Bristol SL Holdings, Inc. v. Cigna Health & Life Ins. Co., No. 23-55019, __ F.4th __, 2024 WL 2789835 (9th Cir. May 31, 2024); Bristol SL Holdings, Inc. v. Cigna Health & Life Ins. Co., No. 23-55019, __ F. App’x __, 2024 WL 2801531 (9th Cir. May 31, 2024) (Before Circuit Judges S.R. Thomas, Bress, and Johnstone)

When we think of ERISA welfare benefit litigation, we typically think of plan participants suing insurance companies. However, when it comes to medical benefits, we are increasingly seeing suits where the plaintiff is the health care provider, not the patient. In a statutory scheme where the participant is the focus, this raises questions. Should the courts treat providers differently from patients? What rights do providers have under ERISA? Must they bring their claims pursuant to ERISA, or can they bring alternative state law claims?

This week’s notable decision is the latest effort by the federal courts to answer some of these questions. The plaintiff was Bristol SL Holdings, Inc., which to complicate matters further is not even a health care provider. Instead, it is a holding company owned by three former shareholders of Sure Haven Inc., a now-defunct drug rehabilitation and mental health treatment center.

Many of Sure Haven’s patients were insured by defendant Cigna, and had assigned their rights under their benefit plans to Sure Haven to seek reimbursement from Cigna for the cost of their treatment. For several years, Cigna reimbursed Sure Haven without incident. However, Cigna began to suspect that Sure Haven was engaged in “fee forgiveness,” a practice where providers waive or do not collect from their patients the financial contributions the patients are required to pay under their plans (such as deductibles and co-pays).

Cigna contended that this practice, which the parties agreed was not permitted under the plans, “inflates insurance costs at an insurer’s expense by eliminating the financial incentive for patients to seek cheaper in-network care.” (Cigna has been particularly aggressive in policing its fee forgiveness prohibitions.)

Eventually Cigna flagged Sure Haven’s account and began denying its claims unless it provided proof of payment by its patients. In the end, Cigna refused to pay claims for 106 patients totaling $8.6 million. Sure Haven filed for bankruptcy, and after settlement talks broke down, Bristol initiated this action as Sure Haven’s successor-in-interest in 2019, alleging claims under ERISA and California law.

At first, Cigna attacked the ERISA claims on the ground that Bristol lacked standing. Cigna contended that while ERISA allows treatment providers to sue, that rule did not extend to Bristol, which was a step further down the assignment chain. This argument was successful with the district court, but in 2022 the Ninth Circuit reversed, holding that “the first assignee as a successor-in-interest through bankruptcy proceedings who owns all of one healthcare provider’s health benefit claims has derivative standing” under ERISA. (This decision was Your ERISA Watch’s notable decision in our January 19, 2022 edition.)

Back in the district court, Cigna advanced its next argument, which was that Bristol’s state law claims for breach of contract and promissory estoppel were preempted by ERISA. Again, the district court ruled in favor of Cigna, and again, Bristol appealed.

This time Bristol was not as fortunate. The Ninth Circuit first explained the Supreme Court’s familiar test under ERISA’s “clearly expansive” preemption provision, which is that a state law is preempted by ERISA if it has a “reference to” or a “connection with” an ERISA plan. Under the “reference to” prong, a claim must be either “premised on the existence of an ERISA plan” or “the existence of the plan is essential to the claim’s survival.”

The Ninth Circuit had no trouble concluding that Bristol’s state law claims satisfied this test. The court noted that when Sure Haven called Cigna, “the context for this communication concerned whether reimbursement was available under the ERISA plans that Cigna administers.” Furthermore, Sure Haven “was seeking clearance to provide what all agree were plan-covered services,” and the reason its claims were denied was because of a plan provision barring fee forgiveness. Finally, any damages suffered by Sure Haven could not be calculated without consulting the plans, which set forth payment rates. Sure Haven’s claims thus had an “impermissible ‘reference to’” ERISA plans.

The Ninth Circuit arrived at the same conclusion regarding the “connection with” prong. The court explained that a state law “has an impermissible connection with an ERISA plan if it governs a central matter of plan administration or interferes with nationally uniform plan administration, or if it bears on an ERISA-regulated relationship.”

The court ruled that Bristol’s claims satisfied at least the first two of these elements. First, Bristol’s contract law argument was that by verifying plan coverage in pre-treatment telephone calls, Cigna had created an obligation to pay for claims. However, the Ninth Circuit ruled that this alleged obligation would intrude on plan administration. It “would be at odds with the way ERISA plans operate, because reimbursement under a plan is ultimately contingent on information and events beyond the initial verification and preauthorization communications.” The court noted that Bristol’s argument would place Cigna in a “Catch-22” in which “administrators must abandon either their plan terms or their preauthorization programs.” This is “the kind of intrusion on plan administration that ERISA’s preemption provision seeks to prevent.”

