Ian C. v. UnitedHealthcare Ins. Co., No. 22-4082, __ F. 4th __, 2023 WL 8408199 (10th Cir. Dec. 5, 2023) (Before Circuit Judges Bacharach, Phillips, and Eid)
Thanks largely to the efforts of Brian S. King, an attorney representing plaintiffs in Salt Lake City, the Tenth Circuit Court of Appeals has recently been at the forefront of litigation involving ERISA-governed medical benefits, specifically benefits involving mental health and substance abuse treatment. In the past few years, Your ERISA Watch has covered several of these decisions, most notably D.K. v. United Behavioral Health, which was the case of the week in our May 24, 2023 issue.
Today’s notable decision continues this trend, as the Tenth Circuit has once again examined the claim administration of insurance juggernaut UnitedHealthcare Insurance Company and found it lacking.
The plaintiffs in the case were Ian C., a participant in an employee medical benefit plan, and his minor son, A.C., who was a beneficiary under the plan. The plan was administered by defendant United.
Unfortunately, A.C. has a history of mental health and substance abuse issues, which led to his admission to several facilities, including Catalyst Residential Treatment, which diagnosed and treated both his mental health and substance abuse issues.
Plaintiffs submitted a claim for benefits to United, which approved benefits for two weeks of treatment. After that period, however, United denied further benefits, determining that the treatment for A.C.’s anxiety disorder did “not appear to be consistent with generally accepted standards of medical practice.”
United referred this decision for further analysis by a medical reviewer, who upheld it, finding that A.C.’s treatment no longer met the plan definition of “medically necessary.” Specifically, United stated that “it seems that your child has made progress and that his condition no longer meets guidelines for coverage of treatment in this setting.” United further contended that A.C. did “not have serious withdrawal or post-acute withdrawal symptoms” that would justify continued coverage.
Plaintiffs appealed, arguing that A.C. still needed residential treatment, and contending that United did not apply the substance abuse guidelines along with the mental health guidelines. United upheld its decision on appeal, stating in its letter that A.C. had made progress and no longer met the criteria for coverage under its mental health guidelines. United did not mention his substance-abuse-related diagnoses.
Having exhausted their appeals with United, plaintiffs filed an action in the U.S. District Court for the District of Utah, seeking payment of benefits under ERISA, 29 U.S.C. § 1132(a)(1)(B). The parties filed cross-motions for summary judgment. After the district court granted United’s motion and denied plaintiffs’, this appeal followed.
The Tenth Circuit first addressed the standard of review. Plaintiffs agreed that the benefit plan granted United the authority to interpret the terms of the plan and make discretionary benefit decisions, which would ordinarily result in abuse of discretion review under the Supreme Court’s test in Firestone Tire & Rubber Co. v. Bruch. However, plaintiffs argued that United’s decision was not entitled to such deference and should be reviewed de novo because United did not “substantially comply” with ERISA’s procedural requirements.
The Tenth Circuit dismissed this argument for two reasons. First, it stated that it had “faced multiple opportunities to overturn or otherwise tweak Firestone deference; and in every instance, it has declined.” Furthermore, the Department of Labor’s regulations were not intended to affect the standard of review: “Congress intentionally left ERISA’s standard of review open to the judiciary’s interpretation, which the Supreme Court duly supplied in Firestone.”
Second, the Tenth Circuit stated that it would be “fruitless” to adopt plaintiff’s arguments because the standard of review did not dictate the outcome of the case. As the court proceeded to explain in the rest of its decision, United’s benefit denial could not even survive abuse of discretion review.
The Tenth Circuit began its abuse of discretion analysis by discussing its decision in D.K. v. United Behavioral Health from earlier this year. The court noted that it had held in that case that “the administrator must include its reasons for denying coverage in the four corners of the denial letter.” Thus, the court’s analysis was focused on United’s two denial letters, and “more critically the second,” final, denial letter.
The court found that these letters were inadequate. In their appeal, plaintiffs had specifically raised the issue that A.C. was “dual diagnosed,” i.e., that he required both mental health and substance abuse treatment. However, United’s letter in response “made no substantive mention of A.C.’s substance abuse, the Substance Abuse Guidelines, or the evidence Ian C. submitted with his appeal.” The court ruled that this violated ERISA because “the fiduciary must consider an independent ground for coverage that the claimant raises during the appeal.” United “was not justified in shutting its eyes to the possibility that A.C. was entitled to benefits based on his substance abuse.”
The court further explained why this result was consistent with ERISA’s rules. The court noted that ERISA requires a “full and fair review,” which includes a “meaningful dialogue” between the administrator and the beneficiary and “an ongoing, good faith exchange of information.” In order to provide this review, the court stated that United was required, at a minimum, to “address Ian C.’s arguments and evidence of A.C.’s substance abuse, the Substance Abuse Guidelines, and the relevant provisions of the plan[.]” Because United’s letters were “silent on A.C.’s substance abuse,” and focused “solely on his mental-health treatment,” United “rebuffed its fiduciary duties and denied Ian C. his right to a ‘full and fair review.’”
