It’ s been another slow-ish week here in ERISA Watch territory, with no case of the week. But keep reading for contrasting approaches (and outcomes) in pension investment fee cases, the latest in the Cloud case challenging the NFL’s disability benefit plan, and a case involving the NBA’s COVID-19 vaccination policy.

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

Breach of Fiduciary Duty

Third Circuit

Binder v. PPL Corp., No. 5:22-CV-00133-MRP, 2024 WL 1096819 (E.D. Pa. Mar. 12, 2024) (Judge Mia R. Perez). Plaintiffs are current and former employees of defendant PPL Corporation who allege that PPL and other defendants breached their fiduciary duties under ERISA by failing to prudently monitor the investments in PPL’s retirement plan. Specifically, plaintiffs allege that defendants should have terminated the plan’s arrangement with the Northern Trust Focus Funds, which caused the plan to unnecessarily invest in higher-cost shares with “unusual transaction costs and a high turnover rate.” Defendants filed a motion to dismiss. At the outset, the court noted that ERISA has a six-year statute of repose, and thus plaintiffs were time-barred from arguing that defendants’ selection of the Focus Funds in 2013 itself was a breach of fiduciary duty. The court also denied defendants’ request for judicial notice of 24 exhibits because they were outside the pleadings. On the merits, defendants argued that the complaint’s first count for imprudent monitoring and retention of the Focus Funds did not provide “meaningful benchmarks” for comparison. The court noted that the Third Circuit had not yet adopted a meaningful benchmark pleading requirement, and thus relied on the Third Circuit’s decision in Sweda v. University of Pennsylvania for guidance. The court ruled that plaintiffs’ allegations in this case were similar to those in Sweda because they had “provided substantial circumstantial evidence” that the Focus Funds were underperforming. The court again relied on Sweda in rejecting defendants’ argument regarding the second count of the complaint, which alleged that defendants imprudently retained higher-cost shares when lower-cost shares were available. The court ruled that plaintiffs had sufficiently alleged that a large plan like PPL’s, with over $1 billion in assets, could easily obtain lower-cost shares due to its bargaining power, but did not do so, thus resulting in the plan paying “150% to 350% more in fees.” Finally, the court ruled that because plaintiffs’ first two counts survived, its third derivative claim that defendants failed to monitor plan fiduciaries survived as well. The court thus denied defendants’ motion to dismiss in its entirety.

Eighth Circuit

Rodriguez v. Hy-Vee, Inc., No. 4:22-CV-00072-SHL-WPK, 2024 WL 1070982 (S.D. Iowa Mar. 7, 2024) (Judge Stephen H. Locher). Plaintiff Theresa Rodriguez and other employees of the Midwest grocery store chain Hy-Vee brought this class action alleging that Hy-Vee and other defendants breached their fiduciary duties to plaintiffs by overcharging recordkeeping fees in Hy-Vee’s 401(k) plan. Defendants filed a motion to exclude the testimony of plaintiffs’ expert and a motion for summary judgment. The court granted defendants’ summary judgment motion. The court stated that the record showed defendants “had adequate processes in place to monitor and evaluate the reasonableness of recordkeeping fees throughout the class period.” This included retaining an outside consultant, obtaining benchmarking reports six times over a four-to-five-year period, and initiating an “extensive RFI [request for information] process” in 2020. Defendants also reduced fees during the relevant time period, “which points toward prudence.” The court also ruled that plaintiffs “have not identified meaningful benchmarks against which to compare the Plan’s recordkeeping fees.” Plaintiffs’ expert identified four allegedly similar plans, but the court ruled that these were not an “apples-to-apples comparison” because the administrators of those plans, Vanguard and Fidelity, declined to respond to Hy-Vee’s RFI, thereby demonstrating that “Hy-Vee literally could not have gotten the same services for the same price from those providers.” The court also criticized plaintiffs’ expert for only measuring fees for one year and calculating those fees using a different methodology. Even if plaintiffs’ comparators did provide a meaningful benchmark, the court ruled that they were insufficient to prove that the fees were “excessive relative to the market as a whole.” The court stressed plaintiffs’ higher burden at the summary judgment stage: “[T]he court views the existence of comparator plans as a necessary but not independently sufficient condition for a plaintiff to survive summary judgment. The plaintiff also must produce evidence showing, among other things, where the defendant’s plan falls in the market as a whole for similar plans…. Plaintiffs here have not done so.” The court also dismissed plaintiffs’ concerns regarding the operation of the plan, ruling that defendants’ actions were the result of deliberate choices that properly evaluated costs and benefits. In short, the court concluded that “no reasonable factfinder could conclude that Defendants breached their fiduciary duties in their handling of recordkeeping fees.” Because the court granted defendants’ summary judgment motion, it denied as moot their motion to exclude plaintiffs’ expert.

