Watson v. EMC Corp., No. 22-1356, __ F. App’x __, 2024 WL 501610 (10th Cir. Feb. 9, 2024) (Before Circuit Judges Matheson, Kelly, and Eid)

Individual benefit plan participants and beneficiaries seeking relief under ERISA typically look to two different provisions in deciding what claims to bring. One section, 29 U.S.C. § 1132(a)(1)(B), allows a plaintiff to “recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan[.]” Another, Section 1132(a)(3), allows a participant to “obtain other appropriate equitable relief…to enforce any provisions of this subchapter or the terms of the plan[.]”

Since ERISA’s enactment 50 years ago, the courts have wrestled with these two provisions. What is the difference between these two claims? When can a plaintiff bring each kind of claim? If a plaintiff cannot recover plan benefits under the first provision, what kind of equitable relief is “appropriate” under the second provision?

This week’s notable decision is the latest installment in this ongoing debate. The plaintiff is Marie Watson, widow of Thayne Watson. (Shameless self-promotion disclosure: Ms. Watson was represented on appeal by Kantor & Kantor attorneys Glenn R. Kantor and Your ERISA Watch co-editor Peter S. Sessions.) Mr. Watson worked for defendant EMC Corporation and participated in its various benefit plans, including its group life insurance plan, which was insured by MetLife. When Dell, Inc. acquired EMC, Mr. Watson entered into a voluntary separation agreement which resulted in the termination of his employment on November 24, 2016.

Under the separation agreement, Mr. Watson was eligible for continued group health benefits after termination and had the right to convert his life insurance from group coverage to an individual policy. Upon termination, Mr. Watson emailed EMC and asked, “How do I start paying for my benefits at the employee rate for the next year?” An EMC benefits representative told him he would be receiving bills from ADP, EMC’s payroll administrator, “to continue paying for your benefits. Benefits remain active during the transition.”

Mr. and Ms. Watson interpreted this email to mean that Mr. Watson’s life insurance benefit would continue so long as he paid the bills he received from ADP, which he did. However, when Mr. Watson died in 2017, and Ms. Watson submitted a claim for benefits, MetLife denied her claim on the ground that Mr. Watson had never converted his insurance to an individual policy as required by the plan, and thus his coverage ended upon his job termination.

Ms. Watson brought this action in the District Court of Colorado against various defendants, and after vigorous litigation one claim remained: a claim for breach of fiduciary duty against EMC under Section 1132(a)(3) seeking equitable relief in the form of surcharge. (Traditionally, surcharge is a monetary remedy that can be awarded to compensate for a loss resulting from a trustee’s breach.)

In this claim, Ms. Watson asserted that even if she was not entitled to plan benefits pursuant to Section 1132(a)(1)(B) – because Mr. Watson had not converted his coverage – she should still be entitled to some equitable remedy from EMC under Section 1132(a)(3) because the only reason Mr. Watson had not converted was because EMC had misled him into thinking he did not need to do so.

The district court resolved this claim in an unusual fashion. Instead of deciding whether a breach of fiduciary duty had occurred, and then devising an equitable remedy in the case of a breach, the court assumed for the purposes of its decision that a breach had occurred. However, even assuming such a breach, the district court ruled that it would not award any equitable relief. The district court’s rationale was that because Mr. Watson never converted his coverage, or paid any premiums on the life insurance coverage under which he sought benefits, he could not recover surcharge based on those lost benefits.

Ms. Watson appealed this decision to the Tenth Circuit. In a brief ruling, the appellate court agreed with Ms. Watson that the district court “committed legal error and therefore abused its discretion because it treated Ms. Watson’s § 1132(a)(3) claim for fiduciary breach as a § 1132(a)(1)(B) claim to recover under the plan.”