The court quickly dispensed with United’s remaining arguments, many of which the court noted were not made in United’s denial letters and thus it was not required to consider them. Among these arguments were contentions that (1) substance abuse was not the “primary driver” of A.C.’s treatment, (2) Catalyst was not “actively treating” A.C.’s substance abuse, (3) United was not required to perform a second substance abuse review because the guidelines for mental health treatment and substance abuse treatment are “nearly identical,” (4) plaintiffs did not meet their burden of proving that A.C. needed substance abuse treatment, and (5) its internal notes justified its denial, even if those notes were not cited in its denial letters.
In sum, the court concluded that United “arbitrarily and capriciously denied A.C. benefits for his treatment at Catalyst and deprived Ian C. of his right to receive a ‘full and fair review’ of his administrative appeal,” and reversed and remanded in yet another Tenth Circuit win for behavioral health patients.
Below is a summary of this past week’s notable ERISA decisions by subject matter and jurisdiction.
Munger v. Intel Corp., No. 3:22-cv-00263-HZ, 2023 WL 8433191 (D. Or. Dec. 1, 2023) (Judge Marco A. Hernández). On October 23, 2023, the court entered a summary judgment order finding plaintiff Ruth Ann Munger, acting on behalf of the estate of decedent Philip Cloud, entitled to ERISA plan benefits. The court agreed with Ms. Munger that the named beneficiary, Mr. Cloud’s wife, Tracy Cloud, was not entitled to benefits under Oregon’s slayer statute as she has been convicted of the second-degree murder of Mr. Cloud. Now, the counter and cross claimants in interpleader – Intel Corporation, the Intel Retirement Plans Administrative Committee, and the Intel Benefits Administration Committee – have moved for an award of attorneys’ fees. Ms. Munger did not take any position on Intel’s fee motion. The court exercised its discretion in this decision to award the Intel parties their full amount of requested fees of $20,297.79. It held that the work of the attorneys was appropriate as they were “‘incurred in filing the action and pursuing the plan’s release from liability,’ rather than in ‘litigating the merits of the adverse claimants’ positions.’” The court also concluded that the hourly rates of the two attorneys – Sarah Ryan and Donald Sullivan – were reasonable. Ms. Ryan has more than 30 years of litigation experience and has been a member of the Oregon State Bar for more than 40 years. Under the 2022 Oregon State Bar Economic Survey, the court found that Ms. Ryan’s requested rate of $499.38 per hour was reasonable. As for Mr. Sullivan, the court concluded that his requested rate of $598.60 per hour was reasonable given his 26 years of experience practicing in the area of ERISA and employee benefits in California. Finally, the court was satisfied that the eight hours of work performed by Ms. Ryan and the 27.5 hours of work performed by Mr. Sullivan were reasonably expended. Thus, the court awarded counsel their requested lodestar fee and granted their motion.
Breach of Fiduciary Duty
Stegemann v. Gannett Co., No. 1:18-cv-325 (AJT/JFA), 2023 WL 8436056 (E.D. Va. Dec. 5, 2023) (Judge Anthony J. Trenga). A class of participants of an ERISA-governed 401(k) savings plan consisting of mostly legacy company single-stock funds sued Gannett Co., Inc. and the plan’s retirement committee for breaching their duties of prudence and diversification by failing to timely liquidate one of the plan’s three single-stock funds, the TEGNA Stock Fund. A three-day bench trial took place last April. In early June of this year, the parties submitted their proposed findings of fact and law. Having reviewed the evidence, weighed the exhibits and experts’ testimony, and reflected on the standards under ERISA, the court issued this judgment. Its ultimate verdict? The fiduciaries acted “with procedural prudence in its approach to the divestiture of the TEGNA Stock Fund, and as a hypothetical prudent fiduciary would have, the divestiture was therefore timely and prudently made, and [defendants] did not breach [their] dut[ies].” The decision centered on what the fiduciaries did right, not what ultimately went wrong, the particulars of which were absent from its lengthy discussion. According to the court, a prudent hypothetical fiduciary under the circumstances would have considered and “weighed the risks of single stock fund holdings against the risks of forced and/or rapid divestiture.” To the court, the committee balanced those risks fairly and appropriately at the time, as they “solicited advice from independent experts in investment management,” and had “timely and regular meetings, both with and without advisors, to discuss the risks of maintaining the TEGNA Stock fund and the risks associated with divestiture, and thereby formulated a considered approach from divestiture.” Thus, it was the “sunsetting” and liquidating process alone, not its results, that counted in the end towards the court’s conclusions, and that process, it held, was entirely kosher. As a result, the court found in favor of defendants and against plaintiffs on all claims and judgment was entered accordingly.