Snyder v. UnitedHealth Grp., No. Civil 21-1049 (JRT/DJF), 2024 WL 1076515 (D. Minn. Mar. 12, 2024) (Judge John R. Tunheim). This case begins with a rather blunt conclusion: “Because a reasonable trier of fact could reasonably conclude that Plaintiff Kim Snyder caught Defendant UnitedHealth Group Inc. with its hand in the cookie jar, the Court will substantially deny United’s motion for summary judgment.” The court found “genuine disputes of material fact as to whether United breached its duties of prudence and loyalty…by investing its employees’ 401(k) savings in underperforming Wells Fargo (‘Wells’) funds for more than a decade and allowing United’s business relationship with Wells to influence that allegedly imprudent retention.” The court also found genuine issues of material fact “as to whether Wells’s fees were reasonable, and thus whether United engaged in a prohibited transaction.” The court rightly referred to the factual background as a “tangled” web involving the 401(k) plan’s target date fund default investment, which changed during the relevant period from a conservative, lower risk, lower reward approach (the “equal weighted TDF”) to what United refers to as an “enhanced TDF,” both of which were Wells Fargo products. The basic problem, as the plaintiff saw it, was that the equal weighted TDF had chronically underperformed and, although United apparently recognized the need to select a different default investment, it took too long to switch to the enhanced TDF, which was another Wells Fargo fund that plaintiff alleged was inappropriately selected. Indeed, despite not ranking in the top three recommendations from the Committee tasked with selecting a new fund, the Wells Fargo enhanced TDF was awarded the lucrative plan contract. The plaintiff alleged that this selection was improperly influenced by the fact that United had lucrative contracts with Wells Fargo as its health insurance provider, relationships that plaintiff alleges were expressly considered during the TDF selection process. United, unsurprisingly, disputed most of this, but disputes of this sort do not summary judgment make. Thus, after a somewhat lengthy and detailed analysis of the claims and the evidence pointed to by both sides, the court concluded that plaintiff could “proceed on her fact-bound claims that United acted imprudently and disloyally when it retained and re-selected Wells as the Plan’s default TDF provider,” as well as her claim that these funds were not reasonable investments for the plan. The court also concluded that plaintiff had adduced sufficient evidence to show that United had engaged in a prohibited transaction in selecting the Wells Fargo replacement fund, and that there were material disputes between the parties as to the reasonableness of the fees paid with respect to the fund, an issue on which defendants bore the burden of proof. The court, however, agreed with United that plaintiff had not shown that United “violated any enforceable provision of a governing plan document,” concluding that plaintiff had failed to show that defendants acted inconsistently with the plan’s investment policy statement. The court also concluded that the individual members of the board of directors were not fiduciaries because they had no discretionary authority or control over the plan and no duty to monitor the other plan fiduciaries. Thus, the court dropped the board as a defendant in the action. Although it was not quite a complete victory for plaintiff, it was a significant one and the bulk of the case will proceed.

Disability Benefit Claims

Second Circuit

Johnson v. The Hartford, No. 22-CV-06394 (PMH), 2024 WL 1076685 (S.D.N.Y. Mar. 12, 2024) (Judge Philip M. Halpern). Melinda Johnson, a nurse at a residential treatment facility, applied for long-term disability benefits due to the side effects of medication prescribed for the effects of smoke inhalation following a fire at the facility. Hartford approved the benefits for the 24-month “own occupation” period, and also initially approved benefits thereafter under the “any occupation” provision of the plan. However, after Hartford retained both a private investigator to conduct surveillance of Ms. Johnson and a doctor to conduct a medical examination, as well as a second medical doctor to conduct a “peer review” by speaking to Ms. Johnson’s psychiatrist, United terminated her benefits, and affirmed this decision on administrative appeal. Plaintiff filed suit for benefits and the parties cross-moved for summary judgment. Although plaintiff argued that Hartford’s decision was arbitrary and capricious because its five reviewing doctors’ determinations were contradicted by plaintiff’s treating physician, the court concluded that this line of reasoning had been rejected by the Supreme Court in Black & Decker Disability Plan v. Nord. Instead, the court concluded that “[s]ubstantial evidence in the form of an independent medical examination report and multiple independent peer review reports support Defendant’s determination.” On this basis, the court granted Hartford’s motion for summary judgment.

