Utah v. Walsh, No. 2:23-CV-016-Z, 2023 WL 6205926 (N.D. Tex. Sep. 21, 2023) (Judge Matthew J. Kacsmaryk)

In right-leaning circles, ESG has become a three-letter buzzword. ESG, which stands for environmental, social, and governance issues, aims to permit investing in companies which consider factors like climate change, equity, and social impact. These days, it hard to find companies which do not consider any of these factors or their financial impacts. Nevertheless, ESG remains controversial.

Despite the fact that the average American probably doesn’t stay up at night worrying about whether their pension plan or Wall Street has become too focused on ESG, conservatives have done their best to label it as “woke” investing, and have attempted to thwart its prevalence in the financial world. They have even notably gone after BlackRock’s CEO, Larry Fink, dragging him into the political debate over comments he made tepidly endorsing ESG. This action, brought in the Northern District of Texas, is one part of this much broader picture.

Twenty-six conservative-leaning states, along with other private parties representing the interests of oil and gas companies, filed this action against the Department of Labor (“DOL”) and the former Secretary of Labor, Martin J. Walsh. In the action the plaintiffs challenged the DOL’s “2022 Investment Duties Rule” and sought to halt its implementation, claiming the Rule violates the Administrative Procedure Act (“APA”), runs afoul of ERISA, and is arbitrary and capricious.

The 2022 Rule was an update and clarification of guidelines issued during the Trump administration regarding the duties of ERISA fiduciaries concerning investment decisions in employee benefit retirement plans, specifically with regard to ESG issues. Broadly, the 2022 Rule was the DOL’s attempt to restore fiduciaries’ investment flexibility with respect to ESG.

Under the language of the Trump-era guidelines (“the 2020 Rule”), it was implied that ESG considerations were “non-pecuniary” factors which could only be considered if all pecuniary interests were equal. The 2020 Rule also added requirements for fiduciaries to consider ESG factors when selecting competing investments that serve the plans and their participants’ interests equally.

Under the Biden administration, the DOL became concerned that its 2020 Rule was having a “chilling effect” on the “appropriate integration of climate change and other ESG factors in investment decisions,” and that the guidelines placed “a thumb on the scale against the consideration of ESG factors, even when those factors are financially material.” As a result, the DOL attempted to remedy these concerns and issued the 2022 Rule, removing the pecuniary/ non-pecuniary terminology. The Rule went on to clarify to fiduciaries that they should not feel hamstrung when considering ESG factors including both their financial and non-financial benefits. The 2022 update also removed a requirement in the 2020 version which mandated that fiduciaries include specific documentation justifying their use of ESG factors.

The parties filed competing motions for summary judgment. In this order, the court granted judgment to the Department of Labor and denied plaintiffs’ summary judgment motion.

The court held that the 2022 Rule does not violate ERISA as it is appropriately neutral and does not tip the scale in favor of or against ESG factors, but rather returns discretion on the matter back to fiduciaries. The court agreed with the DOL that there was no “overarching regulatory bias in favor of ESG strategies” in the 2022 Rule because the DOL’s guidelines provide “that where a fiduciary reasonably determines that an investment strategy will maximize risk-adjusted returns, a fiduciary may pursue the strategy, whether pro-ESG, anti-ESG, or entirely unrelated to ESG.” Furthermore, “like prior rules, the 2022 Rule allows consideration of collateral factors to break a tie. Thus, after affording the DOL the deference it is presently due under Chevron, the Court cannot conclude that the Rule is ‘manifestly contrary to the statute.’”

The court’s reference to the Supreme Court’s decision in Chevron v. Natural Resources Defense Council is interesting given the fact that that court may be poised to overturn its precedent this term in a case before it called Loper Bright Enterprises v. Raimondo (No. 22-451). For now, however, Chevron stands, and the court stressed that it is bound by Chevron’s agency deference precedent.

Plaintiffs’ APA arguments fared no better. The court could not conclude that the Rule was arbitrary and capricious under the APA. It clarified that it could “not substitute its [own] judgment for that of the agency,” that the scope of review is necessarily narrow, and it is required to recognize and defer to the expertise of the agencies. Plaintiffs, the court held, failed to establish an APA violation with their arguments that the DOL did not sufficiently justify its decision to issue the Rule and that the Rule’s provisions were unreasonable because they purportedly relied on factors “Congress has not intended it to consider.” Nevertheless, the court signaled its sympathy for plaintiffs’ frustration and concerns over the Rule, and opted to end its decision by indicating that it does “not condone ESG investing generally or ultimately agree with the Rule.”

However, under the precedent as it currently stands, the court ruled that the DOL was entitled to summary judgment. Thus, even in the very friendly Northern District of Texas, the States, energy companies, and private interest groups were unable to overturn the 2022 Rule in their quest to reinstate Trump-era guidance cautioning fiduciaries against ESG investments in ERISA plans.

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


Fifth Circuit

Rivera v. Ross Dress for Less, Inc., No. 4:22-CV-74, 2023 WL 6282836 (S.D. Tex. Sep. 26, 2023) (Judge George C. Hanks, Jr.). Plaintiff Lourdes Rivera suffered a back injury while on the job working for her employer Ross Dress for Less, Inc. Following that injury, Ms. Rivera sought benefits under an ERISA-governed plan that offers medical benefits specifically for on-the-job injuries. Ross has paid $5,633.05 of Ms. Rivera’s medical expenses under the plan. Ms. Rivera is seeking further benefit payments in this action. Because the plan contains an arbitration provision covering the claims in this lawsuit, Ross moved to compel arbitration and dismiss the case. Here, the court granted the motion to compel arbitration, but opted to stay and administratively closed the case pending arbitration, rather than dismissing it. The court concluded that the plan’s arbitration provision was valid and enforceable, that Ms. Rivera’s claims fall within its scope, and that Ross did not waive its right to seek arbitration by substantially invoking the judicial process. The court expressed that under Texas law, Ms. Rivera has received unequivocal notice of the binding arbitration agreement, and that her “continued employment constituted acceptance of those terms.” Furthermore, because the plan informs Spanish speakers and readers like Ms. Rivera in Spanish how to contact the claims manager if they have any difficulty understanding any part of the plan or its terms, the court held that the burden shifted to Ms. Rivera to understand her rights and that she is therefore bound by the terms of English language clause. Additionally, the court concluded that Ms. Rivera ratified the arbitration agreement through her conduct submitting a claim for benefits under the plan and then accepting and retaining those benefits. For these reasons, the court found the arbitration agreement between the parties enforceable and therefore granted the motion to compel arbitration.