Johnson v. Parker-Hannifin Corp., No. 1:21-cv-00256, 2023 WL 8374525 (N.D. Ohio Dec. 4, 2023) (Judge Bridget Meehan Brennan). Former employees of the Ohio-based engineering company Parker-Hannifin Corporation who are participants in Parker’s defined contribution retirement savings plan brought this action against the plan’s fiduciaries for breaches of their duties under ERISA. Plaintiffs allege that defendants were imprudent in selecting and maintaining underperforming target-date funds in the plan. During the relevant period, they claim these funds had a concerning 90% turnover rate, consistently underperformed the S&P target-date fund benchmark, and “showed severe signs of distress before 2013” when they were added to the plan. In addition to the poorly performing investment options, plaintiffs also aver that defendants violated their standards of conduct under ERISA by including funds with excessive fees despite the plan’s $4.3 billion in net assets and over 32,000 participants. “Plaintiffs maintain that the decision to include the shares with higher fees was inconsistent with Defendants’ fiduciary obligations under the Plan,” and they argue that had defendants forced the investment companies to offer their lower-fee shares to the plan, they would have saved millions in plan assets. Finally, plaintiffs asserted a claim for breach of the duty to monitor, alleging defendants failed to ensure that the entities and individuals it appointed to oversee the plan and make decisions regarding its investments fulfilled their obligations to the participants as required under ERISA. The fiduciaries moved to dismiss. Stressing the “context sensitive” nature of ERISA breach of fiduciary duty pleading in the Sixth Circuit, the court granted the motion to dismiss in its entirety. The court differentiated plaintiffs’ chosen comparators to the challenged funds by agreeing with defendants that the challenged funds “had a uniquely conservative investment strategy and asset allocation compared to” plaintiffs’ chosen target-date funds comparisons, and that these funds therefore had distinct objectives, strategies, and goals, so they could not be used to demonstrate underperformance. The court also dismissed the class share claims, holding that it would not adopt a blanket policy finding plan participants state valid claims “any time a plaintiff alleges a large plan did not obtain the lowest-fee shares.” Instead, it viewed “Plaintiffs’ theory [a]s nothing more than a ‘naked assertion devoid of…factual enhancement.’” Finally, as the duty to monitor claim was contingent on the underlying claims of imprudence, the court granted the motion to dismiss this derivative claim as well. For these reasons, defendants’ motion to dismiss was granted and the case was dismissed.
Su v. Fensler, No. 22-cv-01030, 2023 WL 8446380 (N.D. Ill. Nov. 28, 2023) (Judge Nancy L. Maldonado). Acting Secretary of the Department of Labor, Julie A. Su, brought this action against trustees of the United Employee Benefit Fund alleging they breached their fiduciary duties and engaged in prohibited transactions. Fearing the Fund’s assets would be entirely depleted without intervention, Ms. Su moved for a preliminary injunction removing defendants as plan fiduciaries and installing an independent fiduciary to manage and control the plan during the pendency of the lawsuit. The court granted the Secretary’s motion on August 10, 2023. Defendants subsequently moved for the court to reconsider portions of that order. In this decision the court granted defendants’ motion to a limited extent. It amended its prior order by modifying the process for notice and objection if the independent acting plan fiduciary wishes to make any amendments to the plan documents or attempts to terminate the Fund. In addition, the court agreed with defendants that it was premature to order them to reimburse the Fund for expenses incurred by the appointed acting plan fiduciary. The court stated that it found “modification of the provisions of the PI Order that require Defendants to reimburse the Fund…appropriate because Defendants have not yet been found liable of any wrongdoing.” However, in all other respects, the court left its previous order unchanged. It highlighted that the Fund’s finances were in a dire and tumultuous state when it acted in August. “Indeed, since the time the Independent Fiduciary has taken control of the Fund, it has discovered that the Fund has substantially less cash on hand – almost $400,000 less – than was represented to the Court by Defendants in briefing the motion for preliminary injunction. Further, upon assuming control of the Fund, the Independent Fiduciary reported that the Fund documents were outdated to the point that it could not identify a reliable or accurate list of current plan participants with active life insurance policies, a key metric in determining the actual assets of the Fund.” The court expressed that the current state of the Fund was “particularly concerning given Defense counsel’s vehement arguments to this Court that their significant legal fees over the past several years were necessary and justified in light of the work they had done to get the Fund into shape after the alleged wrongdoing of the other defendants named in this suit.” The millions of dollars spent on defense counsel, the court held, don’t appear to have left the Fund any more secure. Given all of this, the court reaffirmed its broad position that appointing an independent fiduciary was necessary and appropriate, and the court thus left all other portions of its previous order undisturbed.
