Asner v. The SAG-AFTRA Health Fund, No. 2:20-cv-10914-CAS-JEMx, 2023 WL 6984582 (C.D. Cal. Oct. 19, 2023) (Judge Christina A. Snyder)

A judge in the Central District of California approved a settlement of this class action brought by participants and beneficiaries of the SAG-AFTRA Health Plan against the trustees and fiduciaries of the plan, after they amended and restructured the plan during the height of the COVID-19 pandemic to cut costs by changing benefit eligibility requirements. These changes resulted in many then out-of-work actors losing their healthcare coverage. Participants who did not lose coverage saw reduced benefits and higher premiums and out-of-pocket expenses. Plaintiffs brought this ERISA action alleging breaches of fiduciary duties in connection with these changes.

In April of this year, the parties reached agreement on the terms of a settlement and submitted a motion for preliminary approval of class action settlement. The court granted their motion for preliminary approval, approved plaintiffs’ plan for dissemination of settlement notice, and scheduled a fairness hearing. That hearing took place on September 11, 2023. In this decision the court granted the parties’ motion for final approval of the class action settlement, and set out the awards of attorneys’ fees, costs, and class representative service awards.

To begin, the court went through the somewhat complicated terms of the proposed settlement and its impact on the various sub-classes of participants and beneficiaries. Broadly, as proposed, the settlement consists of three main parts. First, it will create a $15 million cash fund to compensate participants and their spouses over the age of 65 who lost coverage because of the amendments. Second, the settlement will provide HRA allocations of up to $700,000 annually to accounts of members who became ineligible for coverage after the plan eliminated residual earnings eligibility as a means of qualifying for coverage. Third, the settlement will provide for certain non-monetary relief, including mandating certain disclosures and requiring fiduciaries to engage a cost consultant for future proposed changes to the plan, allotting additional time for seniors to use their sessional wages to qualify for coverage, and other related enhanced disclosures.

Upon evaluating the settlement and factoring in the two objections voiced during the fairness hearing, the court blessed the terms of the agreement. “Based on its familiarity with the nature of the case, the record, the procedural history, the parties, and the work of their counsel, the Court finds that the Settlement was not the product of collusion and lacks any indicia of unfairness. The Court finds the Settlement is fair, reasonable, and adequate to the Settlement Class considering the complexity, expense, and likely duration of the case, and the risks involved in establishing liability, damages, and in maintaining this case through trial and on appeal. The Court finds that the Settlement represents a fair and complete resolution of all claims.” Accordingly, the court granted final approval of the settlement.

The decision then turned to calculating the fee and cost awards. Regarding attorneys’ fees, plaintiffs argued that fees should be calculated based on the total estimated maximum recovery of the settlement of $20.6 million. They requested a fee award of $6,866,667, or 25% of this amount. Defendants objected to this request and sought a lowered amount. Taking in the portions of the benefit that are not a “sum certain,” the court estimated the total recovery to be worth approximately $15,450,000, considerably less than the plaintiffs’ estimate. Nevertheless, the court agreed that plaintiffs’ attorneys should be awarded “25% of the common fund” of $15,450,000, or $3,862,500, based on their success in securing “a substantial settlement for the class despite their uncertain odds at trial.” This amount was slightly above plaintiffs’ counsel’s collective lodestar of $3.8 million.

As for costs, the court granted plaintiffs’ request for reimbursement of litigation expenses in the amount of $50,954.13. Finally, the court awarded each of the class representatives service awards of $5,000 for their help and effort in actively participating in this litigation and their commitment to seeking a benefit on behalf of the class.

At a time when members of SAG-AFTRA are currently on strike seeking higher pay, more job security, and better benefits from the major studios and streaming platforms, it is nice to see this action come to a favorable resolution for those same individuals.