Attorneys’ Fees

Seventh Circuit

Averbeck v. The Lincoln Nat’l Life Ins. Co., No. 20-cv-420-jdp, 2023 WL 6307414 (W.D. Wis. Sep. 28, 2023) (Judge James D. Peterson). In this lawsuit plaintiff Tamara Averbeck sought to challenge The Lincoln National Life Insurance Company’s termination of her long-term disability and life insurance benefits. Four months after the action was filed, Lincoln reinstated Ms. Averbeck’s benefits, including back benefits. The court previously ruled that Ms. Averbeck was entitled to recover reasonable attorneys’ fees and costs, given that “she had obtained some degree of success on the merits and Lincoln hadn’t shown that its position was substantially justified.” In the same breath, the court cautioned that the fee award “should be relatively modest” considering the case’s quick and relative ease of resolution. Ms. Averbeck did submit a fee petition. However, in the court’s view it was “not relatively modest; [but] eye-popping.” Ms. Averbeck sought an attorneys’ fee award of $180,774, and costs in the amount of $2,984.65. In this order the court denied the requests for costs, concluding they were not properly supported, and reduced the fee award to a total of $69,725. The court agreed with Lincoln that “316 hours far exceeds what courts have deemed reasonably necessary to litigate similar ERISA disability benefit cases. ERISA cases are fact-intensive, but Averbeck’s was not overly complicated, and she does not suggest that her case presented any unique legal or procedural issues.” This was especially true here, the court held, as “the parties settled Averbeck’s claim before dispositive motions were even filed.” The court went on to admonish Ms. Averbeck’s counsel for the fact that most of their hours “spent on this case…related to recovering their own fees.” The court held that it was “left with the sense that counsel intentionally dragged their feet to prolong the case and drive up their fees.” It stated that it would not reward such behavior. Accordingly, the court significantly reduced counsels’ hours from 316 hours down to 172 hours. As for the hourly rates requested, although the court agreed with Ms. Averbeck that her attorneys’ requested rates – $650 per hour for attorney McKennon, $500 per hour for attorney Dufault, and $400 per hour for attorney Salisbury – were “the rates they command in the California market from paying clients for similar work,” it nevertheless stated that Ms. Averbeck failed to show “that experienced ERISA attorneys in Wisconsin were unavailable to handle her case.” Applying more analogous rates for ERISA attorneys in the district, the court awarded $450 for McKennon, $400 for Dufault, and $300 for Salisbury. It was thus left with its new lodestar of $69,725, which it then awarded as fees to plaintiff.

Breach of Fiduciary Duty

Second Circuit

Marlowe v. WebMD, LLC, No. 22-cv-3284 (MKV), 2023 WL 6198665 (S.D.N.Y. Sep. 22, 2023) (Judge Mary Kay Vyskocil). Decedent Erin Kelly began working for WebMD, LLC in 2001 and thus became covered under WebMD’s basic life insurance benefit plan. Over a decade later, Mr. Kelly was diagnosed with cancer. His doctors estimated that he had only six to twenty-four months to live. Remarkably, Mr. Kelly long outlived his dire prognosis. He remained employed at the company for the next six years. Sadly, at the beginning of 2019, Mr. Kelly died from his cancer. The events that took place from the time of Mr. Kelly’s cancer diagnosis in 2012 until the time his widow plaintiff Rebecca Marlowe’s claim for voluntary life coverage was denied are the subject of this lawsuit. Broadly, the complaint alleges that for nearly six years Mr. Kelly expressed a desire to enroll in voluntary life insurance benefits, on top of his basic life insurance benefits, and that for six years WebMD lied to Mr. Kelly by advising him that he was ineligible to enroll in voluntary life benefits without evidence of insurability, which given his terminal cancer diagnosis he naturally could not fulfill. It was not until a meeting in December 2018 when Mr. Kelly and Ms. Marlowe were informed that, in fact, Mr. Kelly was entitled to enroll in the voluntary life benefits for up to five times his annual compensation without evidence of insurability and the “information that Mr. Kelly had received for the preceding six years was, apparently, incorrect.” At this meeting, upon learning this new information, the couple elected to enroll in the voluntary life insurance coverage for a total of $430,000. However, WebMD would never submit enrollment for voluntary life benefits to New York Life, instead leaving Mr. Kelly’s enrollment claim as “pending.” As a result, when Ms. Marlowe applied for both basic life insurance benefits and voluntary life benefits, New York Life only approved and paid the claim for basic life benefits. It never paid nor even responded to Ms. Marlowe’s claim for voluntary life insurance benefits. In this action, Ms. Marlowe seeks those benefits, and has brought ERISA claims under Sections 502(a)(1)(B) and (a)(3). WebMD moved for dismissal of the Section 502(a)(3) breach of fiduciary duty claim pursuant to Federal Rule of Civil Procedure 12(b)(6). The court denied the motion. It found that Ms. Marlowe was not required to exhaust administrative remedies prior to commencing her suit because her complaint alleges that WebMD’s actions deprived the family of the opportunity to even enroll in the voluntary life benefits, meaning she could not possibly exhaust any process in the first place. Additionally, under the Supreme Court’s decision in CIGNA Corp. v. Amara as well as Second Circuit precedent, the court was satisfied that Ms. Marlowe may seek to recover money damages as a form of appropriate equitable relief under Section 502(a)(3). Finally, the court found that Ms. Marlowe pled a cognizable breach of fiduciary duty claim, as it was clear that WebMD was acting in a fiduciary capacity when it allegedly made material misrepresentations to Mr. Kelly and plaintiff that the family relied on to their detriment.

Seventh Circuit

Lard v. Marmon Holdings, Inc., No. 1:22-cv-4332, 2023 WL 6198805 (N.D. Ill. Sep. 22, 2023) (Judge John Robert Blakey). Participants of the Marmon Employees’ Retirement Plan, on behalf of the plan, themselves, and a putative class of similarly situated individuals, sued Marmon Holdings, Inc., its board of directors, the company’s retirement administrative committee, and thirty individual Doe defendants for breaches of their fiduciary duties of prudence and monitoring under ERISA. The operative complaint alleges that defendants breached their duties by allowing the plan to pay excessive fees and retaining poorly performing target date investment fund options. Defendants moved to dismiss the complaint for failure to state a claim. The court granted the motion in this decision. It stated that it could not reasonably infer from the complaint that defendants’ decisions regarding fees and investments fell outside the range of reasonableness. With regard to the recordkeeping and administrative fees the court was not satisfied that plaintiffs alleged sound comparators with plans receiving the same types and qualities of services as the Marmon plan. Moreover, the court stated that “according to Plaintiffs’ own chart, the Plan’s recordkeeping fees decreased every year during the Class Period,” meaning their “claims are not only unfounded, but directly contradicted by the data they cite in their own complaint.” Regarding investment returns, the court not only took issue with plaintiffs comparator plans, but also with the length of time over which the challenged funds allegedly performed poorly. It wrote, “courts do not ‘infer imprudence every time a fiduciary retains a fund that fails to turn in best-in-class performance for any specific period.’” In sum, the court concluded that plaintiffs’ allegations of imprudence fell “far short of the pleading standard outlined by the Seventh Circuit in Hughes II.” Plaintiffs’ derivative duty to monitor claim, which rises and falls with their underlying duty of prudence claim, was also dismissed by the court. Finally, the court declined to address the plan amendment containing a class action waiver, and whether this waiver precludes plaintiffs from proceeding on a class basis. It stated that it need not address the issue in light of its rulings dismissing the complaint for failure to state a claim. Dismissal, however, was without prejudice, and plaintiffs may amend their complaint to cure the shortcomings identified by the court.

