Staffing Servs. Ass’n of Ill. v. Flanagan, No. 23 C 16208, 2024 WL 1050160 (N.D. Ill. Mar. 11, 2024) (Judge Thomas M. Durkin)

Temporary employees have it tough. They often do the same work as their colleagues, but because they are not official full-time employees at their workplace they are often not entitled to the same pay or benefits their peers receive.

The State of Illinois recently attempted to ameliorate this situation by amending its Day and Temporary Labor Services Act. Among the amendments was Section 42, which requires temporary staffing agencies to “pay temporary employees who work at a particular site for more than ninety days within a year at least the same wages and ‘equivalent benefits’ as the lowest paid, comparable, directly-hired employee employed by the third-party client.” Section 42 further allows agencies to pay “the hourly cash equivalent of the actual cost benefits” as an alternative to providing “equivalent benefits.”

This action followed. The plaintiffs, which include two temporary staffing trade associations and three staffing agencies, sued Jane R. Flanagan, the Director of the Illinois Department of Labor. The plaintiffs filed a motion for a preliminary injunction, raising several issues, but because this is Your ERISA Watch, we will focus on plaintiffs’ ERISA-related argument.

In short, plaintiffs contend that Section 42’s “equivalent benefits” provision is preempted by ERISA because it “relates to” their employee benefit plans by having a “connection with or reference to” those plans. The court agreed with plaintiffs: “Plaintiffs have made a sufficiently strong showing that Section 42 fits the bill. The provision ‘dictates the choices facing ERISA plans’… Agencies must determine the value of many different benefit plans and then determine whether to provide the value in cash or the benefits themselves by modifying their plans or adopting new ones. Such a direct and inevitable link to ERISA plans warrants preemption.”

The Department of Labor objected, arguing that Section 42’s cash alternative allowed the law to escape preemption because it enabled the plaintiffs to comply without involving their benefit plans. The court rejected this argument, however, citing the Supreme Court’s decision in Egelhoff v. Egelhoff. In Egelhoff, the Supreme Court ruled that a Wisconsin law requiring payment of non-probate benefits to certain beneficiaries was preempted, even though the law had an opt-out provision, because it required administrators to tailor their plans to individual jurisdictions rather than apply them uniformly as intended by ERISA.

The court ruled, “The same applies here. Even with the choice between providing benefits or cash, Section 42 denies agencies the ability to administer its ERISA plans uniformly.” The court noted that the law placed a burden on plaintiffs that other states did not. For their Illinois employees, plaintiffs would have to “collect and analyze benefit plan information from their client for a comparable employee, compare those plans to their existing plans, and determine whether to modify or supplement their plans, calculate and pay the cost of any benefits they do not presently provide, or both.”

The court further ruled that the cash alternative was insufficient to evade ERISA preemption because Section 42 “requires agencies to make judgment calls about employees’ eligibility and level of benefits on an individualized and ongoing basis.” Under the law, agencies have to “engage in qualitative assessments” involving “complex and particularized” and “inherently discretionary” determinations regarding seniority, working conditions, similarity of work, and other factors. These determinations required “an ongoing administrative scheme to meet the employer’s obligation,” which “raises the very concern ERISA preemption seeks to address.”

In support of its position, the Department of Labor cited cases involving other laws that had survived preemption challenges, but the court found them inapposite. The court distinguished prevailing wage cases, observing that “such statutes are afforded particular deference because public works projects are an area of traditional state regulation.” Furthermore, such laws often used a schedule of wages which made compliance straightforward, unlike “the discretionary and individualized determinations that Section 42 requires.”

The court also distinguished other minimum compensation laws cited by the Department because they “did not involve the discretionary decision-making required by Section 42.” San Francisco’s minimum healthcare benefit requirement imposed a minimal burden of “mechanical record-keeping,” while New York’s home health aide compensation law, while “somewhat closer,” allowed compliance through “any mix of wages and benefits that equaled or exceeded the specified minimum rate.” Thus, it paled in comparison to Section 42’s “ongoing, particularized, discretionary analysis.”