In so doing, the Tenth Circuit emphasized the distinction between (a)(1)(B) and (a)(3) claims. The court explained that Section 1132(a)(1)(B) allows suits for benefits that are “due…under the terms of [a] plan.” Because Mr. Watson had not converted his coverage according to the plan terms, no benefits were “due under the plan” and thus Ms. Watson could not bring an (a)(1)(B) claim. As a result, Ms. Watson’s only alternative was Section 1132(a)(3), which the Supreme Court has ruled acts as “catch-all” relief “for injuries caused by violations that [ERISA] does not elsewhere adequately remedy.”

The Tenth Circuit ruled that the district court had conflated these two sections. By imposing (a)(1)(B) requirements, i.e., complying with the plan’s conversion rules, to Ms. Watson’s (a)(3) claim, a backstop that does not require plan compliance, the district court “legally erred” and thus reversal was required.

Although Ms. Watson achieved a reversal, her victory was not complete. The Tenth Circuit dodged two issues in arriving at its decision. First, the court expressed no opinion as to whether EMC had in fact breached a fiduciary duty, noting that because the district court had not ruled on the issue, “we decline to address it.” Thus, the district court will have to revisit this issue on remand.

More importantly, the court declined to address an issue raised by EMC on appeal, which was whether surcharge is even a valid remedy under Section 1132(a)(3). EMC argued that it is not, relying on a recent controversial decision by the Fourth Circuit, Rose v. PSA Airlines, Inc., which held that ERISA plaintiffs cannot seek “merely personal liability upon the defendants to pay a sum of money” under Section 1132(a)(3) because such a remedy is purely “legal,” not “equitable.” (Your ERISA Watch discussed Rose in detail in its September 13, 2023 edition, a decision that will undoubtedly have far-reaching consequences in courts in the Fourth Circuit and beyond, as demonstrated in the Suchin v. Fresenius Med. Care Holdings decision discussed below.)

In a footnote, the Tenth Circuit responded by asserting that EMC “has not adequately developed an argument in its response brief that a surcharge is never appropriate under § 1132(a)(3)(B).” Thus, “without the benefit of full briefing (here or in district court) and district court analysis on whether Rose, a nonbinding out-of-circuit case, should affect the surcharge issue here, we do not consider EMC’s suggestion.” The court noted that “EMC may, however, ask the district court to consider its Rose argument on remand.”

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

Attorneys’ Fees

Ninth Circuit

Oksana B. v. Premera Blue Cross, No. C22-1517 MJP, 2024 WL 518897 (W.D. Wash. Feb. 9, 2024) (Judge Marsha J. Pechman). Plaintiff Oksana B. prevailed in this action for medical benefits when the court ruled that defendant Premera Blue Cross abused its discretion in denying her claims for plan benefits arising from her stay at two different mental health treatment facilities. In this order the court ruled that she was entitled to an award of attorney’s fees under ERISA because she had “achieved a high degree of success” and had satisfied the Ninth Circuit’s Hummell factors. Specifically, the court found that (1) Premera had acted unreasonably and in bad faith, (2) Premera could satisfy a fee award, (3) Premera would be deterred in similar future circumstances by a fee award, (4) plaintiff’s success might benefit other participants, and (5) the relative merits favored plaintiff. The court further found that the $49,552.50 fee request was reasonable. This calculation was based on 119.1 hours of work by three attorneys, who requested and were awarded hourly rates of $600 (Brian S. King), $500 (local counsel John Wood), and $250/$200 (law clerk/new attorney Andrew Sommers). Premera did not object to the hours or rates requested. The court also awarded plaintiff prejudgment interest at 5.01%, based on the weekly average 1-year constant maturity Treasury yield at the time of judgment, as well as $400 in costs.