Class Actions

Second Circuit

Khan v. Bd. of Dir. of Pentegra Defined Contribution Plan, No. 20-CV-07561 (PMH), 2023 WL 6256204 (S.D.N.Y. Sep. 26, 2023) (Judge Philip M. Halpern), Khan v. Bd. of Dir. of Pentegra Defined Contribution Plan, No. 20-CV-07561 (PMH), 2023 WL 6237862 (S.D.N.Y. Sep. 26, 2023) (Judge Philip M. Halpern). Participants of the multiple employer Pentegra Defined Contribution Plan have sued the plan’s fiduciaries on behalf of the plan and a putative class for breaches of their duties and prohibited transactions for causing the plan to incur unreasonably high administrative and recordkeeping fees causing losses to the plan. This week, two motions were before the court. It ruled on each in a separate order. First, plaintiffs moved to certify their class under Federal Rule of Civil Procedure 23(b)(1). The court granted the motion to certify. Analyzing the proposed class under Rule 23(a), the court was satisfied that it met all of the requirements. As the class has approximately 26,000 members, there was no discussion regarding whether the numerosity requirement was met. Regarding commonality, the court stated that the question of defendants’ liability for their alleged violative ERISA behavior “is common to all class members because a breach of fiduciary duty affects all participants and beneficiaries.” Moreover, the court was persuaded that the named plaintiffs and the class members are in the same boat and “adjudication of the breach of fiduciary duty claims will not turn on any individual class member’s circumstance.” In addition, the court was convinced that the named plaintiffs were adequate representatives with “an interest in vigorously pursuing the claims of the class,” without any “interests that are antagonistic to the class members.” All participants of the plan, the court wrote, “share an interest in remedying any alleged mismanagement of the Plan in violation of ERISA and Plaintiffs’ counsel is qualified to conduct this litigation.” After establishing that plaintiffs satisfied the requirements of Rule 23(a), the court assessed the class under Rule 23(b)(1). Here, it held that class-wide adjudication of the claims is appropriate, it will create consistent standards of conduct for the defendants, proceeding as a class action is in the interests of all parties, and it is nonprejudicial to either defendants or class members. Thus, the court certified the proposed class of plan participants. In the second decision, the court ruled on defendants’ motion to strike plaintiffs’ jury demand. Ultimately, the court granted in part and denied in part the motion. Although the court found that breach of fiduciary duty claims would have historically been within the jurisdiction of the equity courts, it nevertheless concluded that plaintiffs’ claim for make-whole relief to the plan for all losses resulting from the fiduciary breaches was non-equitable in nature as it seeks to recover these losses out of defendants’ assets generally rather from any particular fund or property in defendants’ possession. Thus, this relief was held to be a legal remedy appropriate for a jury trial. However, plaintiffs are also seeking traditional equitable remedies such as removal of fiduciaries, imposition of surcharge, and accounting and reformation of the plan. As these are equitable remedies, the court held that “no jury is required to adjudicate Plaintiff’s claims for these categories of relief.” Under these circumstances, the court concluded that the appropriate course of conduct will be to conduct a jury trial on plaintiffs’ legal claims for money damages resulting from the alleged breaches, and then to conduct a bench trial on the remaining issues and equitable remedies. Accordingly, this breach of fiduciary duty ERISA class action is set to be tried, at least in part, before a jury in the Southern District of New York, making this case a second decision in a district court in the Second Circuit permitting a jury trial in an ERISA fiduciary breach case.  

Disability Benefit Claims

Sixth Circuit

Galvin-Bliefernich v. First Unum Life Ins. Co., No. 1:20-cv-266, 2023 WL 6206148 (E.D. Tenn. Sep. 22, 2023) (Judge Charles E. Atchley, Jr.). During a car crash in 2016, plaintiff Cherish Galvin-Bliefernich suffered serious injuries which left her with enduring musculoskeletal, cognitive, gastrointestinal, and psychiatric impairments, including post-concussion syndrome, PTSD, chronic pain, and pelvic, back, and knee injuries. The following year, in 2017, Ms. Galvin-Bliefernich applied for and began receiving long-term disability benefits under her ERISA-governed plan insured by First Unum Life Insurance Company. In this action, the former elementary school teacher sought judicial review of Unum’s decision to terminate her disability benefits. The parties each moved for judgment. In addition, Ms. Galvin-Bliefernich moved to determine the extent of Unum’s deference. The court started with this latter motion. It held, “there is no colorable legal argument that the Court should review the instant motion under anything other than an arbitrary and capricious standard of review,” and stated that it would only consider Unum’s conflict of interest “as but one factor in the Court’s review.” As for the denial of benefits itself, the court found that the medical record supported Unum’s view that Ms. Galvin-Bliefernich was not physically precluded from performing sedentary work and therefore not entitled to continued benefits under the terms of her policy. It stated that Unum’s termination decision was supported not only by its file-reviewing physicians, but also by the opinions of some of Ms. Galvin-Bliefernich’s treating physicians. Accordingly, based on this evidence, the court was satisfied that “there was a reasoned basis for Unum’s denial of Plaintiff’s LTD claim.” Moreover, the court disagreed with Ms. Galvin-Bliefernich that Unum acted arbitrarily in failing to credit the opinions of the majority of her treating physicians as well as her own subject complaints of pain. It stated that it was not its job to weigh which parties’ evidence was more credible or reasonable, but only to decide whether Unum had a credible basis for its decision. Concluding that it did, the court upheld Unum’s decision, and granted its motion for judgment.

Life Insurance & AD&D Benefit Claims

Fifth Circuit

Lohse v. UNUM Ins. Co. of Am., No. 5:21-CV-00143-RWS-JBB, 2023 WL 6213440 (E.D. Tex. Sep. 25, 2023) (Judge Robert W. Schroeder III). In the fall of 2019, decedent Jay Lohse died due to blunt force trauma to the head resulting from a car accident. At the time of his death, Mr. Lohse was employed at Central Research Inc. and a participant in its ERISA-governed life insurance and accidental death and dismemberment (“AD&D”) plans insured by defendant Unum Insurance Company of America. His beneficiary and brother, plaintiff Haydn Gabriel Lohse, applied for benefits under both plans. Unum approved and paid the life insurance benefit claim, but denied the AD&D claim because of certain coverage exclusions. In particular, Unum determined that Mr. Lohse’s documented medical history of narcolepsy indirectly caused his death. Unum also applied the plan’s crime exclusion as grounds for denial. In this action, Mr. Lohse sued Unum under ERISA to challenge the denial of AD&D claim. He asserted claims under Sections 502(a)(1)(B) and (a)(3). The parties filed competing motions for summary judgment. The matter was assigned to a Magistrate Judge, who issued a report and recommendation recommending that each party’s motion for judgment be granted in part and denied in part. Specifically, the report found that Mr. Lohse met his burden under de novo review to prove his entitlement to AD&D benefit recovery. The Magistrate Judge ruled that under the policy terms only proximate and concurrent proximate causes of death can bar benefit recovery and that Mr. Lohse’s narcolepsy was not a proximate cause of death. Therefore, the Magistrate Judge recommended that Mr. Lohse’s motion for summary judgment be granted on his claim for benefits, and Unum’s cross-motion on the (a)(1)(B) claim be denied. Conversely, the Magistrate Judge recommended that Unum’s motion be granted, and plaintiff’s denied, on the breach of fiduciary duty claim. Finally, the Magistrate Judge recommended that Mr. Lohse file an updated motion for attorneys’ fees and costs pursuant to Section 502(g)(1). Unum filed objections to the report and recommendation on the portion of the report favorable to Mr. Lohse, i.e., the benefits claim. In this decision the court overruled Unum’s objections and adopted the report in full. It found “that the insurance policy’s exclusion language here only bars recovery of benefits based on proximate cause or concurrent proximate causes, and the policy holder’s narcolepsy functioned as an indirect cause that is too remote to bar recovery of accidental death benefits under the disease exclusion.” The court ruled that the policy needed to go much further to “make it clear that coverage is excluded in the situation where disease is the indirect cause of an accident that was the sole, proximate or direct cause of the loss.” As the plan language here was not broad or clear enough to do so, the court agreed with the Magistrate that the disease exclusion did not apply. Moreover, the court also stated that the record did not show that Mr. Lohse’s death resulted from the commission of any crime, as there was no evidence that Mr. Lohse was driving under the influence of drugs or alcohol or even that he was speeding or improperly passing. Accordingly, the court adopted the report and recommendation, concurring with the Magistrate that Mr. Lohse was entitled to benefits.

