Mator v. Wesco Distribution, Inc., No. 22-2552, __ F. 4th __, 2024 WL 2198120 (3d Cir. May. 16, 2024) (Before Circuit Judges Hardiman, Porter, and Fisher)

When the Supreme Court decided Ashcroft v. Iqbal, 556 U.S. 662 (2009), and Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), federal courts were suddenly tasked with the unenviable job of deciding when a complaint sufficiently passes the threshold from “conceivable” to “plausible.” Perhaps nowhere have courts struggled with this calculus more than in the context of suits challenging the fees paid by ERISA-governed 401(k) and other defined contribution plans. The Third Circuit’s decision in this case, reversing a district court’s 12(b)(6) dismissal of such a suit, is a perfect example of the difficult and “context-specific” analysis in which courts must engage.

Nancy and Robert Mator, two participants in a 401(k) plan, brought a putative class action lawsuit against their employer, Wesco Distribution, which was both the plan sponsor and administrator. The complaint stated two counts, one for breach of fiduciary duty in allowing the plan to pay excessive fees to the plan’s recordkeeper, Wells Fargo, and one for failure to monitor the other plan fiduciaries with respect to these fees.

The plan paid these fees both through direct asset-based fees deducted from each participant’s account, and through indirect fees in the form of revenue sharing with plan investments. The Mators alleged that together these two types of fees added up to a shocking $154 average per participant, approximately four times what the Mators alleged was a reasonable per-participant fee based on a number of different comparators, including what Wells Fargo itself charged a number of other plans, as well as the amount received by other service providers such as Fidelity and Vanguard from similarly-sized plans. With respect to the direct and indirect fees, the Mators alleged that all defined contribution plans buy essentially the same bundle of services of approximately the same quality, and they bolstered this assertion by alleging that when the plan switched to Fidelity as the recordkeeper in 2020, the plan received the same services for $54 per participant.

The Mators also alleged that Wesco caused the plan to pay too much by choosing expensive share classes for certain mutual fund investments, rather than available less expensive share classes of the same mutual funds. This led to more money going to Wells Fargo in revenue sharing on top of the already too-high direct fees Wells Fargo was already receiving through the asset-based fees.

Finally, the Mators alleged that Wesco failed to monitor the other individuals responsible for administering the plan and the decision-making processes that led the plan to overpay the fees.

The district court granted three motions to dismiss filed by Wesco, finding each iteration of the Mators’ complaint to be conclusory and insufficiently specific. After the third dismissal, the Mators appealed.

The Third Circuit saw things differently. In concluding that the Mators had stated a claim, the court relied heavily on an earlier Third Circuit decision, Sweda v. University of Pa., 923 F.3d 320 (3d Cir. 2019), in which the court likewise reversed the dismissal of an excessive fee case. (Judge D. Michael Fisher, perhaps not coincidentally, wrote for the court in both this case and Sweda.) While the fees per participant paid by the University of Pennsylvania in Sweda were allegedly higher ($220-$250 per participant), the allegations in the Mators’ case were more specific, according to the court, because the Mators, unlike Sweda, “made additional allegations about the amount of fees paid by comparator plans.”

Although the district court criticized the Mators for failing to make an “apples to apples” comparison, pointing to differences in service codes employed by the various plans, the Third Circuit concluded that the Mators’ allegation that all plans received similar services rendered their claim plausible despite the coding differences. Similarly, although Wesco criticized some of the comparators, the Third Circuit concluded that even winnowing out the more questionable comparators “would not leave the complaint bereft of allegations that help make a fiduciary breach plausible.” Furthermore, although Wesco offered a different calculation of the fees paid by the comparator plans, the court was unpersuaded that Wesco’s alternative calculation was so obvious or natural as to make the allegations of misconduct implausible. And the court was persuaded that the Mators had sufficiently stated that a cheaper comparable service was available through their allegation that the plan obtained just that when it switched service providers in 2020.   

With respect to the mutual fund shares, the court agreed with Wesco that “as the Mators have pled their fiduciary breach claim, the excessiveness of the recordkeeping fees and the impropriety of offering retail-class shares are intertwined” because the fees associated with the higher share classes were paid to Wells Fargo as indirect fees. But this did not help Wesco’s argument. “Because the Mators plausibly allege the fees were too high overall, it is therefore also plausible that it was a fiduciary breach to cause participants to pay indirect fees by offering mutual fund shares subject to revenue sharing.”