As a result, the court ruled that Section 42 had an impermissible “connection with” ERISA plans, rendering it preempted. As for a remedy, because plaintiffs (a) had made a strong showing of likelihood of success on the merits, (b) were “poised to incur significant costs of compliance and face the possibility of penalties,” and (c) “point[ed] to the potential departure of agencies from Illinois if Section 42 goes into effect,” the court ruled that the balance of equities weighed in their favor. Thus, the court granted plaintiffs’ motion for a preliminary injunction based on their ERISA preemption argument.

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

Arbitration

Fourth Circuit

Franklin v. Duke Univ., No. 1:23-CV-833, 2024 WL 1048123 (M.D.N.C. Feb. 29, 2024) (Judge Catherine C. Eagles). Plaintiff Joy Franklin, a former employee of Duke University and a participant in its pension benefit plan, sued Duke and its retirement board contending that they have been incorrectly calculating benefits under the plan. Specifically, Franklin alleges that Duke used “outdated and unreasonable actuarial equivalency formulas in violation of ERISA’s actuarial equivalence requirement.” She alleged a claim under ERISA § 1132(a)(2), on behalf of the plan, and under § 1132(a)(3) individually and on behalf of a putative class. Duke filed a motion to (1) dismiss both claims for lack of subject matter jurisdiction, (2) compel arbitration on Franklin’s (a)(3) claim, and (3) dismiss the complaint for failure to state a claim. On the first issue, Duke argued that Franklin had no standing to bring her claims because the plan was a defined benefit pension plan, and thus her claim was barred by the Supreme Court’s decision in Thole v. U.S. Bank, N.A. However, the court distinguished Thole, finding that Franklin had standing because she alleged that she had been injured by a reduction in her benefit, which was more concrete than the claims by the plaintiffs in Thole. On the second issue, Duke argued that while Franklin was not required to arbitrate her (a)(2) claim, the plan obligated her to arbitrate her (a)(3) claim pursuant to a 2021 amendment to the plan. The court disagreed. Although ERISA claims are “generally arbitrable,” the court found “there is no evidence that Ms. Franklin agreed to arbitrate her 29 U.S.C. § 1132(a)(3) claims.” Duke’s plan amendment was thus “unilateral” and “a far cry from mutual agreement.” Indeed, the court stated that “since the Plan gives Duke an unlimited right to amend the Plan to add an arbitration provision, the faux agreement is illusory and unenforceable. It could hardly be clearer that this is not an enforceable agreement to arbitrate under the [Federal Arbitration Act] and under North Carolina law.” Duke argued that ERISA gave it the power to enforce the arbitration provision, but the court ruled that this power did not override the FAA’s requirement that parties agree to arbitration provisions. The court further stated that allowing otherwise would be contrary to ERISA’s statutory policy goal of providing “ready access to the Federal courts.” The court also distinguished Duke’s cited cases, noting that they involved (a)(2) claims on behalf of the plan, not (a)(3) claims brought by individuals such as Franklin. Thus, the court denied the first two of Duke’s three motions. As for Duke’s third motion, for failure to state a claim, the court stated that it “remains under advisement.” It appears that it will remain under advisement for some time because Duke has already appealed this decision. We will of course keep you advised of any rulings by the Fourth Circuit in the matter.