For the same reasons, Bristol’s state law claims impermissibly “governed a central matter of plan administration.” The Ninth Circuit stated that “if providers could use state contract law to bind insurers to their representations on verification and authorization calls regardless of plan rules on billing practices, benefits would be governed not by ERISA and the plan terms, but by innumerable phone calls and their variable treatment under state law.” The court ruled that ERISA was designed to prevent this type of “discordant regime.”

In so ruling, the Ninth Circuit distinguished cases cited by Bristol purportedly giving it the right to bring its state law claims. The court found that these cases either involved situations where the ERISA plan at issue no longer applied, or where the insurer falsely informed the provider that the patient had coverage for a particular treatment. Neither scenario applied here, where the Sure Haven patients were indisputably covered by ERISA plans for the services at issue. Thus, Bristol’s state law claims were preempted.

Thus ended the Ninth Circuit’s decision regarding Bristol’s state law claims; the court found them preempted and affirmed. But, you may be wondering, what about Bristol’s ERISA claims that were the subject of its first appeal?

The Ninth Circuit disposed of those claims in a separate memorandum disposition (the second of the two rulings linked above). The district court had ruled in Cigna’s favor on these claims as well, finding that Cigna did not abuse its discretion in determining that Bristol’s claims were not payable because of the plans’ fee-forgiveness prohibitions.

Bristol challenged both the standard of review and the merits of Cigna’s decisions, but the Ninth Circuit affirmed on both issues. First, the court ruled that Cigna had discretionary authority in making its decisions, even if that power was conferred in summary plan descriptions, because the SPDs were valid plan documents and there was no overriding formal benefit plan to the contrary in evidence.

Second, the court ruled that (1) Cigna engaged in “meaningful dialogue” with Sure Haven by explaining that its denials were based on the fee-forgiveness provisions, (2) Cigna reasonably interpreted the plan provisions barring fee-forgiveness, and (3) the evidence supported Cigna’s denials because they were based on an internal investigation, letters to Sure Haven patients, an undercover inquiry into Sure Haven’s rates, and audits of patient records.

As a result, after two trips to the Ninth Circuit and three separate decisions from that court, Bristol was left empty-handed on all of its claims. Preemption proponents now also have another arrow in their quiver.

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


Ninth Circuit

Yagy v. Tetra Tech, Inc., No. CV 24-1394-JFW(ASx), 2024 WL 2715900 (C.D. Cal. May 17, 2024) (Judge John F. Walter). Plaintiff Tamara Yagy is a participant of the Tetra Tech, Inc. and Subsidiaries Retirement Plan. Ms. Yagy commenced this putative class action alleging that the fiduciaries are mismanaging the plan by allocating forfeited nonvested employer contribution funds toward future Tetra Tech contributions to the plan instead of applying them toward plan expenses. She asserts claims for fiduciary breaches, prohibited transactions, and violations of ERISA’s anti-inurement provision. Defendants filed a motion to compel arbitration. The plan’s arbitration provision provides that all claims, disputes, and controversies by participants must be referred to and resolved by confidential binding arbitration. The provision additionally contains a class action and representative action waiver, and requires awards of individual relief. Importantly, the plan also contains a savings clause which states in the event the class action waiver, or any other section of the arbitration provision is found to be unenforceable “the arbitration process as mandated in this Section 8.5 is still required with the minimum change necessary to allow the arbitration requirement to be permissible and/or enforceable.” Tetra Tech moved for an order requiring Ms. Yagy to arbitrate each of her claims on an individual basis and stay the action pending completion of arbitration. Ms. Yagy opposed, and argued the arbitration clause restricts statutory remedies available to her under ERISA and therefore falls within the effective vindication doctrine, meaning they function as “a prospective waiver of a party’s right to pursue statutory remedies.” Ms. Yagy therefore contends that she should be able to seek plan-wide monetary and equitable relief in arbitration. In this decision, the court disagreed. The court was receptive to defendants’ interpretation of the Supreme Court’s 2008 ruling in LaRue v. DeWolff, Boberg & Assocs., Inc., arguing that a participant in a defined contribution plan may sue only to recover losses to his or her individual account, without any recovery for other accounts. The court wrote that Section 502(a)(2) doesn’t suggest that a plaintiff “has an unqualified right to bring a collective action to recoup all of a fiduciary’s losses and gains at once.” Instead, the court agreed with defendants that participants have the authority “to sue a fiduciary for ‘appropriate relief,’ which does not necessarily “include the right to pursue plan-wide monetary relief, rather than relief for a participant’s own district harm.” Accordingly, the court held that although the arbitration provision limits Ms. Yagy to obtain only relief available in her individual capacity, it does not prospectively waive a substantive statutory remedy. The court noted that this particular arbitration provision was distinguishable from other out-of-circuit opinions of late where courts have found arbitration provisions within ERISA benefit plans unenforceable under the effective vindication doctrine. This was so, the court said, because those waivers prohibited a plaintiff “from obtaining any relief that had a plan-wide effect, including for example, the removal of a fiduciary, even though such relief was expressly contemplated by ERISA and would have been available in his or her individual capacity.” In contrast, here, the provision expressly stated that it will not limit any right or relief that may be awarded under ERISA. Given this, the court ruled that the arbitrator may award Ms. Yagy any relief available to her under ERISA “including relief that would benefit the Plan such as removal of a fiduciary.” Therefore, the court granted defendants’ motion to compel arbitration and stayed the action pending the completion of arbitration proceedings. 

