Suchin v. Fresenius Med. Care Holdings, No. Civ. JKB-23-01243, 2024 WL 3495778 (D. Md. Jul. 22, 2024) (Judge James K. Bredar)

Lovers of Don Quixote, and we count ourselves among them, might fondly recall scenes of Sancho Panza sitting as a judge and earnestly attempting to dole out justice. He endeavored, if not always successfully, to follow Don Quixote’s guidance:

“Never let yourself be guided by arbitrary law, which is favored by the ignorant who think they’re so clever…. 

When equity can and should find favor, don’t put the whole weight of the law on the delinquent, because the fame of the severe judge is no more than that of the compassionate one.”

Perhaps, like many a judge before and after him, Sancho Panza struggled mightily and most acutely while sitting as a court of equity.

Equitable remedies have always been a particularly tricky issue in ERISA cases. When it enacted ERISA fifty years ago, Congress expressly incorporated equitable principles into the statute, authorizing future plaintiffs to sue for “other appropriate equitable relief” under Section 502(a)(3) in instances where no other provision of the notoriously complex statute provides an adequate remedy. Where other provisions of ERISA expressly enumerate the remedies they provide, Section 502(a)(3) broadly opens up the realm of possibilities by empowering courts to award typically equitable forms of relief.

For years the Supreme Court has weighed in on matters of equitable remedies – what they are, whether and when they are appropriate, and how courts should think of them. In Holland v. Florida, 560 U.S. 650 (2010), the Supreme Court emphasized “the need for flexibility and avoiding mechanical rules” in “a tradition in which courts of equity have sought to relieve hardships, which from time to time, arise from hard and fast adherence to more absolute legal rules, which, if strictly applied, threaten the evils of archaic rigidity.”

The district court in this week’s notable decision invoked this language and applied these equitable principles in its consideration of the equitable remedies sought by plaintiff Dr. Craig Suchin in his quest to right fiduciary wrongs under ERISA.

Dr. Suchin, a former radiologist, is terminally ill with a neurological disorder. He alleges that his former employer, defendant Fresenius Medical Care Holdings, misrepresented the terms of its employee long-term disability and life insurance benefit plans, stating they provided far greater benefits than they actually did, and failed to provide him with ERISA-mandated documents, including summary plan descriptions, which would have cleared up matters.

Because of these misrepresentations and omissions, Dr. Suchin and his wife expected that his long-term disability benefits would be worth 60% of his monthly salary – about $23,000 per month – and that the life insurance proceeds would be worth $1.2 million.

However, the terms of the plans actually capped long-term disability benefits at $10,000 monthly, subject to offsets for Social Security disability insurance payments, and provided life insurance benefits worth only $400,000. Dr. Suchin maintains that had he known the benefits were much less generous than he anticipated, he would have purchased supplemental policies to cover his family’s needs. Now that he is battling a debilitating and terminal illness, it is too late to do so.

Dr. Suchin asserts three causes of action against Fresenius. Counts one and two allege that Fresenius breached its fiduciary duties to Dr. Suchin regarding the long-term disability and life insurance plans, respectively, and seek equitable relief under Section 502(a)(3). Count three alleges that the employer failed to produce statutorily-mandated documents and seeks penalties pursuant to Section 502(c)(1)(B).

On February 6, 2024, the court dismissed counts one and two of Dr. Suchin’s complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). Your ERISA Watch covered that decision in our Valentine’s Day newsletter earlier this year. In that decision, the court rejected many of Fresenius’s arguments in favor of dismissal. It held that Dr. Suchin’s life insurance fiduciary breach claim was ripe even though he is still alive. It also concluded that counts one and two were properly brought under Section 502(a)(3) rather than Section 502(a)(1)(B), and that Fresenius was a fiduciary that plausibly breached its fiduciary duties with respect to both plans. Despite reaching these conclusions, the court dismissed the first two causes of action “on the grounds that Suchin failed to show he was entitled to the requested remedies of reformation, equitable estoppel, or surcharge.”

However, the court’s dismissal was without prejudice, and Dr. Suchin amended his complaint, reasserting the same three causes of action. Fresenius responded by once again moving to dismiss. Upon consideration, the court granted the motion in part and denied it in part.

To begin, the court stressed that it saw no reason to revisit any of its holdings from its February analysis that were favorable to Dr. Suchin. Thus, it proceeded “on the assumption that these issues have been resolved for the purposes of this stage of the litigation.” Instead, the decision narrowed its focus to analyzing whether the amended complaint now adequately states a claim for equitable estoppel or reformation.