Class Actions

Fifth Circuit

Pedersen v. Kinder Morgan Inc., No. 4:21-CV-03590, 2024 WL 495267 (S.D. Tex. Feb. 8, 2024) (Judge Keith P. Ellison). The district court certified a class action (with a number of subclasses) in this suit concerning changes in early and normal retirement pension benefits “brought on by a series of corporate mergers and acquisitions.” Claim I challenges certain benefit calculation changes in normal retirement benefits as violating ERISA’s prohibition on “backloading” or concentrating benefit accruals in employees’ later years of employment. Claim II challenges certain changes in normal retirement benefits as violative of ERISA’s anti-cutback provision. Claim III alleges that relevant summary plan descriptions failed to alert plan participants who started work with the company before the age of 35 that the changes would decrease their monthly retirement benefits. With respect to these counts, the plaintiffs sought certification of a normal retirement/benefit accrual subclass of participants affected by the changes. Count IV alleges that a 2007 change with respect to early retirement eligibility violated ERISA’s anti-cutback provision, and Count V alleges, in the alternative, that employees who were not yet 53 when the 2007 notice came out are still entitled to unreduced early retirement benefits. Plaintiffs sought certification of an early retirement subclass with respect to these claims. Finally, plaintiffs sought certification of an actuarial equivalence subclass with respect to Count VI, which claims that the unreduced early retirement benefits the plan offered were not the actuarial equivalence of benefits that the employees would receive on normal retirement benefits. The court concluded that all three proposed subclasses met the four requirements of Rule 23(a). Likewise, the court concluded that plaintiffs met the requirements of Rule 23(b)(2) for each subclass and therefore declined to assess whether they also met the requirements of 23(b)(1)(A) or 23(b)(3). The court therefore certified the proposed general class and subclasses exactly as proposed and declined to allow defendants further discovery with respect to a proposed additional plaintiff, finding that because the current plaintiff was adequate, discovery was unnecessary.

Disability Benefit Claims

Fourth Circuit

Paulson v. Guardian Life Ins. Co. of Am., No. 1:22-cv-877 (RDA/IDD), 2024 WL 422664 (E.D. Va. Feb. 5, 2024) (Judge Rossie D. Alston, Jr.). Plaintiff Linda Paulson brought suit for disability benefits and penalties after Guardian Life Insurance Co. of America, the insurer and claims administrator of her disability plan, cut off her benefits based on a plan provision limiting benefits to 24 months for certain enumerated conditions. Applying a deferential standard of review based on the plan’s grant to Guardian of “final discretionary authority” to decide claims. the court granted partial summary judgment in favor of Guardian on the claim for benefits. As an initial matter, the court considered Ms. Paulson’s argument that she was not given proper notice of the basis for the termination of her benefits because Guardian raised two new bases for its decision – that her migraines were subject to the 24-month limitations provision and that her cervical radiculopathy was not disabling – in its final denial letter. With respect to her claim based on migraines, the court held that Ms. Paulson was on notice of this basis for denial and indeed submitted additional evidence addressing this issue. However, the court agreed with Ms. Paulson that Guardian presented shifting grounds for denial of benefits with respect to her radiculopathy. Rather than granting summary judgment in her favor on this issue, the proper remedy in the Fourth Circuit was to remand to Guardian for “full and fair” administrative review of this aspect of her claim. With regard to the merits of her claim based on her migraines, the court held that Guardian acted reasonably in concluding that migraines are a type of “headache” and, as such, were expressly limited under the terms of the plan to a 24-month benefit period. Finally, with respect to Ms. Paulson’s claim for penalties, the court requested further briefing on the issue, and likewise held off determination of Ms. Paulson’s claim for attorney’s fees pending its determination of the penalty claim.

ERISA Preemption

Ninth Circuit

Sanjiv Goel, M.D., Inc. v. United Healthcare Servs., Inc., No. 2:23-CV-10065-SPG-E, 2024 WL 515438 (C.D. Cal. Feb. 8, 2024) (Judge Sherilyn Peace Garnett). Dr. Sanjiv Goel is a medical provider who filed this suit against health insurer United in California court alleging state law claims of breach of implied-in-law contract, unjust enrichment, breach of the implied covenant of good faith and fair dealing, quantum meruit, estoppel, violation of California’s Unfair Competition Law, and declaratory relief. United removed the case to federal court, and Goel filed a motion to remand. United opposed on three grounds: (1) diversity jurisdiction existed; (2) Goel’s implied-in-law claim arose under the federal Emergency Medical Treatment and Active Labor Act (“EMTALA”), and (3) Goel’s state law claims were preempted by ERISA. Although the parties were diverse, Goel asserted that he was not seeking more than $75,000 in damages, so the court ruled that diversity jurisdiction did not exist. The court also ruled that because Goel’s claims arose both under state law and EMTALA, the federal issue of EMTALA’s application was not “necessarily raised,” and thus federal jurisdiction did not attach. As for ERISA preemption, the court noted that “health care providers are not ‘beneficiaries’ within the meaning of ERISA’s enforcement provisions,” and thus Goel could not bring his claims under ERISA. Thus, his claims were not preempted. The court declined to award attorney’s fees to Goel, but granted his motion to remand the case to state court.