Breach of Fiduciary Duty

Second Circuit

Wong v. I.A.T.S.E., No. 23 CIV. 7629 (PAE), 2024 WL 898866 (S.D.N.Y. Mar. 1, 2024) (Judge Paul A. Engelmayer). Plaintiff Ka-Lai Wong was engaged to Sean McClintock, who unexpectedly passed away in July of 2022. McClintock was a participant in defendant IATSE’s employee benefit plan. Three weeks before his death, McClintock signed, but did not submit, a form designating Wong as his sole beneficiary under the plan. IATSE refused to pay plan benefits to Wong and instead paid them to McClintock’s allegedly estranged parents, who were the default beneficiaries under the plan in the event no designated beneficiary existed. Wong sued, bringing a single claim for breach of fiduciary duty under ERISA. IATSE filed a motion to dismiss. The court addressed each of the three fiduciary duties of loyalty, care, and acting in accordance with plan documents. The court found no breach of the duty of loyalty because Wong did not plead that IATSE acted self-interestedly. Instead, she argued that IATSE’s beneficiary designation process was faulty because it did not “deploy electronic beneficiary designation processes” and did not sufficiently “educat[e] its participants,” which the court deemed insufficient. The court likewise found no breach of the duty of care because Wong did not plead that IATSE misrepresented or materially omitted any relevant facts. Wong argued that IATSE should have told McClintock that he could submit the beneficiary designation form online, but the court ruled that failing to do so did not amount to misconduct or misrepresentation. Finally, the court ruled that IATSE acted in accordance with plan documents. The plan provided, “The Fund will only recognize beneficiary forms that it actually receives before your death,” and Wong was forced to concede that IATSE adhered to this rule. Thus, ERISA required IATSE to pay the benefits to McClintock’s parents, “notwithstanding the possibility of ‘harsh results.’” As a result, the court granted IATSE’s motion to dismiss, with prejudice.

Sixth Circuit

International Union of Painters & Allied Trades Dist. Council No. 6 v. Smith, No. 1:23-cv-502, 2024 WL 1012967 (S.D. Ohio Mar. 8, 2024) (Judge Douglas R. Cole). In this case, a trade union and a number of ERISA fiduciaries who are union officials brought suit challenging the way in which a health and welfare plan for union members is being operated. The cast of characters and allegations are complicated but, in a nutshell, the plaintiffs have sued both the union-side trustees and the employer-side trustees who operate the plan, asserting that they breached their fiduciary duties to the plan by refusing to vote to remove the two union-side trustees even after the union tried to do so and amending the plan to make it quite a bit more difficult to do so. They alleged that the defendants have acted impudently by entrenching the two union-side trustees and that they have acted in a self-dealing manner by having the plan itself pay for the attorney’s fees associated with defending their actions. In this decision, the court addressed a motion for preliminary injunction filed by the plaintiffs, as well as a motion to dismiss filed by the two employer-side trustees and a motion to intervene filed by the plan. With respect to the preliminary injunction, the court was unconvinced following a hearing that plaintiffs had articulated and offered proof of irreparable harm. The court was unpersuaded that plaintiffs had articulated how they might suffer from having defendants continue to vote their own self-interest or from having plaintiffs’ votes diluted, nor had they articulated to the court’s satisfaction how any such harm would not be compensable through money damages. The court was likewise unconvinced by plaintiffs’ arguments that entrenchment was a harm in and of itself, noting that cases cited by plaintiffs dealt with situations where it was harder for both the union and the employers to replace trustees, as distinguished from this case where only the union-side trustees were allegedly entrenched. Moreover, the court found that plaintiffs had not sufficiently shown illegal entrenchment for preliminary injunction purposes, primarily because the court was not convinced that the union’s constitution ought to govern, or that “at-will” removal powers were mandated by or even consistent with ERISA’s principle that loyalty to the plan should be paramount. The court thus denied the motion for preliminary injunction. However, the court granted the motion to dismiss filed by the union trustees, concluding that the trustees were acting as settlors, not as plan fiduciaries, in amending the plan to make it harder to remove the union-side trustees. The court also concluded in a somewhat ipse dixit fashion that the trustees were not acting as fiduciaries when declining to recognize the removal and appointment notice from the union because once they had amended the pan documents, they were no longer required to do so. As far as the allegations that the trustees violated their duties by voting to reimburse the legal expenses of the union trustees in defending the case, the court concluded that this was consistent with ERISA because the legal expenses were not related to a fiduciary breach but were incurred in the management and preservation of the trust and its assets. This ruling clearly does not bode well for plaintiffs on the remainder of their case against the union-side trustees. Finally, the court granted the plan’s motion to intervene, both as of right and as a permissive matter, concluding that the plan was not already a party, its motion was timely, it had an interest in the case that would be impaired absent intervention, and none of the existing parties were advocating for the plan’s interests.    