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


Sixth Circuit

Merrow v. Horizon Bank, No. 22-123-DLB-CJS, 2023 WL 7003231 (E.D. Ky. Oct. 24, 2023) (Judge David L. Bunning). Three participants of the P.L. Marketing, Inc. Employee Stock Ownership Plan (“ESOP”) sued a group of selling shareholders from whom their plan acquired stock and the bank which acted as the trustee overseeing the transaction for breaches of fiduciary duties and prohibited transactions under ERISA. Defendants moved to dismiss the amended complaint and argued that plaintiffs were required to arbitrate their dispute pursuant to the plan’s arbitration provision. The arbitration clause states that in exchange for participating in the plan participants are bound to mandatory arbitration of any dispute, and that a claimant “whether pursing a claim for benefits or other relief on behalf of the Plan as a whole, by participating in this Plan, is specifically waiving the right it otherwise would have had to sue the Company, Trustee, the Administrator or any party to whom administration or investment discretion is delegated hereunder in court and to have such claims decided by a judge or jury.” Importantly, the ESOP also includes a waiver of class arbitration, and requires claims be arbitrated individually. Plaintiffs maintained that the arbitration agreement in the ESOP is unenforceable. The court resolved the parties’ arbitration dispute in this order in favor of arbitration. It concluded that plaintiffs’ position that the provision was unenforceable because it waives statutory remedies was “based on a misinterpretation of the relevant case law.” It disagreed with plaintiffs’ reading of case law to mean that “a plan cannot agree to prospectively waive statutory rights and remedies.” Instead, the court determined that plaintiffs’ claims must be brought in arbitration pursuant to the broad terms of the ESOP’s arbitration clause. The court therefore compelled arbitration and stayed the case pending arbitration.

Attorneys’ Fees

Eighth Circuit

Yates v. Symetra Life Ins. Co., No. 4:19-CV-154 RLW, 2023 WL 7017736 (E.D. Mo. Oct. 25, 2023) (Judge Ronnie L. White). On January 3, 2022, this court granted summary judgment in favor of plaintiff Terri Yates and awarded her accidental death and dismemberment benefits. Reversing an earlier position that Ms. Yates had failed to exhaust administrative remedies, the court concluded that Ms. Yates was not required to exhaust administrative remedies because there was no exhaustion requirement in the terms of the plan. Further, the court ruled that Symetra Life Insurance Company’s decision to deny benefits was erroneous. Following that decision, the court then issued a second judgment awarding Ms. Yates attorneys’ fees totaling $54,058.50. Symetra appealed the district court’s rulings. On February 23 of this year, the Eighth Circuit Court of Appeals affirmed the lower court’s decisions in all respects. Your ERISA Watch covered the Eighth Circuit’s ruling and featured it as our case of the week in our March 1, 2023 newsletter. Ms. Yates now moves for an award of attorneys’ fees and costs on appeal for her counsel, Kantor & Kantor attorneys Glenn Kantor and Sally Mermelstein. In addition, Ms. Yates sought prejudgment interest on her award of accidental death benefits. As a preliminary matter, the court quickly decided that Ms. Yates was both eligible for and entitled to a reasonable award of attorneys’ fees for her counsel’s work on appeal. It incorporated by reference its earlier analysis in its district court litigation fee decision. Having established that Ms. Yates should be awarded fees, the court moved on to assessing the reasonableness of counsel’s hours and their hourly rates. Ms. Yates sought attorneys’ fees totaling $114,840 for work incurred on appeal. This amount was comprised of hourly rates of $700 per hour for Mr. Kantor and $600 per hour for Ms. Mermelstein, and a total of 180 hours of work between the two attorneys. Symetra did not take issue with Mr. Kantor’s hourly rate, as it was the same rate awarded to Mr. Kantor by this court in 2022. However, the district court awarded Ms. Mermelstein $450 an hour in its 2022 fee decision, and Symetra argued in favor of matching that hourly rate again for the appeal fees. Finding a compromise, the court awarded Ms. Mermelstein an hourly rate of $500. It concluded that Ms. Mermelstein was entitled to an increase in her hourly rate given the “high quality” of her work on appeal, her “additional seniority and appellate ERISA briefing experience since the prior fee award,” and the general fact that “appellate work normally commands a higher rate than trial-level litigation work.” With the hourly rates established, the court then analyzed the hours expended. Ultimately it reduced the 180 hours sought by twenty percent, a reduction of 22.32 hours for Ms. Mermelstein in preparing the brief and 13.68 hours for Mr. Kantor for his work arguing on appeal. The court agreed with Ms. Yates that on appeal “Symetra was arguably seeking to establish Circuit case law that would have been highly unfavorable to millions of employees,” and that this appeal therefore “required a high level of work due to the potential adverse impact on ERISA participants in this Circuit if this Court’s decision had been reversed.” Left with its hourly rates and number of hours, the court calculated the lodestar and awarded Ms. Yates’ attorneys’ fees totaling $82,944. However, her motion for costs was denied. The court stated that Ms. Yates’ bill of costs was deficient because it was not accompanied by a declaration under penalty of perjury that the claimed costs were correct and necessary as required under the local statute. Finally, relying on Eighth Circuit precedent, the court awarded annually compounding prejudgment interest of 0.41%, which was the weekly average 1-year constant maturity Treasury yield from the calendar week preceding the court’s January 3, 2022 order. This low rate was the result of the COVID-19 pandemic when interest rates were set artificially low in order to counteract the economic impact of the pandemic.