Edwards v. Guardian Life Ins. of Am., No. 1:22-cv-145-KHJ-MTP, 2023 WL 8376264 (S.D. Miss. Dec. 4, 2023) (Magistrate Judge Michael T. Parker). Widower James Edwards sued Guardian Life Insurance of America seeking life insurance benefits from a policy belonging to his late wife. The court previously determined that the policy at issue is an ERISA-governed plan. In this decision, the court granted in part and denied in part Mr. Edwards’ motion for discovery. Mr. Edwards moved to depose the beauty technicians who worked at his wife’s salon. He also moved to depose three Guardian Life employees. In addition, Mr. Edwards seeks to conduct discovery about whether a review of the records occurred prior to Mrs. Edwards’ death and whether a notice of cancellation was sent to the family prior to her death. The court considered the depositions first. Regarding the depositions of the beauty technicians, the court concluded that Mr. Edwards was attempting to reopen the issue of whether the policy is an employee benefit plan governed by ERISA. As this determination was already made in the court’s previous decision, the court concluded that discovery on this topic was unnecessary and therefore denied the request to depose the salon workers. As for the depositions of the Guardian Life employees, the court concluded that these depositions are not necessary and the information that Mr. Edwards seeks can be discovered instead through written interrogatories and document production. Because this is an ERISA action, the court wished to limit discovery. It felt that the depositions were not proportional to the needs of the present case. However, the court did agree with Mr. Edwards that some discovery was “needed to determine whether the subject policy was actually canceled prior to Mrs. Edwards’s death,” which “calls into question Defendant’s compliance with ERISA’s procedural regulations.” Accordingly, the non-deposition discovery requests were granted, and Mr. Edwards was granted leave to propound written discovery requests relating to the issues of whether the policy was reviewed and cancelled prior to Mrs. Edwards’ death, and whether the Edwards family was ever provided notice of any cancellation prior to Mrs. Edwards’ death. Thus, to this limited extent, Mr. Edwards’ discovery motion was granted.
Franklin v. Hartford Life & Accident Ins. Co., No. CV-22-00168-TUC-JAS, 2023 WL 8481407 (D. Ariz. Dec. 7, 2023) (Judge James A. Soto). Plaintiff Sabrina Franklin brings this action against Hartford Life & Accident Insurance Company alleging that her long-term disability benefits were wrongfully denied. Ms. Franklin moved to compel discovery from Hartford. She seeks documents, depositions, and interrogatory responses from the insurer related to its structural conflict of interest in this case. As a threshold matter, the court agreed that Hartford has a conflict of interest, and that under Ninth Circuit precedent Ms. Franklin is entitled to discovery relating to that conflict – a conflict which the court must then weigh in determining whether Hartford abused its discretion when denying her claim for benefits. The court ordered Hartford to “produce 100 prior reports from MLS and from ECN for the 2020 and 2021; produce 100 prior reports from each of Dr. Parillo, Dr. Marwah, and Dr. Hoenig for the years 2020 and 2021; produce internal claim metrics and tracking documents; and produce the claim and appeal adjusters who decided Plaintiffs claim for depositions.” It concluded that the circumstances present and Ninth Circuit authority warrant this discovery and agreed with Ms. Franklin that Hartford was improperly designating this information as confidential and non-discoverable. Thus, somewhat unusually for an ERISA disability benefits action, the court granted Ms. Franklin’s discovery motions in their entirety and ordered Hartford to produce the requested documents, respond to the interrogatories, and schedule the depositions as outlined in this order.
Bentley v. Symetra Life Ins. Co., No. 23-CV-1008-CJW-KEM, 2023 WL 8455043 (N.D. Iowa Dec. 6, 2023) (Judge C.J. Williams). Plaintiff Nancy Lynn Bentley and decedent James Lavern Bentley married in 2020. Just over two years later, their marriage was not going well, and on November 8, 2022, Ms. Bentley filed for dissolution of the marriage. On that same day, the state court issued an injunction preventing both Mr. and Ms. Bentley from removing one another on any health or life insurance coverage then in effect until after adjudication of the dissolution. Perhaps unknown to Ms. Bentley, just five days earlier Mr. Bentley had already changed the beneficiary of his two ERISA-governed life insurance policies to his daughter, defendant Brittany Brainard. This change would not go into effect until January 1, 2023, after the court’s injunction. Before the dissolution of the marriage had been finalized, Mr. Bentley died. Based on the most current beneficiary designation, Symetra Life Insurance Company paid the $300,000 in proceeds to Ms. Brainard. Shortly thereafter, Ms. Bentley commenced this litigation, in state court, seeking to freeze the life insurance proceeds and have them paid to her instead. Symetra removed the action to federal court, and Ms. Bentley stipulated to the dismissal without prejudice of Symetra as a defendant. Now, Ms. Bentley moves to remand her action, solely against Ms. Brainard, back to state court. The court denied the motion to remand in this order. Relying on the Supreme Court’s precedent set in Harris Trust, the court held, “plaintiff’s claim for restitution… falls squarely within the embrace of ERISA’s preemptive remedial provisions – namely, Section 1132(a)(3)(B) – thus converting plaintiff’s state law claim against Brainard into a federal claim for restitution of ERISA plan assets.” As Ms. Bentley alleges that Ms. Brainard was not the rightful beneficiary under the plan, claims against Ms. Brainard, as an improper donee, are subject to liability under ERISA and the remedy Ms. Bentley seeks will be an appropriate form of equitable relief if she can prove she is the rightful beneficiary. Thus, under ERISA’s preemptive power, plaintiff’s claim for the benefits were converted from state law causes of action to federal claims, over which the federal court has jurisdiction, and her motion to remand was accordingly denied.