Moreover, although the Mators conceded that plan fiduciaries might prudently choose more expensive share classes with revenue sharing features in order to offset plan recordkeeping expenses, they argued that the plan in this case did not benefit from such an arrangement because they alleged that the plan was already paying too much in fees. On this basis the court concluded that “the Mators have alleged a fiduciary breach based on the Plan’s offerings of retail-class mutual fund shares,” although the court expressly “decline[d] to articulate a bright-line rule that a plan administrator breaches its fiduciary duty merely by offering retail-class investment shares.”

Finally, the Third Circuit reversed the district court’s dismissal of the failure to monitor claim, which the parties acknowledged was derivative of the fiduciary breach claim that the court had just determined passed muster.

In the end, the Third Circuit found that the district court’s “criticisms, although partly valid, only nibble around the edges of the complaint,” and thus “what remains plausibly states a claim.”       

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

Attorneys’ Fees

Sixth Circuit

The W. & S. Life Ins. Co. Benefits Comm. v. Jenkins, No. 1:23-cv-609, 2024 WL 2132416 (S.D. Ohio May. 13, 2024) (Judge Douglas R. Cole). The Western and Southern Life Insurance Benefits Committee (“W&S”) filed this interpleader action to resolve competing claims for proceeds on a $118,700 life insurance policy. W&S filed a motion (1) to deposit the proceeds with the court, (2) requesting an award of attorneys’ fees and costs, and (3) to be dismissed as a party in this action. The competing beneficiaries do not contest that W&S properly filed an interpleader action and should be allowed to deposit the proceeds and be dismissed with prejudice from the suit. The court agreed. However, the beneficiary defendants opposed the insurance company’s motion for attorneys’ fees and costs. In its order the court ruled that Sixth Circuit case law supports awarding reasonable attorneys’ fees and costs to insurance companies in ERISA interpleader actions. It disagreed with defendants’ position that fee awards to insurance companies filing interpleader actions creates perverse incentives and resolving conflicting claims for proceeds is simply a part of an insurer’s cost of doing business. On the contrary, the court held that an interpleading party is entitled to recover reasonable costs and fees when it does not claim an interest in the funds, concedes liability, and deposits the funds into the court. Accordingly, the court was satisfied that an award here was merited. However, it did not find W&S’s requested fee award of $32,465.73 in fees and costs reasonable. The court significantly reduced the requested amount on the grounds that the suit is in its nascency, is not complex, and W&S is an insurance company used to interpleader matters. Accordingly, the court found that an attorney fee award of $5,750 was reasonable. As for costs, the court awarded W&S the full requested amount of $2,790.38, as one of the defendants was in England and serving her was unusually costly. W&S was therefore ordered to deposit the disputed funds, plus interest, and minus the $8,540.38 the court awarded it in this order.

Breach of Fiduciary Duty

Fourth Circuit

Sealy v. Old Dominion Freight Line, Inc., No. 1:23-CV-819, 2024 WL 2212905 (M.D.N.C. May. 16, 2024) (Judge Thomas D. Schroeder). Three participants of the Old Dominion Freight Line, Inc. 401(k) Plan have sued the plan’s fiduciaries on behalf of a putative class alleging the fiduciaries are violating ERISA and causing millions of dollars in losses to the plan through excessive and unreasonable fees. Plaintiffs allege the plan is overpaying direct recordkeeping fees, indirect revenue sharing fees, float fees, and investment management fees. Defendants disagree with the allegations and moved to dismiss the complaint for failure to state a claim. Defendants first argued that the proposed class period extends beyond ERISA’s six-year statute of limitations for fiduciary breach claims. The court, however, saw “no reason to dismiss any claim in part at this time on [time limitation grounds] because the class, if certified, would not extend beyond the proper limitations period.” Defendants also attached several exhibits to their motion to dismiss. The court took judicial notice of the Form 5500s, which it viewed as necessarily incorporated into plaintiffs’ complaint, but declined to take judicial notice of Rule 408(b)(2) disclosures and the master services agreements between Old Dominion and its third-party recordkeepers. Although the court was receptive to defendants’ challenges to the complaint, and took time to caution plaintiffs against “any effort to game the system,” the court nevertheless recognized that it must accept plaintiffs’ allegations as true at this preliminary stage. Favoring plaintiffs’ allegations, the court was satisfied that they stated their fiduciary breach claims based on the fees and share classes. Plaintiffs compared Old Dominion’s plan with four other plans which had much lower per-participant fees. At this stage in litigation, the court was persuaded that these other plans were meaningful benchmarks and demonstrated the plausibility of plaintiffs’ allegations that defendants are breaching their fiduciary duties. The court also accepted plaintiffs’ share class allegations of nine investments in the plan. The court expressed that it could not accept defendants’ view that “expense ratios are per se reasonable simply because other cases have found higher expense ratios to be reasonable.” Accordingly, the court held that defendants did not demonstrate that they are entitled to dismissal of plaintiffs’ claims and therefore denied the motion to dismiss.