Ninth Circuit

Su v. Bowers, No. 22-15378, __ F. 4th __, 2023 WL 7009599 (9th Cir. Oct. 25, 2023) (Before Circuit Judges Bea, Collins, and Lee). The U.S. Department of Labor brought an ERISA action against two owners/selling stockholders of an architecture and build company, appellants Brian Bowers and Dexter Kubota, alleging the two individuals inflated the value of the company’s stock when selling shares to an employee stock ownership plan. The DOL’s arguments were dependent on the report of a single valuation expert, Steven Sherman, resulting in a case the court of appeals described as “shoddy.” The district court rejected Mr. Sherman’s opinion entirely because of a fairly consequential calculation error he made in which he included subconsultant fees in his projections when these fees could not have had any impact on the figures, a fact Mr. Sherman stated that he knew and admitted later was a mistake. It either was known, or should have been known, to the government before trial that this error existed because the defendants’ expert pointed it out during discovery. This mistake left the government without the testimony of their lone valuation expert. As a result, the government lost their action following a bench trial. “Without a reliable expert to show that B+K was sold for more than its fair market value, the government’s case crumbled.” Mr. Bowers and Mr. Kubota then moved for attorneys’ fees and nontaxable costs under the Equal Access to Justice Act (“EAJA”). The district court denied this request and held that the government’s litigation position was substantially justified and that the government had not acted in bad faith by bringing the case. Mr. Bowers and Mr. Kubota appealed that decision. In this order the Ninth Circuit affirmed the district court’s denial of fees and costs under EAJA and remanded the district court’s award of taxable costs. Specifically, the court of appeals concluded that the lower court had not abused its discretion in concluding that the government’s position was substantially justified, despite their case’s “many flaws,” as the government could not have known heading into trial that the district court would reject their expert’s opinion as entirely unreliable. “The government’s expert, despite his errors, arguably had a reasonable basis – at least at the time of trial – in questioning whether the company’s profits could surge by millions of dollars in just months.” Therefore, the court of appeals concluded that the district court had not clearly erred in finding the government did not act in bad faith. However, the Ninth Circuit found the district court did abuse its discretion in reducing the award of taxable costs. It held that the lower court had relied on findings of fact that were clearly erroneous about when depositions were taken. The district court mistakenly believed that these depositions occurred after the summary judgment motion. However, it is clear from evidence provided that the depositions were actually taken before then. The Ninth Circuit therefore held that because “the district court’s reduction of costs was mainly based on that clear error, it abused its discretion.” Therefore this portion of the district court’s decision was overturned and remanded to the district court with instructions to reconsider its decision on the corrected record. Circuit Judge Collins dissented from the majority’s view affirming the denial of the EAJA attorneys’ fees. He was dubious of the district court’s determination that the government’s position was in fact substantially justified and stated that he would remand to the district court with instructions to consider the government’s argument that Mr. Bowers and Mr. Kubota did not satisfy the net worth requirements under EAJA. Nevertheless, Judge Collins stated that he concurred with his colleagues’ decision to vacate the district court’s order reducing the award of taxable costs.

Class Actions

Third Circuit

Packer v. Glenn O. Hawbaker, Inc., No. 4:21-CV-01747, 2023 WL 7019187 (M.D. Pa. Oct. 25, 2023) (Judge Matthew W. Brann). In 2021, the Pennsylvania Attorney General brought a criminal complaint against defendant Glenn O. Hawbaker, Inc., alleging the company underfunded benefits of prevailing wage employees. Later that same year, Hawbaker pleaded no contest to the charges and agreed to pay over $20 million in restitution to over 1,000 employees. Two months after the plea, three former employees of Hawbaker initiated this ERISA suit on behalf of themselves and others similarly situated. On June 6, 2023, the court certified a class of all current and former hourly wage employees who worked on prevailing wage contracts with the company in Pennsylvania from 2012 to 2018. Hawbaker moved for reconsideration of the class certification decision. In response, plaintiffs moved to supplement the class certification record. The court resolved both motions in this order. To begin, the court granted defendant’s motion. It agreed with Hawbaker that it shouldn’t have considered the criminal complaint and affidavit of probable cause to establish commonality, typicality, or adequacy. Because these documents could not be considered to establish the company’s benefit practices, the court ruled that certification of the class was in error. However, its decision didn’t stop there. Looking at plaintiffs’ motion to supplement the certification record, the court ended up back where it started. Plaintiffs included deposition transcripts and accompanying exhibits from Hawbaker’s CFO and Corporate Comptroller to prove the prerequisites of certification under Rule 23(a). The court held that this updated information was an adequate substitute for the criminal case documents it was now excluding, and that this supplemental information could be used to establish Hawbaker’s benefit calculation methods and the legality of those methods. Therefore, pursuant to this new record, the court held that plaintiffs carried their burden to establish that each of Rule 23’s prerequisites remained satisfied, and therefore ended up reaffirming its June 6 order certifying the class. Thus, after only a little ado, this decision ended with no change in the status quo.

