Guenther v. BP Retirement Accumulation Plan, No. 4:16-CV-995, 2024 WL 1342746 (S.D. Tex. Mar. 28, 2024) (Judge George C. Hanks, Jr.)

As expected, we received a deluge of cases this week as the Civil Justice Reform Act reporting period drew to a close. With so many interesting decisions it was difficult to choose just one to highlight, but the findings of fact and conclusions of law from this long-running class action in Houston against the North American subsidiary of oil giant British Petroleum stood out. All employers who are considering changing their retirement plans should read this decision for valuable lessons on what not to do.

The plaintiffs are retired employees of BP America, Inc. who used to work for Standard Oil of Ohio (“Sohio”). BP acquired Sohio in 1987 and merged its retirement plan with BP’s plan. The combined BP plan calculated benefits under a “final average pay formula” and had an early retirement option. Under this plan, BP was required to purchase an annuity for retiring employees that paid a specific sum, regardless of interest rate changes.

In 1989, however, BP changed the plan. The new plan replaced the final average pay formula with a “cash balance” benefit formula. Extensive documentary evidence showed that BP initiated the change in order to reduce costs, and that it was aware the new plan would reduce benefits for a significant number of people. Under the new plan, interest rate fluctuations were a risk that was shifted to employees because BP did not have to buy employees annuities. Instead, employees received whatever sum was in their account, which was vulnerable to falling interest rates.

BP organized a promotional campaign to explain the new plan to its employees. Among its letters and brochures were statements that the old plan was “extremely complicated, and difficult to understand,” and the new plan was “much simplified.” BP represented that it – “not you – bears all the risk associated with investments in the Plan,” and “[t]he Plan is designed to provide a retirement benefit that is comparable to – and, in most cases, better than – the benefit you would have received under the prior pension formula.” BP informed employees that their opening account balance would include the early retirement benefit, but did not explain that it had been removed entirely from the new plan.

When BP acquired ARCO and Amoco, transitioning employees from those companies received an “enhancement” upon joining the plan based on BP’s acknowledgment that the plan was potentially less generous than the employees’ old plans. Heritage Sohio employees like the plaintiffs began wondering why they did not receive a similar enhancement, and lodged a complaint. BP referred the complaint to an independent ombudsman, Stanley Sporkin, a retired federal judge and former director of enforcement for the SEC.

Sporkin ultimately recommended that BP pay additional benefits to legacy Sohio employees, stating that “[t]he relevant facts of this matter are not in serious dispute.” BP’s statement that the new plan would provide “a retirement benefit that is comparable to – and in most cases, better than” the old plan was incorrect “because the interest rate environment did not meet the hoped-for expectations… The employees simply were not told that the risks associated with a decline in interest rates would be solely borne by the employees.”

BP did not implement these recommendations. Instead, it sparred with Sporkin’s office over his findings and how to communicate them to employees. Eventually, in September of 2014, BP issued a statement to affected employees in which it expressed regret that “market conditions yielded an unexpected outcome for you,” but did not inform them that Sporkin’s investigation “identified a potential discrepancy between the 1989 promise and actual retirement benefits.” Sporkin responded with his own letter in which he set forth his findings, including the discrepancy.

Plaintiffs filed this action in 2016 and it has been pending ever since. During that time it has been up to the Fifth Circuit and back (on the issue of whether plaintiffs in another case should have been able to intervene in this one). Finally, after a fourteen-day bench trial, the court issued this decision, in which it found in plaintiffs’ favor in all respects.

The court was highly critical of BP, ruling that it failed to comply with ERISA’s requirements that it (a) disclose its plan changes to participants in a manner calculated to be understood by the average plan participant, (b) notify participants of material modifications to the plan, and (c) provide notice of a significant reduction in benefits.

The court further ruled that BP violated its fiduciary duties under ERISA because “1) BP promoted only the positive aspects of the plan change to employees for the purpose of retaining the employees, 2) BP made promises to employees about comparative plan performance without warning employees about circumstances that would cause the promise to fail; 3) BP did not share with employees that BP realized benefits from the conversion other than immediate cost savings; 4) BP did not share with employees that the converted plan introduced risk to the employees they had not previously borne; and 5) BP did not explain it had removed the early retirement benefit, and what that meant to employees as they reached age 55.”

Furthermore, the court found that BP continued to mislead employees even after they became suspicious. BP “concealed all along it had no intent to fulfill its promise by enhancing the class members’ benefits to be as good or better than what the class would have received” under the old plan. BP “encouraged class members to engage in the Ombudsman process and await its outcome,” and implied that it would follow the ombudsman’s recommendation. However, “BP never intended to follow the Ombudsman’s recommendation if the Ombudsman found, as he did, that the employees’ benefits should be enhanced to fulfill BP’s promise.”

The court also addressed BP’s defenses. BP argued that plaintiffs did not exhaust their administrative remedies, but the court ruled that fiduciary breach claims do not require exhaustion, and in any event BP’s rejection of the ombudsman’s report demonstrated that any such exhaustion would have been futile. BP also argued that some of the plaintiffs had released or waived their rights, but the court ruled that there was no evidence that the plaintiffs had intentionally relinquished their right to bring a suit for breach of fiduciary duty, and in any event such releases would violate ERISA’s anti-alienation provision.

The court also rejected BP’s statute of limitations defense, finding that plaintiffs were not fully aware of their rights until the ombudsman’s report in 2014, and thus their 2016 suit was timely. The court further ruled that the claims certified in this case were dissimilar from those certified in another case against BP in the Northern District of Illinois that concluded in 2002, and thus any claims disposed of by that case did not affect this one. Finally, the court ruled that it was appropriate to impose liability on the current plan sponsor (BP Corporation North America), even though the breach was committed by the prior plan sponsor (BP America, Inc.).

In the end, the court decisively ruled that plaintiffs were entitled to equitable relief under 29 U.S.C. § 1132(a)(3) because of BP’s numerous procedural and fiduciary failures. It ordered the parties to “file supplemental briefs regarding the appropriate form of that equitable relief.”

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

Attorneys’ Fees

Ninth Circuit

Protingent, Inc. v. Gustafson-Feis, No. 2:20-CV-1551-KKE, 2024 WL 1282839 (W.D. Wash. Mar. 26, 2024) (Judge Kymberly K. Evanson). Defendant Lisa Gustafson-Feis was injured in a motor vehicle accident in 2016. She had health insurance through an ERISA-governed medical benefit plan sponsored by plaintiff Protingent, Inc., which paid for her treatment. Gustafson-Feis filed a personal injury suit, and Protingent placed a lien on it. The case eventually settled for $150,000, but Gustafson-Feis refused to reimburse Protingent, whose lien totaled $73,326.54. Protingent filed this action against Gustafson-Feis, and as we reported in our January 24, 2024 edition, it was successful on summary judgment. Protingent then filed a motion for attorney’s fees, which was decided in this order. The court ruled that Protingent was entitled to fees under the terms of the plan, which had a fee-shifting provision, and also under ERISA’s remedial scheme, 29 U.S.C. § 1132(g). The court acknowledged that Gustafson-Feis had suffered a “catastrophic financial loss” as a result of her accident, but ruled that the balance of factors weighed in favor of awarding fees to Protingent. This was because “Gustafson-Feis did not act in good faith in pursuing a litigation position not supported by facts or law, an award of fees would deter others from frivolous challenges to subrogation rights under ERISA plans, and Protingent’s position was well-supported under the relevant legal authorities.” The court threw Gustafson-Feis a small bone, however, and declined to award prejudgment interest. In the end, the court approved voluntarily reduced hourly rates of $210, $295, and $345 for Protingent’s attorneys, and awarded Protingent the full amount it requested, $66,676. As a result, a financially strapped Gustafson-Feis now owes Protingent almost $140,000, with post-judgment interest only accumulating.