Class Actions

Seventh Circuit

Urlaub v. Citgo Petroleum Corp., No. 21 C 4133, 2024 WL 2209538 (N.D. Ill. May. 16, 2024) (Judge Matthew F. Kennelly). Plaintiffs Leslie Urlaub, Mark Pellegrini, and Mark Ferry commenced this putative class action against their former employer, Citgo Petroleum Corporation, its two defined benefit pension plans, and the fiduciaries of the plans, alleging defendants violated several provisions of ERISA by calculating joint and survivor annuity benefits using out-of-date mortality assumptions based on 1970s-era mortality tables. Plaintiffs moved to certify a class of over 1,700 individual participants and beneficiaries of the plans who are receiving a joint and survivor annuity. Plaintiffs allege that the total underpayments for the class members is at least $31,713,141. In this order the court provisionally granted the motion to certify the class subject to certain amendments outlined in the decision. To begin, the court ordered that a breach of fiduciary duty subclass be created for members who were issued checks less than six years before the date of this suit was filed whose claims are not time-barred under ERISA’s statute of limitations. The court clarified that plaintiffs Urlaub and Ferry, but not Pellegrini, will be representatives of this subclass. Additionally, the court eliminated 26 individuals from the proposed class whose benefits were not calculated using an eight-percent interest rate and the 1971 mortality table, and instead had joint and survivor annuity benefits calculated using “Tabular Factors.” The court agreed with defendants that these 26 people were not properly within the class and therefore ordered amendment of the class definition to exclude them. The court further excluded three individuals from the proposed class who received a “Subsisted Pre-Retirement Survivor Annuity.” However, after eliminating these 29 individuals, the class size was only whittled down slightly and still encompasses 1,744 members. It was with regard to this revised class that the court evaluated the requirements of Rule 23(a) and (b)(1). Starting with Rule 23(a), the court concluded that the class is sufficiently numerous; that defendants’ single course of conduct is common to all class members; that the named plaintiffs are typical of absent class members as they suffered the same financial harm in the form of lower payments; and that the named plaintiffs and their counsel are adequate representatives to act in the interest of the class. Simply put, the court expressed that the dispute at the heart of this case is whether the single life annuity to joint and survivor annuity conversion factor was within the reasonable range for all class members. Answering this question, the court stated, can and should be done on a class-wide basis. Finally, the court concluded that certification under Rule 23(b)(1) was appropriate because prosecuting separate actions would create a risk of inconsistent and varying adjudications creating potentially incompatible standards of conduct for the defendants. For these reasons, the court provisionally granted plaintiffs’ motion for class certification and directed the parties to propose amended class and subclass definitions consistent with this order.