Fifth Circuit

Cloud v. Bert Bell/Pete Rozelle NFL Player Ret. Plan, No. 22-10710, __ F.4th __, 2024 WL 1143287 (5th Cir. Mar. 15, 2024) (per curiam, dissent by Circuit Judge James E. Graves, Jr.). In June of 2022, after a week-long bench trial, the district court in this case issued a lengthy, scathing decision in which it excoriated the National Football League’s retirement benefit plan for its shoddy claim handling. The court issued judgment in favor of plaintiff Michael Cloud on his claim that he was entitled to reclassification for the highest level of disability benefits available under the plan due to his neurological impairments. (Your ERISA Watch named that decision one of the five best of 2022.) The court also awarded Cloud $1.2 million in attorney’s fees. However, last year the Fifth Circuit overturned Cloud’s win, as we chronicled in our October 11, 2023 edition. Although the Fifth Circuit commended the district court for “expos[ing] the disturbing lack of safeguards to ensure fair and meaningful review of disability claims brought by former players,” and for “chronicling a lopsided system aggressively stacked against disabled players,” these compliments did not translate into success for Cloud. The court ruled that the plan did not abuse its discretion in denying Cloud’s reclassification request because Cloud did not make an appropriate showing of “changed circumstances” as required by the plan. Cloud petitioned for rehearing, but the Fifth Circuit denied his request in this order. Ordinarily we would not report on such a purely procedural decision, but this one contained a dissent by Judge James E. Graves, Jr., who voted in favor of rehearing, stating that “the record does not support the panel’s conclusion.” Judge Graves, like the courts before him, again emphasized that the record paints a “bleak picture” of how the plan handles appeals: “The record indicates that nobody really reads any individual applications or administrative records, there’s really no oversight, and a paralegal for outside counsel drafts the denial letters and adds language, often incorrect, that the board never considered or said, as acknowledged by the panel.” Judge Graves argued that Cloud had overcome these obstacles and proven that he had in fact established a “change in circumstances.” Judge Graves contended that the record showed that (a) Cloud’s reclassification application included new disabilities and conditions, (b) his prior award was solely based on his favorable Social Security decision and not his additional supporting information, which he was free to resubmit, and (c) the plan should have considered his worsening symptoms. Judge Graves also stated that the panel erred in ruling that Cloud had forfeited his claim for changed circumstances because the letter on which it relied only showed that Cloud wanted to make an argument in the alternative in support of his claim, and did not intend to waive anything. Furthermore, the plan itself made no such finding of forfeiture. As a result, Judge Graves “disagree[d] with the panel that Cloud ‘did not’ and ‘cannot’ demonstrate changed circumstances. Accordingly, I dissent from the denial of rehearing en banc.”

Sixth Circuit

Harmon v. Unum Life Ins. Co. of Am., No. 23-5619, __ F. App’x __, 2024 WL 1075068 (6th Cir. Mar. 12, 2024) (Before Circuit Judges Griffin, Thapar, and Nalbandian). Plaintiff Joey Harmon injured his back lifting a treadmill while working as a facilities technician for 24 Hour Fitness. He submitted a claim for benefits under 24 Hour Fitness’ long-term disability benefit plan, which Unum paid for two years but then terminated, determining that Harmon could perform sedentary work. Harmon filed this lawsuit, the district court granted Unum’s motion for judgment on the record, and Harmon appealed. On appeal, the Sixth Circuit noted that the standard of review was “arbitrary and capricious” because the benefit plan gave Unum discretionary authority to determine benefit eligibility. Harmon contended that Unum’s decision was unreasonable because Unum should not have relied on its in-house file-reviewing physician, Unum misinterpreted his doctor’s opinions, and Unum’s vocational analysis was faulty. The court rejected these arguments. The court ruled that the in-house physician’s review was proper because Harmon denied back pain, had a full range of motion in his spine, and had not been prescribed pain medication since 2016. The Social Security Administration had also found that Harmon could perform light work. The court also agreed with the district court that Unum reached out to Harmon’s doctor to resolve any issues with his opinion, and that Unum’s vocational report properly considered that Harris had moved from Memphis to Miami. Finally, the court dismissed Harmon’s concerns regarding Unum’s conflict of interest, ruling that Unum’s weekly reports tracking the opening and closing of claims were insufficient to show that Unum was biased. The Sixth Circuit thus affirmed the district court’s judgment in favor of Unum.

