that it lacked jurisdiction to adjudicate any of the claims brought by the 882 individual unnamed plaintiffs, holding that these plaintiffs could not proceed anonymously under their initials because there was no reason they would be required to disclose personal health or medical information during this litigation. Therefore, the court considered the remainder of the motion to dismiss solely with respect to Lone Star. The court accepted as true the complaint’s assertions that Lone Star was assigned benefits by all of its patients. This, the court stated, was “sufficient to withstand [Blue Cross’s] facial attack to the Court’s subject matter jurisdiction based upon lack of standing to sue for ERISA benefits under plans.” As a result, the court denied defendant’s motion to dismiss the ERISA claim for lack of derivative standing. It also “admonishe[d]” Blue Cross “for continually asserting this unsuccessful argument for dismissal,” and cautioned it against raising the same argument in future and pending ERISA healthcare cases brought by providers. Blue Cross’ jurisdictional challenges to Lone Star’s state law claims were likewise denied. The court then proceeded to analyze Blue Cross’ motion to dismiss for failure to state a claim. Regarding the ERISA claim, the court found that Lone Star had plausibly pled sufficient details regarding a right to greater benefits and thus stated a viable cause of action. Once again, the court reprimanded Blue Cross “for continually asserting” in the courts that plaintiffs need to provide specific plan terms. Instead, the court stated that this position improperly raises the pleading burden. Blue Cross was warned “to carefully consider any future assertion in any pending or new case, as it could be determined to be frivolous given the numerous historical renunciations.” Finally, the court denied Blue Cross’ motion to dismiss the state law causes of action for failure to state a claim under Rule 12(b)(6). It also found that the issue of ERISA preemption was premature at this juncture.
Advanced Phys. Med. of Yorkville v. Cigna Health & Life Ins. Co., No. 22-CV-02982, 2023 WL 5830791 (N.D. Ill. Sept. 8, 2023) (Judge John F. Kness). Advanced Physical Medicine of Yorkville, a chiropractic practice, brought this action under ERISA against the employer of one of its patients and Cigna, the claim administrator for the employer’s medical benefit plan, alleging that they failed to pay benefits for treatment incurred by the patient. It also sued for statutory penalties because plan documents were not provided upon request. Both defendants filed a motion to dismiss, arguing that plaintiff did not have a valid assignment of its patient’s right to sue due to the benefit plan’s anti-assignment clause. Cigna also argued separately that it was an improper defendant. The court noted that the only plan document in front of it was the summary plan description, and that the SPD contained provisions which conflicted on the anti-assignment issue. One provision purported to bar such assignments, while another stated that “you” had the right to sue under ERISA and defined “you” as “the Covered Member, and also…a representative or provider designated by you to act on your behalf.” The court ruled that it could not resolve this ambiguity at the pleading stage and thus denied defendants’ motion on this ground. All was not lost for Cigna, however, as the court agreed it was an improper defendant. The SPD stated that the plan was self-funded by the employer, which was financially responsible for paying any benefits. Cigna “does not insure or guarantee” the benefits and thus could not be sued for those benefits. Furthermore, plaintiff’s claim for statutory penalties also could not be brought against Cigna because ERISA provides that such claims can only be brought against plan administrators, not claim administrators. Thus, plaintiff’s claims against Cigna were dismissed with prejudice, but its claims will continue against the employer.
Severance Benefit Claims
Rhode v. CSX Transp., Inc., No. 22-10909, __ F. App’x __, 2023 WL 5846296 (11th Cir. Sept. 11, 2023) (Before Circuit Judges Wilson, Grant, and Brasher). Bryan Rhode, a former executive at CSX, filed this action under ERISA contending that CSX unlawfully denied his claim for severance pay and benefits under the company’s Executive Severance Plan. The district court ruled for CSX, finding that CSX reasonably denied Rhode’s claim, Rhode received a full and fair review of his claim, and Rhode did not show that any conflict of interest tainted CSX’s decision. On appeal, Rhode contended that he did not voluntarily resign, and was in fact involuntarily terminated. He also argued that he did not receive a full and fair review because the plan administrator did not review his emails, files, and calendar entries or interview his colleagues in order to ascertain whether he in fact intended to resign from CSX. The Eleventh Circuit did not dig into these issues, simply holding that after “careful consideration of the record and the parties’ briefs, and with the benefit of oral argument, we find no reversible error in the district court’s judgment.” The judgment was thus affirmed.
Statute of Limitations
Zink v. St. Luke’s Health System, Ltd., No. 1:22-CV-00359-AKB, 2023 WL 5748158 (D. Idaho Sept. 6, 2023) (Judge Amanda K. Brailsford). Husband and wife Adam and Lauren Zink brought this action against Adam’s employer, St. Luke’s Health System, and SelectHealth, the administrator of St. Luke’s employee health benefit plan. Their claim arose out of a 2019 motorcycle crash suffered by Adam, which resulted in severe injuries. SelectHealth denied the claim, asserting that it was barred by the plan’s exclusion for “services to treat conditions that are related to illegal activities,” which allegedly applied to Adam’s injuries because his blood alcohol level was above the legal limit at the time of his crash. After the Zinks brought suit, defendants moved to dismiss several of the Zinks’ claims. The Zinks conceded on most of these arguments, leaving only one claim: Adam’s claim for denial of benefits under ERISA § 1132(a)(1)(B). Defendants argued that this claim was time-barred because the plan has a two-year limitation on filing suit, and Adam filed his complaint more than two years after SelectHealth’s final denial. Adam admitted to this chronology, but argued that the limitation period was unenforceable due to inadequate notice because SelectHealth did not include the time limit in its denial letters. In this order, the court sided with Adam. The court noted that although the Ninth Circuit had not ruled directly on the issue, three other circuit courts – the First, Third, and Sixth – had all concluded that ERISA regulations require administrators to include a plan-imposed time limit for judicial review in their denial letters. The court agreed with these decisions, and distinguished other contrary district court rulings on the ground that those rulings preceded the cited circuit court decisions and thus were less persuasive. Thus, the court granted defendants’ motion as to the conceded claims, but denied it as to Adam’s claim for benefits, finding it timely.