Disability Benefit Claims

Fourth Circuit

Aisenberg v. Reliance Standard Life Ins. Co., No. CIVIL 1:22-cv-125 (DJN), 2024 WL 2154739 (E.D. Va. May. 14, 2024) (Judge David J. Novak). Over two years ago plaintiff Michael Aisenberg applied for long-term disability benefits after major open-heart surgery rendered him unable to continue working as an attorney. Reliance Standard Life Insurance Company determined that Mr. Aisenberg was not entitled to benefits and denied his claim. Mr. Aisenberg challenged that decision in court. Ultimately, the court found Reliance Standard’s decision arbitrary and capricious. It determined that the insurance company abused its discretion by failing to assess the risk of future cardiovascular harm. Accordingly, the court overturned the denial and remanded to Reliance Standard to reconsider in light of its ruling. On remand, Reliance once again determined that Mr. Aisenberg was not entitled to long-term disability benefits under the plan. Mr. Aisenberg appealed to the court for a second time. The court concluded that Reliance Standard again abused its discretion, and this time ordered it to pay Mr. Aisenberg benefits. Reliance Standard began paying benefits, but determined that it could offset monthly benefit amounts by Mr. Aisenberg’s earned-income Social Security benefits. Mr. Aisenberg disputes this conclusion. He believes that earned-income Social Security benefits do not “result” from his long-term disability and therefore cannot be offset against his monthly payments under the terms of the plan. Accordingly, Mr. Aisenberg filed a motion to determine sum certain. As a preliminary matter, the court resolved the parties’ dispute over exhaustion. Mr. Aisenberg argued that exhaustion does not pose a barrier to the court ruling on the parties’ dispute because the court has jurisdiction to adjudicate disputes related to benefit assessments. The court agreed, and stated that exhaustion would serve no purpose here. The court “therefore declines to require that Plaintiff fully exhaust his internal remedies as to the question of whether Defendant has abused its discretion in interpreting the terms of its Plan related to the benefits offset.” As for the merits of the dispute, the court held that earned-income Social Security benefits do not constitute “other income” under the plain language of the plan. “Defendant’s Plan is unambiguous; it does not permit offsetting Plaintiff’s Social Security benefits, as they result from his earned income, rather than his disability, and Defendant’s plan permits offsetting only those Social Security benefits ‘resulting from the same Total Disability for which a Monthly Benefit is payable.” Reliance Standard has in fact litigated this interpretation of the same language in federal court before, and was told “that when its Plan’s language created a relationship between Social Security benefits and disability benefits, that language must be given interpretive force.” Accordingly, the court determined that Reliance Standard abused its discretion, for a third time in this matter, and ordered it to pay Mr. Aisenberg benefits without the offset.

ERISA Preemption

Seventh Circuit

The Regents of the Univ. of Cal. v. Health Care Serv. Corp., No. 22 C 6960, 2024 WL 2209595 (N.D. Ill. May. 14, 2024) (Judge Lashonda A. Hunt). A healthcare provider, the UCLA Health System, sued defendant Health Care Service Corporation d.b.a. Blue Cross and Blue Shield of Texas in state court for breach of contract and quantum meruit seeking payment of $78,737.20 for medical treatment it provided to three individuals with health insurance plans administered by defendant. To date, defendant has not paid anything. UCLA Health maintains that it is entitled to payment in this amount under the terms of a written contract between it and Anthem Blue Cross. Defendant removed the case to federal court on the basis that the two state law claims are preempted by ERISA. UCLA Health moved to remand its lawsuit to state court. In this decision the court granted the motion to remand. It held that neither prong of the Davila preemption test was satisfied, and thus the claims are not completely preempted by ERISA. The court determined that UCLA Health is not asserting rights for benefits under the ERISA plans. Rather, it explained that UCLA Health brings state law claims independently as a healthcare provider, not as an assignee of benefits under any plan. The court held that UCLA Health’s claims are based on an implied-in-fact contract and the parties’ conduct and interactions which “are independent from any duties that arise under the patients’ ERISA Plans. Indeed, UCLA Health does not contest HCSC’s denial of coverage. Rather, UCLA Health ‘is bringing its own independent claims, and these claims are simply not claims to ‘enforce the rights under the terms of the plan.’’” Therefore, the court concluded that ERISA does not convert UCLA Health’s state law claims into federal ones, and so granted the motion to remand the matter back to state court.