Medical Benefit Claims

Fourth Circuit

Swartzendruber v. Sentara RMH Med. Ctr., No. 5:22-cv-055, 2023 WL 6279361 (W.D. Va. Sep. 26, 2023) (Judge Michael F. Urbanski). Plaintiff Michael Swartzendruber seeks to bring an unusual ERISA class action against his medical providers, the RMH Medical Group, LLC, and the insurer of his healthcare plan, UnitedHealthcare Insurance Company, for playing a role in systematically overcharging him out-of-pocket expenses for medical services he received. Mr. Swartzendruber asserts five counts in his complaint: (1) a claim to recover benefits due under the plan; (2) a claim for breach of fiduciary duty on behalf of the plan; (3) an equitable relief claim seeking reprocessing of the healthcare claims; (4) a RICO violation claim; and (5) a claim for violation of the Virginia Consumer Protection Act. Defendants moved to dismiss. The court granted in part and denied in part the motions to dismiss. Specifically, the court denied the motions to dismiss the Section 502(a)(1)(B) benefit claim and the Section 502(a)(3) reprocessing claim, and granted the motions to dismiss the breach of fiduciary duty Section 502(a)(2) claim, the RICO claim, and the state law consumer protection act claim. Starting with the benefit claim, the court wrote that Mr. Swartzendruber “sufficiently alleged that he was entitled to payment under the United Defendants’ contract with RMH Medical,” that he “alleged facts sufficient to make administrative exhaustion plausible,” and the dispute centers on a benefit determination under the terms of the ERISA plan. The court also allowed Mr. Swartzendruber to simultaneously assert a cause of action under Section 502(a)(3). Given the strange nature of this action, which was brought against providers and an ERISA-plan insurer, the court found “a traditional action under ERISA § 502(a)(1) to recover benefits under the plan would not provide sufficient relief. Full redress of Swartzendruber’s injury requires a mechanism to remedy the [provider] defendants alleged misrepresentations. That mechanism is the equitable relief envisioned by ERISA § 502(a)(3).” Regardless, the court concluded that Mr. Swartzendruber’s Section 502(a)(2) claim was inappropriate for this action as the “relief Swartzendruber seeks would flow not to the Plan, but directly to Swartzendruber and other similarly situated plan participants.” Therefore, the court dismissed the breach of fiduciary duty claim asserted under 502(a)(2), concluding that Mr. Swartzendruber lacked standing to bring this claim. The court also dismissed Mr. Swartzendruber’s RICO claim. It found that he failed to allege a pattern of racketeering activity necessary to state a claim under RICO. Finally, the court dismissed the Virginia Consumer Protection Act claim, finding it both completely and expressly preempted by ERISA. Mr. Swartzendruber, the court stated, is a plan beneficiary, whose “core complaint is that he was charged more than his ERISA-governed plan allowed because of the [provider] Defendants’ misrepresentations, which can be remedied through § 502(a).”

Ninth Circuit

Bruce M. v. Sutter W. Bay Med. Grp. Health & Welfare, No. 22-cv-06149-JST, 2023 WL 6277269 (N.D. Cal. Sep. 25, 2023) (Judge Jon S. Tigar). Plaintiffs Bruce M. and J.M., a father and his young adult daughter, have sued J.M.’s ERISA-governed healthcare plan, the Sutter West Bay Medical Group Health and Welfare Plan, and its administrator and insurer, Aetna Life Insurance Company, to challenge defendants’ denial of J.M.’s claim for her stay at a residential treatment facility. Plaintiffs bring claims for recovery of benefits under Section 502(a)(1)(B) and breaches of fiduciary duties under Section 502(a)(3). Defendants jointly moved to dismiss the complaint pursuant to Federal Rules of Civil Procedure 12(b)(1) and (b)(6). They argued that J.M. lacks Article III standing because it was her father who incurred out-of-pocket expenses as a result of the denials, that Bruce M. is not authorized to bring claims relating to the Plan under ERISA because he is neither a participant nor beneficiary, and that plaintiffs fail to state both of their causes of action. The court began its analysis by addressing plaintiffs’ standing. Beginning with J.M., the court steadfastly disagreed with defendants that she had not suffered an injury in fact because her father paid for the costs of her treatment at the residential mental healthcare facility. “Defendants’ argument misunderstands the question. The question is not whether J.M. is presently in a state of indebtedness; rather, the question is whether Aetna wrongly denied J.M. benefits to which she was entitled under the Plan. ‘ERISA’s core function is to protect contractually defined benefits.’” Thus, the court was resolute that J.M. suffered a concrete injury in the form of denied health care benefits which she alleges she was owed under her plan. The court also found that J.M. has standing to seek equitable relief in the form of disgorgement and surcharge. However, it agreed with Aetna that J.M. lacks standing to seek prospective forms of equitable relief, including a declaration of her rights to future benefits under the plan and an injunction prohibiting Aetna from serving as a fiduciary with respect to the plan. This was so, the court held, because Aetna no longer is a fiduciary of the plan and therefore “has no ongoing role with respect to employee group health coverage offered to employees of Sutter West Bay Medical Group and their beneficiaries.” Moreover, the court agreed with defendants that plaintiff Bruce M. is not authorized to sue as he is not a plan participant or beneficiary, nor a healthcare provider who has been assigned benefits. Accordingly, Bruce M. was dismissed as a plaintiff in this action. The decision then analyzed the sufficiency of J.M.’s pleading of her two causes of action. It ultimately took no issue with either claim, finding that J.M. adequately pled entitlement to coverage for medically necessary residential treatment programs for the treatment of mental illnesses, and that J.M. sufficiently alleged defendants breached their fiduciary duties by acting disloyally, imprudently, and not in accordance with the terms of the plan. Therefore, neither of J.M.’s claims were dismissed pursuant to Rule 12(b)(6). For these reasons, defendants’ motion to dismiss was granted as to Bruce M.’s claims and J.M.’s claims for prospective relief, but denied in all other respects.

