No atmospheric river of ERISA cases this week, just a slow trickle as the year winds to an end. But keep reading for a number of interesting ERISA decisions, mostly concerning medical benefits, including the latest discovery decision in the Chippewa Tribe’s longstanding dispute with Blue Cross Blue Shield of Michigan.
Below is a summary of this past week’s notable ERISA decisions by subject matter and jurisdiction.
Saginaw Chippewa Indian Tribe of Mich. v. Blue Cross Blue Shield of Mich., No. 1:16-cv-10317, 2023 WL 8313270 (E.D. Mich. Dec. 1, 2023) (Judge Thomas L. Ludington). Fatigue has set in for the court in this action brought by the Saginaw Chippewa Indian Tribe of Michigan challenging Blue Cross’s hidden fee system in which the insurer has been found to inflate the fees it charged to its clients through undisclosed markups for hospital charges. “And, as the Sixth Circuit has explained in this case, had the Tribe only alleged that BCBSM inflated the Tribe’s medical bills with undisclosed administrative fees, ‘this would be a relatively simple case.’ But this case has become anything but,” according to the court. A year and a half since the Sixth Circuit’s most recent ruling and remand in this action – its second – and over seven years since this litigation began, things have ground to a standstill. The parties have been engaged in an ongoing discovery dispute over whether the Tribe’s contract health service program, funded at least in part by the Indian Health Service and Congressional appropriations, entitles the Tribe to pay only Medicare-like rates. On remand, the parties are trying to parse out who is entitled to Medicare-like rates under the Tribe’s ERISA plan because although the employee plan is actionable under ERISA, only Tribal members within the plan may be eligible for Medicare-like rates. “Resolution has proved tedious,” and “this parsing out has proved difficult.” The Tribe moved for default judgment arguing that Blue Cross failed to produce all claims data it is required to under the court’s previous discovery orders. This motion was nearly identical to a default judgment motion the Tribe filed four months ago which was denied by the court. Once again, the Tribe’s renewed motion for default judgment was denied without prejudice. Much like its previous decision four months ago, the court highlighted that the Tribe had a duty to identify its members in the ERISA plan in order to allow Blue Cross to produce the claims data for these individuals and “at the core of the discovery dispute were birthdates needed to conduct the most accurate searches for the claims data.” Without the Tribe providing this information, Blue Cross was not able to accurately search its database for the pertinent claims, the court found. The court still feels that the parties have exchanged most of the information necessary pertaining to liability, rather than damages. More to the point, the court felt that the Tribe’s renewed motion failed to show that Blue Cross’s failure to comply with discovery was motivated by willfulness, fault, or bad faith, and it stated that the renewed motion raised most of the same arguments already addressed and rejected by the court in the first. Thus, the court denied the Tribe’s motion.
Hanson v. Mid Cent. Operating Eng’rs Health & Welfare Fund, No. 3:23-CV-2343-MAB, 2023 WL 8252229 (S.D. Ill. Nov. 29, 2023) (Magistrate Judge Mark A. Beatty). In April of 2022, plaintiffs Deborah and Timothy Hanson and their attorney, John Womick, sued Mid Central Operating Engineers Health & Welfare Fund in state court in Illinois asking the court to adjudicate a lien of an at-fault driver settlement under the Illinois common fund doctrine. The parties then stayed the proceedings and explored settlement. Settlement negotiations ultimately faltered the following April when plaintiffs rejected the Fund’s settlement offer. Plaintiffs subsequently amended their complaint to include new allegations of breaches of fiduciary duties. The amended complaint challenged the amount of benefits paid by the Fund to the healthcare providers as unreasonable and excessive. In response to these new allegations the Fund removed the lawsuit to federal court, arguing that the new claims were preempted by ERISA. Plaintiffs moved to remand their action back to Illinois state court. In this order their motion for remand was denied. The court held that the removal was timely as the case was not removable until the new claims were added. The original complaint, it said, “essentially asked the court to apportion the settlement between Womick and the Fund,” and “claims for lien adjudication are not completely preempted by ERISA and therefore not removeable.” The court concluded that the nature of plaintiffs’ complaint changed between the original complaint and the amended complaint. It held that the new allegations and causes of action in the amended complaint, which challenge the amount the Fund paid in benefits and its compliance with payment provisions in the healthcare plan, altered the complaint in such a way as to transform it from one not falling within the scope of ERISA Section 502(a) to a complaint which is completely preempted. “Plaintiffs are thus seeking to enforce their rights under an ERISA plan, if not complaining about a breach of fiduciary duty, both of which fall within the scope of § 502(a). Accordingly, the claims are completely preempted and properly removable to federal court.”