Ninth Circuit

California Brain Inst. v. United Healthcare Servs., No. 2:23-cv-06071-ODW (RAOx), 2024 WL 2190983 (C.D. Cal. May. 15, 2024) (Judge Otis D. Wright, II). Plaintiff California Brain Institute provided medical treatments to two patients insured under healthcare plans administered by defendant United Healthcare Services, Inc. First, California Brain Institute provided medical services to Patient RH. It submitted bills to United for these treatments. United paid the submitted claims for reimbursement, but later claimed that they were overpaid. Accordingly, when California Brain Institute submitted bills for a different patient, Patient MV, United kept the funds to offset them for the mistaken overpayments it made for Patient RH’s separate and entirely unrelated medical services. In this action, California Brain Institute seeks to recover the amounts of the unpaid medical bills from United. It asserts four causes of action: three common law causes of action in its own individual capacity, and one cause of action for recovery of benefits under ERISA Section 502(a)(1)(B) as Patient RH’s assignee. United moved to dismiss the three state law claims. United argued that these claims are conflict preempted under ERISA Section 514(a). The court agreed, and granted the motion to dismiss the common law claims with leave to amend. The court found that the three claims California Brain Institute asserted in an individual capacity are all premised on the existence of the ERISA plan and that it would have no claim to the funds it seeks from United “without the ERISA Plan’s coverage of ‘eligible expenses.’” In addition, the court noted that the overpayment recovery provision is also part of the two ERISA plans, and resolution of the dispute requires interpreting and analyzing the plans. “Accordingly, MV’s ERISA Plan will necessarily play a ‘critical factor in establishing’ United’s liability for [plaintiff’s] claims, which are therefore preempted under § 514(a)’s ‘reference to’ test.” The court further held that the individual state law claims were preempted under the “connection with” test as it viewed these claims as pursuing an alternative enforcement mechanism for benefits due under ERISA-regulated plans. Thus, because the court found the complaint explicitly alleges that the provider and United did not have any separate contract and fails to allege any independent representation made by United to pay benefits, the court determined that California Brain Institute’s “claims are essentially claims for wrongfully withheld benefits.” The three state law claims were accordingly dismissed.

Fiscu v. UKG Inc., No. 3:23-cv-01240-AN, 2024 WL 2153537 (D. Or. May. 13, 2024) (Judge Adrienne Nelson). Plaintiff Ovidiu Fiscu became ill in the fall of 2021 and took extended leave from his employment at UKG Inc. In February 2022, Mr. Fiscu applied for benefits under UKG’s supplemental long-term disability plan (“SLTD plan”). His request for benefits was denied. In response, Mr. Fiscu commenced a lawsuit in state court, alleging state law claims. UKG removed the action to federal court and subsequently moved to dismiss for failure to state a claim, arguing the state law claims are preempted under ERISA. The court agreed with UKG that the claims are preempted and thus granted the motion to dismiss, with leave to amend, in this order. First, the court construed the SLTD plan as an ERISA-governed plan. It concluded that Mr. Fiscu did not show that the SLTD plan satisfies all four requirements of ERISA’s “safe harbor” provision. Specifically, the court noted that Mr. Fiscu did not address whether UKG endorsed the program and whether UKG receives no consideration for the program. Accordingly, the court considered the plan to be an ERISA plan and therefore progressed to analyzing whether the state law claims are preempted by ERISA. It began by evaluating whether the claims are completely preempted under the two-prong Davila test. As to the first prong, the court found that Mr. Fiscu is a participant in the plan with “a colorable claim for vested benefits,” and his “complaint appears to seek benefits under an ERISA plan and to clarify his rights under an ERISA plan.” Thus, the court held that prong one of the Davila test was satisfied. Further, the court determined that Mr. Fiscu’s breach of contract and declaratory judgment claims do not arise independently of the ERISA plan and its terms, and that they are therefore completely preempted. However, Mr. Fiscu’s negligence claim was not found by the court to be completely preempted by ERISA, as the “legal implications of [UKG’s] alleged misrepresentation and negligent actions would exist whether or not the SLTD plan was governed by ERISA.” Nevertheless, the court found that the negligence claim was preempted by Section 514 of ERISA because the claim “would not exist but for the fact that UKG allegedly denied plaintiff benefits.” Accordingly, the court agreed with UKG that ERISA governs this action and Mr. Fiscu cannot sustain his state law claims. The court ended its decision by granting Mr. Fiscu leave to amend his complaint to plead causes of action under ERISA, or to plead sufficient facts to establish that the SLTD plan is not governed by ERISA.