Life Insurance & AD&D Benefit Claims

Sixth Circuit

Bowles v. Estes Express Lines Corp., No. 2:22-CV-2660-SHL-ATC, 2024 WL 1142073 (W.D. Tenn. Mar. 15, 2024) (Judge Sheryl H. Lipman). Zrano Bowles worked for defendant Estes Express Lines and was enrolled in its ERISA-governed optional life insurance employee benefit plan. He married plaintiff Lisa Bowles in 2015 and designated her as his beneficiary under the plan. However, in 2017, premiums stopped being paid for the insurance, although the record was unclear as to why. After Mr. Bowles died in 2021, Ms. Bowles submitted a claim for benefits under the plan, which was denied by the plan’s insurer, Guardian Life Insurance Company of America, on the ground that Mr. Bowles’ coverage had lapsed due to non-payment of premiums. Ms. Bowles brought this action and filed a summary judgment motion against Estes, asserting that Estes breached its fiduciary duty under 29 U.S.C. § 1132(a)(3). Estes filed a motion to strike Ms. Bowles’ motion and a cross-motion for summary judgment asserting that it had done nothing wrong. The court denied Estes’ motion to strike, observing that because Ms. Bowles could not make a claim for benefits against Guardian under § 1132(a)(1)(B), her motion was properly filed against Estes under § 1132(a)(3) as it was her “exclusive remedy” under ERISA. On the merits, the court ruled that Estes was a fiduciary under ERISA because it was the plan administrator. The court then addressed Ms. Bowles’ two arguments for why Estes breached its duties. First, the court ruled that Estes did not breach its fiduciary duty by failing to deduct premiums and remit them to Guardian because these actions were “ministerial” tasks and not “discretionary” ones. If there was a failure by Estes, it was “remedied when Estes notified Mr. Bowles of the lapse in coverage” through his wage statements, which showed “$0.00” for premiums paid, and on Estes’ benefits portal, which informed Mr. Bowles that he had “waive[d] coverage” for his optional life insurance. Second, the court ruled that Estes did not breach a fiduciary duty by failing to notify Mr. Bowles that his coverage would terminate because it had no such duty and made no misrepresentations. Furthermore, as explained above, Estes informed Mr. Bowles that his coverage had lapsed. As a result, the court granted Estes’ motion for summary judgment and denied Ms. Bowles’ motion.

Medical Benefit Claims

Ninth Circuit

Scott D. v. Anthem Blue Cross Life & Health Ins. Co., No. 23-CV-05664-RS, 2024 WL 1123210 (N.D. Cal. Mar. 14, 2024) (Judge Richard Seeborg). Plaintiff Scott D. challenges defendant Anthem’s denial of his claim for mental health benefits related to treatment his son received at an outdoor behavioral health program and a residential treatment center. He brought two claims under ERISA, one for unlawful denial of benefits and one for breach of fiduciary duty. Defendant Anthem moved to dismiss, arguing that plaintiff’s breach of fiduciary duty claim was duplicative of his claim for benefits, and that plaintiff should not be permitted to bring a claim under the Mental Health Parity and Addiction Equity Act. The court noted the “difficulty in establishing whether claims are duplicative at the pleading stage” and ruled that it would be premature to dismiss plaintiff’s breach of fiduciary duty claim. The court stated that plaintiff was seeking relief under this claim that might not be available in his claim for benefits, such as reformation of the plan and equitable surcharge, and thus the claims were not duplicative. As for Anthem’s Parity Act argument, plaintiff responded that he was not asserting a separate Parity Act claim. Instead, he was asserting a Parity Act violation “as an element of his breach of fiduciary duty claim.” Plaintiff alleged that Anthem had violated the Parity Act because it applied less stringent coverage requirements for equivalent intermediate care medical facilities, such as skilled nursing facilities, than it did for mental health residential treatment facilities. The court ruled that these allegations “go beyond the merely conclusory or formulaic” and were “enough to plead an as-applied Parity Act violation.” The court thus denied Anthem’s motion to dismiss.