Breach of Fiduciary Duty

Second Circuit

Bloom v. AllianceBernstein L.P., No. 22-CV-10576 (LJL), 2024 WL 1255708 (S.D.N.Y. Mar. 25, 2024) (Judge Lewis J. Liman). The plaintiffs are participants in defendant AllianceBernstein’s 401(k) profit sharing plan. They brought this putative class action against AllianceBernstein, an investment firm, and related defendants responsible for overseeing the plan, alleging that defendants breached their fiduciary duties and should be compelled to disgorge profits and restore losses to the plan. Defendants filed a motion to dismiss. The court addressed the duty of loyalty first. Plaintiffs contended that defendants breached this duty by including AllianceBernstein’s proprietary investment products in the plan. The court disagreed: “Accepting Plaintiffs’ theory would require the Court to create an inference of disloyalty whenever an employee retirement plan offered proprietary investment options, an approach that has been rejected on numerous occasions.” The court ruled that plaintiffs were required to “allege specific facts” showing that defendants were disloyal, which they had not done. Next, the court addressed the duty of prudence. Plaintiffs contended that “the Court can plausibly infer, based upon the underperformance of certain Plan investment options as compared to alternative, better-performing investments, that the process for selecting and monitoring the menu of investment options available in the Plan was flawed[.]” However, plaintiffs did not cite any “direct evidence regarding the investment evaluation process employed by Defendants” and the court ruled that plaintiffs’ comparators were insufficient because their results differed only slightly from those of the AllianceBernstein plan: “the alleged underperformance is not of sufficient duration or magnitude to create an inference of misconduct.” Next, because plaintiffs could not maintain their duty of loyalty and duty of prudence claims, the court also dismissed their derivative duty to monitor and co-fiduciary duty claims. Finally, the court addressed plaintiffs’ prohibited transaction claim. Defendants contended that to the extent this claim was based on the plan’s selection of AllianceBernstein’s proprietary funds in 2014-15, it was untimely under ERISA’s six-year statute of limitations. The court agreed. The court further ruled that to the extent plaintiffs’ claims were based on the plan’s retention of those funds they failed to state a claim. The court ruled that retaining funds is not a “transaction” for ERISA’s purposes and in any event plaintiffs had not alleged that the plan received unreasonable compensation. Plaintiffs’ final argument, that the fees charged by the proprietary funds constituted a prohibited transaction, also failed. The only fees charged were insurance fees, which went to insurance providers and not to any fiduciaries. The court thus granted defendants’ motion in its entirety and dismissed plaintiffs’ complaint, albeit without prejudice.

Eleventh Circuit

Su v. CSX Transp., No. 3:22-cv-849-MMH-JBT, 2024 WL 1298825 (M.D. Fla. Mar. 27, 2024) (Judge Marcia Morales Howard). Acting Secretary of Labor Julie A. Su brings this action against the fiduciaries of the CSX Corporation Master Pension Trust for prohibited transactions and breaches of their duties. As the court summarized, “Plaintiff alleges that (1) CSX has absolute authority to appoint committee members, (2) those committee members did not review the reasonableness of CSX’s fees despite their obligation to do so, and instead of appointing new committee members, (3) CSX ‘streamlined its fees calculations to the detriment of the Plans,’” meaning “CSX did not simply charge for its services or appoint members of the committees, but ‘caused the Master Pension Trust to pay itself Service Fees without any oversight.’” In this decision, the court accepted these allegations as true, denied defendants’ motion to dismiss the second amended complaint, overruled defendants’ objections to the October 11, 2023 Report and Recommendation of the Magistrate, and adopted in full the Magistrate’s report as the opinion of the court. And although the court noted that plaintiff’s pleading lacked certain precise details of all of the relevant facts, it nevertheless stated that defendants clearly did not have difficulty understanding the allegations. To the contrary, “the arguments presented by Defendants in the Motion show they have had no difficulty identifying the claims Plaintiff seeks to pursue or the factual basis of those claims.” As a result, the Secretary’s action survived defendants’ pleading challenge and will thus continue forward.

Class Actions

Fourth Circuit

Paul v. Blue Cross Blue Shield of N.C., No. 5:23-CV-354-FL, 2024 WL 1286208 (E.D.N.C. Mar. 26, 2024) (Judge Louise W. Flanagan). Plaintiffs Doug Paul and Alexander Beko, on behalf of themselves and a putative class of similarly situated individuals, are challenging defendant Blue Cross Blue Shield of North Carolina’s practice of denying claims for proton beam radiation therapy for the treatment of prostate cancer. According to the complaint, Blue Cross’ “corporate medical policies” categorically consider proton beam radiation therapy investigational for the treatment of prostate cancer. In their lawsuit plaintiffs allege causes of action under ERISA under Sections 502(a)(1)(B), (a)(3), and (g), as well as claims under North Carolina state law. Defendant moved for dismissal and to strike pursuant to Federal Rules of Civil Procedure 12(b)(1), 12(b)(6), 12(b)(7), and 12(f). Blue Cross sought dismissal of Mr. Beko’s claims “for failure to join the state plan, an assertedly necessary and indispensable party under Federal Rule of Civil Procedure 19, and for failure to state a claim upon which relief may be granted with respect to his UDTPA (North Carolina Unfair and Deceptive Trade Practices Act) claim.” Blue Cross also sought to dismiss Mr. Paul’s ERISA Section 502(a)(3) claims as duplicative of his claims asserted under Section 502(a)(1)(B). Additionally, Blue Cross moved to strike the class claims, arguing that class-wide resolution of the individual medical claims could not be maintained. Finally, Blue Cross sought, in the alterative, to dismiss “any putative class members whose claims are time-barred and who were encompassed within the proposed class” in a related action. Blue Cross’ motion was denied in its entirety in this decision. First, the court agreed that the state plan was a necessary party, but held that “joinder is feasible where North Carolina’s waiver of sovereign immunity with respect to contracts may allow it to participate in this litigation.” Next, the court analyzed the UDTPA claim and concluded that Mr. Beko “stated facts sufficient to draw plausible inference that defendant’s actions were the proximate cause of his injury.” Getting to ERISA matters, the court cited Fourth Circuit precedent holding that “alternative pleading [is] permissible in the ERISA context.” As a result, the court declined to dismiss Mr. Paul’s Section 502(a)(3) claims as duplicative of the relief available under 502(a)(1)(B). Finally, the court disagreed with Blue Cross that it was clear from the face of the complaint that plaintiffs could not meet the requirements of class certification under Rule 23 and therefore denied its motion to strike the class claims. With regard to the commonality requirement of Rule 23(a), the court wrote, “Plaintiffs allege in essence that defendant ignored the nuances of each member’s medical situation, applying instead a standardized coverage policy.” Such behavior, according to the court, may be appropriately resolved on a class-wide basis, and accepting the allegations as true for the purposes of this decision, the court held that they establish commonality between the putative class members. Nor was it clear to the court that there is a conflict of interest between the named plaintiffs and potential class members on the face of the complaint. Finally, defendant’s assertion that certification of a class would be impossible under Rules 23(b)(1) or (b)(2) was also rejected by the court. The court stated that “no portions of the complaint show plaintiffs will fail to meet these requirements and (Blue Cross’s) predictions regarding the risk of inconsistent adjudication of the consistency of its own conduct are premature in the absence of class certification discovery.” Thus, Blue Cross’s motions to dismiss and strike were denied in their entirety and plaintiffs’ action will proceed. (Plaintiffs are represented by Kantor & Kantor partner Tim Rozelle and Elizabeth K. Green of Green Health Law.)