Discovery

Sixth Circuit

DaVita Inc. v. Marietta Mem. Hosp. Emp. Ben. Plan, No. 2:18-CV-1739, 2024 WL 957734 (S.D. Ohio Mar. 6, 2024) (Magistrate Judge Kimberly A. Jolson). Kidney dialysis provider DaVita brought this ERISA benefits action against an employee medical benefit plan alleging that the plan and its benefit manager MedBen “reimburse[] dialysis services at a depressed rate.” In this order the court addressed three discovery disputes. First, DaVita requested documents from MedBen relating to plan dialysis claims dating back to 2012, but MedBen refused to produce documents prior to 2014. The court agreed with DaVita, ruling that the requested documents were relevant to DaVita’s effort to show how defendants administered dialysis claims over time. MedBen contended that production of these documents would be an undue burden because it was expensive and difficult due to HIPAA protections. However, the court ruled that MedBen did not provide sufficient evidence to support these assertions, especially since MedBen was producing similar documents for later time periods. Next, the court found that DaVita’s request for documents related to MedBen’s other clients was relevant. However, the court was more convinced by MedBen’s burden argument on these documents, because MedBen represented that it had 180 other clients, many of which had multiple plans. The court thus ordered the parties to meet and confer regarding this issue and report back to the court. Second, the court addressed DaVita’s demand for emails and electronically stored information. DaVita contended that defendants had produced very few documents, and sought more information about how they conducted their searches. The court agreed that DaVita’s concerns were “not unfounded,” but again ruled that “the parties must do more to resolve their dispute” and ordered them to meet and confer and file a report. Finally, DaVita complained that defendants had “provided little information on their litigation holds.” The court noted that litigation holds by themselves are not protected by privilege, but “litigation hold letters generally are privileged and not discoverable.” Thus, the court denied DaVita’s motion on this issue, but without prejudice in the event spoliation issues arose at a later time.

Life Insurance & AD&D Benefit Claims

Fifth Circuit

Krishna v. National Union Fire Ins. Co. of Pittsburgh, No. 23-20289, __ F. App’x __, 2024 WL 1049474 (5th Cir. Mar. 11, 2024) (Before Circuit Judges Stewart, Clement, and Ho). As we reported in our June 14, 2023 edition, the district court in this case upheld defendant National Union Fire Insurance Company’s (NUFIC) denial of plaintiff Deepa Krishna’s claim for business travel accident insurance benefits after Krishna’s husband died in a plane crash. The court ruled that Krishna did not meet her burden of proving that her husband’s plane trip was “at the direction of” his employer, which was required under the plan in order to be “business travel” and thus qualify for benefits. Krishna appealed. First, she argued that the district court erred in using the deferential abuse of discretion standard of review because (a) the entities that denied her claim were not authorized to do so, and (b) NUFIC violated ERISA procedural regulations in denying her claim. The Fifth Circuit disagreed, ruling that the employer had delegated discretionary authority to NUFIC, NUFIC was permitted to delegate ministerial tasks to other entities, and NUFIC had made the final decision as required even if the other entities appeared on the denial letterhead. As for Krishna’s procedural argument, the Fifth Circuit applied its “substantial compliance” test and ruled that any delay by NUFIC in denying Krishna’s claim did not harm her, and that she had received a full and fair review of her claim. On the merits of Krishna’s claim, the Fifth Circuit upheld the district court’s ruling that the plan language was not ambiguous and that the husband’s plane trip did not qualify as business travel. Even if the language was ambiguous, the Fifth Circuit held that because NUFIC had discretionary authority, its “interpretation was a reasonable exercise of its ‘interpretive discretion.’” The judgment below was thus affirmed.