Lou v. Accenture United States Grp. Health Plan, No. 22-cv-03091-HSG, 2024 WL 1122427 (N.D. Cal. Mar. 14, 2024) (Judge Haywood S. Gilliam, Jr.). Joe Lou, a participant in a healthcare plan sponsored and administered by his employer, Accenture, filed suit after Accenture denied some of his claims for benefits for in-home skilled nursing care for his minor daughter, A.L., who suffered from a rare genetic disorder. Before the court were cross-motions for summary adjudication. At issue was the impact of a separation agreement and waiver that Mr. Lou had signed after filing suit on his claims for coverage. Although Mr. Lou communicated with Accenture in an effort to carve out his claims from the release, Accenture refused to change the language in the way suggested by Mr. Lou, who ultimately signed the agreement with the original language. Ultimately, the court concluded that Mr. Lou had released his claims. The court relied most heavily on the very broad language of the release, which stated that it released “any and all claims of any nature whatsoever,” as well as plaintiffs’ conduct, which the court saw as clearly reflecting plaintiffs’ understanding that the release bore on his claims. The court therefore granted Accenture’s motion for judgment and denied plaintiff’s motion.

Solis v. T-Mobile U.S., Inc., No. 2:23-cv-04024, 2024 WL 1117897 (C.D. Cal. Mar. 14, 2024) (Judge Stephen V. Wilson). Two participants in the T-Mobile healthcare plan, Jannet Solis and Michael Ortega, challenged denials of their benefit claims by United Healthcare, the claims administrator, for out-of-network hiatal hernia repair and gastric sleeve surgery. Plaintiffs first objected to some of the evidence United included in the administrative record. The court held that transcripts of call recordings pertaining to the medical procedures, the National Correct Coding Initiative Policy Manual, and United’s own policies were properly included and therefore overruled plaintiffs’ objections with respect to these materials. The court also agreed with defendants that two expert declarations and some additional medical information that plaintiffs submitted after the bench trial should be excluded. The court found that United’s unilluminating denials did not meet the applicable standard for a “meaningful dialogue” in the Ninth Circuit, thus warranting application of a “tempered abuse of discretion” standard, but not de novo review, as the “procedural violations were not sufficiently flagrant to frustrate ERISA’s underlying purposes.” Having cleared these matters, the court moved on to the merits of the denials. The court had no problem affirming United’s denial of coverage for the gastric sleeve surgery under the plan’s exclusion for weight loss surgery except in narrow circumstances. The court likewise held that United’s conclusion that the hiatal hernia repair was sufficiently related to the weight loss surgery to be excluded was reasonably supported by the evidence. The court therefore concluded that United did not abuse its discretion in denying coverage entirely for the procedures at issue.  

Pension Benefit Claims

Second Circuit

Kowal v. Hooker & Holcombe, Inc., No. 21-CV-1299-LJV, 2024 WL 1094959 (W.D.N.Y. Mar. 13, 2024) (Judge Lawrence J. Vilardo). The two plaintiffs in this case are the daughters of Lynn Keller, who participated in a pension plan sponsored by her employer, HealthNow. Keller stopped working in 2015 when she was diagnosed with cancer, after which she successfully applied for disability benefits. She died in 2020, shortly after receiving pension benefit election forms. Keller completed those forms, but plaintiffs contended that she made a “clerical error” by selecting a life annuity as her pension benefit instead of a benefit with a fixed term or survivor benefit. Defendants, the claim administrators of the plan, refused to “rectify the clerical error,” so plaintiffs sued under ERISA. Defendants filed a motion to dismiss, contending first that plaintiffs lacked standing because they were not “beneficiaries” as defined by ERISA. The court quickly rejected this argument, ruling that this was not a jurisdictional argument, but “an argument that [plaintiffs] do not have a cause of action under ERISA.” The court then addressed defendants’ second argument, which was that plaintiffs failed to state a claim. The court agreed with defendants that plaintiffs “are not entitled to benefits for several reasons.” First, Keller clearly indicated that she had selected a life annuity benefit. Second, even if that election was invalidated, under the terms of the plan her benefits “would ‘default’ to a life annuity under section 5.3 of the Plan,” so plaintiffs still would not be entitled to benefits. Finally, the court noted that even if it ruled that Keller’s benefit election should be changed to an option urged by plaintiffs, Keller died before those benefits were scheduled to commence, which under the plan meant the selection was “void and of no effect.” The court thus granted defendants’ motion to dismiss.