Exhaustion of Administrative Remedies
Ellefson v. General Elec. Co., No. 23-cv-1145-JAR-TJJ, 2023 WL 8434403 (D. Kan. Dec. 5, 2023) (Judge Julie A. Robinson). Plaintiffs Russell Ellefson and Joshua Zongker sued General Electric Company (“GE”) and its ERISA-governed severance plan claiming they are owned benefits under the plan. In 2022, Mr. Ellefson and Mr. Zongker were told by GE that their positions were being eliminated. The notice GE provided them explained that they were eligible for lump-sum severance benefits in exchange for executing “Full Benefits Release agreements.” Mr. Ellefson and Mr. Zongker did so, and understood this action to be the equivalent of filing a claim for benefits. However, shortly before their last scheduled day of employment, GE renewed its contract at the windfarm where they worked and informed them that because of this change the planned layoffs would not occur. GE did not, however, formally rescind the offer of severance benefits. Instead, it adopted the view that “severance entitlement [w]as always… conditioned on an actual termination of employment due to layoff,” and therefore declined to honor the terms of the severance agreements or pay the benefits. And, rather than notify plaintiffs of “any applicable internal appeal procedure and its applicable timelines,” GE’s counsel told them “to go ahead and file a lawsuit.” They did so through this action. Plaintiffs maintain that in reliance upon their severance offers and in exchange for the executed release agreements their employment was terminated and they are entitled to benefits. Plaintiffs argue that they could not exhaust administrative remedies prior to filing their action because the plan failed to establish or follow claims procedures consistent with ERISA’s requirements as defendants’ notice and disclosure deficiencies denied them a reasonable review procedure, making exhaustion impossible and futile. Defendants disagreed with this view, and moved for dismissal on the grounds that plaintiffs failed to administratively exhaust. Defendants’ motion to dismiss was denied in this order. The court agreed with plaintiffs that their complaint stated exceptions to ERISA’s exhaustion requirement. “Viewing the allegations of the Complaint in Plaintiffs’ favor – as it must – Plaintiffs have alleged facts that are capable of supporting a finding or inference that Defendants prevented them from seeking timely review.” Thus, pursuant to the liberal pleading standards of Rule 8, the court concluded that plaintiffs did enough to plead an exception to the exhaustion rule and therefore survived a Rule 12(b)(6) dismissal.
Life Insurance & AD&D Benefit Claims
K.K. v. CDK Glob., No. 3:22-cv-562-MOC, 2023 WL 8459850 (W.D.N.C. Dec. 6, 2023) (Judge Max O. Cogburn Jr.). The circumstances of Samir Pradeep Kulkarni’s death are disputed among the parties in this accidental death and dismemberment benefit action. Mr. Kulkarni died while traveling on company business when he shot himself in the head with a co-worker’s gun. Mr. Kulkarni and his co-worker drank heavily that night and Mr. Kulkarni had consumed methamphetamine. According to the co-worker, Mr. Kulkarni, seemingly out of nowhere and without warning, picked up the loaded handgun present in the room “pressed the muzzle to the side of his head, and fired.” Importantly for the court, “there is simply no evidence Samir knew the gun was loaded when he pulled the trigger.” Mr. Kulkarni died a few days later from his injury. Benefits are payable to Mr. Kulkarni’s niece and nephew, the policy’s named beneficiaries and the plaintiffs in this action, if their uncle’s death was “a direct result of an accident” that was not “intentionally self-inflicted.” The parties cross-moved for summary judgment. The court denied both motions. It stated that genuine disputes of material fact about Mr. Kulkarni’s death preclude granting summary judgment to either party at this moment. In particular, the court stressed that Mr. Kulkarni’s mental state when he put the gun to his head is a material fact that will affect the outcome of this lawsuit. If he intended to kill himself, or knew that the injury was likely when he pulled the trigger, benefits are not payable. However, if Mr. Kulkarni did not think the gun would go off, “Plaintiffs have a claim.” Whether the death was an accident is therefore still entirely unclear, and “the parties offer conflicting evidence.” Resolving this conflicting evidence would require making credibility determinations, inappropriate at the summary judgment stage. As a result, the court concluded that a reasonable fact-finder could rule for either party, and a bench trial is necessary to resolve the matter.
Medical Benefit Claims
LaVallee v. Medcost Benefits Servs., No. 1:21-cv-00265-MR, 2023 WL 8459852 (W.D.N.C. Dec. 6, 2023) (Judge Martin Reidinger). Mother and daughter Lisa LaVallee and Erica Ray initiated this lawsuit seeking medical benefits under ERISA after their healthcare plan denied the family’s claim for reimbursement of Ms. Ray’s stay at a residential treatment facility for the care of her mental health. Defendant MedCost Benefits Services moved to be dismissed as a defendant in this action for lack of subject matter jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(1). A few months after this lawsuit was filed, MedCost ceased operating as the third-party claim administrator of the healthcare plan. It is undisputed that MedCost no longer has any involvement with the plan and presently has no discretion over the plan or its funds. However, at the relevant time of the benefits denial, up until the first four months of this lawsuit, MedCost was the claim administrator with fiduciary duties to plaintiffs and discretionary authority over their benefit claim. Because of that critical fact, plaintiffs argued against dismissing MedCost as a defendant. However, they were unable to persuade the court, and in this decision it granted MedCost’s motion to dismiss. It held, “because MedCost is no longer the claims administrator for the Plan, it has no control over the administration of benefits under the Plan. Therefore, a claim against MedCost cannot provide redress to the Plaintiffs’ injuries, and the Plaintiffs lack standing to bring such a claim. As such, this Court does not have jurisdiction over the Plaintiffs’ claim against MedCost, and the claim accordingly must be dismissed.”