Exhaustion of Administrative Remedies
Cheeks v. Montefiore Med. Ctr., No. 23-CV-2170 (JMF), 2023 WL 8235755 (S.D.N.Y. Nov. 27, 2023) (Judge Jesse M. Furman). Pro se plaintiff Leslie Cheeks sued her former employer, Montefiore Medical Center, her healthcare workers union, and the fund that administered her ERISA-governed welfare benefit plan after she was fired in 2021 for failing to comply with a state-mandated COVID-19 vaccine requirement for healthcare workers following her employer’s denial of her requests for a religious exemption to the mandate. Construing Ms. Cheeks’ complaint liberally, the court understood her lawsuit as alleging claims under the First Amendment’s Free Exercise of Religion Clause, Title VII of the Civil Rights Act for religious discrimination, a claim against the fund for ERISA benefits, and a claim against the union for breach of fair representation under the National Labor Relations Act. Defendants filed motions to dismiss for failure to state a claim. Their motions were granted in this decision. The court held that Ms. Cheeks could not state a First Amendment claim because defendants are not state actors, that she failed to allege exhaustion of her Title VII and ERISA claims, and that her duty of fair representation claim against the union was untimely. Regarding ERISA specifically, the court held that the complaint did not allege that Ms. Cheeks submitted a claim for benefits and then pursued the appeals process of any adverse claims decision under her plan before filing a civil suit. Accordingly, the court concluded that the ERISA claim should be dismissed for failure to exhaust administrative remedies. Finally, to the extent Ms. Cheeks alleged any state law cause of action, the court declined to exercise supplemental jurisdiction over such claims. Dismissal of the federal causes of action was with prejudice.
Life Insurance & AD&D Benefit Claims
Anderson v. Reliance Standard Life Ins. Co., No. 22-4654 (RK) (DEA), 2023 WL 8271931 (D.N.J. Nov. 30, 2023) (Judge Robert Kirsch). Plaintiff Cathy Anderson alleges that Reliance Standard Life Insurance Company, Matrix Absence Management, Inc., and K. Hovnanian Companies, LLC never advised her late husband of the lapse of, or any issues regarding, his group life insurance policies, and that their failure to do so during his battle with bladder cancer resulted in the termination of the policies and a subsequent denial of benefits she would otherwise have been entitled to as the policies’ named beneficiary. On December 7, 2022, the court granted Reliance and Matrix’s motion to dismiss count one of Ms. Anderson’s complaint, a claim of breach of fiduciary duty under Sections 502(a)(2) and 502(a)(3) of ERISA. In that order, the court found that Ms. Anderson could not state a claim under Section 502(a)(2) because she was not bringing any claims on behalf of the Plan but was instead bringing an individual claim. In addition, the court dismissed count one under Section 502(a)(3). It concluded that Section 502 provided an appropriate remedy elsewhere, and that Ms. Anderson was not seeking any available equitable form of relief. Thus, the court held that the relief Ms. Anderson was seeking fell outside the category of recoverable equitable restitution and therefore dismissed the claim against Matrix and Reliance. In response to that order, defendant K. Hovnanian moved for dismissal of count one of Ms. Anderson’s complaint as asserted against it. In addition, defendant K. Hovnanian also moved to amend its answer to assert a crossclaim of negligence against Reliance. Beginning with the partial motion to dismiss, the court held that the analysis of count one was exactly the same for K. Hovnanian as it was for Matrix and Reliance last December, and as a result, “the law of case doctrine applies with respect to the Court’s prior decision finding that Plaintiffs’ claims fail under Sections 502(a)(2) and 502(a)(3).” The court therefore dismissed count one against K. Hovnanian. Dismissal of count one was without prejudice. The decision then addressed the motion to assert a crossclaim against Reliance Standard Life Insurance Company. There, it held that the claim was completely preempted by ERISA as its resolution depends on the existence and interpretation of the ERISA plan. Specifically, K. Hovnanian’s claim alleged that Reliance misrepresented the life insurance policy to Ms. Anderson, and the court determined that in order to decide whether decedent was in fact eligible for and entitled to benefits under the life insurance plans would require analyzing and scrutinizing the terms of the policy. As a result, the court agreed with Reliance that ERISA preempted the proposed state-law negligence claim, and amendment would be futile. The court therefore denied K. Hovnanian’s request to amend its answer.