Breach of Fiduciary Duty

Ninth Circuit

Perez-Cruet v. Qualcomm Inc., No. 23-cv-1890-BEN (MMP), 2024 WL 2702207 (S.D. Cal. May. 24, 2024) (Judge Roger T. Benitez). Plaintiff Antonio Perez-Cruet is a participant in the Qualcomm, Inc. defined contribution pension plan. In this action he is making very similar claims to those in the Yagy case above. He is litigating whether the fiduciaries of the plan are violating ERISA’s fiduciary duties, engaging in prohibited transactions, and violating the anti-inurement principle by choosing to use forfeited plan contributions to reduce their own future contribution obligations to employees rather than spending the money to defray administrative expenses borne by the plan participants. In essence, Mr. Perez-Cruet argues in his complaint that defendants are putting their own financial interests over those of the participants and beneficiaries every time they chose to put forfeited non-vested plan contributions towards future contribution obligations instead of spending it on administrative costs. Accordingly, he contends that defendants are not acting for the exclusive purpose of benefiting plan participants, are breaching their duty of prudence, inuring plan assets to their own benefit, engaging in prohibited transactions, and breaching their duty to monitor one another. Defendants moved to dismiss, arguing the claims are not plausible because they rely on a mistaken premise that un-vested employer contributions are plan assets. In support of their motion to dismiss defendants relied heavily on proposed guidance from the Department of Treasury stating that a defined contribution pension plan may use forfeited contribution money to do reduce employer contributions under the plan as well as to pay plan administrative expenses, or to increase benefits to plan participants. The court stated throughout its decision that the plausibility standard in ERISA cases is context-sensitive. “Taken in context, Plaintiff describes plausible claims for relief.” Regarding the Treasury Department’s proposed regulation, the court noted that it has not yet been adopted, that it has no force of law, and that it does not come from the Secretary of the Department of Labor “who has authority to define what are assets of a pension plan” under ERISA. Therefore, the court held that the proposed regulation does not have sufficient authority to persuade it that plaintiff’s claims are implausible. In contrast, the court viewed Mr. Perez-Cruet’s narrative as supporting plausible claims for ERISA violations. “Had Defendants used the $1,222,072 of forfeited nonvested contributions from 2021 toward paying Plan administrative expenses, all Plan participants would have benefited by incurring no administrative expense charge to their accounts. Instead, all Plan participants had to pay for administrative expenses that could have been reduced to zero had the Defendants chosen to use forfeited contributions in that way.” It was therefore plausible to the court that defendants are not acting prudently or in the exclusive interest of the plan members, and that they are potentially using what may be plan assets in a way that benefits themselves. The court acknowledged that two important questions are still open: (1) whether nonvested forfeited employer contributions fall within the definition of “plan assets”; and (2) whether nonvested forfeited contributions fall within Section 1103’s exception for “mistaken contributions.” However, the court found “little authority supporting the argument against finding [the claims] to be plausible,” and therefore concluded that they pass the plausibility test to survive the motion to dismiss. As a result, defendants’ motion was denied and the complaint was left undisturbed.

Class Actions

Third Circuit

Luense v. Konica Minolta Bus. Sols. U.S.A., No. 20cv6827 (EP) (JSA), 2024 WL 2765004 (D.N.J. May. 30, 2024) (Judge Evelyn Padin). A putative class of participants and beneficiaries of the Konica Minolta Business Solutions U.S.A. Inc. 401(k) Plan moved for class certification in their breach of fiduciary duty action. The participant plaintiffs allege that Konica, its board of directors, and the plan committee violated their duties of prudence and monitoring by selecting and retaining unreasonably expensive and poorly performing investment funds and by paying excessive compensation in recordkeeping and administrative expenses to Prudential Retirement Insurance and Annuity Company. Plaintiffs sought certification pursuant to Federal Rule of Civil Procedure 23 and appointment of the named plaintiffs as class representatives and Edelson Lechtzin LLP and Berger Montague PC as class counsel. Their motion was granted in this order. To begin the court analyzed the proposed class under the four prongs of Rule 23(a) – numerosity, typicality, commonality, and adequacy. First, the court concluded that the 8,000-member class satisfies numerosity. Second, the court agreed with plaintiffs that questions over the defendants’ conduct are common and plan-wide. The court stated, “the ‘glue’ holding the class together is whether fiduciary duties owed to the entire class were breached and ‘the common answer to the factual question of whether Defendants violated ERISA is sufficient to advance the resolution of the entire class.’” Third, the court found plaintiffs typical of the absent class members as the allegedly “flawed selection process makes uniform the claims for all Plan participants regardless of whether the named Plaintiffs invested in the exact funds alleged to be imprudent.” With regard to allegations of the excessively costly fees, the court expressed it couldn’t image plan members who “are content to pay, pointless fees.” The court therefore disagreed with defendants’ argument that the class certification motion fails because of intra-class conflicts. Fourth, the court found the interests of the named plaintiffs sufficiently aligned with the interests of the absent class members and their counsel to be competent, experienced ERISA class action litigators who are more than qualified to satisfy the adequacy requirement. The court further found the proposed class readily ascertainable based on the included Form 5500s. Finally, the court concluded that certification under Rule 23(b)(1) is appropriate. Multiple actions, the court determined, run the risk of leading to inconsistent and incompatible results and standards, making certification suitable under Rule 23(b)(1)(A). In addition, the court stated that plaintiffs’ claims brought on behalf of the plan alleging breaches of fiduciary duties on the part of the defendants “will, if true, be the same with respect to every class member,’ and thus ‘Rule 23(b)(1)(B) is clearly satisfied.’” For these reasons, the court granted plaintiffs’ motion, certified the proposed class, and appointed class representatives and class counsel.