Eleventh Circuit

In re Blue Cross Blue Shield Antitrust Litig., No. 22-13051, __ F. 4th __, 2023 WL 7012247 (11th Cir. Oct. 25, 2023) (Before Circuit Judges Pryor and Abudu and District Judge Thomas P. Barber). The Eleventh Circuit affirmed a $2.67 billion settlement in this multi-district class action brought a decade ago by policyholders of Blue Cross Blue Shield Association plans who alleged the insurer and its affiliated member plans were conspiring to drive up the cost of health insurance by agreeing not to compete with each other in violation of antitrust laws. The healthcare plan subscribers alleged that Blue Cross engaged in a multi-part campaign to restrain competition by allocating geographic regions, limiting the competition of member plans through mandating business under the Blue Cross brand, by restricting the right of member plans to be sold outside the Blue Cross Association, and through other consolidating and anticompetitive behaviors and schemes. In addition to the billions of dollars in monetary recovery, the settlement also provides for several forms of injunctive relief, including new requirements that will force “Blue Cross to make structural reforms to increase competition between its members.” The terms of the settlement also call for attorneys’ fees and expenses of 25% of the settlement fund, totaling $667 million. Although not an ERISA action, an ERISA issue did come up both during the fairness hearing and again on appeal. Two employees of fully insured employer plans who objected to the settlement argued “that the district court erred in…approving a plan of distribution that fails to address the employers’ disbursement obligations under…ERISA.” During the fairness hearing of the proposed settlement, the Department of Labor, which is not a party to this action, filed a statement of interest expressing concerns regarding the terms of the agreement and its effect on employers and other plan fiduciaries regarding their obligations under ERISA. “Specifically, the Department was concerned that the settlement did not account for ERISA at all.” This concern by the DOL, along with all other objections, was overruled by the district court, which approved the settlement. On appeal, the Eleventh Circuit found that the district court had not abused its discretion in holding that ERISA was no impediment to approving the agreement. The appeals court wrote, “as the district court explained, nothing in the settlement agreement changes ERISA rights: the order approving the settlement states that ‘all ERISA duties still apply’ and that ‘all ERISA fiduciaries must comply with those duties.’ Plans and employees retain their rights to sue under ERISA. The fear of a speculative violation is no reason to reject the settlement.” Aside from ERISA, no other argument presented on appeal persuaded the Eleventh Circuit to overturn the district court’s approval of the settlement. It rejected all of the legal challenges and found that (1) the terms of the release were not in violation of public policy; (2) they do not perpetuate illegal conduct; (3) the release is appropriately limited in its scope; (4) the distribution methods are fair under civil procedure rules; (5) the district court did not err by approving a settlement with the same named plaintiffs representing both the injunctive and damage classes; and (6) the attorneys’ fees were within the range of reasonableness. Accordingly, the settlement objectors’ concerns were overruled and the judgement approving the settlement agreement itself was affirmed.