Boyle v. Legacy Health Plan No. 504, No. Civ. 6:20-cv-00705-AA, 2023 WL 6318923 (D. Or. Sep. 28, 2023) (Judge Ann Aiken). Plaintiff Riley Boyle commenced this ERISA action against her healthcare plan, the Legacy Health Plan No. 504, its sponsor, Legacy Health, and its third-party administrator, PacificSource Health Plans, after her claim for benefits to cover the cost of her one-year stay from the summer of 2017 to the summer of 2018 at a residential treatment facility in Utah while she was teenager was denied. The plan denied Ms. Boyle’s claim for benefits at the time because the facility was an out-of-network provider. The plan only covers out-of-network mental healthcare when three conditions are met: (1) the treatment is medically necessary, (2) the treatment is not available through an in-network provider, and (3) the care has been preapproved. In denying the claim, defendants’ only stated basis for denying coverage was that there were in-network options available to Ms. Boyle to treat her concurrent mental health conditions, which included depression, trauma, self-harm, disordered eating, and suicidal ideation. Ms. Boyle maintains that the plan never presented an appropriate in-network medical option to treat her conditions, and that the plan violated ERISA’s claims handling procedures by not having a mental healthcare professional weigh in on the appropriateness of in-network facilities to treat her illnesses. In this lawsuit, Ms. Boyle seeks judicial review of her denial, and payment of the benefits for her stay, and in this order she received both. Before the court were the parties’ cross-motions for judgment as well as Ms. Boyle’s motion to strike a declaration submitted by defendants concerning an in-network facility considered appropriate to treat Ms. Boyle’s conditions. To begin, the court granted the motion to strike the challenged declaration, as the court agreed with Ms. Boyle that it was an attempt by defendants to add new bases to justify the denial during litigation that were not included as part of the administrative record. The court also denied defendant PacificSource Health Plans’ motion to dismiss, in which it argued that it is not a proper defendant as its role was purely ministerial. The court disagreed, finding that PacificSource exercised discretion through denying Ms. Boyle’s claim and upholding that denial during the internal appeals process. As one last preliminary issue, the court settled on the appropriate review standard, agreeing with all parties that abuse of discretion review applied. Additionally, the court agreed with Ms. Boyle that defendants’ structural conflict of interest should be factored in during its analysis of the claims denial. The court then analyzed whether defendants abused their discretion in determining that there were appropriate services available in-network to treat Ms. Boyle. First, the court held that defendants “failure to consult with a medical provider certified and experienced in the field of mental health before determining that there were appropriate services available in-network weighs in favor of finding an abuse of discretion.” Next, the court agreed with Ms. Boyle that none of the in-network residential facilities were appropriate for the care that she required. “Defendants offered only the vague statement that appropriate services were available, but Defendants did not identify any appropriate providers.” As a result, the court concluded that it was necessary for Ms. Boyle to seek out-of-network care and that she was entitled to coverage for her claims under the terms of the plan. Accordingly, the court found that defendants abused their discretion in denying the claims and so granted Ms. Boyle’s motion for judgment and denied defendants’ cross-motion for judgment. The court concluded by finding that the appropriate remedy in this case was a retroactive benefits award, “because Defendants’ denial of benefits is contrary to the factual record.”

Tenth Circuit

A.H. v. Healthkeepers, Inc., No. 2:22-CV-368 TS, 2023 WL 6276599 (D. Utah Sep. 26, 2023) (Judge Ted Stewart). Plaintiff A.H., on behalf of minor child H.H., sued defendant Healthkeepers, Inc. d/b/a Blue Cross and Blue Shield, the insurer and claims administrator of the family’s ERISA-governed welfare benefits plan, under ERISA Section 502(a)(3) seeking payment of the $250,000 A.H. incurred in connection with H.H.’s one-year stay at a mental health residential treatment facility. Defendant moved to dismiss the complaint for failure to state a claim. The court denied the motion to dismiss plaintiff’s claim for violation of the Mental Health Parity and Addiction Equity Act, but granted the motion to dismiss the breach of fiduciary duty claim. Starting with the Parity Act claim, the court found that plaintiff adequately pled a facial disparity in the plan between the accreditation requirements for skilled nursing facilities and mental healthcare residential treatment facilities. “On its face, this discrepancy is sufficient to support a plausible violation of the Parity Act. That Plaintiffs have not explained the specifics of how a skilled nursing facility can obtain coverage without accreditation is not detrimental to their claim at this point in the litigation process before discovery has been conducted. At this stage, it is reasonable to infer that obtaining approval from Defendant is less onerous than the accreditation requirements imposed on residential treatment centers.” Accordingly, the court denied the motion to dismiss the equitable relief claim for violating the Parity Act. However, the court did dismiss plaintiff’s breach of fiduciary duty claim. This claim alleged essentially that defendant adopted plan eligibility requirements for covering residential treatment services which offered the appearance that this treatment was covered under the plan while at the same time making it unlikely that the plan would ever have to actually incur the cost of such coverage. The court agreed with defendant that plan design is a non-fiduciary act under ERISA that cannot give rise to a fiduciary breach claim. Thus, the court dismissed this claim pursuant to Federal Rule of Civil Procedure 12(b)(6).