Eleventh Circuit

Small v. Blue Cross & Blue Shield of Fla., Inc., No. 3:23-cv-603-MMH-PDB, 2024 WL 482802 (M.D. Fla. Feb. 2, 2024) (Magistrate Judge Patricia D. Barksdale). Similar to the case just discussed, this decision involves the application of ERISA’s preemption provision to claims by an out-of-network medical provider against Blue Cross and Blue Shield of Florida and other related Blue Cross entities. These claims relate to four reconstructive surgeries performed by Dr. Small on breast cancer patients who were participants in ERISA plans insured and administered by Blue Cross for which Blue Cross reimbursed Dr. Small only $5,204.32 on $200,062.50 in billed charges (or 2.67%). Not surprisingly, Dr. Small sued asserting two state-law claims: a claim for breach of implied-in-fact contract/quantum meruit and a claim for breach of implied-in-law contract/unjust enrichment. Blue Cross moved to dismiss and strike these claims, citing ERISA’s express preemption provision. Relying on cases from the Third and Fifth Circuits, the magistrate judge concluded that ERISA preempts Dr. Small’s claims under state law because, as the magistrate saw it, both claims were premised on the existence of an ERISA plan, unlike claims for breach of contract or promissory estoppel, or claims based on state statutory violations, which could exist separate from an ERISA plan. The court thus recommended that the district court enter an order dismissing the case on the basis of preemption and denying as moot Blue Cross’ motion to strike these claims and Dr. Small’s jury demand.  

Life Insurance & AD&D Benefit Claims

Tenth Circuit

Metropolitan Life Ins. Co. v. Badali, No. 1:22-CV-00158-TC-JCB, 2024 WL 418118 (D. Utah Feb. 5, 2024) (Judge Tena Campbell). Plaintiff MetLife brought this interpleader action, asserting that it was unable to determine the proper beneficiary of life insurance proceeds payable after the death of Delta Air Lines pilot Boyd Badali. The potential beneficiaries were Mr. Badali’s former wife, Diann Badali, and his wife at the time of his death, Renata Badali. Both defendants filed motions for summary judgment, which were decided in this order. The court determined that because ERISA governed the operation of the benefit plan at issue, “determining the proper payee is relatively simple.” The plan stated that if there was “no Beneficiary designated or no surviving Beneficiary at Your death, We will determine the Beneficiary according to the following order: 1. Your Spouse or Domestic Partner[.]” It was undisputed that Mr. Badali had not completed a beneficiary designation form. Diann, his former wife, argued that an agreement between her and Mr. Badali clarifying their divorce decree specified that Mr. Badali would “keep Diann as beneficiary on the Delta provided life insurance policy.” Diann also presented a declaration from a MetLife employee stating that that it did not handle complete recordkeeping for the plan and that a third-party administrator handled eligibility/coverage information for Delta. The court ruled that this evidence did not overcome the fact that Mr. Badali had not designated a beneficiary pursuant to plan procedures, and thus the plan dictated that benefits be paid to his current spouse, i.e., Renata. The court also rejected Diann’s argument that equity supported awarding her the benefits, noting that her cited state law cases did not involve ERISA, “which does not allow the court to consider equitable arguments when a plan’s language is clear.” Furthermore, Diann could not bring an equitable claim for unjust enrichment against Renata because she had not conferred a benefit on Renata. As a result, the court granted Renata’s motion for summary judgment, denied Diann’s, and awarded the life insurance benefits to Renata.