Brock v. Wells Fargo & Co., No. EDCV 21-0532JGB (SHKx), 2023 WL 8275970 (C.D. Cal. Nov. 29, 2023) (Judge Jesus G. Bernal). Plaintiff Isalliah Brock filed this civil action to challenge MetLife’s denial of her claim for Accidental Death and Dismemberment benefits under her deceased fiancée’s ERISA-governed plan. Decedent Ronnie R. Allmond Jr. died on June 22, 2019, of blunt force trauma from injuries sustained during a car crash. Blood taken from Mr. Allmond at the time was tested to determine his blood alcohol levels. Those results showed that Mr. Allmond’s blood alcohol level was 0.083%, which is above the legal limit for operating a vehicle in the state of Nevada of 0.08%. Upon evaluating Ms. Brock’s benefit claim, MetLife concluded that because Mr. Allmond was intoxicated while driving at the time of the crash, the plan’s intoxication exclusion provision applied, meaning benefits were not payable to Ms. Brock. During the internal appeals process and throughout this litigation, Ms. Brock has challenged the integrity of the blood sample analyzed, including its chain of custody. She maintained that the results were unreliable and insufficient and that they could not be used as evidence to support the denial or to conclude Mr. Allmond’s blood alcohol level was over the legal limit. In this decision the court issued its findings of fact and conclusions of law under the de novo review standard. It ultimately rejected Ms. Brock’s arguments about the veracity of the blood results and concluded that MetLife met its burden of proving that Mr. Allmond’s injuries were sustained while driving his car under the influence of alcohol. Further, the court held that MetLife’s reliance on the “toxicology report was justified and appropriate based on the facts of this claim and that MetLife correctly applied the Exclusion Provision.” Thus, based on its review of all the available evidence, the court was convinced that the denial was proper. As a result, the denial was affirmed.
Medical Benefit Claims
M.R. v. United Healthcare Ins. Co., No. 23 Civ. 04748 (GHW) (GS), 2023 WL 8178646 (S.D.N.Y. Nov. 20, 2023) (Magistrate Judge Gary Stein). After his ERISA-governed healthcare plan denied his claim for health insurance benefits for his minor stepdaughter’s stay at a wilderness therapy program in 2020, plaintiff M.R. commenced this action against United Healthcare Insurance Company, United Behavioral Health, and Pfizer Inc. In his complaint M.R. brings claims for benefits, breach of fiduciary duty, violation of the Mental Health Parity and Addiction Equity Act, and for statutory penalties for failure to provide documents upon request. Defendants moved to dismiss the complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). They argued that M.R.’s lawsuit was untimely under the plan’s one-year contractual limitations period to bring legal actions. In the alternative, defendants argued that M.R. failed to state his claims. In this report and recommendation Magistrate Judge Gary Stein recommended the court deny the motion to dismiss, except insofar as the statutory penalties claim was asserted against any defendant other than the plan administrator, Pfizer Inc. To begin, the court addressed whether the action was timely brought. M.R. contended that the one-year statute of limitations in the governing plan document did not apply because United failed to provide written notice of it in its claim denial letters as required under the Department of Labor’s governing regulation, 29 C.F.R. § 2560.503-1(g)(1)(iv). Plaintiff argued that the appropriate remedy for defendants’ violation of this regulation is to find the contractual limitations period was waived. The Magistrate Judge agreed. Judge Stein stated that the “overwhelming weight of authority” supports a reading of the regulation holding that it requires plan administrators to inform claimants of plan-imposed time limits for bringing ERISA civil suits in any adverse benefit determination letter. Not only does the DOL maintain that this was its intent in implementing the regulation, but reading the statute in this manner also promotes the underlying statutory purpose of the regulation “to provide ‘adequate notice in writing’ of claim denials and afford claimants the opportunity for a ‘full and fair review’ of their claim.’” On the other hand, allowing plan administrators to bury limitations periods in plan documents would strongly disadvantage plan participants and “obstruct access to the courts.” Moreover, the Magistrate agreed with M.R. that the appropriate remedy for defendants’ failure to comply with the regulation is to find the plan-imposed time limit unenforceable. Finally, under the analogous state law statutes of limitations for breach of contract claims, Magistrate Stein concluded that M.R.’s action was timely brought. The report then turned to whether plaintiff’s complaint stated claims upon which relief could be granted. It began its analysis with the Parity Act violation. The Magistrate found that the complaint’s allegation of a categorial exclusion of coverage for wilderness therapy programs under the plan’s experimental or investigational exclusion, which does not exist for analogous forms of sub-acute inpatient medical and surgical settings, taken as true, plausibly states a claim for equitable relief under ERISA. He found that at the pleading stage, when ERISA claimants do not have easy access to the process their insurer “uses to evaluate analogous medical claims’ absent an opportunity for discovery,” such an allegation is sufficient to establish a Parity Act violation. Additionally, the report stated that the complaint plausibly alleges Pfizer did not comply with document requests that M.R. sent to it, and that M.R. therefore stated a statutory penalty claim against Pfizer. However, because statutory penalty claims under Section 1132(c) claims may only be imposed against a plan administrator, Magistrate Judge Stein clarified that M.R. could only bring this cause of action against Pfizer and not against the United defendants. All other claims were found to satisfy Rule 8’s pleading requirements, and left undisturbed. As a result, the report recommended defendants’ motion to dismiss be denied, and plaintiff’s complaint be allowed to proceed past the pleading stage.