Fourth Circuit

Trauernicht v. Genworth Fin., No. 3:22-cv-532, 2024 WL 2749831 (E.D. Va. May. 29, 2024) (Judge Robert E. Payne). Class representatives Peter Trauernicht and Zachary Wright have sued the fiduciary of the Genworth Financial Inc. Retirement Savings Plan, Genworth Financial, Inc., on behalf of themselves, the plan, and other similarly situated individuals for breaching its duties under ERISA and causing substantial losses to the plan. Genworth moved to exclude the expert opinions and testimony of plaintiffs’ two experts, Mr. Richard Marin and Dr. Adam Werner. Mr. Marin provided expertise on liability and damages as a former plan fiduciary and board member, asset manager, professor of finance and economics, and the author of a book on pension issues. Dr. Werner relied on Mr. Marin’s opinions and selected comparator funds to calculate the losses to the plan, which he put at over $34 million. Genworth objected to Mr. Marin’s qualifications, investment monitoring framework, the application of his methodology, and the selection of the comparator funds and investment options. Genworth also objected to Dr. Werner’s damages analysis, saying it rests on the opinions of Mr. Marin which the company views as unreliable. The court disagreed with Genworth on each point and denied its motions to exclude. To start, the court found Mr. Marin qualified and possessing specialized knowledge to provide an expert opinion on investment selection and monitoring in the context of ERISA defined contribution retirement plans. Next, the court stated that the methodology used by Mr. Marin “removing a fund after a certain number of quarters for violating specified performance criteria” is reliable under Rule 702 and “is neither new or unique. Instead, it is a well-established method reflective of common-sense.” Moreover, the court concluded that the investment monitoring framework Mr. Marin adopted was readily and appropriately applied to the facts of the case. To the court, it was “not unreasonable to believe that Genworth would have considered those various types of peer funds to be potential alternatives,” which included funds with different investment strategies. “Whether Genworth would have actually replaced [the challenged funds] with a differently managed fund goes to the weight rather than the admissibility of Marin’s opinion.” The court further clarified that Genworth’s challenges to the correctness and thoroughness of Mr. Marin’s opinions should be addressed during cross-examination and through rebuttal evidence. Should Genworth prove Mr. Marin’s views are truly “as arbitrary or as groundless as [it] claims, then the Court can give the testimony no weight.” At this juncture, however, the court was satisfied that Mr. Marin’s expert opinions are sufficiently reliable. Because Genworth’s challenges to Dr. Werner’s testimony derived from its challenges to Mr. Marin’s testimony, the court ruled that Genworth’s objection to Dr. Werner’s testimony likewise failed. Accordingly, neither of plaintiffs’ experts’ opinions were eliminated or reduced by the court’s order and defendant’s motion was denied.