Medical Benefit Claims

Ninth Circuit

Archer v. UnitedHealthcare Servs, No. CV-20-02458-PHX-JJT, 2024 WL 492230 (D. Ariz. Feb. 8, 2024) (Judge John J. Tuchi). After receiving plasma injections for chronic back pain, undergoing back surgery, and receiving treatment for an infection, plaintiff Scott Archer entered inpatient rehabilitative care. Defendant United denied benefits for most of Archer’s rehabilitation treatment, contending that he had stopped making medical progress, and thus his care was custodial and not “medically necessary” under the terms of his employee medical benefit plan. Archer filed suit and the case proceeded to motions for judgment. The court first concluded that the abuse of discretion standard of review applied. Archer argued that a de novo standard was appropriate because of delays in United’s handling of his claim, but the court ruled that any such delays occurred during voluntary review after Archer’s appeals had concluded, and did not mandate de novo review in any event. Under a deferential standard of review, the court concluded that United did not abuse its discretion. The court stated that United had reasonably found that Archer’s progress had plateaued and that he was self-sufficient in some areas. United also “explained why many aspects of Plaintiff’s care could have been accomplished at a lower level of care or in an out-patient facility.” The court thus entered judgment in favor of defendants.


Fourth Circuit

Suchin v. Fresenius Med. Care Holdings, No. Civ. JKB-23-01243, 2024 WL 449322 (D. Md. Feb. 6, 2024) (Judge James K. Bredar). Dr. Suchin, a terminally ill radiologist, brought suit for fiduciary breach under Section 1132(a)(3) against his former employer (and the administrator of the plans in question) after receiving far less in disability benefits, and learning that his wife would receive far less in life insurance proceeds after he died, than he had been led to believe. Specifically, Dr. Suchin alleged that Fresenius provided him with misleading and inaccurate information indicating that he would receive 60% of his salary in disability benefits and his widow would receive twice his annual salary upon his death in life insurance benefits when, in fact, both amounts were capped at a much lower level and subject to offsets. Furthermore, Fresenius failed to provide him with summary plan descriptions (SPDs) and plan documents which would have clarified the matter. Fresenius moved to dismiss. The court rejected Fresenius’ argument that Dr. Suchin’s life insurance claim was unripe while he was still alive, and concluded, similarly to the Tenth Circuit in Watson v. EMC Corp., our case of the week above, that Dr. Suchin could seek relief under Section 1132(a)(3) precisely because he was not entitled to benefits under the terms of the plan. The court then addressed whether Dr. Suchin had stated a claim for fiduciary breach. The court again ruled in Dr. Suchin’s favor, concluding that Dr. Suchin adequately alleged that Fresenius was an ERISA fiduciary that breached its duties in providing him with incomplete and misleading information about his benefits and failing to provide him with statutorily-required SPDs. Dr. Suchin did not fare as well with respect to his request for relief. With respect to his request that both plans be reformed to reflect the benefits he thought he and his family would receive, the court concluded that he was required but failed to adequately allege that Fresenius had acted fraudulently even as an equitable matter and failed to join New York Life Insurance Co., one of the parties to the contract. With respect to Dr. Suchin’s request for equitable estoppel, the court concluded that Dr. Suchin failed to allege that his belief about the extent of his benefits based on alleged misrepresentations was reasonable, suggesting that Dr. Suchin was required to meet a “who, what and when” pleading standard applicable to fraud allegations. Finally, the district court held that the Fourth Circuit’s Rose v. PSA Airlines, Inc. decision (addressed above in our discussion of Watson) foreclosed the availability of the surcharge remedy sought by Dr. Suchin. Thus, the court concluded “that Suchin has plausibly alleged a breach of fiduciary duty, but nevertheless is not entitled to the three remedies at issue in the present Motion to Dismiss.” It dismissed, “albeit without prejudice with respect to Suchin’s claims for reformation and equitable estoppel.”  