Pension Benefit Claims

Sixth Circuit

Emberton v. Board of Trustees of Plumbers & Pipefitters Local 572 Pension Fund, No. 3:21-CV-00757, 2024 WL 900209 (M.D. Tenn. Mar. 1, 2024) (Judge Aleta A. Trauger). Billy Joe Emberton’s wife, Kathy Emberton, brought this action as administrator of Mr. Emberton’s estate after his death against the defendant, an ERISA-governed pension fund. Mr. Emberton was a pipefitter who submitted a claim for early pension benefits in 2018, which the fund initially approved, but then denied, determining that Mr. Emberton was not entitled to benefits because he had not “retired” according to the plan. The plan defined “retire” as “a Participant’s complete cessation of: (i) any kind of work for an Employer, or (ii) any plumbing or pipefitting work in the construction or maintenance industries within the geographical area of the Fund.” Mr. Emberton filed this action in 2021 and the parties submitted cross-motions for judgment. The parties agreed that the “arbitrary and capricious” standard of review applied. Under this standard of review, the court agreed with Ms. Emberton that the fund abused its discretion in ruling that Mr. Emberton did not meet part (i) of the “retire” definition. The record showed that although Mr. Emberton had continued working, his employer was not an “Employer” as defined by the plan, i.e., an employer who had a collective bargaining agreement with the fund. Thus, the court moved on to the issue of whether it should address part (ii) of the “retire” definition. Ms. Emberton argued that the word “or” in between parts (i) and (ii) meant that Mr. Emberton only had to satisfy one of the two parts to be entitled to benefits, and thus there was no need to address part (ii). The fund, on the other hand, did not even address the issue of what “or” meant in its briefing. Furthermore, the court stated that “[n]either party…attempts to construe the definition of ‘Retire’ in light of the Plan as a whole.” The court thus examined other parts of the plan for assistance, as well as a Seventh Circuit decision addressing similar facts. The court noted that “the Plan contains a provision requiring the suspension of benefits for any employee who is reemployed following retirement, under certain circumstances,” which mitigated against Ms. Emberton’s position. Thus, the court ruled that while the “retire” definition’s use of the word “or,” on its own, was ambiguous, it was “rational in light of the plan as a whole” to conclude that the definition meant “that a participant is retired if he is not engaged in (has ceased) ‘(i) any kind of work for an Employer’ and is not engaged in ‘(ii) any plumbing or pipefitting work in the construction or maintenance industries within the geographical area of the Fund.’” Indeed, according to the court, “this interpretation is the only one that makes sense.” As a result, even though the fund “fail[ed] to articulate a legitimate rationale,” its decision was not arbitrary and capricious, and the court thus granted the fund’s motion and denied Ms. Emberton’s.