M.A. v. United Healthcare Ins., No. 1:21-CV-00083-JNP-DBP, 2023 WL 6318091 (D. Utah Sep. 28, 2023) (Judge Jill N. Parrish). A plan participant, M.A., and his daughter, a plan beneficiary, Z.A., brought this ERISA action against their healthcare plan, the Kaiser Aluminum Fabricated Products Welfare Benefit Plan, and its administrators, United Healthcare Insurance and United Behavioral Health, after the family was denied reimbursement for Z.A.’s stays at two residential treatment centers for the treatment of her mental health disorders. The claims for benefits were denied by the plan on two grounds. First, one of facilities was denied as being an “experimental” wilderness program, excluded by United through a policy guideline outside the terms of the plan. Both facilities were also denied for not being medically necessary. In their action, the family asserted claims for recovery of $230,000 in unreimbursed medical expenses stemming from Z.A.’s treatment. Additionally, plaintiffs asserted an equitable relief claim under Section 502(a)(3) for violation of the Mental Health Parity and Addiction Equity Act. The parties filed competing motions for summary judgment. Before resolving the summary judgment motions, the court stated that it would apply abuse of discretion review. It declined to consider whether to lower the standard of review to de novo based on plaintiffs’ allegations of defendants’ procedural violations, writing, “the court need not adjudicate the procedural deficiencies Plaintiffs allege in determining which standard to apply, because the court would grant Plaintiffs summary judgment on their ERISA Claim under either standard. The court will therefore proceed under arbitrary and capricious review.” The court then determined that defendants’ use of the plan’s experimental treatment exclusion was inappropriate, as the wilderness policy was ambiguous, impermissibly amended the plan’s terms, and was applied arbitrarily. Moreover, the court found defendants’ denials on medical necessity grounds for both treatment facilities to be an abuse of discretion. Defendants, the court held, did not engage meaningfully with Z.A.’s medical records, the opinions of her treating physicians, or provide sufficient explanations for their reasons for denying benefits. Taken together, these actions constituted an abuse of discretion. The court thus granted summary judgment to plaintiffs on their benefits claim, and denied defendants’ motion for summary judgment. It then side-stepped resolution of the Parity Act violation claim, determining that it was premature to rule on “the possibility of future denial of benefits.” The decision ended with a discussion about the appropriate remedy for the arbitrary and capricious benefit denials. In the end the court determined that remand was the appropriate remedy. Nevertheless, the court clearly struggled with this decision, acknowledging the inherent tension in remanding to defendant as a remedy for its arbitrary behavior. Indeed, the court wrote a comprehensive outline of the ways in which remand is an absurd remedy. “Perhaps, by so limiting the grounds on which Defendants can reconsider their coverage decisions upon remand, the court turns this procedure into an exercise in futility. The court has held that Defendants’ decision to deny benefits, on the grounds outlined in their denial letters, was arbitrary and capricious. Relying on those same rationales to deny benefits on remand would be arbitrary and capricious a second time. But those are the only rationales Defendants may rely upon, because granting them another opportunity to engage in a more searching inquiry of Z.A.’s medical records at this point would undermine the entire purpose of the meaningful dialogue ERISA requires.” Still, despite this astute observation, the court declined to order the benefits be paid and instead opted for remand. And despite the ultimate decision to remand, this decision is yet another recent mental healthcare benefit victory in Utah, which we here at Your ERISA Watch are always happy to cover.

Pension Benefit Claims

Fourth Circuit

Bova v. Abbott Labs, No. 1:21-CV-274, 2023 WL 6314570 (M.D.N.C. Sep. 28, 2023) (Judge William Lindsay Osteen Jr.). Plaintiff David J. Bova worked for Kos Pharmaceuticals, Inc. for ten years from 1992 until 2002. The year before he left Kos, Mr. Bova was sent a letter from the company stating, “if and when an employee pension plan is implemented for the Company, you will be considered eligible based on your tenure with the Company through your last day of active employment and your age, subject to the provisions of such a plan.” There would eventually be a pension plan in 2006, when Kos was acquired by Abbott Laboratories, Inc. Following the merger, Abbott’s plan “became Kos’ plan.” Mr. Bova believes that, under the terms of Kos’ letter, he should be considered a participant of that plan, and is entitled to benefits under it. In this action, Mr. Bova has sued the companies and the retirement plan administrator seeking those benefits. He brings four causes of action: a claim for benefits under ERISA Section 502(a)(1)(B), a claim for denial of requested plan documents under ERISA Section 502(c), a state law claim for breach of contract, and a state law claim for fraud. Defendants filed motions to dismiss Mr. Bova’s complaint for failure to state a claim. Their motions were granted in this order. At the outset, the court dismissed the companies as defendants. It found that Mr. Bova’s complaint included “merely conclusory statements” that the companies were “fiduciaries of any pension plan such that they exercise any discretion or control.” Without specific allegations about how the employers controlled the plan, the court found that they were not proper ERISA defendants and so granted their motion to dismiss the ERISA causes of action. That left the court only with the plan administrator as a defendant of the ERISA claims. The court ultimately dismissed the ERISA claims against the plan administrator too, as it concluded that the unambiguous terms of the plan made clear that Mr. Bova did not qualify as an “employee” and was not eligible to participate in the plan or receive benefits from it. The court stated, “under the terms of the Abbott Pension Plan, Plaintiff must have been treated as an employee by Abbott for employment and Federal income tax purposes during the year of the merger to be eligible for plan benefits… Plaintiff does not allege that he was treated as an employee for employment and Federal income tax purposes from the year 2006 onward, therefore Plaintiff is not an employee eligible to participate in the Abbott Pension Plan by its terms.” Consequently, the court found that both Mr. Bova’s benefits claim and his claim for failure to produce plan documents upon request failed, and thus it dismissed both causes of action. Having dismissed the federal ERISA claims, the court stated that it lacked subject matter jurisdiction over the two state law claims. It therefore dismissed these claims, without prejudice. Accordingly, the entirety of Mr. Bova’s complaint was dismissed.

Sixth Circuit

Su v. Allen, No. 3:17-cv-784-BJB, 2023 WL 6323310 (W.D. Ky. Sep. 28, 2023) (Judge Benjamin Beaton). The Department of Labor initiated this lawsuit against Sypris Solutions, the Sypris 401(k) Merged Retirement Savings Plan, and members of its savings plan advisory committee for mishandling forfeitures under the plans. Acting Secretary of Labor Julie A. Su and Sypris Solutions have jointly submitted a proposed consent order and judgment against Sypris only. The judgment would require Sypris to pay a $57,500 penalty, and to allocate $575,000 to the retirement accounts of affected plan participants, which it defines as participants whose payments are pro-rated at over $250 dollars. “To avoid the administrative costs of reallocating amounts the parties treat as de minimis, plan participants whose payment would fall below $250 are not entitled to anything.” However, none of the plan participants, including those who will not receive a payment from the proposed judgment, would be bound by the judgment. Under these terms, they would therefore still have contractual rights under the plan to bring individual suits against Sypris should they wish to do so. The court in this order approved and entered the proposed consent order and judgment, finding it fair, reasonable, and adequate, and consistent with the public interest and the goals of ERISA. It held, “the agreed resolution serves the public interest by deterring violations of ERISA, carrying out Congress’ instruction that plan sponsors should carry out their fiduciary duties in accordance with governing plan documents, providing both public and private remedies, and avoiding the added delay and expense of a trial.” Moreover, the court was satisfied that the terms of the judgment were the result of “a hard-fought compromise,” and the product of good-faith and informed negotiations. Accordingly, the court approved and entered the proposed judgment.