Retaliation Claims

Fourth Circuit

Johns v. Morris, No. 5:23-CV-324-D, 2024 WL 457766 (E.D.N.C. Feb. 6, 2024) (Judge James C. Dever III). Plaintiff Bryan Johns was the company president and chief operating officer for Morris & Associates for many years. As a result, he was both a participant in, and a fiduciary trustee of, the Morris & Associates Employee Stock Ownership Plan. Johns contends that defendants, which included the company, trustees of the plan, and the board, terminated him in 2023 “after he questioned the reasonableness of the market valuations given for the ESOP’s stock holdings in the Company.” In this action he has alleged four claims under ERISA: three for breach of fiduciary duty and a fourth for retaliation under ERISA Section 510 for “interfering with his protected rights under ERISA and the Plan to investigate and manage the ESOP stock valuations[.]” Defendants moved to dismiss, arguing first that Johns did not have standing to bring his breach of duty claims because he no longer served as a fiduciary for the plan. (The defendants had voted to remove him.) The court rejected this argument, noting that even if Johns was no longer a fiduciary for the plan, he still had standing because he was a participant in the plan. As for Johns’ Section 510 claim, defendants argued that his objections were simply an “internal complaint” that did not give rise to liability. The court disagreed, ruling that Johns had “anchored” his claim in the statutory language of Section 510 by pleading that he was exercising a right to which he was entitled under the terms and conditions of the plan. The court thus denied defendants’ motion in its entirety.

Fifth Circuit

Coleman v. Chevron Phillips Chem. Co., No. CV H-23-350, 2024 WL 460248 (S.D. Tex. Feb. 6, 2024) (Judge Lee H. Rosenthal). Plaintiff Ronnie Coleman contends in this action that his former employer, CPChem, discriminated against him based on his race and age, and terminated him in violation of ERISA because it wanted to avoid paying medical benefits for his gout condition. CPChem filed a motion for summary judgment, which the court granted in this order. The court ruled that Coleman had presented a prima facie case of race discrimination, but because Coleman had failed a “walkthrough test,” CPChem had articulated a legitimate, non-discriminatory reason for his termination. Coleman argued that CPChem’s test was biased, but the court ruled that he had not presented sufficient evidence to support that argument. The court likewise ruled in CPChem’s favor on Coleman’s age discrimination claim because Coleman could not present any evidence of pretext by CPChem. As for Coleman’s ERISA claim, the court stated that he “relies on the temporal proximity between his informing CPChem that he needed a liver transplant and CPChem’s decision the next day to terminate Coleman.” However, citing a Fifth Circuit decision, the court ruled that “reliance on temporal proximity alone is insufficient to raise a genuine issue of fact material to determining whether CPChem terminated Coleman with the specific intent of violating ERISA.” The court thus granted CPChem summary judgment on all of Coleman’s claims.

Eleventh Circuit

Monte v. City of Tampa, No. 8:23-CV-855-JLB-SPF, 2024 WL 449634 (M.D. Fla. Feb. 6, 2024) (Judge John L. Badalamenti). Plaintiff Anthony Monte was a Tampa, Florida police officer from 2009 to 2022, when he was discharged due to medical disability. He filed suit in 2023, contending that his pension benefit was artificially low because he should have been offered overtime in his final year of work, which would have increased his benefit substantially. He asserted claims of disability discrimination in violation of the Americans with Disabilities Act and the Florida Civil Rights Act of 1992, as well as a claim for interference with benefits in violation of ERISA. Tampa filed a motion to dismiss. At the outset, the court rejected Tampa’s argument that Monte was not a “qualified individual” under the ADA and FCRA, and let those claims proceed. As for Monte’s ERISA claims, Tampa contended that “refusal to offer overtime work and pay is not actionable under ERISA,” and Monte did not allege that he had a statutory or contractual right to overtime. The court disagreed with these arguments, ruling that Monte plausibly pled a claim for interference with benefits because he alleged that Tampa intentionally prohibited him from working overtime in order to reduce his retirement pension. The court further rejected Tampa’s argument that Monte did not exhaust his administrative remedies under ERISA because Tampa failed to identify what procedure he was required to participate in. Finally, the court ruled that Monte’s ADA claim was not preempted by ERISA because ERISA provides that “[n]othing in this subchapter shall be construed to alter, amend, modify, invalidate, impair, or supersede any law of the United States…or any rule or regulation issued under any such law.” Because Monte’s FCRA claim tracked his ADA claim, the court ruled that it was saved from preemption as well. As a result, Tampa’s motion to dismiss was denied.