Denney v. Humana Ins. Co., No. CIV-23-120-D, 2023 WL 8358564 (W.D. Okla. Dec. 1, 2023) (Judge Timothy D. Degiusti). The Denney family sued Humana Insurance Company after the daughter, Jacqueline Denney, underwent medically necessary jaw surgery. Plaintiffs allege that Humana violated ERISA by improperly denying and underpaying the benefit claims they submitted for Jacqueline’s care. In this action they seek reimbursement of benefits, and allege that Humana breached its fiduciary duties under ERISA. The complaint asserts three claims; a claim for unpaid benefits under Section 502(a)(1)(B), an alternative claim for relief under Section 502(a)(3), and a claim under Section 1132(c)(1) for failure to provide requested plan information. Humana moved to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(6). The court granted in part and denied in part the motion to dismiss. Beginning with the benefits claim, the court held that plaintiffs satisfied notice pleading and sufficiently stated a claim for unpaid ERISA benefits. It also determined that plaintiffs alleged enough in their complaint to potentially excuse a failure to exhaust administrative remedies because they included details about their inability to comply with the appeals process provided by the plan and alleged that further efforts to attempt to exhaust prior to litigation would have been futile. As a result, the court denied the motion to dismiss the Section 502(a)(1)(B) claim. However, the court did dismiss, without prejudice, plaintiffs’ Section 502(a)(3) fiduciary breach claim, which they pled in the alternative to their benefits claim. It found that plaintiffs had an adequate remedy under Section 502(a)(1)(B), as their theory of fiduciary breach was essentially that Humana wrongfully denied the family’s claims for benefits. “Plaintiffs do not identify any other fiduciary acts underlying their claim for equitable relief. Plaintiffs have not demonstrated…any possibility that § 1132(a)(1) cannot provide an adequate remedy for Defendant’s denial of benefits, meaning there is no plausible claim for equitable relief.” Thus, under the facts and circumstances of the allegations in their complaint, the court held that plaintiffs stated a claim under (a)(1)(B), but could not bring an alternative claim under (a)(3), and therefore held that dismissal of their “catchall” equitable relief claim was appropriate. Finally, the court dismissed the statutory claim under § 1132(c)(1)(B) with prejudice because Humana is not the plan administrator, but is instead the claims administrator of the plan, and is therefore not a proper party for the purposes of § 1132(c)(1).
M.P. v. Bluecross Blueshield of Ill., No. 2:23-cv-216-TC, 2023 WL 8481410 (D. Utah Dec. 7, 2023) (Judge Tena Campbell). Plaintiff M.P. sued BlueCross and BlueShield of Illinois, Arthur J. Gallagher & Co., and the Arthur J. Gallagher Benefits Plan alleging three causes of action under ERISA; a claim for recovery of benefits, an equitable relief claim for violating the Mental Health Parity and Addiction Equity Act, and a claim for statutory damages for failure to produce documents upon request. This action stems from the plan’s denial of M.P.’s claim for minor child C.P.’s stay at a residential treatment facility. Under the plan language, residential treatment centers for mental healthcare are covered if and only if the facility offers 24-hour onsite nursing services. The facility that C.P. stayed at did not offer such services. Defendants moved to dismiss the complaint. They argued that the plan properly denied the benefit claim as it unambiguously excludes coverage for residential treatment centers that do not meet the 24-hour nursing requirement. In addition, defendants maintained that the plan is not in violation of the Parity Act because this same requirement is also applied to skilled nursing facilities and all other analogous levels of intermediate medical/surgical care. Finally, defendants argued in favor of dismissing the statutory penalties claim because M.P. sent the request to the wrong address, and Blue Cross, the claims administrator, is not a proper party to a Section 1132(c)(1) claim. The court agreed with defendants on almost all of their arguments, and largely granted the motion to dismiss. To begin, the court concurred with the plan and its administrators that C.P.’s treatment was not covered under the terms of the plan because the facility C.P. received care from does not provide 24-hour onsite nursing as required for all residential treatment centers under the plan. “Because Cascade did not satisfy the Plan’s unambiguous requirement… coverage for C.P.’s treatment at Cascade was not available under the Plan and [defendants] appropriately (under the Plan and ERISA) denied the Plaintiffs’ claim.” Thus, the court found the Section 502(a)(1)(B) claim meritless and dismissed this cause of action. Next, the court once again agreed with defendants that the complaint could not state a Parity Act violation. It held that the plan’s 24-hour onsite nursing requirement was not more restrictive for mental healthcare than for comparable medical or surgical care. M.P.’s subtle argument, that the plan violates the Parity Act because 24-hour nursing care is part of generally accepted standards of care for skilled nursing facilities, but not for residential treatment centers providing mental healthcare, did not sway the court. It held that these “conclusory allegations” were insufficient to plead a Parity Act violation, and accordingly dismissed the second cause of action too. However, the court denied the motion to dismiss the statutory penalties claim as asserted against defendant Arthur J. Gallagher & Co., the plan administrator. It found that the complaint sufficiently alleged that M.P. requested plan documents and did not receive them in a timely manner as required under the statute. The court was not persuaded by defendants’ “argument that the Plaintiffs’ claim is foreclosed because the Plaintiffs sent their document request to the wrong address.” Thus, this cause of action alone was allowed to proceed past the pleadings, and in all other respects, defendants’ motion to dismiss was granted.