Sixth Circuit

Sweeney v. Nationwide Mut. Ins. Co., No. 2:20-cv-1569, 2024 WL 1340262 (S.D. Ohio Mar. 28, 2024) (Judge Sarah D. Morrison). A putative class of former employees of Nationwide Mutual Insurance Company and participants in its 401(k) savings plan moved for certification in their collective ERISA action brought against Nationwide and the other plan fiduciaries. In their action, named plaintiffs Ryan Sweeney and Bryan Marshall allege that The Guaranteed Fund, the challenged plan investment, “pits Nationwide’s economic interests against Participants’ – in violation of ERISA’s provisions on fiduciary duties, prohibited transactions, and private inurement, and to Participants’ financial detriment.” Plaintiffs challenge the annuity contract supporting The Guaranteed Fund, as well as the crediting rate established and determined by Nationwide. Plaintiffs sought to certify a class of all “participants and beneficiaries in the Nationwide Savings Plan who were invested in the Guaranteed Fund at any time from March 26, 2014 through the date of final judgment in this action, excluding the individual Defendants.” In this order the court granted plaintiffs’ motion and certified their class. Applying the criteria of Federal Rule of Civil Procedure 23(a), the court found that: (1) the proposed class of more than 50,000 current and former plan participants was “sufficiently numerous to make joinder impracticable”; (2) common issues regarding defendants’ behavior unites the class members; (3) the named plaintiffs were typical of the others in the class and their “claims arise from the same events, course of conduct, and legal theories as the class claims”; and (4) the named plaintiffs were adequate representatives seeking appropriate class-wide relief and recovery on behalf of the plan. The court found “unavailing” defendants’ arguments regarding the named plaintiffs releasing their claims, lacking knowledge of the claims, having conflicting interests with the putative class, and failing to exhaust administrative remedies. The court found that the named plaintiffs had a stake in the outcome of the case, they understand the claims adequately for laypeople, and there is no insurmountable conflict between them and the other plan participants. With regard to exhaustion, the court stated that Sixth Circuit precedent in Hitchcock v. Cumberland Univ. 403(b) DC Plan, 851 F.3d 552 (6th Cir. 2017), establishes that participants and beneficiaries in ERISA actions “do not need to exhaust internal remedial procedures before proceeding to federal court when they assert statutory violations of ERISA.” Under its Rule 23(b)(1)(B) analysis, the court concluded that “because Named Plaintiffs seek recovery on behalf of the Plan, a decision in this case would practically affect the interests of others whether or not a class is certified.” In fact, were a class not to be certified, the court stated that there would be a risk that future plaintiffs would be left “without relief and without representation.” It therefore concluded that certification under Rule 23(b)(1)(B) was entirely appropriate for this kind of ERISA action under the circumstances presented in this lawsuit. Thus, the court held that the proposed class met the requirements of Rule 23 and certified the proposed group of participants.

Disability Benefit Claims

Second Circuit

Fichtl v. First Unum Life Ins. Co., No. 1:22-cv-06932 (JLR), 2024 WL 1300268 (S.D.N.Y. Mar. 26, 2024) (Judge Jenifer L. Rochon). Plaintiff Richard Fichtl was a longtime employee of New York Presbyterian Hospital and is a participant in its ERISA-governed benefit plans, including its long-term disability and life insurance plans, the subjects of this litigation. In December 2017, Mr. Fichtl filed a claim for short-term disability benefits in anticipation of an upcoming surgical procedure, a laparoscopic colectomy, to treat a colon disease called sigmoid diverticulitis. Following the surgery, Mr. Fichtl’s health only deteriorated, both physically and cognitively. He subsequently applied for long-term disability benefits. In the months and years that followed his procedure Mr. Fichtl would complain of depression, memory, and concentration issues, stomach and abdominal pain, post-operative incision issues, low energy levels, kidney disease, and diabetes. Defendant First Unum Life Insurance Company approved Mr. Fichtl’s claim for long-term disability benefits, but only for 24 months pursuant to the plan’s limitation for benefits caused from debilitating depression. However, even before the 24 months were up, on March 3, 2020, Unum concluded that Mr. Fichtl was no longer totally disabled and terminated his long-term disability and waiver of life insurance premium benefits. Ruling on the parties’ cross-motions for judgment on the administrative record under de novo review, the court granted Mr. Fichtl’s motion and denied Unum’s motion. The court agreed with Mr. Fichtl that his ability to “engage in normal life activities” on an occasional basis doesn’t equate to the ability to work full time in his demanding role as the hospital’s Director of Pharmacy. As the court put it succinctly, “[t]he core issue in this case is whether Plaintiff is ‘limited from performing the material and substantial duties of [his] regular occupation due to [his] sickness or injury.” It answered that question in the affirmative. “In deciding this issue, the Court finds that the medical opinions of Plaintiff’s treating physicians…are more probative of Plaintiff’s health and capabilities than the medical opinions of Defendant’s in-house file reviewers,” and stated, “Defendant offers no sound reason for the Court to doubt the capabilities, credibility, or integrity of any of Plaintiff’s treating physicians.” Moreover, the court determined that Mr. Fichtl’s physicians’ areas of expertise were more relevant to his ailments than Unum’s family medicine doctors who reviewed the files. Altogether, the court was convinced that Mr. Fichtl was disabled from the combined and cumulative symptoms of his diseases and unable to perform the duties of his occupation for at the least the initial 24 months. Accordingly, it decided that the denials of the disability and life insurance waiver benefits were wrong and granted summary judgment in favor of Mr. Fichtl. The court reinstated both his long-term disability benefits and premium waiver benefits for the date between the termination of coverage on March 3, 2020 and the conclusion of the first 24 months of payments. However, for benefits under both plans beyond the 24-month initial period, the court remanded to Unum to decide anew.

Eighth Circuit

Garwood v. Sun Life Assurance Co. of Can., No. 22-cv-1918 (MJD/DLM), 2024 WL 1285731 (D. Minn. Mar. 26, 2024) (Judge Michael J. Davis). Plaintiff Brandon Garwood’s claim for long-term disability benefits was denied by defendant Sun Life Assurance Company of Canada pursuant to the plan’s exclusion clause which states that benefits are not payable under the policy when “caused by, contributed to in any way, or resulting from…your committing or attempting to commit an assault, felony, or criminal act.” Sun Life based its denial on the events of April 23, 2020, the date of Mr. Garwood’s gunshot wounds and the cause of his lower extremity paraplegia. On that date, in Keller, Texas, Mr. Garwood was shot after an escalating altercation found him behind the driver’s seat of his truck, ramming into an occupied motorcycle and toward a group of people in a driveway, conduct that is illegal, even in Texas. Mr. Garwood was later charged with aggravated assault with a deadly weapon, a second-degree felony. The charge was ultimately dropped “based on prosecutorial discretion.” But thanks to his actions and these charges, Sun Life determined that Mr. Garwood was ineligible for disability benefits under the plan. In this decision ruling on the parties’ cross-motions for summary judgment, the court agreed. As an initial matter, the court granted Sun Life’s motion in limine to exclude extra-record evidence, which consisted of Mr. Garwood’s Social Security Administration disability award and evidence that he was executing a “three-point turn” when he hit the motorcycle and drove into the driveway. The court found that the Social Security decision was irrelevant to the application of the crime exclusion. With regard to the evidence of the three-point turn, the court held that Mr. Garwood had failed to establish good cause for why he didn’t submit this evidence to Sun Life during the administrative review of his claim. Turning to its de novo review of the summary judgment motions, the court concluded that the plan’s exclusion applies, as the record showed that Mr. Garwood “acted intentionally and knowingly with respect to driving into the driveway toward a group of people before being stopped by running into a motorcycle.” Moreover, the court concluded that the fact the charge was eventually dropped was “immaterial to the determination of whether the exclusion applies.” Accordingly, the court found that the record established that Mr. Garwood attempted to commit or committed an assault and that the benefits were therefore not payable under the policy terms. As a result, summary judgment was granted in favor of Sun Life and its denial was upheld.