Disability Benefit Claims

Ninth Circuit

Haag v. Unum Life Ins. Co. of Am., No. 22-cv-03130-TSH, 2023 WL 6960369 (N.D. Cal. Oct. 20, 2023) (Magistrate Judge Thomas S. Hixson). Plaintiff Rebecca Haag commenced this disability action against Unum Life Insurance Company of America to recover terminated long-term disability benefits under an ERISA-governed policy. Ms. Haag, a clinical lab scientist, stopped working and started receiving disability benefits on January 1, 2020, after finding she could not sustain even part-time work with the symptoms she was experiencing from lumbar radiculopathy, spondylosis, sciatica, a labral tear, and a herniated disc. Ms. Haag’s musculoskeletal spine and hip conditions ultimately required her to undergo two surgeries, experiment with a series of pain medications, and engage in several rounds of physical therapy. In the end these treatments did help improve Ms. Haag’s conditions. In August of 2022, after recovering from her second surgery, Ms. Haag returned to work as a lab analysist. However, this date was nearly three years after she stopped full time employment and “just under two years after [Unum’s] initial determination that she would not receive ongoing benefits.” Thus, the question before the court was whether the medical records established that Ms. Haag remained unable to work from the date when Unum terminated benefits until the date when Ms. Haag returned to work. In this decision ruling on the parties’ cross-motions for judgment, the court found that Ms. Haag produced sufficient evidence to demonstrate that she was disabled within the meaning of the policy from the date when Unum denied benefits through December 7, 2021. Beyond that date, the court concluded that the records did not support continued evidence of disability, as Ms. Haag’s surgeon concluded that she was doing well with significantly decreased pain levels. Nevertheless, prior to December 7, 2021, the court stated that Ms. Haag was “credible in describing her pain and ongoing symptoms…[and] consistently sought medical treatment, visited multiple providers…, engaged in multiple rounds of MRIs and testing,…. tried multiple medications which themselves created side effects, engaged in months and months of physical therapy, all while reporting ongoing pain. These activities support that she was truthfully and actually in serious pain.” Furthermore, the court found that objective evidence, including the results of a functional capacity examination, supported Ms. Haag’s characterization of her pain and work limitations, and that her treating physician’s opinions should be afforded weight. Additionally, the court was not persuaded by Unum’s hypothesis that Ms. Haag’s “real motivation in not returning to work was not back pain, but rather related to her mental health.” If anything, the court viewed Ms. Haag’s mental health as taking a toll from not being able to continue working in her career path. The court reminded Unum that it had itself concluded that Ms. Haag’s cause of disability was her pain when it approved her claim for benefits. Based on the foregoing, the court concluded that the evidence in the administrative record demonstrated that Ms. Haag was disabled under the terms of her plan through December 7, 2021, and that Ms. Haag was entitled to judgment in her favor up until that date. For the period beyond December 7, 2021, judgment was granted in favor of Unum. Ms. Haag was represented by Your ERISA Watch co-editor Peter Sessions.


Fifth Circuit

Edwards v. Guardian Life Ins. of Am., No. 1:22-CV-145-KHJ-MTP, 2023 WL 7092500 (N.D. Miss. Oct. 26, 2023) (Judge Kristi H. Johnson). This action involves a dispute over a life insurance policy. In a previous order the court concluded that the policy at issue is an ERISA-governed employee benefit plan. Following that order, the Magistrate Judge issued a case management order setting out the deadlines for the case. Plaintiff Jimmy Edwards appeals that case management order because it limits discovery to the administrative record absent a court order on a discovery motion filed by either party. Applying a clear error standard, the court denied Mr. Edwards’ motion and upheld the case management order. The court understood Mr. Edwards’ motion as an attempt to reconsider its prior holding that the policy is an ERISA plan. It declined to engage with this attempt. Instead, the court stressed that Mr. Edwards does not have grounds to challenge the order as clearly erroneous or contrary to law. It emphasized that he has not been denied a specific discovery request. Rather, the order reiterates the court’s holding that ERISA applies, and incorporates ERISA’s general principle of limiting discovery to the administrative record. Should he wish, Mr. Edwards can petition the court for discovery. As such, the court found no mistake in the order and therefore upheld it.

Life Insurance & AD&D Benefit Claims

Fourth Circuit

GSP Transp. Inc. 401(k), Plan Comm. v. Hall, No. 2:23-cv-814-RMG, 2023 WL 6969962 (D.S.C. Oct. 23, 2023) (Judge Richard Mark Gergel). Marriage. Marriage is what brings these parties together today, in this interpleader action. Specifically, they were brought together over a dispute about whether the marriage of decedent Jeffrey Schoepfel and defendant Summer Hall was legally invalid, as his surviving children, defendants Jessica and Nicholas Schoepfel, contend, or whether Ms. Hall was Mr. Schoepfel’s lawful wife and thus entitled to benefits under the plan, as Ms. Hall maintains. Ms. Hall moved for judgment on the pleadings pursuant to Federal Rule of Civil Procedure 12(c). Noting that judgment on the pleadings is only appropriate if, after accepting all of the nonmoving parties’ allegations as true and viewing facts most favorably to them, the moving party is entitled to judgment as a matter of law, the court wrote it was “abundantly clear that this is not a case that should be disposed of on a motion for judgment on the pleadings.” To the contrary, the validity of the marriage between Ms. Hall and Mr. Schoepfel “is vigorously disputed” among the competing beneficiaries. Therefore, the court ruled that judgment on the pleadings would not be appropriate here, and consequently denied Ms. Hall’s Rule 12(c) motion.