Sagebrush LLC v. Cigna Health & Life Ins. Co., No. 24-00353-CJC (JDEx), 2024 WL 2152458 (C.D. Cal. May. 13, 2024) (Judge Cormac J. Carney). A mental health and substance abuse treatment center, plaintiff Sagebrush LLC, sued Cigna Health and Life Insurance Company and Cigna Healthcare of California, Inc. in California state court for failing to properly reimburse it for treatment it provided to 24 patients insured under Cigna healthcare plans. Sagebrush seeks payment of $7,267,347.06 under the following state law causes of action: violation of California’s unfair competition law, breach of implied contract, unjust enrichment, quantum meruit, and accounts stated. The Cigna defendants removed the action to federal court. Defendants maintain that the state law claims are preempted by ERISA. Sagebrush disagrees. It moved to remand its action back to state court. In this decision the court agreed with Cigna on the issue of preemption. It held that Sagebrush is a provider with assigned benefits for at least one of the patients, meaning it has standing to sue for benefits under ERISA. Moreover, at heart, the court determined that the claims in this action “in effect, seek benefits that are owed under an ERISA plan.” Finally, the court evaluated whether there was an independent legal duty implicated by defendants’ actions. Cigna argued that at least the unfair competition law is completely preempted by ERISA because it is entirely dependent on the existence and terms of the ERISA plans. Once again, the court agreed. It found that plaintiff’s claim seeks reimbursement for medically necessary services at rates tied directly to the ERISA-regulated benefit plans. Because ERISA completely preempts at least one of Sagebrush’s state law claims, the court held that removal was appropriate and therefore denied the motion to remand.

Life Insurance & AD&D Benefit Claims

Ninth Circuit

Wilcox v. Dearborn Ins. Co., No. 23-55484, __ F. App’x __, 2024 WL 2130598 (9th Cir. May 13, 2024) (Before Circuit Judges Tallman, Forrest, and Bumatay). Plaintiff-appellant Kevin Wilcox sued Dearborn Insurance Company under ERISA Section 502(a)(1)(B) seeking to recover waiver-of-premium life insurance benefits provided to disabled plan participants under his policy. Following a trial, the district court entered judgment in favor of Dearborn. Mr. Wilcox appealed the unfavorable ruling to the Ninth Circuit. Reviewing the district court’s legal conclusions de novo and factual findings for clear error, the court of appeals affirmed in this short unpublished decision. The Ninth Circuit held that the lower court had not erred by concluding that “in the absence of ongoing symptoms, the evidence presented by Wilcox was insufficient to show that he could not work in any occupation.” The appeals court disagreed with Mr. Wilcox that the district court had improperly required him to demonstrate “persistent symptomatology” to establish an inability to work in any occupation. Rather, the Ninth Circuit viewed the district court’s conclusion as based on a plausible and reasonable reading of the medical records. Additionally, the court of appeals rejected Mr. Wilcox’s argument that the district court improperly considered reasons for denial that Dearborn itself did not provide during its administrative appeal process. It stated that Dearborn provided a clear and specific reason for its denial to “ensure meaningful review,” and that the district court appropriately examined only Dearborn’s rationales for its denial in its review. The district court’s decision was accordingly affirmed.

Medical Benefit Claims

Ninth Circuit

Lawrence B. v. Anthem Blue Cross Life & Health Ins. Co., No. 23-cv-06529-JSC, 2024 WL 2112866 (N.D. Cal. May. 8, 2024) (Judge Jacqueline Scott Corley). Plaintiff Lawrence B. paid out of pocket for his daughter’s treatment at a residential treatment facility after defendant Anthem Blue Cross Life & Health Insurance Company denied the family’s claim for coverage by concluding the care was not medically necessary under the terms of the ERISA-governed healthcare plan. In this action, plaintiff seeks to recover those benefits. He asserts two claims, a claim for plan benefits under Section 502(a)(1)(B), and a claim for equitable relief for breach of fiduciary duty under Section 502(a)(3). Anthem moved to dismiss the second cause of action for breach of fiduciary duty. It argued that plaintiff cannot sustain both claims, insisting that the two counts are duplicative because they are both premised on allegations Anthem failed to follow plan terms. In addition, Anthem challenged the sufficiency of the claim on the grounds that “Plaintiff fails to plead any fact which would allow this Court to reasonably infer the MCG clinical guidelines fail to align with the Plan’s definition of medical necessity.” In this decision, the court ruled that the complaint currently fails to state a fiduciary breach claim against Anthem and therefore granted the motion to dismiss. It concluded that “the complaint is devoid of facts to support” its allegations that MCG Behavioral Health Guidelines used by defendant are inconsistent with the plan’s definition of “medically necessary” treatment. Thus, the court stated that it cannot currently infer that Anthem’s reliance on the MCG clinical guidelines to determine medical necessity for mental health benefits violates plan terms and is more restrictive than generally accepted standards of medical care. The court therefore agreed with Anthem that plaintiff failed to state a fiduciary breach claim, and accordingly granted the motion to dismiss the second cause of action. However, dismissal was granted with leave to amend, as the court broadly rejected Anthem’s argument that plaintiff cannot sustain claims one and two. The court concluded it was premature to determine whether plaintiff’s Section 502(a)(3) claims for relief are duplicative of his claim for benefits at this stage.