Seventh Circuit

Komaniecki v. Ill. Tool Works, Inc. Ret. Accumulation Plan, No. 21-cv-2492, 2023 WL 6198817 (N.D. Ill. Sep. 22, 2023) (Judge Joan B. Gottschall). Plaintiff James Komaniecki worked for Illinois Tool Works, Inc. from 2000 until 2004. In 2004, he stopped working for the company and went on long-term disability. Over the years, Mr. Komaniecki was given conflicting information about whether he qualified for pension benefits under the company’s defined benefit pension plan. And over the years, the requirements for eligibility in fact shifted. Under the 2001 plan document, employees only became eligible for benefits after 5 years of qualifying vesting service. Under later versions of the plan, that requirement dropped to just 3 years of vesting employment. Mr. Komaniecki, who had just over 4 years of vested employment service, was therefore eligible only under the latter requirements. Eventually, Mr. Komaniecki applied for benefits under the plan. Relying on the 2001 plan document, which was the governing document during Mr. Komaniecki’s tenure at the company, defendants denied Mr. Komaniecki’s claim for pension benefits. Following an unsuccessful administrative appeal challenging that denial, Mr. Komaniecki commenced this ERISA lawsuit, asserting two claims, a claim for benefits under Section 502(a)(1)(B), and a claim for breach of fiduciary duty under Section 502(a)(3). Defendants moved for summary judgment on both counts. In this order their motion was granted by the court. Beginning with the benefits claim, the court agreed with defendants that their denial was not arbitrary and capricious given that Mr. Komaniecki did not qualify for benefits under the unambiguous terms requiring five years of vesting credit for employees to become eligible for pension benefits under the governing plan document. The court stated that Mr. Komaniecki “develops no argument that the plan administrator’s decision was arbitrary, capricious, or otherwise incorrect,” and therefore held that it could not disturb defendants’ determination. Next, the court progressed to the breach of fiduciary duty claim. It first found that statements by the company’s HR representative and statements on the company’s website could not be breaches of fiduciary duties because they were not made by a plan fiduciary, but rather by employees with no authority concerning the plan or its management or administration. It expressed that the plan’s fiduciaries could not be held liable for the actions of its non-fiduciary employees and that there was nothing in the record proving “that a plan fiduciary made or knew about” these inaccurate and misleading representations. However, the court concluded that communications, inaccurate information, and omissions made to Mr. Komaniecki during his 2019 communication with the plan were attributable to a plan fiduciary. Nevertheless, the court determined that it need not decide whether a breach had occurred during these communications with the plan “because there is no genuine dispute on the harm element.” It was clear from the record evidence that Mr. Komaniecki knew he had been sent the wrong plan document and that even under the terms of the non-governing plan document Mr. Komaniecki could not be considered an “eligible employee” under the clear language of the plan. Accordingly, the court found that Mr. Komaniecki failed to come forward with sufficient evidence to establish harm resulting from the fiduciary breach and therefore granted defendants’ motion for summary judgment on both claims.

Plan Status

Sixth Circuit

DiGeronimo v. Unum Life Ins. Co. of Am., No. 1:22-cv-00773, 2023 WL 6258258 (N.D. Ohio Sep. 26, 2023) (Judge David A. Ruiz). Plaintiff Donald DiGeronimo is challenging defendant Unum Life Insurance Company of America’s denial of his long-term disability benefits under two separate plans in this lawsuit. Although the parties agree that one policy is definitely governed by ERISA, there is a threshold issue between them over whether the second policy is also governed by ERISA. Mr. DiGeronimo maintains that it is not, that it is a supplemental individual policy separate from the group plan, and that he is therefore entitled to open discovery related to the second plan. The parties filed cross-motions on the issue of whether the second disability policy is governed by ERISA. In this order the court ruled that ERISA governs the policy. It concluded that the plan does not fall under ERISA’s “safe harbor” exemption because Mr. DiGeronimo’s employer, at least initially, paid the premiums on the plan. “For the safe harbor exemption to apply, it requires that an employer make no contributions.” Having established that Mr. DiGeronimo could not satisfy all four of the safe harbor criteria, the court concluded that the policy was established and maintained by the employer and therefore governed by ERISA. Thus, Unum’s motion for an order that ERISA applies to the policy was granted, and Mr. DiGeronimo’s cross-motion on the issue was denied.

Pleading Issues & Procedure

Ninth Circuit

Meyer v. UnitedHealthcare Ins. Co., No. CV 21-148-M-DLC, 2023 WL 6241140 (D. Mont. Sep. 26, 2023) (Judge Dana L. Christensen). Plaintiff John Meyer moved for leave to file a second amended complaint in his action against UnitedHealthcare Insurance Company and Billings Clinic wherein he alleges that defendants are engaging in surprise billing and practices charging insured participants more than their maximum deductibles. In his motion, Mr. Meyer seeks to add a previously dismissed RICO claim, to add a new defendant, Regional Care Hospital Partners Holdings, Inc. (“RCCH”), and to convert his existing ERISA claims into class-action claims. Defendants opposed the motion to amend. The court granted in part and denied in part the motion. First, it denied the motion to reallege the RICO claim, concluding that Mr. Meyer did not add any substantive allegations of fact or supporting proof to cure the deficiencies it previously identified. Second, the court permitted Mr. Meyer to add the new defendant and to assert a knowing participation in fiduciary breach claim against it. “This matter is still in its early stages and the Court finds that adding RCCH at this point in time presents no acute threat of significant prejudice to RCCH.” Third, the court granted the motion to convert the surviving ERISA causes of action into class-action claims. The court stated that it would be premature to assess Mr. Meyer’s putative class under Rule 23 at this juncture, and that it wishes to be careful of not depriving Mr. Meyer of the opportunity of developing his claims through discovery. Last, the court instructed Mr. Meyer to remove statements he included in his amended complaint that it had struck in a previous order for being irrelevant and immaterial.

Provider Claims

Ninth Circuit

Cal. Spine & Neurosurgery Inst. v. Blue Cross of California, No. 22-cv-03782-JD, 2023 WL 6226370 (N.D. Cal. Sep. 22, 2023) (Judge James Donato). In this healthcare provider action, plaintiff California Spine and Neurosurgery Institute d/b/a San Jose Neurospine has sued Blue Cross of California and 100 Doe defendants seeking reimbursement for surgical services it provided to fourteen patients who were members or beneficiaries of ERISA-governed welfare plans administered and insured by Blue Cross. Plaintiff alleges that it has been assigned healthcare benefit coverage rights by these patients and that Blue Cross has failed to pay the usual and customary rates for out-of-network providers which it is required to pay under the terms of the ERISA plans. The neurosurgery center asserts claims for benefits under Section 502(a)(1)(B), as well as recovery of attorneys’ fees under 502(g)(1). Blue Cross moved for dismissal. Its motion was granted in part and denied in part. To begin, the court rejected Blue Cross’s argument that plaintiff failed to state claims for benefits under the terms of the plans. To the contrary, the court stated that Blue Cross was not fairly characterizing the allegations in the complaint, and expressed that this is not a case where the insurance provider, “in trying to respond to the TAC, ‘would have little idea where to begin.’” Accordingly, the court was satisfied that the complaint stated claims for benefits under (a)(1)(B) and satisfied Rule 8 notice pleading. Additionally, the court declined to dismiss the complaint for failure to exhaust administrative remedies. The provider explained that Blue Cross “has violated the applicable claims procedure regulations governing ERISA plans,” and therefore argued that it should be deemed to have exhausted the administrative remedies under the plans. Given plaintiff’s argument and the early stage of litigation, the court refused to dismiss for failure to administratively exhaust, but informed Blue Cross that it may renew these arguments in the future if the circumstances justify doing so. However, the court did dismiss the seven benefit claims with dates of service between 2014 and 2017. It agreed with defendant that these claims were time-barred under California’s applicable four-year statute of limitations period for contract disputes. The court also rejected the provider’s explanation for why the statute of limitations should be tolled. Instead, it ruled that the center knew about these claims, having brought a previous lawsuit seeking reimbursement of them, and the statute of limitations was therefore triggered. Dismissal of the untimely claims was without leave to amend. The court viewed amendment of these claims futile. Finally, the court dismissed all 100 Doe defendants, although dismissal was without prejudice so that plaintiff may later request to add additional defendants as warranted. At present, the court saw the unnamed defendants as unjustifiably numerous and the allegations about who they may be to be “wholly conclusory.”