Medical Benefit Claims

Fifth Circuit

Windmill Wellness Ranch LLC v. H.E.B., Inc., No. SA-23-CV-00034-DAE, 2023 WL 6981993 (W.D. Tex. Oct. 23, 2023) (Magistrate Judge Elizabeth S. Chestney). A rehabilitation facility, plaintiff Windmill Wellness Ranch LLC, and a patient who received treatment there, E.A., brought this ERISA action against the HEB PPO healthcare plan, and its sponsor and administrator, H.E.B., Inc., for underpaying for E.A.’s treatment at Windmill. HEB and the Plan filed a joint motion objecting to plaintiffs’ experts’ testimony “asking the Court to exclude all of Plaintiffs’ designated experts.” In this order the court granted defendants’ motion. Plaintiffs designated four experts. They were the CEO of Windmill, Windmill’s Medical Director, a medical doctor hired as a consultant retained to testify about the reasonableness of Windmill’s charges, and plaintiffs’ counsel to testify on the reasonable of their attorneys’ fees. Defendants argued that plaintiffs’ experts should not be allowed to provide testimony because plaintiffs’ violated a procedural requirement for submitting a written report of their retained expert witness, the testimony of the experts is beyond the scope permitted in ERISA benefit actions, the proposed testimony will not assist the trier of fact, and plaintiffs’ counsel’s testimony on fees is unnecessary as fee motions are submitted separately after resolution of the merits of the case. The court agreed with these points. “The question in this case centers on whether HEB violated the Plan terms in applying its methodology for reimbursing Windmill for E.A.’s treatment. Here, none of the experts identified by Plaintiffs have been designated to testify as to how HEB, as administrator of the Plan, has interpreted the relevant terms of the Plan in other instances. Nor have Plaintiffs designated any experts to testify to assist the Court in its understanding of medical terminology or practice related to E.A.’s benefits claim. Rather, Plaintiffs’ experts are employees of Windmill who intend to testify on the services Windmill provides, the reasonableness of Windmill’s charges, the necessity of E.A.’s treatment, and the appropriate reimbursement rate for the services provided.” This information, the court held was “beyond the scope of the administrative record,” and not useful for resolution of the claims at issue. Therefore, the court granted defendants’ motion to strike plaintiffs’ experts.

Pension Benefit Claims

Second Circuit

Board of Trs. of the Bakery Drivers Local 550 & Indus. Pension Fund v. Pension Benefit Guar. Corp., No. 23-CV-1595 (JMA) (JMW), 2023 WL 7091862 (E.D.N.Y. Oct. 26, 2023) (Judge Joan M. Azrack). Just in time for the Halloween season, this case involves a zombie multiemployer plan resurrected from the grave not to eat brains but to apply for funds from a government assistance program. On December 17, 2016, the Bakery Drivers Local 550 and Industry Pension Fund was terminated following a mass withdrawal of employers. It was restored six years later on September 1, 2022, when the employer Bimbo Bakeries USA, Inc. and the Union agreed to amend the collective bargaining agreement, springing the pension plan back to life. Just five days later, the Fund filed a certification of its critical and declining status with the IRS. Why would they do this? Likely because of a pandemic-era amendment to Title IV of ERISA, wherein Congress enacted a new special financial assistance program to give multiemployer plans money to pay all benefits due through 2051 from general taxpayer monies. The program applied to plans in critical funding status from 2020 through the end of 2022. The Fund applied for $132,250,472.00 in assistance under the program. As the court wrote, “[i]t appears that the purpose of the Fund’s attempted restoration in September 2022 was to allow it to apply for [the program’s] assistance.” Its application was denied by the Pension Benefit Guaranty Corporation (“PBGC”) based on the PBGC’s opinion that “ERISA contains no provision allowing a multiemployer plan that terminated by mass withdrawal under Section 1341a to be restored.” The trustees of the Fund and the PBGC have each moved for judgment on the denial of the application for the government-backed financial assistance under the program. In this order the court affirmed the PBGC’s denial and granted judgment in its favor. The court identified “two questions of statutory interpretation” that it needed to answer in order to resolve the dispute. The first question was whether plans terminated by mass withdrawal prior to January 1, 2020 and remained terminated are eligible for special financial assistance benefits. The second was whether a multiemployer plan that was previously terminated by mass withdrawal can be restored after such a termination. The court concluded first that plans which terminated prior to January 1, 2020 are not eligible for benefits under the program. Accordingly, in order to qualify for benefits, the Fund needed to have been restored following its termination, making the answer to the second question central to the dispute among the parties. To answer this question, the court needed to consider the Chevron doctrine, and decide whether the PBGC’s interpretation is entitled to Chevron deference. It concluded that Congress had sufficiently delegated interpretive authority of Title IV of ERISA to the PBGC “such that its interpretation of Tile IV, including Sections 1347 and related provisions, trigger the Chevron deference framework.” Moreover, the court found that the PBGC’s interpretation was not unreasonable, arbitrary, or capricious. Therefore, it upheld the PBGC’s reasonable interpretation that Title IV prohibits restoration of a multiemployer plan terminated by mass withdrawal, and therefore granted the PBGC’s motion for summary judgment and denied the Fund’s motion for summary judgment. Thus, the court did not allow the undead Fund to feast on the pandemic-era assistance.