Pension Benefit Claims
Carr v. Abington Mem’l Hosp., No. 23-1822, 2023 WL 8237253 (E.D. Pa. Nov. 28, 2023) (Judge Harvey Bartle III). Plaintiff Alice M. Carr commenced this ERISA action against her former employer, Abington Memorial Hospital, the Pension Plan of Abington Memorial Hospital, the Jefferson Defined Benefit Plan, which merged with the Abington pension plan, and Thomas Jefferson University seeking denied pension benefits. In her complaint Ms. Carr alleges that her claim for benefits was denied after defendants concluded that she did not have five years of vested service and therefore did not qualify for pension benefits. According to defendants’ calculations, Ms. Carr was a mere 50 hours short of her pension vesting. Their records allegedly show that while Ms. Carr worked more than the 1,000 hours required per year for four service years, she only worked 950 hours in 1997. Ms. Carr disagrees with this calculation and alleges she worked 1,009 hours in 1997, qualifying that year as a service year and making her fully vested in the merged Jefferson Plan. During the administrative appeals process, defendants did not produce documentation about Ms. Carr’s payroll records and hours worked to support their calculations, despite requests from Ms. Carr for them to do so. Moreover, she claims that defendants breached their fiduciary obligations by misrepresenting her vesting status over the years. In her action, Ms. Carr asserted a claim to recover benefits, enforce her rights under the plan, and clarify her rights to future benefits pursuant to Section 502(a)(1)(B). Additionally, she brought claims for statutory penalties for failure to produce plan documents upon request, and an equitable relief claim for breach of fiduciary duty. Defendants moved to dismiss the complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). Their motion was granted in part. First, the court dismissed the benefit claim against Abington Memorial Hospital and the Abington pension plan. It held that Ms. Carr did not allege that her previous employer “had any discretion to deny her benefits or determine her eligibility,” and that the old plan “which no longer exists as a separate entity, had no role in the denial of benefits.” However, count I was not dismissed against either Thomas Jefferson University or its pension plan. Next, the court noted that Section 105(a)(1)(B)(ii) statutory penalty claims apply only to benefit plan administrators, in this case, Thomas Jefferson University. The court concluded that “Ms. Carr sufficiently alleges she made a specific request for an accounting from Jefferson, the plan administrator. Therefore, she has successfully alleged a violation of Section 105 against Jefferson.” However, the court dismissed this claim as to the other three defendants. Finally, the court entirely dismissed Ms. Carr’s equitable relief claim pursuant to Section 502t(a)(3) against all defendants. It found that her claim for injunctive relief was truly a claim for benefits “dressed in the cloak of equity,” as the “requested relief simply focuses on resolving Ms. Carr’s adverse benefits determination.” Accordingly, the court concluded that the Section 502(a)(3) claim was not distinct from the Section 502(a)(1)(B) claim and the complaint thus failed to plead an equitable relief claim upon which relief could be granted.