Exhaustion of Administrative Remedies

Fifth Circuit

Brushy Creek Family Hosp. v. Blue Cross Blue Shield of Tex., No. 1:22-CV-00464-JRN, 2024 WL 2789389 (W.D. Tex. May. 30, 2024) (Magistrate Judge Susan Hightower). Plaintiff Brushy Creek Family Hospital, LLC treated a patient enrolled in an ERISA-governed health insurance policy administered by Blue Cross Blue Shield of Texas. After the patient was discharged from the hospital, Brushy Creek submitted claims for the treatment to Blue Cross totaling $51,419. Blue Cross paid only $197.44. In response, Brushy Creek submitted a claim review form to Blue Cross requesting it reconsider its payment determination. Blue Cross did not modify its conclusion. The parties then engaged in mediation of the decision with the Texas Department of Insurance. This too proved unfruitful. Accordingly, litigation followed. Brushy Creek sued Blue Cross in state court asserting state law claims. Blue Cross removed the action to federal court, and Brushy Creek subsequently amended its complaint to assert a claim under ERISA Section 502(a)(1)(B). Now Blue Cross moves for summary judgment. It argues that Brushy Creek failed to exhaust administrative remedies because it never appealed the claim determination using the procedure authorized by the plan. In this decision the assigned magistrate recommended Blue Cross’s motion be granted. First, the magistrate agreed with Blue Cross that Brushy Creek needed to submit an appeal through the process available to the plan participant. It rejected Brushy Creek’s argument that the claim review it submitted was permitted because it was “not specifically excluded by the Plan as an appeal.” The decision stated that the “exhaustion requirement is not excused when a Plaintiff argues that the Plan’s information is incomplete because the plaintiff has a ‘duty to seek the necessary information even if it has not been made available.’” Therefore, the magistrate concluded that the alternative claim review process Brushy Creek perused to resolve the dispute was insufficient to be considered exhaustion of the plan’s claims appeals process of adjudication. Therefore, the magistrate agreed with Blue Cross that the provider failed to exhaust its administrative remedies. The magistrate also disagreed with Brushy Creek that Blue Cross was estopped from asserting failure to exhaust because it never invoked the provisions of the ERISA plan or referred the provider to the proper appeals avenues when the parties were engaged in mediation. Blue Cross, the magistrate ruled, “correctly argues that Brushy Creek failed to ‘make clear it was filing a member-authorized appeal’ because it did not provide [the patient’s] authorization in writing.” As a result, the magistrate did not view the circumstances of this case as demonstrating that Blue Cross affirmatively misled Brushy Creek. Instead, the magistrate concluded that Blue Cross carried its burden to demonstrate that the hospital failed to exhaust administrative remedies and concluded that the hospital failed to show it was entitled to an exception to the exhaustion requirement. Therefore, the magistrate recommended the district court grant Blue Cross’s motion for summary judgment as the ERISA claim for benefits is barred for failure to exhaust.

Life Insurance & AD&D Benefit Claims

Fifth Circuit

Harris v. UnitedHealth Grp., No. 3:23-CV-02486-E, 2024 WL 2734974 (N.D. Tex. May. 28, 2024) (Judge Ada E. Brown). In 2020, an employee of UnitedHealth, Brenda Harris, was diagnosed with colon cancer. Her illness forced her to retire. At the time of her retirement, UnitedHealth mailed her a COBRA Enrollment Notice and information on life insurance conversion. Ms. Harris opted to enroll in COBRA. However, she later decided to end her cancer treatment and discontinue paying the COBRA premiums. She did not realize that COBRA benefits included the life insurance policy premiums in addition to healthcare insurance. “Thus, by discontinuing the COBRA payment and not returning the [Individual Life Conversion Request for Information], both healthcare insurance and life insurance would be terminated as to the Harrises.” At this point, Ms. Harris was getting sicker and sicker. She suffered a stroke and then doctors found a cancerous brain tumor. Ms. Harris died on December 30, 2021. In this action, her widower, Rex Harris, brings claims of violation of ERISA/COBRA, violations of Texas insurance regulating laws, breach of the common law duty of good faith and fair dealing, and declaratory judgment against UnitedHealth and the plan administrative committee for their actions during this period when Ms. Harris was vulnerable and mentally and physically declined, which Mr. Harris alleges led to the loss of life insurance coverage for the family. Defendants moved to dismiss, seeking dismissal of all claims for failure to state a claim pursuant to Rule 12(b)(6). In this decision the court granted the motion to dismiss. Defendants argued that Mr. Harris did not plausibly allege that the COBRA and life insurance notices were vague or that they could not be understood by an average participant. In addition, defendants asserted that they have no duty to provide individualized advice to participants about how to maximize their plan benefits under Fifth Circuit precedent. The court took each of these arguments in turn, and agreed with UnitedHealth on both. First, “the Court agrees that the notices provided to Brenda Harris were perfectly clear and that Harris fails to point to any specific provision of the COBRA Notice or the Life Insurance Notice that is deficient, unclear, or confusing.” Second, the court stated that there is no heighted duty requiring employers to follow up and ensure an individual understands the notices they were provided with, even under circumstances like those alleged here where that individual is suffering from physical and cognitive decline. Instead, the court stated that “nothing in the record [demonstrates] Defendants did not make a good faith effort to provide notification; Harris does not allege such notification was not given, but rather that the notification given was insufficient. Defendants timely sent Brenda Harris her COBRA Notice and her Life Insurance Notice written in a manner to be understood by the average plan participant, and thus Defendants have satisfied their duty under this circuit’s precedent.” Accordingly, the court decided that Mr. Harris failed to state claims under ERISA and COBRA. The court then turned to the state law claims, and determined that they were preempted by ERISA as they essentially sought ERISA-governed benefits via alternative routes. Moreover, the court agreed with defendants that the state law claims directly affect the relationship between a beneficiary and a plan administrator and are premised on an alleged failure to provide proper notice of the right to continued benefits, which is governed exclusively under ERISA. Thus, the court found each of the state law claims impermissibly relates to the ERISA plan and is therefore preempted. For these reasons the court granted the motion to dismiss in its entirety. The court’s dismissal was with prejudice. It determined that amendment would be futile.