Pleading Issues & Procedure

Fourth Circuit

Deutsch v. IEC Grp., Inc., No. CV 3:23-0436, 2024 WL 1008534 (S.D.W. Va. Mar. 8, 2024) (Judge Robert C. Chambers). Plaintiff Daniel Deutsch, proceeding pro se, filed a form complaint in West Virginia state court alleging wrongful denial of $309.59 in medical benefits for preventative bloodwork he received. Defendant AmeriBen, the insurer of Deutsch’s benefit plan, removed the case to federal court on ERISA preemption grounds and filed a motion for a more definite statement. As we explained in our September 20, 2023 edition, a magistrate judge denied this motion but gave Deutsch an opportunity to amend his complaint to provide more factual detail in accordance with federal pleading requirements. Deutsch proceeded to file an amended complaint, AmeriBen filed another motion to dismiss, and the magistrate judge recommended that this motion also be denied. AmeriBen objected to the magistrate’s report, and thus the assigned district judge addressed those objections in this order. AmeriBen made two arguments: the magistrate judge (1) improperly “rewrote” Deutsch’s pleadings, and (2) ignored binding Fourth Circuit authority regarding Deutsch’s estoppel claim. The court rejected both arguments. On the first issue, the court ruled that AmeriBen’s arguments were “disingenuous” because Deutsch had expressly pleaded that the bloodwork he received was covered by his plan. Furthermore, by pleading that he “relied on oral and verbal representations from [] AmeriBen’s representatives that he would not bear any out-of-pocket expenses,” he had adequately pleaded estoppel. AmeriBen contended that the representations were made by a third party, not by AmeriBen, but the court agreed with the magistrate judge that the record “suggest[ed] a greater connection between the two parties.” On the second issue, the court ruled that the magistrate judge properly considered the Fourth Circuit’s controlling authority on estoppel, Coleman v. Nationwide Life Ins. Co., but neither that case nor any other Fourth Circuit case addressed “the question of whether estoppel claims are available to address ‘informal interpretations of ambiguous provisions’ of an ERISA plan.” As a result, AmeriBen’s “contention that estoppel is categorically unavailable in ERISA actions is conjectural.” Thus, the court adopted the magistrate judge’s report and recommendation, and Deutsch’s claim for $309.59 in benefits lives to fight another day.

First Reliance Bank v. AmWINS, LLC, No. CV 3:22-2674-MGL, 2024 WL 942778 (D.S.C. Mar. 5, 2024) (Judge Mary Geiger Lewis). Plaintiffs, a bank and its welfare benefit plan, sued the defendants, who were “generally involved with the implementation of the plan,” alleging five state law claims in South Carolina state court. Defendants removed the case to federal court and filed a motion to dismiss, arguing that plaintiffs’ claims were preempted by ERISA. The court chided both sides for “fail[ing] to mention,” presumably because “they are all unaware and unfamiliar with long-standing Fourth Circuit precedent,” that, “when a claim under state law is completely preempted and is removed to federal court because it falls within the scope of [ERISA], the federal court should not dismiss the claim as preempted, but should treat it as a federal claim under [ERISA].” The court thus denied defendants’ motion and ruled that it would “consider any other arguments as to the merits of Plaintiffs’ state claims at the summary judgment stage.” The court did, however, direct plaintiffs to “file a status report indicating whether they wish the Court to treat their state claims as ERISA claims going forward. If yes, they may amend their complaint, but the Court will decline to require it.”

Provider Claims

Second Circuit

Murphy Med. Assocs., LLC v. Yale Univ., No. 3:22-CV-33 (KAD), 2024 WL 988162 (D. Conn. Mar. 7, 2024) (Judge Kari A. Dooley). In March of last year the court granted the defendants’ motion to dismiss this action by plaintiff Murphy Medical Associates, LLC seeking reimbursement for COVID-19 diagnostic tests it provided to patients insured by Yale University’s medical benefit plans. However, the court gave Murphy leave to amend, cautioning Murphy that it “must provide allegations as to ‘the patients whose rights are being asserted, the alleged assignment of those rights, the specific plans under which Murphy Medical asserts claims, and whether Murphy Medical has exhausted their administrative remedies or whether such exhaustion would be futile.’” Murphy amended its complaint, prompting a new motion to dismiss from defendants. The court agreed with defendants that Murphy’s new complaint was again defective. Murphy alleged that it received assignment of benefit forms from “many” plaintiffs, that defendants’ plans did not prohibit such assignment, and attached a sample assignment of benefits form. This was not enough for the court, which deemed Murphy’s allegations “conclusory.” Murphy did not “provide enough specificity to give Defendants fair notice of whose rights Plaintiff purport to assert or the plans under which those rights derive.” The sample form was “insufficient to allow the Court to draw the inference that each beneficiary made a valid assignment.” The court also noted that Murphy’s complaint ignored an anti-assignment provision in the Yale Health Member plan document and ruled that defendants had not waived it. Furthermore, the amended complaint lacked adequate factual allegations that Murphy had exhausted its administrative remedies before filing suit, or that such exhaustion would have been futile. Murphy alternatively argued that its complaint passed muster because the Families First Coronavirus Response Act (“FCCRA”) and the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) effectively amended ERISA to allow for its claims. The court rejected this theory, ruling that FCCRA and CARES did not create a private right of action, and characterizing Murphy’s creative argument as “simply an attempted end run” around the court’s prior decision addressing these laws. In the end, the court concluded that Murphy’s amended complaint was an attempt to “sidestep” ERISA’s “well established” requirements by “seeking reimbursement for testing done on a massive scale, for individuals with a multitude of different benefit plans, who may or may not have assigned their ERISA benefits, and who may or may not have been allowed to assign their ERISA benefits. ERISA does not countenance such an effort[.]” Dismissal this time was with prejudice.