Ninth Circuit

E.L. v. Hartford Life & Accident Ins. Co., No. 22-cv-00050-PCP, 2024 WL 1336463 (N.D. Cal. Mar. 27, 2024) (Judge P. Casey Pitts). Plaintiff E.L. and defendant Hartford Life and Accident Insurance Company filed cross-motions for judgment on the administrative record under Federal Rule of Civil Procedure 52 in this dispute over Hartford’s denial of E.L.’s claim for long-term disability benefits. In this order the court granted E.L.’s motion and found that she was disabled from performing the essential duties of her own occupation under de novo review of the extensive administrative record. The court wrote that a “complete and holistic review of E.L.’s medical records paints a picture of a woman with a lengthy and complex medical history.” That complex medical history included a brain tumor located on the optic nerve, diabetes, cervical and spinal conditions, a buildup of fat deposits and excess growth from a condition known as acromegaly, hormone imbalances, and an array of mental health conditions including major depression and anxiety. “Based on these records and her ongoing and worsening symptoms, E.L. has established by a preponderance of the evidence that she has been continuously disabled under the Plan.” The combination of these symptoms prevented E.L. from performing the “non-seated” and “non-reduced work schedule” of her profession as an equipment manufacturing technician at Boston Scientific Corporation. The court found that Hartford’s failures and errors in handling E.L.’s claim “were substantive, not procedural,” and it determined that she was therefore not denied a full and fair review (which presumably would have necessitated or allowed a remand). Accordingly, E.L. was granted judgment in her favor on her Section 502(a)(1)(B) wrongful denial of benefits claim, but not on her Section 502(a)(3) claim. The decision concluded with the court ordering E.L. to provide a proposed form of judgment.

Vongkoth v. PCC Structurals Inc., No. 3:22-cv-00681-AN, 2024 WL 1286537 (D. Or. Mar. 26, 2024) (Judge Adrienne Nelson). In early November 2020, plaintiff Vilasack Vongkoth was admitted to a hospital and diagnosed with a 5.5cm liver abscess surrounded by fluid. This mass and the resulting infection required a percutaneous hepatic drain and a course of antibiotics. After his discharge from the hospital, Mr. Vongkoth continued to be under the care of a team of doctors and complained of heart pain, rapid heart rate, fatigue, chest pain, and a cough. Follow-up testing on December 4, 2020 showed that the abscess was successfully cured and that there was no long fluid or hypodensity. Nevertheless, doctors noted the underlying cause of the abscess “was unclear and required additional investigation.” This date is important, because on December 4, 2020, Mr. Vongkoth’s short-term disability benefits were terminated under the ERISA-governed disability plan of his employer, defendant PCC Structurals Inc. Mr. Vongkoth administratively appealed the denial. His doctors were all in agreement that he could not work. Then, in the midst of everything, on March 9, 2021, Mr. Vongkoth got into a car accident, only making his health worse. Results from a cardiac event monitor at the time showed labile tachycardia with a resting heart rate of 119 beats per minute and a pulse of 147.7 bpm from “light activity,” as well as skipped and fluttering heartbeats. Given these results, Mr. Vongkoth’s treating physicians once again unanimously stated they did not believe he could return to his work as a grinder which involves heavy lifting and constant motion. Nevertheless, Cigna upheld its prior decision, concluding “the medical information on file does not support [plaintiff’s] functional impairment.” Its reviewing doctor noted that the liver abscess had been adequately drained and that Mr. Vongkoth’s complaints, and his treating doctor’s findings following the car accident, “did not support any work limitations” and were based on subjective self-reported symptoms. After Cigna issued its final decision, Mr. Vongkoth challenged it in this action under ERISA Section 502(a)(1)(B). PCC Structurals moved for summary judgment under abuse of discretion review. The court denied the motion in this decision finding that there were “serious questions” and “disputed issues of material fact regarding whether [defendant’s] conclusion was implausible, illogical, and unreasonable, raising a genuine issue of material fact as to whether the administrators abused their discretion in denying plaintiff benefits beyond December 4, 2020.” The court noted that the only doctor who found that Mr. Vongkoth did not have physical limitations was Cigna’s, a doctor who never personally treated or examined Mr. Vongkoth. Moreover, the record, including the results from the cardiac event monitor, contradicted the reviewing physician’s assertion that Mr. Vongkoth’s self-reported symptoms were not supported by objective medical testing. And, as the court pointed out, many of Mr. Vongkoth’s symptoms, such as his severe fatigue, are inherently subjective, and “[n]o diagnostic testing exists” for these types of symptoms, making the opinions and credibility assessments of treating physicians all the more central. Therefore, the court questioned Cigna’s doctor’s decision to not personally examine Mr. Vongkoth and wrote that it raised “questions about the thoroughness and accuracy of the benefits determination.” Thus, even under deferential review, the court denied defendant PCC Structurals’ motion for summary judgment.

Tenth Circuit

Erickson v. Sun Life & Health Ins. Co., No. 2:22-CV-00258-JNP-JCB, 2024 WL 1307167 (D. Utah Mar. 27, 2024) (Judge Jill N. Parrish). Plaintiff Kristoffer Erickson filed this action to challenge defendant Sun Life Insurance of Canada’s denial of his claim for short-term disability benefits. Mr. Erickson became ill in March 2020 with an upper respiratory infection which may have been the result of COVID-19. Mr. Erickson’s treating physician described his symptoms as “mild” and wrote that he was “cleared to return to work without restrictions.” However, this same doctor continued to care for Mr. Erickson and subsequently changed his opinion of Mr. Erickson’s condition and his ability to work. But the damage had already been done. Relying on the doctor’s initial notes and assessment prepared during the normal course of care, Sun Life denied the claim for disability benefits. In this decision, the court ruled on Sun Life’s motion for summary judgment. The court granted Sun Life’s motion in this order and affirmed the denial under deferential review. It agreed with the insurer that it had appropriately determined Mr. Erickson was not totally disabled based on contemporaneous medical information. The court stated this type of medical information is much more persuasive and credible than any later medical records “prepared with the purpose of supporting a patient’s long-term disability application.” Further, the court found no procedural errors with the denial. It “determine[d] that the methodology that Sun Life followed in denying Mr. Erickson’s benefits claim was not an abuse of discretion.” Finally, the court agreed with Sun Life that Mr. Erickson did not submit sufficient information to prove his entitlement to benefits, which is his burden under ERISA, and therefore concluded that the denial was supported by substantial evidence. For these reasons, judgment was entered in favor of Sun Life.