Plan Status

Second Circuit

Lovo v. Investis Dig., No. 23 Civ. 1868 (LLS), 2023 WL 7004772 (S.D.N.Y. Oct. 24, 2023) (Judge Louis L. Stanton). The terms of decedent Charles D. Scales’ employment agreement with his employer, Investis Digital Inc., were amended in the spring of 2021. At the time Mr. Scales was the Global CEO of the company. The amendment extended the list of employee benefit plans in which Mr. Scales was eligible to participate to include life insurance, with a benefit valued at five times his base salary of $459,000. This was a big deal for Mr. Scales, who was in his mid-60s and had a series of health complications which made obtaining life insurance difficult. However, Investis was not able to provide Mr. Scales with these promised life insurance benefits. The third-party insurer it attempted to secure a policy from denied Mr. Scales’ application after it received his statement of health and medical evaluation. Mr. Scales died just one month later, and was therefore never able to appeal the denial of his application for benefits. Investis has never paid any form of life insurance to Mr. Scales’ estate. In this action, asserted under both ERISA and state law, Mr. Scales’ estate seeks the life insurance benefits Mr. Scales was allegedly promised. Plaintiff alleges that defendants “knew that Scales could have obtained life insurance for three times the amount of his salary without completing a statement of health, and that Investis gave that life insurance option to the other two executives who received life insurance following Scales’ death.” The complaint maintains that this failure to pay life insurance benefits to the estate violates ERISA because the employment agreement entitles Mr. Scales to five times his base salary in life insurance benefits. Defendants moved to dismiss the action. Their motion was granted in this order, as the court concluded that it lacked subject matter jurisdiction over the lawsuit. The court disagreed with the estate that the employment agreement was an ERISA-governed plan. It wrote, “not every agreement by an employer to provide benefits to an employee constitutes an ERISA plan.” Because the court concluded that the agreement at issue here did not create an ongoing administrative program, it found that no ERISA life insurance plan exists and that the claims therefore do not arise under ERISA. In sum, the court stated that “a promise to obtain life insurance on Scales’ behalf is not the same as providing life insurance.” As a result, the court determined that it lacked federal subject matter jurisdiction over the case and dismissed it without prejudice.

Mason v. District Council 1707, No. 21-CV-9382 (VSB), 2023 WL 7043226 (S.D.N.Y. Oct. 26, 2023) (Judge Vernon S. Broderick). Former employees of District Council 1707, American Federation of State, County and Municipal Employees have sued the organization and its parent union under ERISA and New York State labor law after they were not paid the full amount of severance and vacation benefits for terminated employees that they maintain they are entitled to. Defendants moved to dismiss. They argued that the severance and vacation policies do not constitute employee benefit plans under ERISA. At this early stage of litigation, the court held that defendants failed to establish that either the vacation plan or the severance plan were beyond the scope of ERISA as a matter of law. Taking the allegations in the complaint as true, the court concluded that they were plausible to allege plaintiffs’ ERISA causes of action and therefore denied the motion to dismiss the ERISA claims. The court also denied the motion to dismiss the state law claims, as defendants’ only argument in support of dismissing them was that plaintiffs failed to raise federal claims, and thus the court lacks supplemental jurisdiction over the state law causes of action. “Because Plaintiffs’ ERISA claims survive Defendants’ motion to dismiss, so do their New York state law claims.”