Severance Benefit Claims

Fourth Circuit

Benzing v. USAA Officer Severance Plan, No. 3:22-cv-146-MOC-DSC, 2023 WL 6305805 (W.D.N.C. Sep. 27, 2023) (Judge Max O. Cogburn Jr.), Benzing v. USAA Officer Severance Plan, No. 3:22-cv-146-MOC-SCR, 2023 WL 6307079 (W.D.N.C. Sep. 26, 2023) (Judge Max O. Cogburn Jr.). Plaintiff Lisa Benzing sued the USAA Officer Severance Plan under ERISA after she was terminated from her position and denied benefits under the plan. The parties filed cross-motions for summary judgment. In addition, Ms. Benzing moved to include certain employment documents as part of the administrative record. These documents included a hiring letter, an employee benefits handbook, a W-2 tax form, bonus payment documentation, and other employment records. The court granted Ms. Benzing’s motion to include these documents as part of the record. It found these documents and the information they included to be indisputably created by USAA and known to the plan administrator, relevant to Ms. Benzing’s benefit claim, and helpful to the court for its resolution of that claim. The court then proceeded to adjudicate the cross-motions for summary judgment. As a preliminary matter, it agreed with defendant that abuse of discretion review applied given the plan’s grant of discretionary authority. The court declined to apply a de novo standard of review in this instance despite defendant’s noncompliance with ERISA’s claims handling procedures, as it concluded that Ms. Benzing was not prejudiced by the noncompliance. Under the deferential review standard, the court concluded that the decision to deny benefits based on defendant’s determination that Ms. Benzing failed to meet the standards of job performance was supported by substantial evidence. “While Plaintiff disputes Defendant’s contention that she was not meeting the standards of her job performance, even in the wrongful termination context, it is the employer’s assessment of an employee’s performance that counts, not the employee’s.” Thus, the court concluded that the decision to deny severance benefits was reasonable, and so upheld it, granting defendant’s motion for summary judgment and denying plaintiff’s.

Subrogation/Reimbursement Claims

Seventh Circuit

GC Am. v. Hood, No. 20-cv-03045, 2023 WL 6290281 (N.D. Ill. Sep. 27, 2023) (Judge Andrea R. Wood). Plaintiff GC America Inc. is the sponsor and fiduciary of the GC America Inc. Group Benefit Plan. It has sued a plan participant, defendant Kevin Hood, and Mr. Hood’s counsel who represented him in his third-party medical negligence action, defendant Law Offices of Goldberg & Goldberg (“Goldberg”), under ERISA to recover $1,732,846.51 it paid for Mr. Hood’s medical bills pursuant to the plan’s subrogation and reimbursement clause. Defendant Goldberg moved to dismiss the claims against it. Meanwhile, GC America moved for default judgment against Mr. Hood. The decision began with Goldberg’s motion to dismiss. The court held, “GC America has pleaded facts sufficient to support its claim for equitable relief under ERISA in the form of constructive trust or equitable lien in its favor, injunctive relief, and declaratory relief.” It stated that GC America need only plead “upon information and belief” that the specific, identified settlement funds it seeks are retained by Goldberg and in the law offices’ possession. Thus, Goldberg’s motion to dismiss these claims was denied. However, the court granted Goldberg’s motion to dismiss the claim seeking equitable surcharge against it under Section 502(a)(3), as Goldberg is not a plan fiduciary under ERISA. Next, the court turned to GC America’s motion for default judgment against Mr. Hood, which it denied for two reasons. First, the court had entered default against Mr. Hood as to GC America’s original complaint, but not as to its amended complaint, and it was therefore concerned whether “its entry of default can still stand in light of the amended complaint.” Even aside from this issue, however, the court also concluded that denial of the motion for default judgment against Mr. Hood was necessary because the two defendants in this action are jointly and severally liable and granting GC America’s motion against Mr. Hood would therefore run “the risk of inconsistent judgments related to the Award proceeds.”


Second Circuit

Penrose v. N.Y. Life Ins. Co., No. 22 Civ. 2184 (JPC), 2023 WL 6198249 (S.D.N.Y. Sep. 22, 2023) (Judge John P. Cronan). After his long-term disability benefits were terminated, plaintiff Frederick Penrose sued defendants New York Life Insurance Company and Life Insurance Company of America (“LINA”) under ERISA, seeking a court order challenging that decision. Defendants moved to dismiss the complaint against New York Life for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6), to dismiss LINA for lack of personal jurisdiction under Rule 15(a)(2), and dismissing the action for improper venue pursuant to Rule 12(b)(3). In the alternative, defendants moved to transfer this action in the interest of justice to the District of Utah. In this order the court denied the motion to dismiss, but granted the alternative motion to transfer, agreeing that Utah was a more appropriate venue for this action given that Mr. Penrose is a resident of Utah, and his doctors and other witnesses are also located there. The court wrote that Utah was the venue with the most interest in and connection to this action as “Plaintiff resides and worked in Utah, received benefits checks in Utah, and had his benefits terminated while residing in Utah.” Furthermore, the court stated that Mr. Penrose’s forum choice should not be given great deference because “the operative facts have no connection to the chosen district.” Nevertheless, the court was unwilling to dismiss the case, and instead left the merits of defendants’ motion to dismiss for the District of Utah to weigh and decide.

Tenth Circuit

J.K. v. Anthem Blue Cross & Blue Shield, No. 2:22-cv-00370 JNP, 2023 WL 6276598 (D. Utah Sep. 26, 2023) (Judge Jill N. Parrish). Plaintiffs J.K. and K.K. sued their self-funded employee welfare benefits plan, the General Dynamics corporation Anthem BCBS Premium HAS & Premium Plus HAS Benefits Plan, the plan’s administrator, General Dynamics Corporation, and its claims administrator, Anthem Blue Cross and Blue Shield, seeking reimbursement of costs for mental health treatment K.K. received in Utah at a residential treatment facility. Plaintiffs assert claims for recovery of benefits, violation of the Mental Health Parity and Addiction Equity Act, and statutory penalties for failure to produce documents upon request. Defendants moved to transfer venue to the Eastern District of Virginia, where General Dynamics is headquartered. The court granted the motion to transfer in this order. Although the court acknowledged that a “plaintiff’s choice of forum should rarely be disturbed,” it nevertheless chose to give little deference to plaintiffs’ forum selection because the family resides in the state of Georgia and “K.K.’s treatment in Utah provides the only connection to this forum.” As the family lives outside the district, the defendants are not located in Utah, and the alleged breaches, including the decision to deny benefits, did not occur in the State, the court found the circumstances did not justify adjudicating the action in the District of Utah. Rather, the court held that practical considerations, including convenience of the witnesses, relative congestion of the courts’ dockets, and the location of the key pieces of evidence all favored transferring the case to the east coast. Consequently, the case will proceed in the Eastern District of Virginia.