Life Insurance & AD&D Benefit Claims

Fourth Circuit

Bellon v. The PPG Emp. Life & Other Benefits Plan, No. 5:18-CV-114 (GROH), 2024 WL 1303911 (N.D.W. Va. Mar. 27, 2024) (Judge Gina M. Groh). In Your ERISA Watch’s July 20, 2022 newsletter we featured as one of our two notable decisions the Fourth Circuit’s decision affirming in part, and reversing and remanding in part, the district court’s summary judgment ruling in this retiree life insurance class action. At issue was eleventh-hour discovery of critical documents which revealed that in 1969 the PPG Industries Benefits Plan “took the extraordinary step of removing the then-existing reservation of rights clause…to allay employee concern about the security of promised benefits.” This rather remarkable discovery resurrected plaintiffs’ case. The court of appeals concluded that that given this uncovered information there was a genuine issue of material fact about whether the life insurance benefits had vested, and it therefore reversed defendants’ summary judgment win and remanded to the district court with the mandate to reconsider the vesting issue anew. Before the court here were several motions: (1) defendants’ objections to Magistrate Judge Robert W. Trumble’s class certification report and recommendation; (2) defendants’ motion for summary judgment; (3) plaintiffs’ motion for summary judgment; and (4) plaintiffs’ motion for default judgment against defendants for spoliation of “the critical box” of documents. The decision began by overruling defendants’ objections to Judge Trumble’s class certification analysis. The court described defendants’ objections as both “silly” and “border[ing] on being frivolous.” And it concluded that defendants’ positions were directly in conflict with the Fourth Circuit’s reversal and the mandate rule. Accordingly, “the Magistrate Judge’s thorough and thoughtful explanation [was] explicitly incorporated” by the court and the class certification analysis provided by Magistrate Judge Trumble was adopted. In a similar vein, the court rejected defendants’ summary judgment motion. Much like defendants’ objections to class certification, the court found that defendants’ arguments in favor of summary judgment ignored the Fourth Circuit’s ruling. The court ruled that agreeing with defendants’ basic position that no evidence exists which makes vesting possible would require it to completely “ignore the Fourth Circuit’s decision.” Instead, the court agreed with plaintiffs that “PPG is rehashing arguments the Fourth Circuit expressly or implicitly rejected,” and “making new arguments it never presented to the Fourth Circuit and… therefore waived” in violation of the mandate rule. Accordingly, the court found that the issue of whether the life insurance vested remains a genuine issue of material fact appropriately left for resolution at trial. Applying this same logic, the court likewise denied plaintiffs’ motion for summary judgment, albeit with less strong language. “The problem with Plaintiffs’ argument – like the Defendants’ – is that the Fourth Circuit had nearly all the evidence and arguments before it when it held that ‘vesting is a disputed issued of material fact.’” The decision then turned to the spoliation issue. Unsurprisingly, the court did not grant plaintiffs’ motion for default judgment. “Legal precedent is clear that default judgment should be reserved for cases that present the most egregious instances of spoliation – whether that is by significant bad faith, extreme prejudice to the aggrieved party, or some combination of the two.” And while the court was not comfortable stating that this was such an instance, it did come close. “There is no question that PPG’s intentional conduct caused the destruction of potentially relevant evidence. Although proof of bad faith is lacking, the circumstances are suspicious. Indeed, the Plaintiffs paint a compelling picture PPG acted in bad faith.” Rather than default judgment, the court concluded that an adverse inference was appropriate under the circumstances given PPG’s “willful” conduct which “resulted in prejudice to the Plaintiffs.” The parties were directed to meet and confer “to discuss a mutually agreeable adverse inference for the Court’s consideration.” Finally, the decision ended with the court ordering the parties to attend mediation before a magistrate judge. Perhaps, after more than six years, this case may be drawing near its end.

Seventh Circuit

Butch v. Alcoa U.S. Corp., No. 3:19-cv-00258-RLY-CSW, 2024 WL 1283531 (S.D. Ind. Mar. 25, 2024) (Judge Richard L. Young). This is the first of two decisions issued by Judge Young last week in related but separately filed class actions asserting that Alcoa retirees had vested benefits under collectively bargained ERISA welfare benefit plans. This first case concerns retiree life insurance benefits, which Alcoa unilaterally terminated on the last day of 2019. The retirees sued, arguing that Alcoa violated the terms of the governing collective bargaining agreements (CBAs) and therefore violated the Labor Management Relations Act (LMRA) and ERISA in terminating their life insurance benefits. Previously, the court certified two classes of retirees: (1) a main class consisting of those who received life insurance benefits paid for by Alcoa; and (2) a subclass consisting of those who participated in a voluntary life insurance program under which the retirees had opted to purchase additional life insurance. In this decision, the court addressed the parties’ cross-motions for summary judgment. On the merits of the ERISA and LMRA claims asserted by the main class, the court agreed with plaintiffs that the CBAs unambiguously promised life insurance benefits to eligible retirees consisting of employees who retired after June 1, 1993 under an Alcoa retirement plan and were covered by a CBA between Alcoa and the unions. Because Alcoa “terminated the company-paid life insurance plan despite its contractual promise to the contrary,” the court granted summary judgment in favor of the main class of retirees. Similarly, with respect to the sub-class of retirees, the court found that they were also entitled to summary judgment based on the plain language of the governing CBA, which plainly and unambiguously guaranteed them a right to the voluntary life insurance program for the rest of their lives and contained no language reserving the company’s right to terminate benefits. Despite ruling in favor of the retirees on their claims to vested benefits under the governing plan language, however, the court then noted that “retirees from both classes have a problem: many signed and cashed checks agreeing to waive any claims for life insurance.” In fact, 88% of the two classes did so after receiving allegedly misleading communications from Alcoa, both before and after the suit was filed. Alcoa asserted waiver as an affirmative defense with respect to the thousands of retirees who cashed their checks, and the retirees countered that the waivers were invalid as a legal matter under both the LMRA and ERISA, and as a factual matter because they were not knowing and voluntary. The court held that the plaintiffs were wrong on the first argument because nothing in the LMRA or ERISA prevented the retirees from waiving their claims as a general matter even if some of the communications about this were misleading. With respect to the retirees’ argument that the waivers were not knowing and voluntary, the court concluded that this “presents individualized factual issues in the current posture and consequently cannot be resolved on a class-wide basis.”  On this basis, although the court refused to grant either side summary judgment on the affirmative defense of waiver, the court held that “[a]ny retiree who signed and cashed the check waiving their right to life insurance – whether members of the main or sub-class – will be decertified from this class action.” Therefore, it appears that, despite decisively winning the almost final battle, the retirees lost much of the war or at least many of their comrades.  

Medical Benefit Claims

Second Circuit

Stewart v. Cigna Health & Life Ins. Co., No. 3:22-CV-769 (OAW), 2024 WL 1344796 (D. Conn. Mar. 30, 2024) (Judge Omar A. Williams). The plaintiffs allege in this putative class action against Cigna Health & Life Insurance Company that Cigna violated ERISA in the way it handled out-of-network health claims. Specifically, plaintiffs contend that Cigna had a contract with Multiplan, LLC, a third party that contracts directly with providers. The idea behind this contract was to secure a lower rate for Cigna and its insureds for certain out-of-network services provided by physicians contracted with Multiplan. However, when insureds submitted claims for services that were covered by Cigna’s agreement with Multiplan, Cigna refused to pay the Multiplan rates, thereby saddling the insureds with large bills. Several individual plaintiffs who were affected by Cigna’s decisions convinced the American Medical Association, the Medical Society of New Jersey, and the Washington State Medical Association to join them as plaintiffs. The individual plaintiffs brought three claims: one for denial of benefits and the other two for equitable relief unavailable under their first claim. The association plaintiffs asserted four claims under state law: negligent misrepresentation, tortious interference with the patient-physician contract and/or relationship, promissory estoppel, and violation of the Washington Consumer Protection Act. Cigna moved to dismiss. Addressing the individual claims first, the court agreed with plaintiffs that it could not consider the Multiplan agreements in deciding the motion to dismiss because they were extrinsic to the complaint; the individuals’ allegations only focused on Cigna’s obligations to plaintiffs, not its obligations to Multiplan. The court further found that the plan terms supported plaintiffs’ allegations, in that “participating” and “in-network” were synonymous, and thus plaintiffs plausibly relied on these terms in thinking that Multiplan providers would be paid at a certain rate. As for the breach of fiduciary duty claims, the judge ruled that these were not “circuitous” or duplicative of plaintiffs’ claims for benefits. Instead, plaintiffs “have alleged separate and specific facts which could be relevant to the denial-of-benefit claim… but which also could form the basis for an independent claim,” which was that Cigna engaged in a “underlying scheme” in which it enriched itself by refusing to reimburse providers at the Multiplan rates. The court was skeptical that plaintiffs were entitled to equitable relief, because any restitution or disgorgement would likely go to the plans and not the individuals, but the court refused to make that ruling “at this early stage of litigation.” The court then turned to the association claims, which it dismissed for lack of standing. The associations claimed that they were injured by “(1) the uncertainty they will face when treating patients such as Individual Plaintiffs, and (2) the damage that this uncertainty will inflict upon the relationship between Multiplan Providers and patients with coverage like Individual Plaintiffs.’” The court rejected this argument as “unpersuasive” because such “uncertainty” was insufficient to establish standing. Indeed, “this uncertainty does not appear any greater than that inherent in the modern healthcare system, in which providers and patients alike often are unclear as to what the out-of-pocket cost of a particular procedure might be until after a claim is submitted, which claim may be denied by insurers for myriad reasons.” Furthermore, the associations had not shown that Cigna’s actions deterred anyone from seeking healthcare with their members. The court also criticized the associations’ claims for “sound[ing] in pseudo-contract” when their members in fact had contracts with Multiplan which were reviewable and could be enforced. Thus, “it is unclear how Defendants can be held liable for exercising an entitlement [the Association plaintiffs] fairly negotiated.” In the end, Cigna’s motion was only partly successful; the individual claims survived but the associations’ claims were all dismissed.