Pleading Issues & Procedure

Ninth Circuit

Tolentino v. Saito, No. 23-00280 SOM-KJM, 2023 WL 7090375 (D. Haw. Oct. 26, 2023) (Judge Susan Oki Mollway). This action, asserted under ERISA, the Labor Management Relations Act (“LMRA”), and the Federal Arbitration Act (“FAA”), is a dispute among union trustees and employer trustees in interpreting the language of a collective bargaining agreement and its effect on settling matters over which the trustees are deadlocked. There are an equal number of union trustees and employee trustees. All of the union trustees have voted in favor of expanding certain benefits under a training fund. All of the employer trustees have voted against these added benefits. The document governing the trustees has a provision regarding deadlock votes. It states, “If the number of votes on any matter is deadlocked, the matter may be submitted to an impartial umpire mutually agreed upon by the Union and the Association.” Here, the union trustees are seeking a court order compelling the employer trustees to participate in arbitration over the deadlock. Plaintiffs bring an ERISA claim under Section 502(a)(3) to enforce the terms of the plan, a claim under Section 301 of the LMRA for refusal to arbitrate pursuant to the terms of the plan, and a claim under the FAA seeking to compel arbitration. Defendants moved to dismiss pursuant to Federal Rules of Civil Procedure 12(b)(1) and (b)(6). They argued that the court lacks subject matter jurisdiction and that the complaint fails to state a claim because the use of the word “may” indicates that arbitration is only permitted, not required. The court denied the motion to dismiss. It held that plaintiffs stated nonfrivolous claims under ERISA and LMRA, which establish federal jurisdiction, even if those claims later fail on the merits. With respect to ERISA, the court stated that “there is at least a question as to whether the Training Fund qualifies as a ‘plan’ for the purposes of ERISA. While the existence of such a question does not on its own render the Training Fund an ERISA plan, Defendants’ uncertainty at the very least means that Plaintiffs’ claim that ERISA applies cannot be disregarded as frivolous.” As for the use of the word “may” in the arbitration/deadlock provision, the court held that context matters. While the word “may” is usually understood to be permissive, here there would be no procedure for resolving a deadlock if arbitration is voluntary or requires all parties to agree to arbitration. Thus, because there would be no way to break a deadlock, “a deadlock would instead represent the failure of a motion to carry by a majority vote.” Given that this reading of the word “may” would essentially nullify the very clause it is contained within, the court declined to dismiss for failure to state a claim. Accordingly, none of plaintiffs’ claims were dismissed.

Severance Benefit Claims

Tenth Circuit

Franke v. Fifth Amended & Restated Newfield Expl. Co. Change of Control Severance Plan, No. 21-cv-2234-WJM-SKC, 2023 WL 6962081 (D. Colo. Oct. 20, 2023) (Judge William J. Martínez). The company plaintiff Jarrid Franke worked at for 14 years, Newfield Exploration Company, was acquired in 2019. Prior to that acquisition, the company had created a change of control severance plan to provide severance benefits to covered employees if they were involuntarily terminated or voluntarily resigned for “Good Reason” following a change of control at the company. In this ERISA action, Mr. Franke has sued the plan, its benefits administrator, and its committee, for improperly denying him severance benefits after his position at the company and aggregate responsibilities were materially reduced in the wake of the acquisition. In this order the court agreed with Mr. Franke that defendants arbitrarily and capriciously denied him severance benefits, and remanded to the committee with instructions and guidance to reconsider their decision under the proper standards outlined by the terms of the plan. The court held that defendants did not meaningfully engage with the material reductions in the scope and nature of Mr. Franke’s work in his roles immediately prior to and after the change in control and instead inappropriately “focused a great deal on Plaintiff’s career development, which has nothing to do with whether his aggregate responsibilities were reduced or if any such reduction was material.” The court wrote, “[n]ot only is the opportunity for future growth highly subjective and difficult to define, neither the Plan’s language nor the Committee’s interpretation worksheet indicate that it is a proper consideration at all.” Regardless, defendants’ discussions focused almost exclusively on this immaterial point. Therefore, the court found that defendants’ denial was an abuse of discretion not supported by substantial evidence, and so ordered them to perform a proper analysis of whether Mr. Franke is entitled to benefits under the plan by engaging with Mr. Franke’s specific evidence submitted regarding the ways in which his work was reduced. It stressed, “the Committee must not consider opportunity for growth or any other concepts not related to Plaintiff’s comparative aggregate responsibilities.” Mr. Franke was not awarded an injunction or statutory penalties on his second claim for breach of fiduciary duty claim though. The court stated that defendants did not breach any fiduciary duty and were in compliance with the Department of Labor’s governing regulations because they produced all documents they were required to which were relevant to his claim. Finally, the court determined that Mr. Franke achieved success on the merits in this action, and as a consequence concluded that he is entitled to an award of reasonable attorneys’ fees and costs.