Minisohn Chiropractic & Acupuncture Ctr. v. Horizon Blue Cross Blue Shield of N.J., No. 23-01341 (GC) (TJB), 2023 WL 8253088 (D.N.J. Nov. 29, 2023) (Judge Georgette Castner). A chiropractic and acupuncture center and the estate of the late doctor who ran the practice have sued Horizon Blue Cross Blue Shield of New Jersey under ERISA and state law for systematically denying claims for health benefits stemming from their services. Plaintiffs asserted claims for reimbursement of benefits and breach of fiduciary duty under ERISA, and a state law breach of contract claim. They allege that they are owed over $250,000 plus interest in claims that were wrongfully denied for care they provided between 2019 and 2022. Blue Cross moved to dismiss the complaint for failure to state a claim. Defendant argued that the healthcare providers lacked derivative standing to bring their claims under ERISA. The court agreed. Following precedent in the circuit, the court concluded that the complaint’s single sentence asserting that the practice “has entered written assignment of benefit agreement[s] with… [Horizon] subscribers of their contractual rights under the policy of group health insurance issued by [Horizon],” was conclusory and insufficient to establish standing. Instead, to establish derivative standing, the court expressed that plaintiffs need to identify specific patients who assigned their claims to them and include “factual detail as to the terms, limitations, or specifics of alleged assignments.” Without these particular details, or the actual benefit assignments attached to the complaint, the court was clear that plaintiffs could not plausibly demonstrate standing to sue under ERISA. And although the court dismissed the ERISA causes of action for lack of standing, the decision also addressed further shortcomings with the ERISA claims as currently pled. It held that the benefit claims asserted under Section 502(a)(1)(B) failed to identify the plan provisions that were violated which entitle plaintiffs to the payments they seek. Additionally, the court expressed skepticism about whether the breach of fiduciary duty Section 502(a)(3) claim, pled in the alternative to the claim for benefits, truly differed from the Section 502(a)(1)(B) claim. The court also expressed “concern about Plaintiff’s failure to specify what alleged conduct breached Horizon’s fiduciary duties.” Because the court’s dismissal was without prejudice, plaintiffs were instructed to consider and remedy these pleading defects in their amended complaint. Finally, because the federal causes of action were dismissed, the court declined to exercise supplemental jurisdiction over the state law breach of contract claim.
Chappell v. SkyWest Airlines, Inc., No. 4:21-cv-00083-DN-PK, 2023 WL 8261667 (D. Utah Nov. 29, 2023) (Judge David Nuffer). Plaintiff Randy T. Chappell brought this lawsuit against his former employer, defendant SkyWest Airlines, Inc., after his employment as a SkyWest pilot was terminated in 2020. In his action Mr. Chappell asserts six counts; (1) a claim for discrimination in violation of the Americans with Disabilities Act; (2) a claim for discrimination in violation of the Age Discrimination in Employment Act; (3) a claim for retaliation under ERISA Section 510; (4) a claim for violation of the Rehabilitation Act; (5) a state law breach of contract claim; and (6) a state law negligence claim. SkyWest moved for summary judgment on all claims arguing that Mr. Chappell cannot establish a prima facie case for any of his causes of action because the reasons for his termination were legitimate and non-discriminatory. According to SkyWest, Mr. Chappell’s termination stemmed from a serious safety incident in which he was involved while flying a plane on March 24, 2020. Mr. Chappell drove the airplane off the tarmac into the dirt. Later, when questioned about what had occurred, Mr. Chappell was found to be dishonest, as his testimony did not match that of his co-pilot or the other contemporaneous pieces of evidence. SkyWest maintains that Mr. Chappell’s safety failures and his lies about them violated company policies and that immediate termination was therefore the proper course of action. The court agreed with SkyWest in this decision and granted its summary judgment motion. It wrote, “even if Mr. Chappell had established a prima facie case, the undisputed material facts demonstrate that SkyWest had a legitimate, non-discriminatory reason for terminating Mr. Chappell’s employment and Mr. Chappell cannot establish pretext.” With regard to Mr. Chappell’s ERISA Section 510 claim, the court disagreed with his speculation that his firing was in any way connected to his family’s high healthcare costs. For one, the court noted that the costs of Mr. Chappell’s wife’s heart surgery were paid by SkyWest even though the surgery took place after the termination. Furthermore, SkyWest paid for Mr. Chappell’s son’s diabetes treatments for fourteen years without incident and there was no evidence produced that anyone involved in the termination decision had any access to information about Mr. Chappell’s benefit use. In sum, the court held, “Mr. Chappell cannot identify anything that changed around the time of the Occurrence such that SkyWest would no longer be willing to pay for his insurance, and he admits that it is just his assumption… Mr. Chappell’s bald assumptions are insufficient to establish SkyWest’s intent.”