Seventh Circuit

Kaiser v. Alcoa U.S. Corp., No. 3:20-cv-00278-RLY-CSW, 2024 WL 1283535 (S.D. Ind. Mar. 25, 2024) (Judge Richard L. Young). In this second Alcoa case, a class of retirees obtained a more decisive victory. Plaintiff Lynette Kaiser filed a class action lawsuit on behalf of pre-1993 Alcoa retirees challenging the company’s elimination of a collectively bargained healthcare plan and its replacement with a healthcare reimbursement arrangement that she asserted reduced their benefits. Plaintiffs asserted both a claim for benefits under ERISA Section 502(a)(1)(B) and a claim for equitable relief under Section 502(a)(3), as well as a claim for violation of the LMRA. An earlier change to the healthcare plan that put a cap on healthcare spending by the company had led to a retiree lawsuit more than a decade earlier in which a Tennessee district court ultimately held, at Alcoa’s urging, that the healthcare plan had promised benefits for life but such benefits were subject to the spending cap. The Sixth Circuit affirmed, explicitly agreeing with the district court that the plan promised lifetime benefits. Based on these earlier decisions, the court in this decision held that Alcoa was judicially estopped from asserting that the plan did not provide lifetime benefits, particularly because Alcoa had advocated for this result. Thus, the court held that the only remaining issue on summary judgment was whether the new health reimbursement plan was, as Alcoa argued, “reasonably commensurate with the retirees’ prior insurance plan.” The court held that it was not for three pretty obvious reasons: (1) the new plan provided that Alcoa could cancel benefits at any time; (2) only 33% of the class would be eligible for benefits under the new plan; and (3) the burden of inflation shifted to the retirees. The judge concluded that these three factors demonstrated that the new plan “significantly reduced” the “general level of benefits,” despite some evidence suggesting that employees might be somewhat better off in the short term. The court thus granted summary judgment in favor of the retirees on the claim that Alcoa violated its promises under the collective bargaining agreements governing the plan, and therefore violated the LMRA. With respect to the ERISA claims, based on the court’s understanding that Alcoa conceded that plaintiffs may receive their requested injunctive relief under Section 502(a)(1)(B), the court granted Alcoa’s motion for summary judgment with respect to the claim asserted under Section 502(a)(3).     

Tenth Circuit

Anne A. v. United Healthcare Ins. Co., No. 2:20-CV-00814-JNP-DAO, 2024 WL 1307168 (D. Utah Mar. 26, 2024) (Judge Jill N. Parrish). From January 2016 through December 2017, plaintiff Kate A. received inpatient psychiatric care at a residential mental health facility called Chrysalis. This ERISA and mental health parity action stems from United Behavioral Health’s denial of coverage of Kate’s stay at the facility. In this order, eight years later, Kate and her mother Anne were granted summary judgment on their wrongful denial of benefits claim for the denials which caused them to incur a quarter of a million dollars in unreimbursed medical expenses. The court ruled that the United Healthcare defendants, the Apple, Inc. Health and Welfare Benefit Plan, and the Apple Inc. Small Business Health Options Program failed to engage in a meaningful dialogue with Kate’s medical records and the opinions of her treating physicians throughout the appeals process and therefore abused their discretion. Although plaintiffs attempted to administratively appeal the denial by specifically referencing the voluminous medical record, which included 1,700 pages of exhibits, defendants shut “their eyes to readily available information.” Instead of referencing specific information and expressing the reasons for disagreeing, the denial letters provided only vague and conclusory explanations, without reference to and often in conflict with the medical records. Because defendants’ denials were based on medical necessity grounds, the court stressed that they were obliged to engage with the opinions of the treating doctors, especially regarding Kate’s suicide risk. Thus, their failure to do so was out of step with the Tenth Circuit’s, and ERISA’s, requirements. The decision was not a complete victory for plaintiffs, however. Although Kate and Anne were victorious on their benefits claim, the same could not be said of their Mental Health Parity and Addiction Equity Act violation claim. In that cause of action plaintiffs alleged that defendants violated the Parity Act by requiring Kate to display acute mental health symptoms “while applying a lesser standard to residential admission for analogous non-mental health care.” The court declined to rule one way or another on this claim, finding resolution premature given its remedy decision – remand. The court assumed remand “appears to be the appropriate remedy here.” It did, however, admit confusion about the somewhat murky guidelines for determining the appropriate remedy for what the court viewed as these kinds of ERISA procedural violations. Without further guidance from the Tenth Circuit on when to award benefits versus when to remand to the claim administrator, the court attempted a compromise. It structured the remand order with certain safeguards in place. Defendants, for instance, are not allowed to rely on any of their “post-hoc” rationales, nor are they given the benefit of relying on any “citations to Kate’s medical records that were [not] included in the prelitigation denial letters.” Given these restrictions, it’s unclear how any denial on remand could be anything but another abuse of discretion, which was maybe the point. The decision ended with the court taking the opportunity to sympathize with plaintiffs’ concerns with remand as a remedy. Insurance companies, the court warned, should not be allowed to use ERISA litigation to make the same denials of benefits “now based on better reasoning.”

R.J. v. BlueCross BlueShield of Texas, No. 23-CV-00177-PAB-STV, 2024 WL 1257524 (D. Colo. Mar. 25, 2024) (Judge Philip A. Brimmer). The plaintiffs, R.J. and his minor son B.J., filed this action alleging that defendant BlueCross BlueShield of Texas violated ERISA in connection with B.J.’s behavioral health treatment at Red Mountain Colorado, a licensed residential treatment facility. Plaintiffs asserted a claim for failure to pay benefits and a claim for violation of the Mental Health Parity and Addiction Equity Act. BlueCross filed a motion to dismiss, arguing first that no benefits were payable because the benefit plan’s definition of residential treatment center required that covered facilities include 24-hour onsite nursing, which Red Mountain lacked. In response, plaintiffs argued that B.J.’s treatment was medically necessary under the plan, that their benefit claim incorporated allegations that the plan’s nursing requirement violated the Parity Act, and that BlueCross did not give them a full and fair review. The court ruled in BlueCross’ favor, holding that plaintiffs could not state a claim because they were required to, but did not, allege that “Red Mountain met the Plan’s definition for covered residential treatment facilities by having 24-hour onsite nursing care.” Next, BlueCross argued that plaintiffs’ Parity Act claim should be dismissed because “there is no disparity between the Plan’s treatment of residential treatment facilities and skilled nursing facilities… Under the Plan, both residential treatment facilities and skilled nursing facilities are required to have 24-hour onsite nursing services.” Again, the court agreed with BlueCross. Plaintiffs contended that the plan’s nursing requirement for mental health facilities was inconsistent with generally accepted standards of care, but the court ruled that this was the wrong comparison. Under the Parity Act, plaintiffs were required to show a disparity between medical and mental health coverage under the plan, but “[t]here is nothing in the complaint asserting that benefits are available for analogous medical care in the absence of the 24-hour onsite nursing services required at residential treatment facilities.” In short, “Plaintiffs’ attempt to attack the use of the same or a comparable standard by reference to a separate standard is inconsistent with the Tenth Circuit test and the underlying regulations.” The court thus granted BlueCross’ motion to dismiss, albeit without prejudice.