Pension Benefit Claims

Third Circuit

Luciano v. Teachers Ins. & Annuity Ass’n of Am., No. 15-6726 (RK) (JBD), 2024 WL 2702341 (D.N.J. May. 24, 2024) (Judge Robert Kirsch). Plaintiff Lorraine Luciano filed a claim with the Teachers Insurance and Annuity Association of America seeking to recover her husband’s pension benefits. Her claim for 100% of her deceased husband’s Qualified Preretirement Survivor Annuity under the Educational Testing Service 401(a) Plan was denied. Instead, defendants paid Ms. Luciano only a 50% benefit. Civil litigation and then arbitration followed. In 2020, the arbitrator determined that the plan terms unambiguously required full benefit payments to Ms. Luciano and issued an award in her favor. On July 26, 2023, the court affirmed the arbitration award. In that same decision, however, the court also granted defendants’ motion for equitable reformation of the plan. Defendants sought to amend the 401(a) Plan to correct a scrivener’s error which resulted in the plan language accidentally eliminating the 50% Qualified Preretirement Survivor Annuity benefit. The court in that decision ruled that the motion was timely and that defendants had not waived their argument for equitable reformation by not raising it during the administrative proceedings or arbitration proceedings. The court further concluded that defendants met their burden of proving that the drafting error was unintentional, providing for a 50% benefit was always intended, and no participants saw the plan language containing the error. Accordingly, the court allowed Educational Testing Service and TIAA to amend the plan to reflect their intent to provide the 50% benefit. Ms. Luciano moved for reconsideration. She argued that the court’s previous opinion had three clear errors: (1) defendants waived their reformation claim by not raising it in arbitration because equitable reformation was a subject of arbitrability and the arbitrator should have decided the issue; (2) the court ignored the arbitrator’s and previous district court findings that the plan called for 100% Qualified Preretirement Survivor Annuity; and (3) defendants waived their reformation argument by failing to advance it during the administrative proceedings. The court denied Ms. Luciano’s motion. It viewed her motion as simply a disagreement with its decision, recycling old arguments that the court previously considered and found unconvincing in its order last July. “On its own, this regurgitation of a previously rejected argument with no new facts or law is enough to deny Plaintiff’s Motion.” The court once again concluded that equitable reformation was not within the scope of arbitration, and defendants had not waived their right to seek equitable reformation for failing to raise it during either the administrative review or during arbitration proceedings. Thus, the court declined to deviate from its earlier holdings and denied Ms. Luciano’s motion for reconsideration.

Pleading Issues & Procedure

Ninth Circuit

Goodsell v. Teachers Health Tr., No. 2:23-cv-01510-APG-DJA, 2024 WL 2750467 (D. Nev. May. 29, 2024) (Judge Andrew P. Gordon). Teachers and other employees of the Clark County School District in Nevada bring this action on behalf of themselves and other similarly situated individuals against various individuals and entities in charge of the Teachers Health Trust, a health benefit coverage trust, for grossly mismanaging the plan. As relevant here, plaintiffs sue the former chairman of the Teachers Health Trust Board, Michael Steinbrink, for negligence, gross negligence, breach of fiduciary duty, negligent misrepresentation, violations of Nevada insurance regulations, per se negligence, consumer fraud, and fraudulent misrepresentations and omissions. Mr. Steinbrink moved to dismiss all of the claims against him. The court granted the motion, with leave to amend. Those familiar with ERISA will recognize immediately that this plan is not governed by ERISA because it is maintained by government entities for its employees and therefore exempted from ERISA. Nevertheless, the health trust at issue here expressly states that it is meant to conform to ERISA’s requirements and that “the trustees shall follow the constraints of ERISA.” Accordingly, the court applied ERISA principles in this decision, including analyzing the impact of the Supreme Court’s decision in Thole v. U.S. Bank on the employees’ standing. Relying on Thole, the court concluded that here the plaintiffs are entitled to “defined benefits” and that they have no equitable interest or property rights in the Teachers Health Trust’s funds. “Therefore, to the extent that Steinbrink caused a loss to the [Teachers Health Trust], that claim belongs to [the trust], not individual plan participants.” Therefore, the court agreed with Mr. Steinbrink that plaintiffs, as plan participants, have a problem with standing under Thole to sue for waste of the trust’s funds. However, the court agreed with plaintiffs that the Supreme Court left open the possibility that participants in defined benefit plans may have standing to allege waste of plan funds if they allege “the mismanagement of the plan was so egregious that it substantially increased the risk that the plan and the employer would fail to be able to pay the participants’ future…benefits.” Here, the court said plaintiffs have not currently alleged as much, but granted them leave to amend their claims relating to the depleted trust funds because there is a possibility they may be able to do so, particularly as the trust was experiencing monthly deficits of over $200,000 and board meetings included concerns that the plan was at unsustainably low funding levels. Nevertheless, the court dismissed plaintiffs’ claims for benefits against Mr. Steinbrink with prejudice because the trust agreement’s plain language states participants cannot sue trustees for the trust’s failure to pay a plan benefit, meaning trustees cannot be held personally liable. The remainder of the decision went over more of Mr. Steinbrink’s arguments for dismissal, such as identifying potential problems with statutes of limitations, the lack of private rights of action under state insurance laws, and analyzing sufficiency of the pleadings on the merits of each of the claims. Thus, Mr. Steinbrink’s motion to dismiss was granted and plaintiffs were given leave to replead their claims and file a third amended complaint consistent with this order.