Pension Benefit Claims

Second Circuit

Grosso v. AT&T Pension Benefit Plan, No. 22-1701-cv, __ F. App’x __, 2024 WL 2180316 (2d Cir. May. 15, 2024) (Before Circuit Judges Leval, Merriam, and Kahn). Plaintiffs-appellants Vincent C. Grosso and Patricia M. Wing were each eligible to begin receiving early retirement benefits at the age of 55. However, neither filed a written request for benefits until 2017, when Mr. Grosso was 62 and Ms. Wing was 59. Along with their elections to receive early retirement benefits, plaintiffs also sought to receive retroactive payments dating back to when each was age 55. The AT&T Pension Benefit Plan denied their claims for retroactive pension benefits. The Plan concluded that under the governing plan terms Mr. Grosso and Ms. Wing had to have filed written applications for early retirement benefits at age 55 to receive the benefits at that time. Because they waited, they were not entitled to retroactive benefits. This litigation followed the denials of the retroactive pension benefits. The district court ultimately granted summary judgment to AT&T under abuse of discretion review. It held that defendants reasonably interpreted the plan to require participants to file an election to become entitled to the early retirement benefits. Mr. Grosso and Ms. Wing appealed the district court’s denial of their motion for summary judgment to the Second Circuit. In this order the court of appeals affirmed. The Second Circuit agreed with the district court that the denials were reasonable and supported by substantial evidence “and that summary judgment in favor of defendants was therefore appropriate.” Finding the denials for retroactive early retirement benefits “at minimum, not arbitrary and capricious,” the appeals court affirmed the grant of summary judgment to the AT&T defendants on plaintiffs’ claim for benefits under Section 502(a)(1)(B).

Statute of Limitations

Tenth Circuit

J.H. v. Anthem Blue Cross Life & Health Ins. Co., No. 2:23-CV-00460-TS-DBP, 2024 WL 2243316 (D. Utah May. 16, 2024) (Judge Ted Stewart). Plaintiff A.H., a beneficiary in an insured ERISA-governed healthcare plan, was treated at a residential treatment center from July 1, 2020 to June 4, 2021. Anthem Blue Cross Life and Health Insurance Company denied the claim for benefits for this treatment, determining that it was not medically necessary. The family appealed the adverse decision, and on August 12, 2021, Anthem affirmed its denial of benefits and informed the family that it was a final adverse determination. In its letter, Anthem informed the family that under their plan they had one year to bring a civil lawsuit under ERISA Section 502(a) to challenge the decision in court. Before bringing a lawsuit, the family submitted an external review request for the denied claim. On October 21, 2021, the external review agency upheld Anthem’s denial of coverage. The family would eventually file this action, but not until July 17, 2023. Viewing this litigation as untimely, Anthem referred to the plan terms and moved to dismiss the complaint. Relying on the unambiguous limitation period in the plan which states: “If you bring a civil action under Section 502(a) of ERISA, you must bring it within one year of the grievance or appeal decision,” the court concluded that plaintiffs needed to file their complaint no later than October 31, 2022 to comply with the Plan’s one year statute of limitations. Because they filed their complaint almost a whole year after this date, the court agreed with Anthem that the complaint was untimely and barred. Thus, the court granted the motion to dismiss.