Pleading Issues & Procedure

Seventh Circuit

Case v. Generac Power Sys., No. 21-cv-1100-PP, 2024 WL 1284607 (E.D. Wis. Mar. 26, 2024) (Judge Pamela Pepper). In the Seventh Circuit, the pleading standard for ERISA actions alleging breaches of fiduciary duties has shifted over the past few years. For a while, even readers of Your ERISA Watch might have been left shrugging their shoulders when asked where things stood. Indeed, the Supreme Court’s ruling in Hughes v. Northwestern University itself was read differently by plaintiffs and defendants, with each side seeing in it what they liked. It was not until the Seventh Circuit set out a newly formulated, context-specific pleading standard in its remand decision of Hughes II on March 23 of last year that a more settled status took shape. As things stand now in the Seventh Circuit, where “alternative inferences are in equipoise,” or equally reasonable, courts are required to resolve the matter in favor of the plaintiffs. Thus, so long as plaintiffs plead a more prudent course of action might have been available to the fiduciaries, their complaint survives a Rule 12(b)(6) challenge. The decision in this case puts that pleading standard into practice. Here, plaintiff Dereck Case moved for leave to file a second amended complaint in his class action alleging breaches of fiduciary duties owed to the participants and beneficiaries of the Generac Power Systems, Inc. Employees 401(k) Savings Plan, which he had originally filed nearly three years ago in 2021. Mr. Case argued that under the Seventh Circuit’s new pleading standard his proposed second amended complaint “plausibly alleges that Defendants violated their fiduciary duty of prudence under ERISA by incurring unreasonable recordkeeping fees as compared to other similarly-situated plans.” Mr. Case believes that the claims in his action are analogous to the plaintiffs’ allegations in Hughes II and therefore requested the opportunity to amend his complaint to comply with the new standard outlined in the Hughes II decision. Writing that it was not “certain from the face of the complaint that any amendment would be futile or otherwise unwarranted,” the court granted leave to amend. It expressly recognized that “[s]ince the defendants filed their motion to dismiss the plaintiff’s amended complaint back in December 2021 – nearly two and a quarter years ago as of this writing – the standard for pleading ERISA breach of fiduciary duty of prudence claims in the Seventh Circuit has shifted,” and given that shift “much – if not all – of defendants’ original December 2021 motion dismiss…has been rendered moot.” Particularly because Mr. Case’s motion was based on “a change in the law and not a lack of diligence,” the court granted his motion for leave to file his proposed second amended complaint and denied as moot defendants’ motion to dismiss this putative class action.

ICI Benefits Consortium v. United States Dep’t of Labor, No. 1:23-CV-00603-JPH-MG, 2024 WL 1329935 (S.D. Ind. Mar. 28, 2024) (Judge James Patrick Hanlon). Plaintiff Independent Colleges of Indiana is a group of 29 private colleges and universities in Indiana. It created a group called the ICI Benefits Consortium, the purpose of which was to form a combined healthcare benefit plan that would reduce the cost of insuring school employees. The Consortium sought an advisory opinion from the Department of Labor asking if its plan would qualify as a single employee welfare benefit plan under ERISA, but the DOL declined to answer. The Consortium then brought this action for declaratory and injunctive relief under ERISA. The DOL responded with a motion to dismiss, arguing that the Consortium did not have standing “because it has not pled a concrete, actual, or imminent injury.” Consortium argued that “two injuries confer standing: (1) if the DOL determines that the Plan does not qualify as a single plan MEWA, the Consortium and its members could face civil liability, including up to $2,586 in daily fines; and (2) it’s a ‘reasonable inference’ that the lack of guidance from the DOL has hindered other ICI member schools from joining the Consortium.” The court rejected these arguments. The court instead accepted the DOL’s position that a “lengthy chain of events” would have to happen before the DOL imposed monetary penalties, rendering the Consortium’s claims speculative, and thus there was no “‘substantial risk’ of monetary harm.” In particular, the court noted that because the Consortium was attempting to play by the book, it was less likely that the DOL would target it over other multiemployer plans that were fraudulent or abusive. As for the Consortium’s deterrence argument, the court noted that the Consortium had not alleged that any schools had declined to join because of the DOL’s refusal to issue an advisory opinion, rendering its argument speculative. Furthermore, the alleged “failure to join” was not redressable by the court because “[t]he Court has ‘no way of knowing’ how other institutions would proceed following a ruling in the Consortium’s favor, based on its allegations.” Thus, the court granted the DOL’s motion to dismiss.

Tenth Circuit

Phillips v. Boilermaker-Blacksmith Nat’l Pension Tr., No. 19-2402-TC-BGS, 2024 WL 1328378 (D. Kan. Mar. 28, 2024) (Magistrate Judge Brooks G. Severson). This case involves plaintiff participants of the Boilermaker-Blacksmith National Pension Trust who allege that their early retirement benefits were improperly terminated. Plaintiffs contend, among other things, that the trust employed a new manner of interpreting the plan’s “separation from service” provision that resulted in benefit denials and requests for reimbursement, even though the applicable plan language itself never changed. Last year, the trust filed a motion for judgment on the pleadings which the court mostly denied, a decision Your ERISA Watch chronicled as the case of the week in our April 26, 2023 edition. In August of 2023, the court certified a class of plaintiffs. Now, plaintiffs have moved to supplement their complaint based on Congress’ December 29, 2022 enactment of Secure Act 2.0, which governs the repayment of erroneously overpaid plan benefits, arguing that the trust has not complied with its requirements. In this order the magistrate judge granted plaintiffs’ motion. The court found that plaintiffs had good cause to supplement because they were unaware of their potential cause of action until September of 2023, when the trust sent letters invoking the new law. The trust objected, arguing that plaintiffs’ amendment was futile because their Secure Act 2.0 claims would only affect “a 2-person subclass of their previously certified 100+-member class,” and this new subclass did not meet the numerosity requirements of the Federal Rules of Civil Procedure governing class actions. However, the court was persuaded by plaintiffs that this issue “would better be addressed during a class certification analysis.” The court thus granted plaintiffs’ motion to supplement their complaint with their Secure Act 2.0 claims.

Provider Claims

Third Circuit

The Peer Grp. for Plastic Surgery v. United Healthcare Servs., Inc., No. 2:23-CV-02073-BRM-MAH, 2024 WL 1328134 (D.N.J. Mar. 28, 2024) (Judge Brian R. Martinotti). The plaintiff is a medical practice that specializes in post-breast cancer plastic surgery reconstruction. It performed services on four individuals who were insured under health benefit plans insured by defendant United. Plaintiff, which is out of network with United, alleged that United gave it “gap exceptions” such that United would compensate it at the in-network benefit level. However, United failed to do so. In the end plaintiff billed United for $513,290, but only received $34,017.56. Plaintiff filed suit in New Jersey state court and United removed to federal court on diversity jurisdiction grounds. Plaintiff then amended its complaint to allege three state law causes of action, and United responded by moving to dismiss, contending that plaintiff’s claims were preempted by ERISA. Plaintiff argued that it was “well settled law in the 3rd Circuit that state law causes of action for breach of contract and promissory estoppel are not preempted by ERISA when an insurance carrier makes an agreement with an ‘out of network’ provider to cover its insureds at the ‘in-network’ benefits level.” The court disagreed, ruling that plaintiff’s claims “challenge the administration of benefits” and “could have been brought under the scope of ERISA.” The court further ruled that plaintiff did not sufficiently plead that a duty independent of ERISA existed: “The Gap Exception Letters inform the Patients that surgeries conducted by out-of-network providers would be covered at the ‘in-network’ benefit level subject to the Plans. It is impossible to determine the merits of Plaintiffs’ claims without examining the provisions of their ERISA-governed Plans.” The court stated that plaintiff’s reliance on Third Circuit authority was misplaced because the gap exception letters “explicitly reference the plan,” “do not include an agreed-upon rate of payment,” and instead provided that “payment will be based on the terms of the Plans and Defendant’s reimbursement policies.” As a result, plaintiff’s claims were preempted, the court granted United’s motion to dismiss, and plaintiff was given a chance to amend its complaint to assert claims under ERISA.