Provider Claims

Third Circuit

Abira Med. Labs. v. Avera Health Plans, No. 23-03465 (GC) (TJB), 2024 WL 2721390 (D.N.J. May. 28, 2024) (Judge Georgette Castner). This action is just one of more than forty filed by plaintiff Abira Medical Laboratories, LLC suing health insurance companies, healthcare plans, welfare funds, third-party plan administrators, and plan sponsors for failure to pay for lab testing including reimbursement of COVID-19 tests. In this particular case that Your ERISA Watch has chosen as an exemplar, Abira sues Avera Health Plans and its affiliates for breach of contract, breach of the implied covenant of good faith and fair dealing, fraudulent misrepresentation, negligent misrepresentation, promissory estoppel, equitable estoppel, quantum meruit, unjust enrichment, and violations of the Families First Coronavirus Response Act (FFCRA) and the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Avera Health Plans moved to dismiss for lack of personal jurisdiction and for failure to state a claim. Despite not asserting a cause of action under ERISA or alleging that the health insurance plans are governed by ERISA, Abira “contends that personal jurisdiction is appropriate here because ‘ERISA is unique for having relaxed jurisdictional requirements.’” Like other courts in the District of New Jersey have done, this court rejected Abira’s attempt to invoke ERISA’s jurisdictional provisions without asserting a count under ERISA. Defendant argued that even if the court were to construe the amended complaint liberally to view it as asserting claims for benefits under ERISA, neither Abira nor plan members pursued administrative appeals, so any ERISA claim would have to be dismissed for failure to exhaust administrative remedies. The court stated that it would only decide failure to exhaust at the summary judgment stage. Nevertheless, it wrote, “Plaintiff has not plausibly established it has standing to pursue an ERISA claim for benefits.” Accordingly, the court stated that ERISA jurisdictional provisions are not properly invoked in this case and therefore spent the remainder of the decision examining whether it has general or specific jurisdiction over Avera Health Plans as to the state common law claims and the alleged violations of the FFCRA and the CARES Act. Ultimately, it concluded that it did not. The court held that defendant is not incorporated or headquartered in New Jersey and does not conduct business in the state so as to give rise to general jurisdiction. Further, the court concluded that Abira failed to state sufficient bases for specific jurisdiction and that nearly identical allegations have been rejected by the Third Circuit as creating specific jurisdiction. Accordingly, the court found that it does not have jurisdiction over Avera Health Plans and therefore granted the motion to dismiss the action.

Fifth Circuit

Guardian Flight LLC v. Health Care Serv. Corp., No. 3:23-CV-1861-B, 2024 WL 2786913 (N.D. Tex. May. 30, 2024) (Judge Jane J. Boyle). The plaintiffs in this action are two air ambulance providers, Guardian Flight LLC and Med-Trans Corporation. Air ambulances are emergency healthcare services that transport individuals by helicopter to hospitals when they are experiencing severe medical distress. Before the No Surprises Act was passed in 2022, patients often got hit with large medical bills when they received out-of-network emergency services such as air ambulance transportation. This occurred through a practice called “balance billing,” in which patients were responsible for the difference between the billed rate for their medical services and the amount paid by their health insurance plan. Now, under the No Surprises Act, health insurance companies, healthcare plans, and providers resolve billing disputes through a statutorily mandated independent dispute resolution system. The parties in this action, the plaintiff air ambulance companies and defendant Health Care Service Corporation, did just that after plaintiffs provided services to insured patients. HCSC has failed to pay the awards determined by the certified independent dispute resolution handler. Plaintiffs filed this action seeking to require HCSC to pay them the award. Plaintiffs assert three causes of action. First, they bring a claim for violation of the No Surprises Act. Second, plaintiffs assert an ERISA claim for improperly denied benefits. Third, plaintiffs bring a claim for either unjust enrichment or, in the alternative, quantum meruit. HCSC moved to dismiss all three claims. Its motion was granted, with prejudice, in this decision. To begin, the court concluded that there is no private right of action to judicially enforce dispute resolution awards under the No Surprises Act. The court held that to establish an implied private right of action plaintiffs need to demonstrate that the Act creates both a right and a remedy. “While Plaintiffs present compelling arguments that the [Act] created a right, they fail to identify any ‘statutory intent’ to create a remedy to enforce that right.” The court concluded that the Act does not contemplate a procedural judicial mechanism enabling the providers to enforce their rights and instead the language of the No Surprises Act “almost entirely forbid[s] judicial review of [independent dispute resolution] decisions strongly suggest[ing] that Congress did not intend to confer Plaintiffs a cause of action to enforce [these] awards.” To the court it was notable that Congress decided to distinguish No Surprises Act language from language in the Federal Arbitration Act (FAA), by incorporating some sections of the FAA into the No Surprises Act, but not its judicial award confirmation procedures. “If Congress intended to create a procedural mechanism under the NSA, it simply could have incorporated one more section from the FAA, yet Congress did not do so. The Court interprets this omission in the NSA to mean that Congress did not intend to create a remedy under the NSA.” Accordingly, the court dismissed the claim asserted under the No Surprises Act. Next, the court addressed plaintiffs’ ERISA claim. Here, it identified a problem with standing. Under ERISA, healthcare providers with valid assignments of benefits, like plaintiffs, are standing in the shoes of the covered plan participants and beneficiaries. However, under the No Surprises Act patients can no longer be “balance billed” for the amount in dispute. To the court, because the No Surprises Act eliminates beneficiaries’ financial responsibility, emergency healthcare providers inheriting the beneficiaries’ rights likewise have no financial responsibility, and thus they have not suffered a harm under ERISA. “The [Health Care Service Corporation] beneficiaries suffered no concrete injury from [their insurance provider] allegedly failing to pay [the dispute resolution] awards to Plaintiffs. As the Court discussed above, the passage of the NSA means that patients…are no longer financially responsible for balanced billing,” so the beneficiaries would not incur a financial injury even if their health plan does not pay their provider. Arguments to the contrary were rejected by the court. It viewed all the ways patients might be hurt by such a holding as speculative and hypothetical. Thus, the court dismissed the ERISA cause of action for lack of standing. Finally, the court dismissed the unjust enrichment/quantum meruit claim because the air ambulances did not provide the insurance company “with any direct benefit.” The court ended its decision by clarifying that all of the claims were dismissed without leave to amend because the defects in the complaint are incurable which makes amendment futile. If courts elsewhere in the country adopt similar holdings, insurance companies may quickly take advantage of the situation as they would be financially incentivized to stop honoring No Surprises Act dispute awards. It’s hard to think this was the result Congress intended. Either way, Your ERISA Watch will keep our eyes peeled for future developments, and what we see, you’ll hear about.