Severance Benefit Claims

Sixth Circuit

Kramer v. American Elec. Power Exec. Severance Plan, No. 2:21-CV-5501, 2024 WL 418979 (S.D. Ohio Feb. 5, 2024) (Judge Sarah D. Morrison). Plaintiff Derek Kramer, a former Vice President and Chief Digital Officer for American Electric Power, seeks benefits under AEP’s Executive Severance Plan pursuant to his termination. AEP filed a motion for summary judgment, contending that it properly denied Kramer’s benefit claim because an internal investigation revealed that he had facilitated the misuse of a company credit card. AEP also contended that during its investigation Kramer acted suspiciously by remotely wiping his company-issued phone after AEP retrieved it from him. The court began its analysis with the standard of review. The plan provided that employees are ineligible for benefits if they are terminated “for Cause,” and that the plan’s committee, “in its sole and absolute discretion, shall determine Cause.” Kramer argued that this language did not properly confer discretionary authority because the court had previously determined that the plan was a “top hat” plan. (Your ERISA Watch covered this ruling in its April 19, 2023 edition.) The court stated, however, that the standard of review analysis was the same regardless of whether the plan was a top hat plan, and thus the appropriate standard of review was abuse of discretion. Under this deferential review, the court upheld AEP’s decision to deny Kramer’s claim for severance benefits, ruling that AEP and its committee had “offered a reasonable explanation, based on evidence, for their conclusion that Mr. Kramer was terminated for Cause. As such, the adverse benefit determination was neither arbitrary nor capricious. The Court will not disturb it.” In doing so, the court rejected Kramer’s arguments that (a) the plan had a conflict of interest, (b) he was not given a written explanation for his termination, (c) his claim was denied based on ex post facto evidence, (d) the court should draw a negative inference from AEP’s use of attorneys, and (e) the plan’s reasons for his suspension and termination changed over time. The court also ruled that Kramer could not bring an interference claim under ERISA because he “does not allege that AEP engaged in any conduct beyond denying his claim for Plan benefits.” Thus, the court granted AEP’s motion for summary judgment.

Statute of Limitations

Third Circuit

Verizon Employee Benefits Comm. v. Irizarry, No. CV-23-1708-MAS-DEA, 2024 WL 415692  (D.N.J. Feb. 5, 2024) (Judge Michael A. Shipp). Defendant Edgar Irizarry is a former employee of Verizon who participated in Verizon’s pension plan. When he divorced cross-claimant Sara Irizarry in 1999, a New Jersey court issued a qualified domestic relations order (“QDRO”) to divide their assets, which entitled Ms. Irizarry to a portion of Mr. Irizarry’s pension benefit. Verizon was provided with a copy of the QDRO. Mr. Irizarry retired in 2011 and requested that his pension be paid in a lump sum. On his request form he falsely certified that his pension was not subject to a QDRO, and Verizon erroneously paid him the entirety of the pension fund. Eleven years later, in 2022, Ms. Irizarry contacted Verizon to find out why she had not received her portion of the pension. In response, Verizon filed this action seeking equitable relief under ERISA § 1132(a)(3), hoping to recover from Mr. Irizarry the funds that should have been paid to Ms. Irizarry. Ms. Irizarry also filed a cross-claim against Mr. Irizarry. Mr. Irizarry filed a motion to dismiss, which was decided in this order. He first claimed that Verizon’s claim was time-barred. The parties agreed that Verizon’s claim was analogous to an equitable claim for unjust enrichment, and thus the court borrowed New Jersey’s six-year statute of limitations for that cause of action to decide the issue. The parties did not agree about when the six-year limit began to accrue, however. Mr. Irizarry contended that it accrued in 2011 when he requested his pension, while Verizon contended that it accrued in 2022 when it was contacted by Ms. Irizarry. The court concluded that ERISA’s “discovery rule” applied, and that it could not decide based on the pleadings when Verizon should have discovered the mistaken payment with reasonable diligence. For the same reason, the court declined to grant Mr. Irizarry’s motion based on a laches defense. As for Mr. Irizarry’s motion to dismiss Ms. Irizarry’s cross-claim, the court granted it without prejudice because Ms. Irizarry did not respond to the motion and it was unclear what provision under ERISA she was invoking to justify her claim. Finally, Mr. Irizarry asked the court to stay the proceedings so that a New Jersey court could resolve the issue of Ms. Irizarry’s entitlement to payments under the QDRO due to a potential ambiguity in the QDRO. The court rejected this request, ruling that it had jurisdiction over the relevant claims and was obligated by ERISA to adjudicate the issue of declaratory relief over a beneficiary’s rights.