NYU Langone Hosps. v. 1199SEI Nat’l Benefit Fund for Health & Human Serv. Emps., No. 22 CIV. 10637 (NRB), 2024 WL 989700 (S.D.N.Y. Mar. 7, 2024) (Judge Naomi Reice Buchwald). Plaintiff sued two multi-employer benefit funds in New York state court, alleging that they committed breach of contract when they denied claims for the hospital stays of the newborns of three fund beneficiaries. The funds removed the action to federal court and filed a motion to dismiss. Plaintiff responded by arguing that the hospital stays were a covered maternity benefit under the Newborns’ and Mothers’ Health Protection Act of 1996 (“NMHPA”). The court was not impressed: “Whatever the merits of this contention, the Court is precluded from addressing it because plaintiff’s breach of contract claims are expressly preempted by ERISA.” The court noted that NMHPA was incorporated into ERISA, and thus any claims under it were governed by ERISA’s preemption provision. Plaintiff attempted to escape this conclusion by arguing that it was “simply seeking to enforce the terms of its own, separate contract with defendants.” However, the court ruled that plaintiff’s case law did not support this proposition. Furthermore, plaintiff’s claims “expressly challenge the scope of benefits provided to the Benefit Funds’ plan members and the Funds’ administration of their plans,” which meant that they “fall squarely within the scope of ERISA’s expansive preemption provision.” The court thus granted the funds’ motion to dismiss. The court also rejected plaintiff’s request for leave to amend its complaint for two reasons. First, plaintiff had already amended once, with knowledge of ERISA’s application, yet did not assert claims under ERISA. Second, the court ruled that amendment would be futile because the plans at issue included anti-assignment provisions precluding plaintiff from pursuing any claims under ERISA.

Redstone v. Empire HealthChoice HMO, Inc., No. 23-CV-2077 (VEC), 2024 WL 967416 (S.D.N.Y. Mar. 5, 2024) (Judge Valerie Caproni). Plaintiffs in this case are two surgeons who sued Empire HealthChoice HMO, Inc., the claims administrator of the ERISA plan of one of their patients, after Empire paid only $26,099.20 on a $671,723 claim for the first breast reconstruction surgery following the patient’s double mastectomy, and $7,2316.77 out of $131,234.22 on the second stage surgery. The doctors asserted claims for benefits under ERISA and state law claims for breach of contract, breach of implied contract, unjust enrichment, tortious interference, and third party beneficiary. Empire moved to dismiss the complaint in its entirety. The court’s analysis of the ERISA benefits claims turned on whether the plaintiffs had standing to sue based on their patient’s assignment of her claim for benefits, despite the anti-assignment provision in the plan document. The court concluded the answer was no, rejecting as “silly” the doctors’ claims that the anti-assignment clause was contradictory and unenforceable because it prohibited assignment without consent but did not define what was required to obtain consent. Although the language the court quoted did not state that any consent had to be in writing, the court concluded that the plan clearly required written consent, which the doctors had not obtained. Nor was the court convinced that Empire’s course of conduct in dealing with the doctors and partially paying the claims directly to them constituted a waiver of the anti-assignment provision. On this basis, the court dismissed all of the ERISA claims. Nevertheless, the court granted the plaintiffs an opportunity to amend their complaint despite defendants’ arguments that plaintiffs had the opportunity to do so at an earlier point in the litigation. Turning to the state law claims, the court concluded that all five depended on Empire’s payment obligations under the ERISA plan and therefore dismissed these claims with prejudice, concluding that they were preempted by ERISA’s broad preemption provision.   