Severance Benefit Claims

Second Circuit

Fromer v. Public Serv. Enterprise Grp., No. 1:20-cv-963 (BKS/CFH), 2024 WL 2784276 (N.D.N.Y. May. 30, 2024) (Judge Brenda K. Sannes). Plaintiff Howard Fromer worked for Public Service Enterprise Group Incorporated for eighteen years as director of market policy in Albany, New York. In April of 2020 Mr. Fromer was informed that his position was being eliminated. At the same time he was offered a new position as strategy manager, in the same pay grade as his old job. However, this new position was not located in Albany. Mr. Fromer believed it would require communing more than fifty miles from his current location. Accordingly, he declined the offer. Mr. Fromer then applied for severance benefits under the PSEG Separation Allowance Plan for Non-Represented Employees. Pursuant to the terms of the plan an employee involuntarily terminated “where the only position offered to [him] within the Company…would require [the individual] to increase their one-way commuting distance by more than [fifty] miles” is entitled to separation pay. Mr. Fromer’s application, however, was denied. His employer reasoned that he was not entitled to benefits because his “reporting location [and commuting distance] would not change,” and he would “continue to work from home.” In this ERISA action, Mr. Fromer challenges his employer’s denial of severance benefits under the plan. The parties filed cross-motions for summary judgment. They agreed that the plan administrator was granted discretionary authority and therefore that the arbitrary and capricious standard applies. As an initial matter, the court declined to consider evidence outside the administrative record. Although the court agreed with Mr. Fromer that there is an inherent conflict of interest at play, it nevertheless found that he did not meet his burden of establishing good cause to expand evidence beyond the administrative record because he “provided no reason why he was unable to submit the extra-administrative record evidence during the administrative process.” The court then turned to the merits of the parties’ positions. Ultimately, it found that both sides had a reasonable interpretation of the word “commute.” Presented with two decent and rational readings of the plan language, the court was left to favor defendants’ view given the highly deferential standard of review. Therefore, the court upheld the denial based on the commonly understood definition of “commute” to mean “one’s daily travel to and from one’s regular workplace.” Summary judgment was accordingly granted in favor of defendants.

Subrogation/Reimbursement Claims

Ninth Circuit

AGC Int’l Union of Operating Eng’rs Local 701 Health & Welfare Tr. Fund v. Beeler, No. 2:24-cv-00725-JHC, 2024 WL 2701690 (W.D. Wash. May. 24, 2024) (Judge John H. Chun). A self-funded health insurance plan, the AGC-International Union of Operating Engineers Local 701 Health and Welfare Trust Fund, brings this action seeking reimbursement of payments it made on a covered family’s medical claims. The health trust moved for ex parte entry of a temporary restraining order (TRO) requiring defendants not to dispose of or otherwise dissipate the third-party settlement proceeds it contends are subject to subrogation. Plaintiff’s TRO motion was granted in this decision. The court held: (1) the health trust is likely to succeed on the merits of its claim for reimbursement; (2) defendants are likely to dissipate the settlement proceeds if no action is taken; which (3) may cause the plan to suffer irreparable harm absent entry of a TRO; (4) the balance of equities weighs in favor of granting the motion because it will maintain the status quo; and (5) granting the TRO advances the public interest as it will ensure the stability of ERISA plans.