Mauer v. National Basketball Ass’n, No. 23-CV-4937 (JPO), 2024 WL 1116848 (S.D.N.Y. Mar. 13, 2024) (Judge J. Paul Oetken). Plaintiff Kenneth Mauer is a former NBA referee. Before the 2021 season, the league and Mauer’s union implemented a COVID-19 policy that required referees to be vaccinated. Mauer applied for a religious exemption, which was denied on the ground that his beliefs were “not sincerely held.” Mauer was suspended and ultimately terminated in 2022. He and two other terminated referees have sued the league arguing that their terminations were unlawful. He also filed this action challenging the denial of his claim for pension benefits. The pension plan committee denied Mauer’s claim because, due to his other litigation, it was uncertain whether he might return to work as a referee, and thus the committee concluded that he had not “‘attained a distribution event,’ ‘such as retirement or termination of employment,’ within the meaning of the Plan.” Mauer filed a motion for summary judgment, and defendants filed a motion to dismiss. The court granted defendants’ motion in part, ruling that the NBA and NBA Services Corp. were not proper defendants. As for the merits, the court first determined that the appropriate standard of review was “arbitrary and capricious” because the plan “clearly vests the Committee with broad discretionary authority to interpret ambiguous language in the Plan and determine eligibility for benefits.” Under this standard of review, the court examined the key plan language, which provided that benefits are paid upon “termination of employment.” Defendants argued that this term was ambiguous given Mauer’s circumstances, because he might return to work, and thus the court should adopt its interpretation under the deferential standard of review. The court disagreed, ruling that the plan “does not require that severance of the employer-employee relationship be permanent and irrevocable.” Indeed, “The Plan explicitly contemplates that a former referee could be re-hired by the employer,” which undermined defendants’ position. Thus, the court ruled that “Mauer experienced a termination of employment and is thus entitled to his pension benefits in accordance with…the Plan.” The court granted Mauer’s summary judgment motion against the plan and ordered the parties to confer on a proper remedy.

Pleading Issues & Procedure

Seventh Circuit

Bangalore v. Froedtert Health, Inc., No. 20-CV-893-PP, 2024 WL 1051104 (E.D. Wis. Mar. 11, 2024) (Judge Pamela Pepper). This putative class action, in which plaintiff argues that defendants violated their duties of loyalty and prudence under ERISA in the administration of a retirement benefit plan, languished on the docket while the Supreme Court decided Hughes v. Northwestern University. After that decision, which vacated a key Seventh Circuit ruling relied upon by defendants, defendants refiled their motion to dismiss. After briefing on that motion was completed, plaintiff sought leave to file a second amended complaint based on a recent decision from the Seventh Circuit interpreting Hughes, Albert v. Oshkosh Corp. Then, the Seventh Circuit issued its ruling on remand in Hughes, after which plaintiff sought to file a new and different second amended complaint, arguing that the new Hughes decision “narrowed the holding” in Albert and “clarified the pleading standard in ERISA excessive fee cases like this one.” Faced with plaintiff’s motion to file a second amended complaint and defendants’ motion to dismiss his first amended complaint, the court granted plaintiff’s motion and denied defendants’ motion as moot. Defendants contended that the new Hughes decision by the Seventh Circuit did not announce a new standard, and that plaintiff’s proposed second amended complaint was futile because his amendments did not “salvage” his complaint. However, the court ruled that “defendants’ contention…is difficult to reconcile with the fact that in the Seventh Circuit’s own words, Hughes II described a ‘newly formulated pleading standard.’” The court further ruled that it was “premature” to rule that plaintiff’s amendments were futile because the new standard had just been announced. The court acknowledged that granting plaintiff’s motion would mean a new motion to dismiss from defendants, which would cause delay, and possibly some prejudice, but such prejudice “does not warrant denial of the plaintiff’s motion to amend. The plaintiff correctly points out what the defendants seem reluctant to acknowledge – that since the plaintiff filed the initial complaint in June 2020, the standard for pleading ERISA breach of fiduciary duty claims has shifted…. Given that shift, the plaintiff’s request for leave to amend the complaint is reasonable. The delay is regrettable, but it is due in great part to the time it has taken for the issue to become settled in the Seventh Circuit.”

Tenth Circuit

Pension Benefit Guar. Corp. v. Automatic Temp. Control Contractors, Inc., No. 2:22-CV-00808-CMR, 2024 WL 1093774 (D. Utah Mar. 13, 2024) (Magistrate Judge Cecilia M. Romero). In this action the Pension Benefit Guaranty Corporation (PBGC) seeks to enforce a final agency determination that defendant Automatic Temperature Control Contractors, Inc. (ATCC) failed to pay pension benefits to four plan participants. ATCC filed a motion for leave to amend its answer to add a counterclaim and three affirmative defenses, centered around an argument that the plan contained “a scrivener’s error.” ATCC alleged that it should be allowed to equitably reform its plan so that the participants at issue did not “benefit from a windfall.” PBGC opposed the motion, arguing that amending would be futile. The court started by noting that ATCC’s motion was timely filed and there was no evidence of bad faith. The court ultimately declined to engage in the futility analysis proposed by PBGC because it determined that this analysis would be better addressed on dispositive motions. In doing so, the court relied on case law from the Third and Seventh Circuits addressing the viability of equitable plan reformation which it “understands…to, at this pleading stage, allow for the Counterclaim and second affirmative defense to be asserted.” However, the court “expresse[d] no opinion on the viability of the allowed amendments,” and observed that the standard for proving equitable plan reformation was “hefty.”