Sixth Circuit

Valentine v. Line Constr. Ben. Fund, No. 2:23-CV-4175, 2024 WL 488048 (S.D. Ohio Feb. 8, 2024) (Magistrate Judge Chelsey M. Vascura). Plaintiff Nicholas Valentine filed this action in state court seeking benefits under an employee health insurance plan. Defendant removed the case to federal court on ERISA preemption grounds and filed a motion to transfer venue to the Northern District of Illinois, citing the plan’s forum-selection clause. Mr. Valentine did not respond to the motion. Relying on Sixth Circuit precedent, the court concluded that the clause was valid and enforceable, and agreed that the case should be transferred because the case was “not one of the ‘most exceptional cases’ in which the public-interest factors outweigh the parties’ agreement to litigate in the Northern District of Illinois.” The court thus granted defendant’s motion to transfer.

Withdrawal Liability & Unpaid Contributions

D.C. Circuit

Trustees of the IAM Nat’l Pension Fund v. M&K Emp. Sols., No. 22-7157, __ F. 4th __, 2024 WL 501826 (D.C. Cir. Feb. 9, 2024) (Before Circuit Judges Rao, Walker, and Childs). This opinion consolidated two cases which fall in the relatively rare category of withdrawal liability disputes that raise complicated and interesting issues worthy of our beloved and complex statute. In these cases, the district court vacated arbitration decisions based on a determination that Cheiron, Inc., an actuarial consulting firm employed by the IAM National Pension Fund (the “Fund”) to assess liability, had erred in assessing the amount of withdrawal liability for employers participating in the Fund. The court of appeals held that the district court correctly found that the arbitrator erred in concluding that the actuary must use the assumptions and methods in effect on the relevant measurement date in calculating the employer’s proportionate share of the Fund’s unfunded vested benefits. Instead, the relevant statutory provisions are best “read to allow later adoption of actuarial assumptions, so long as those assumptions are ‘as of’ the measurement date – that is, the assumptions must be based on the body of knowledge available up to the measurement date.” This meant that it was it is “permissible for the Fund to assess withdrawal liability for the Companies, which withdrew in 2018, based on actuarial assumptions adopted in January 2018,” and that Cheiron was not required as a matter of law to use assumptions that had been adopted prior to December 31, 2017. Any other approach would be contrary to the statutory “requirement that an actuary use its ‘best estimate’ of the plan’s anticipated experience as of the measurement date to require an actuary to determine what assumptions to use before the close of business on the measurement date.” The decision was not a complete victory for the Fund, however. The court of appeals also concluded that the employer in one of the cases, M&K, was entitled to something referred to as the “free-look exception,” which “allows an employer to withdraw from a plan within a specified period after joining without incurring withdrawal liability.” Because M&K “had an obligation of fewer than five years at the time” it partially withdrew from the plan in 2017, it “met the free-look exception requirements.” On this basis, the appellate court affirmed the district court’s decision vacating the arbitrator’s decision to the contrary.