Sixth Circuit

Beaumont Health v. United Healthcare Servs., Inc., No. 2:23-CV-10982, 2024 WL 1317772 (E.D. Mich. Mar. 26, 2024) (Judge Stephen J. Murphy, III). Plaintiff Beaumont Health alleged that it treated a woman involved in a motor vehicle accident in 2020, providing services worth $208,045.39. The woman was insured through an ERISA-governed employee health benefit plan administered by defendant United. Beaumont brought this action in Michigan state court contending that United had failed to pay benefits for the treatment. United removed the case to federal court on ERISA preemption grounds and filed a motion for summary judgment. Beaumont did not respond to the motion. United’s motion was based on its assertion that Beaumont had never made a claim for the provided services. Beaumont admitted that it did not submit a claim but argued that it did not know about it until December of 2021. However, according to the court, “no evidence suggests that Plaintiff filed a claim after December 2021.” The court noted that the plan required submission of claims prior to payment, and thus “without a claim, Defendant United cannot be liable to Plaintiff to provide coverage for those services.” As a result, the court granted United’s motion for summary judgment.

Ninth Circuit

Aguilar v. Coast to Coast Comput. Prods., Inc., No. 2:23-CV-03996-MCS-E, 2024 WL 1319777 (C.D. Cal. Mar. 26, 2024) (Judge Mark C. Scarsi). The plaintiffs in this case, Christine Aguilar and her medical provider, Minimally Invasive Surgical Associates and Advanced Weight Loss Surgical Associates, are currently on their third amended complaint. They allege, in a single count under ERISA for payment of plan benefits, that defendant United Healthcare, the insurer of Aguilar’s medical benefit plan, refused to pay for Aguilar’s EGD and hiatal hernia procedure. Defendants filed a motion to dismiss, arguing that plaintiffs (1) did not have standing and (2) had failed to state a claim. The court rejected defendants’ standing argument, ruling that plaintiffs had adequately amended their complaint to address this issue. Plaintiffs had satisfactorily pleaded that Aguilar assigned her rights to the provider, and that the assignment was not conditional or revoked. Furthermore, they had alleged they were harmed by defendants’ refusal to pay, in the amount of $101,046. Defendants had more success with their second argument. The court noted that the plan provided that obesity and weight loss surgery is only covered if performed by in-network providers, and that coverage is only available for “medically necessary” services. However, plaintiffs “fail to grapple with these provisions.” Thus, “[u]ntil Plaintiffs cure their complaint to identify a provision that entitles them to benefits, their § 502(a)(1)(B) claim fails.” The court thus granted defendants’ motion on this ground, but “[b]ecause the Court has not previously dismissed on this ground, dismissal is with leave to amend.” Perhaps the fourth time will be the charm.


Second Circuit

McCutcheon v. Colgate-Palmolive Co., No. 16 Civ. 4170 (LGS), 2024 WL 1328217 (S.D.N.Y. Mar. 28, 2024) (Judge Lorna G. Schofield). On March 22, 2023, Your ERISA Watch featured the Second Circuit’s decision in this action as the case of the week. The case involves complicated calculations of the class action plaintiffs’ cash balance pension plan benefits. After remand from the Second Circuit two issues remained: “(1) which interest rate Defendants must use to calculate the benefit attributable to employee contributions when determining a grandfathered participant’s Plan Appendix C § 2(b)(ii) Account-plus-Employee Contribution benefit and (2) whether Defendants may apply a PRMD (pre-retirement mortality discount) when adjusting the age 65 residual annuity due to a participant who takes her retirement benefits before age 65.” These two issues were cleared up in this order and were resolved in the retirees’ favor. First, the court held that defendants “must use the 20+1% interest rate to calculate the benefit attributable to (both employer and) employee contributions for a participant’s § 2(b)(ii) benefit.” The court expressed that up until now “Defendants themselves have consistently applied the 20+1% rate to both components of the § 2(b)(ii) benefit – the employer and employee contributions.” As defendants were unable to point out any clear error, change in intervening law, or new evidence, the court rejected defendants’ arguments as waived and clarified this first calculation point. The same was true for the pre-retirement mortality discount calculations. Once again, the court stressed that defendants “never previously raised [their] argument” and “under the law of case doctrine, Defendants cannot apply a PRMD to adjust the age 65 residual annuity for a participant who takes early retirement.” The court stated that the purpose of the residual annuity was to remedy the plan’s previous present value violations and therefore would permit defendants to adjust the lump sum in such a way as to decrease the value of the benefit paid to an amount lower than the accrued benefit determined by IRC § 417(e). Thus, defendants were not allowed to apply the pre-retirement mortality discount to adjust the residual annuity “from age 65 to payment age.” Having decided these issues, the court revised its final judgment, as plaintiffs requested, to clarify the manner of calculations and ensure that fancy math did not get in the way of make-whole relief.


Tenth Circuit

Trevor T. v. California Physicians’ Service, No. 1:22-CV-00140 JNP, 2024 WL 1330040 (D. Utah Mar. 28, 2024) (Judge Jill N. Parrish). Plaintiffs, three family members, brought this action against California Physicians’ Service (“Blue Shield”), alleging that it unlawfully denied a claim for healthcare benefits under ERISA for treatment received by one of the plaintiffs. Plaintiffs live in Orange County, California, Blue Shield is based out of Oakland, California, and the treatment at issue was administered in Utah, where the suit was filed. Blue Shield moved to transfer venue to the Northern District of California under 28 U.S.C. § 1404(a), arguing that this location was “a closer and more convenient venue for all parties and witnesses.” Plaintiffs opposed and filed a motion for sanctions arguing that Blue Shield had misrepresented facts to the court. Addressing the venue motion first, the court agreed that the suit could have been filed in the Northern District of California and thus considered whether that venue was more appropriate. The court noted that Utah’s only connection to the dispute was the treatment facility, and “[i]n the context of ERISA, this court has routinely declined to defer to a plaintiff’s choice of forum where the location of plaintiff’s treatment was the only connection to the forum.” None of the parties resided in Utah, the plan was not administered there, the failure to pay did not occur there, and the decision to deny benefits was not made there. Furthermore, the relevant witnesses and documents were in California where the claim was administered, and a judgment against Blue Shield would be easier to enforce in California where it is headquartered. Thus, the court granted Blue Shield’s motion to transfer venue. As for plaintiffs’ motion for sanctions, the court determined it was “wholly without merit.” Plaintiffs “failed to satisfy the safe-harbor provision of Federal Rule of Civil Procedure 11(c)(2), spared no expense in briefing an argument tangential to the issue of where Plaintiffs’ claims were administered, not processed, and impugned defense counsel’s character in the process.” As a result, in a surprising turnabout, the court stated that it would issue a separate order to show cause why plaintiffs should not be sanctioned for their motion for sanctions.