Provider Claims

Second Circuit

Gordon Surgical Grp. v. Empire HealthChoice HMO, Inc., No. 1:21-CV-4796-GHW, 2024 WL 1134682 (S.D.N.Y. Mar. 14, 2024) (Judge Gregory H. Woods). The plaintiffs in this action are three affiliated general surgery providers who provided services to 126 patients who were insured by defendant Empire. In their complaint they alleged two federal and five state law causes of action seeking “over $1 million in reimbursement of their charges for 291 ‘medical claims’ governed by 72 different health insurance plans”; 209 of those claims are governed by ERISA. Empire filed a motion to dismiss, which a magistrate judge recommended granting, and plaintiffs objected. The district court judge largely upheld the recommendation in this order. The court first ruled that plaintiffs had failed to exhaust their ERISA-governed claims. Plaintiffs had alleged two examples of exhaustion, but the judge ruled that this was insufficient to establish exhaustion as to all 209 of their claims. The court acknowledged the “administrative nightmare of sorting through and complying with these various appeals processes,” but just because “exhausting one’s administrative remedies may be time-consuming or burdensome does not obviate Plaintiffs’ need to do so.” The court further agreed with the magistrate judge that plaintiffs had not established the futility of engaging in those appeals. Next, the court ruled that plaintiffs did not adequately allege that they were entitled to benefits because they again pleaded “illustrative examples” and did not “specify the terms of the plans that allegedly entitle them to a particular benefit.” The court also ruled that plaintiffs lacked statutory standing as to 84 of the claims because they did not adequately plead that the patients had assigned their benefits to plaintiffs. The court found that Empire had not waived these provisions, the direct payment provisions in the plans did not render the anti-assignment provisions ambiguous, and the plans’ requirements regarding paying for emergency services did not override the anti-assignment provisions. The court further upheld the magistrate judge’s ruling that 37 of the claims were time-barred, although it disagreed with the magistrate’s reasoning on this issue. The magistrate judge ruled that Empire’s failure to cite the relevant time limitations in its denials, which is a violation of ERISA regulations, did not stop the limit from triggering. The district court, on the other hand, concluded that it was an open question as to “whether any regulatory noncompliance suffices to toll the plan limitations period.” Nevertheless, “the Court need not reach the issue” because plaintiffs “have not adequately pleaded that the Defendants violated the DOL Regulation as to each allegedly denied medical claim,” and thus it was proper to dismiss the claims. The court then dismissed plaintiffs’ breach of fiduciary duty claims because they were based on the same rejected allegations supporting their benefit claims, and declined to exercise supplemental jurisdiction over plaintiffs’ state law claims. Finally, the court deviated from the magistrate judge’s recommendation of dismissal with prejudice, even though plaintiffs had been allowed to amend twice and had conducted discovery. The court agreed with plaintiffs that dismissal with prejudice was unwarranted because their prior amendments did not have the benefit of the court’s input. However, the court cautioned plaintiffs that “the principal defects in the complaint stem from the fact that Plaintiffs have attempted to consolidate their claims for 291 medical claims that arise under 72 separate health insurance plans in a single federal action containing only seven claims for relief. The Court has substantial concerns that these claims have been improperly joined into a single federal action.” The court also requested separate briefing regarding its “substantial concerns regarding whether the Court has supplemental jurisdiction over the claims under non-ERISA plans.”