AA Med. v. 1199 SEIU Benefit & Pension Fund, No. 21-CV-5239 (JS)(SIL), 2024 WL 964712 (E.D.N.Y. Mar. 5, 2024) (Judge Joanna Seybert). In this last provider case of the week (all from the Second Circuit, curiously), a surgical group sued for reimbursement of multiple claims for benefits under ERISA plans after the plans paid a fraction of one percent on billed charges for numerous surgeries and follow-up visits. Defendants moved to dismiss, arguing that the medical group failed to exhaust its administrative claims remedies under the union-sponsored healthcare plan, and that the complaint failed to allege that the fund denied benefits that were due to the patients. The court agreed with defendants that plaintiffs and their patients had failed to exhaust the required appeal steps spelled out in summary plan descriptions (SPDs) that defendants attached to their motion to dismiss, which the court concluded it could consider without converting the motion to dismiss into a motion for summary judgment. Plaintiffs, however, alleged that they had, in fact, appealed but that the fund informed them that they could not appeal and that this sufficed for exhaustion purposes. The court, however, found this conclusory and unsupported by plausible factual allegations in the complaint. The court likewise rejected plaintiffs’ contention that exhaustion was futile because they had been told by representatives of the plan that they could not appeal. Instead, the court agreed with defendants that, contrary to the allegations in the complaint, the SPDs do permit providers to appeal where authorization has been obtained from the plan and that the SPD also forbade reliance on telephone conversations. Concluding that there were no allegations in the complaint concerning such authorization, the court agreed with defendants that plaintiffs failed to make the requisite clear and positive showing of futility necessary to excuse the plan’s and ERISA’s exhaustion requirement. The court therefore dismissed the complaint but did so without prejudice.

Venue

Ninth Circuit

Plan Adm’r of the Chevron Corp. Ret. Restoration Plan v. Minvielle, No. 20-CV-07063-TSH, 2024 WL 923554 (N.D. Cal. Mar. 1, 2024) (Magistrate Judge Thomas S. Hixson). Just two weeks ago, in our February 21, 2024 edition, we reported on the court’s ruling in this interpleader action on a motion to transfer venue by two of the defendants and potential beneficiaries, Anne Minvielle and her husband. The Minvielles live in the Eastern District of Louisiana and wanted this case and a related case transferred there. The court, addressing a number of factors, denied the motion. The Minvielles promptly filed a motion for reconsideration which the court addressed in this order. The court observed that local rules required the Minvielles to obtain leave before filing such a motion, which they had not done, and thus denied on that ground. The court addressed the merits nonetheless, and again ruled against the Minvielles. The Minvielles focused their motion on potential witnesses, arguing that the court “failed to consider the witnesses they named in Louisiana,” and thus “the logical and legally correct thing to do is to transfer both cases to the Western District of Louisiana for consolidation in that district where the overwhelming number of witnesses (both doctors and lay witnesses) reside.” The court ruled that this was an inappropriate ground for moving for reconsideration because it did not represent a material difference in fact or law or an emergence of new material facts. Furthermore, the Minvielles admitted that their previous motion lacked specific detail regarding their witnesses, which could not be remedied by a reconsideration motion. In any event, the court reiterated that “there are potential witnesses in Louisiana, California, and London, and any choice of venue would be equally inconvenient to the witnesses not located in that venue.” Furthermore, “relevant evidence is likely found in at least this District, London, and Louisiana,” and “transfer to Louisiana does not serve the interests of justice because both [cases] have been pending here for some time, and this Court is likely positioned to resolve the disputes faster than a new court.” The court thus denied the Minvielles’ reconsideration motion.