Pension Benefit Claims
Deville v. Pension Benefit Guar. Corp., No. 1:23-cv-1343 (DLF), 2023 WL 8449238 (D.D.C. Dec. 6, 2023) (Judge Dabney L. Friedrich). Pro se plaintiff Frank Deville worked for nearly three decades as a full-time employee of Exide Holdings, Inc. and has been a member of the Exide Technologies Retirement Plan since 1987. Mr. Deville stopped working in 2015 and applied for disability benefits with the Social Security Administration. His claim for Social Security disability benefits was approved but the Social Security Administration determined that Mr. Deville became disabled on June 1, 2016. It found that because he had been able to work in 2015, he was not disabled that year. A few years later, in 2020, Exide filed for bankruptcy and its plan was terminated as insolvent. As a result, the Pension Benefit Guaranty Corporation (“PBGC”) became the trustee of the Exide retirement plan. Shortly after, Mr. Deville applied for pension benefits under the plan. The PBGC provided Mr. Deville with a pension benefit estimate. He objected to the calculations and requested that his benefits be processed under the plan’s disability pension provisions. The PBGC responded by determining that Mr. Deville did not qualify for the plan’s disability benefits. It interpreted the plan language as requiring disabilities to have incurred while participants were active employees of Exide in order for claimants to qualify for disability pension benefits. It held that because the Social Security Administration found Mr. Deville’s disability start date to be in 2016, after he had stopped working for Exide, he was not entitled to benefits under the plan. This determination was affirmed on appeal to the appeals board, which then prompted Mr. Deville to challenge the appeals board’s decision in federal court under ERISA and the Administrative Procedure Act. The parties filed cross-motions for summary judgment. The court granted summary judgment in favor of PBGC in this decision. It concluded that the appeals board did not misapply the Exide Plan to deny Mr. Deville benefits, and that its decision was therefore not “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law.” The language of the Exide retirement plan states, “To qualify as Disability, the events causing the physical and mental disability and the manifestation of the physical and mental disability must be incurred while a Participant is an active employee.” The court agreed with PBGC and the appeals board that the critical issue under the plan is whether the employee “incurred” the disability “before or after he stopped working.” Given the Social Security Administration’s conclusion that Mr. Deville’s disability began in 2016, after he had stopped working at Exide, the court concluded that PBGC lawfully and appropriately determined that Mr. Deville was not entitled to disability benefits under the plan. Accordingly, PBGC’s benefit determination was upheld and summary judgment was granted in its favor.
Shanklin v. United Mine Workers of Am. Combined Benefit Fund, No. 6:22-cv-01056-LSC, 2023 WL 8459930 (N.D. Ala. Dec. 6, 2023) (Judge L. Scott Coogler). Plaintiff Clayton Shanklin brought this action against the United Mine Workers of America 1974 Pension Trust seeking a court order overturning the plan’s denial of his claim for disability pension benefits. Mr. Shanklin spent most of his adult life working in the coal mine industry. This work has taken its toll physically on Mr. Shanklin. Since at least 2015, Mr. Shanklin has suffered from back problems, in addition to heart problems, high blood pressure, and other health conditions. However, it was in early 2017 when things went from bad to worse for Mr. Shanklin. First, on January 5, 2017, and then on February 21, 2017, Mr. Shanklin ended up in emergency rooms after being injured in two different workplace accidents. The first accident involved a mine cart crash, and the second involved an accident that took place while Mr. Shanklin was unloading 100 pounds of rock dust. These two incidents left Mr. Shanklin, already in a fragile state, completely disabled, which was the conclusion of the administrative law judge at the Social Security Administration who approved his claim for disability benefits. The United Mine Workers plan provides a disability pension to participants with at least 10 years of service prior to retirement who became totally disabled as a result of an on-the-job mine accident. Having established his disability by his award of Social Security disability benefits, Mr. Shanklin applied for disability pension benefits from the plan. After his claim was denied and that denial was administratively affirmed during the internal appeals process, Mr. Shanklin commenced this ERISA action. He brought two claims against the plan: a claim for benefits and a claim for statutory penalties for failure to provide documents upon request. In this decision the court entered its final judgment, granting judgment to Mr. Shanklin on his Section 502(a)(1)(B) benefit claim and judgment in favor of the plan on the statutory penalties claim. “As a threshold issue,” the court found that the plan’s “determination that the January 5, 2017, accident was not a ‘mine accident’ was patently erroneous.” Not only did the court view both accidents as “mine accidents” as defined by the plan, but it also agreed with Mr. Shanklin and the SSA administrative law judge “that the mine accidents aggravated or combined with his impairments to cause [the] disabling pain; and therefore, he is entitled to disability benefits under the Plan.” The plan’s holding to the contrary was found by the court to be de novo wrong. Moreover, the court concluded that the plan did not provide Mr. Shanklin with a “full and fair review” of his claim for benefits because it did not provide him with reasonable access to the information relevant to his claim for benefits. Due to this failure, the court treated the plan as having made its benefit determination without discretion, and therefore held that Mr. Shanklin was entitled to benefits under the plan. Furthermore, for the sake of completeness, the court emphasized that it also viewed the denial as arbitrary and capricious. However, the plan was granted judgment in its favor on Mr. Shanklin’s statutory penalties claim, as it is the plan, not the plan administrator, and therefore not a proper party to a claim for statutory penalties under Section 1132(c). Accordingly, judgment was granted in part and denied in part for each party as described above.