Third Circuit

Atlantic Spine Center, LLC v. Deloitte, LLP Grp. Ins. Plan, No. 2:23-CV-00614-BRM-JBC, 2024 WL 1092526 (D.N.J. Mar. 12, 2024) (Judge Brian R. Martinotti). Plaintiff Atlantic Spine Center filed this action seeking benefits arising from lumbar surgery it performed on a patient insured by Deloitte, LLP’s medical benefit plan. The plan moved to dismiss, arguing first that Atlantic did not have standing because it did not plausibly allege that it had been assigned the right to sue on behalf of its patient. Atlantic responded that the patient’s checking of a box on a health insurance claim form constituted evidence of an assignment, and that the plan had waived its standing argument because it had already made a direct payment to Atlantic for its services. The court ruled in Atlantic’s favor on this issue, finding that its allegations regarding assignment were sufficient to assert derivative standing at this early stage of litigation. The court then turned to the plan’s argument that Atlantic failed to state a claim for relief. The plan contended that pursuant to a summary of material modifications it was authorized to “calculate reimbursement for out-of-network services using a variety of different methods,” and that it was not obligated to pay “100% of whatever an out-of-network provider deems as its usual and customary charge,” as alleged by Atlantic. Atlantic argued that the language on which the plan relied was invalid because it conflicted with the summary plan description (SPD). The court ruled in the plan’s favor on this issue, stating that “although Plaintiff has identified a specific provision of the SPD which purportedly entitles it to relief, it has failed to plead how its demand for reimbursement is covered under the terms of the provision.” Specifically, while the SPD referenced “competitive fees in the geographic area,” Atlantic “does not specify any data or data source suggesting its fees are similar to other providers in the geographic area[.]” Instead, Atlantic only provided “conclusory” allegations that its “fees are competitive based on unnamed sources.” The court thus granted the plan’s motion to dismiss but gave Atlantic leave to amend to provide further factual support for its “comparable fee” allegations.

Standard of Review

Ninth Circuit

Rampton v. Anthem Blue Cross Life & Health Ins. Co., No. 23-CV-03499-RFL, 2024 WL 1091194 (N.D. Cal. Mar. 5, 2024) (Judge Rita F. Lin). In this dispute over ERISA-governed life insurance benefits, plaintiff Cheryl Rampton filed a motion to determine the standard of review. The court agreed with Rampton that the proper standard was de novo, regardless of whether the plan granted defendant Anthem discretionary authority to determine benefit eligibility, because California’s insurance code voided any such grant. Anthem conceded the application of California law, but “expresse[d] concern that a ruling on the standard of review would constitute an advisory opinion.” The court characterized this concern as “unfounded. There is undeniably an active case or controversy concerning the denial of ERISA benefits here, on which the parties are to begin briefing the merits shortly. In similar cases, courts routinely determine the standard of review as a threshold matter prior to consideration of the merits.” Anthem further contended that Rampton’s “waiver theory of liability” obviated the need to determine the standard of review because the insurance coverage at issue “never went into effect.” The court ruled that this argument did not alter the standard of review because, regardless of Rampton’s theory of liability, she was still seeking benefits under an ERISA plan and thus “the Court must still decide whether the insurer’s denial of benefits should be reviewed de novo or for abuse of discretion.” Anthem also filed a sur-reply regarding discovery, but the court refused to rule on the issues raised in it because they were unrelated to the standard of review: “Though the Court understands Anthem’s concerns, the Court cannot entertain motions raised in the sur-reply briefing for a different motion.”


Ninth Circuit

Ennis-White v. Nationwide Mut. Ins. Co., No. 2:23-CV-01863-APG-DJA, 2024 WL 1137942 (D. Nev. Mar. 14, 2024) (Judge Andrew P. Gordon). The plaintiffs in this case are spouses proceeding pro se; one is a participant in an employee disability income benefit plan administered by defendant Nationwide. They filed a complaint in Nevada state court asserting eight claims against various defendants and alleging that “[t]his is not an ERISA suit and does not seek any remedies under ERISA with respect to the suit.” Nevertheless, Nationwide removed the suit to federal court based on ERISA preemption and filed a motion to sever the claims against it and transfer them to the Southern District of Ohio pursuant to the plan’s forum selection clause. Plaintiffs filed a motion to remand the entire case. The court agreed with Nationwide that the claims were preempted by ERISA because plaintiffs alleged “leveraging of the ERISA products” managed by Nationwide, and the complaint was “replete with additional allegations confirming that the plaintiffs’ claims against Nationwide relate to Ennis’ benefits under the Plan.” The court also agreed that the claims against Nationwide should be transferred to the Southern District of Ohio pursuant to the forum selection clause because such clauses are “prima facie valid” and plaintiffs had not alleged that the clause was “induced by fraud, overreaching, or bad faith.” Finally, the court severed the claims against Nationwide from the remaining claims against the other defendants. The court ruled there was no federal question jurisdiction over the remaining claims, because they were based on state law, there was no diversity jurisdiction because one of the defendants was a Nevada resident, and there was no supplemental jurisdiction because the claims against Nationwide were not “part of the same case or controversy” as the claims against the other defendants. Thus, the court granted Nationwide’s motion in full and denied plaintiff’s motion to remand as moot.