Pleading Issues & Procedure
Moyer v. Gov’t Emps. Ins. Co., No. 2:23-cv-578, 2023 WL 8358381 (S.D. Ohio Dec. 1, 2023) (Judge Michael H. Watson). A group of insurance agents employed by GEICO Insurance Agency, LLC brought this civil action under the theory that GEICO is in violation of ERISA by allowing them to participate in health and life insurance plans but not in other employee benefit plans, including the company’s retirement and pension plans. Plaintiffs assert several claims under ERISA for benefits, retaliation, and equitable relief. The GEICO defendants maintain that plaintiffs are not plan participants in the relevant plans and that they therefore lack statutory standing to sue under ERISA. Based on this conviction, defendants moved to dismiss the complaint. Their motion was granted in this order. As a preliminary matter, the court decided whether it could consider the documents defendants submitted with their motion which they represent are the relevant plan documents. Plaintiffs questioned the authenticity and completeness of these documents. They maintained that they are entitled to discovery to verify that the documents provided by the defendants are those that were in effect during the relevant period, that they are all of the relevant plan documents, and that they are accurate. Nevertheless, as defendants “represented to the Court, in response to a Court order, that these are the relevant Plan documents, and have submitted a declaration in support of the same,” the court was satisfied that it may rely on them to review the motion to dismiss. The decision then considered the merits of plaintiffs’ claims and concluded that the complaint failed to state a claim for relief. First, the court held that the claims for declaratory judgment and injunctive relief were duplicative of other claims in the complaint and accordingly dismissed these two causes of action with prejudice. Regarding statutory standing, the court entirely agreed with defendants. It rejected plaintiffs’ argument that they either are or may be plan participants and therefore have standing to sue under ERISA. “Here, Plaintiffs’ claims fail because they cannot show they are eligible for benefits under the language of the Plans. When a plan’s plain language expressly excludes a person from eligibility, that person is not a plan participant.” Plaintiffs stressed that the statutory definition of participant provides that a participant is any employee “who is or may become eligible to receive a benefit of any type of an employee benefit plan.” But the court did not understand the language of the statute to mean that “once someone is eligible for a benefit, they are eligible for all benefits.” Instead, the court determined that under ERISA an employee may only bring claims “under the plan in which he is a participant, not a different plan in which he is not a participant.” Thus, the court was not persuaded by plaintiffs’ theory of their action, and therefore granted the motion to dismiss. Plaintiffs were granted a limited ability to amend their complaint to state claims, but were cautioned against relitigating their position that “they are participants in any other plans.”
Radle v. Unum Life Ins. Co. of Am., No. 4:21CV1039 HEA, 2023 WL 8449084 (E.D. Mo. Dec. 6, 2023) (Judge Henry Edward Autrey). Plaintiff Michael Radle commenced this disability benefits action against Unum Life Insurance Company of America to challenge its termination of his long-term disability benefits after 24 months. Unum subsequently moved for leave to file a counterclaim against Mr. Radle to recover as overpayment the amount it paid to him while he was receiving disability benefits from the Social Security Administration. Mr. Radle moved to dismiss the counterclaim for failure to state a cause of action pursuant to Rule 12(b)(6). The court denied the motion in this decision. Mr. Radle argued that the counterclaim should be dismissed because Unum did not allege that the overpayment funds were separately identifiable or that the court could identify the funds independent of his other assets. The court agreed with Unum that “these grounds for dismissal are not proper at this stage of the litigation.” It held that Unum was seeking appropriate equitable relief to recover for the overpayment while Mr. Radle was concurrently receiving Social Security benefits and assuming the truth of its allegations, Unum did enough to plead a claim for equitable relief under Section 502(a)(3). Thus, the court concluded, “Plaintiff’s concerns regarding whether the funds can be identified may be raised after discovery,” and his motion to dismiss was denied.