Breaking its decision in two, the court tackled equitable estoppel first. As the court stated, “[e]quitable estoppel is a ‘traditional equitable remedy’ that operates to place the plaintiff ‘in the same position he would have been in had the representations been true.’” To state a claim for equitable estoppel under Section 502(a)(3), the court clarified that a plaintiff must plausibly allege five things: “(1) a promise; (2) reasonable reliance on that promise; (3) injury caused by the reliance; (4) injustice if the promise is not enforced; and (5) the presence of extraordinary circumstances justifying equitable relief.” The court then explained why it found that Dr. Suchin adequately alleged all five elements with respect to both plans.

Unlike the original complaint, the amended complaint alleges that Fresenius made a promise to Dr. Suchin by stating the more generous benefit amounts for both plans on its employee website. “These allegations, which were not present in the original Complaint, suffice to elevate Fresenius’s alleged communications from the realm of omission to the realm of affirmative misrepresentations.”

As for whether reliance on these promises was reasonable, the court said that Dr. Suchin is only required to plead plausible facts from which it can infer reasonable reliance, but that he is not required to affirmatively prove that his reliance was reasonable at this stage. “Viewing the facts in the light most favorable to the plaintiff, the Court cannot conclude that as a matter of law Suchin’s reliance on Fresenius’s misstatements – coupled with the alleged omissions – was unreasonable.”

On the third prong, the court held that Dr. Suchin has sufficiently alleged he was injured by relying on Fresenius’s actions. The court also found that, assuming Dr. Suchin’s account of what occurred is true, “it would be unjust to deny him relief.”

Fifth, and last, the court found that the allegations in the complaint of Fresenius’s failure to provide plan documents and its website that misstated benefit amounts constitute extraordinary circumstances justifying equitable relief. At best, the court found the complaint’s allegations paint a picture of gross negligence, and at worst, intentional deception.

In addition, the court rejected Fresenius’ argument that Dr. Suchin cannot receive equitable relief that is at odds with unambiguous plan terms. The court explained that “to hold that estoppel cannot vary unambiguous plan language even when the defendant never provided the plaintiff with that language would be to defeat ERISA’s policy of ‘requiring the disclosure and reporting’ of plan information ‘to participants and beneficiaries.’” The court found the idea of such a ruling absurd. It stressed that plan documents, no matter how clear, are of no use to employees “if they have no way to read that plan.” 

For these reasons, the court denied the motion to dismiss counts one and two insofar as they seek equitable estoppel.

Nevertheless, the court reached a different result with regard to reformation. In contrast to equitable estoppel, the court concluded that Dr. Suchin did not adequately plead entitlement to reformation in counts one and two. The court reiterated that reformation for fraud is only an available remedy where the fraud is in the formation of the contract, and not where, as here, the allegations of fraud and misrepresentations center on events that took place after Dr. Suchin already agreed to be bound by the terms of the plans. Because “the alleged fraud was subsequent to and unrelated to the plaintiff’s assent to the contract,” the court granted the motion to dismiss the claims for reformation, this time with prejudice.

Regardless of the dismissal of reformation as a form of relief available to Dr. Suchin, the decision allows all three of Dr. Suchin’s claims to proceed past the pleading challenge. What equity will require at the end of the journey remains to be seen.

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

Attorneys’ Fees

Second Circuit

E.V. v. United HealthCare Oxford, No. 22 Civ. 2855 (VM), 2024 WL 3534405 (S.D.N.Y. Jul. 25, 2024) (Judge Victor Marrero). Last September, the court granted summary judgment in favor of plaintiffs E.V. and L.V. on their claim for healthcare benefits and ordered the United Healthcare defendants to pay for the costs of L.V.’s stay at a residential treatment center in this ERISA medical benefits action. In that same decision, it should be noted the court denied plaintiffs’ motion for judgment on their claim for violation of the Mental Health Parity and Addiction Equity Act. Plaintiffs have since moved for attorneys’ fees, costs, and interest pursuant to Section 502(g)(1). Plaintiffs moved for an award of $48,105 in attorneys’ fees, $400 in costs, and prejudgment interest at 8.5%. In this decision the court granted plaintiffs’ motion. As a preliminary matter, the court agreed with plaintiffs that they achieved success on the merits which entitles them to fees. The court was also “mindful that ‘ERISA’s attorney’s fee provisions must be liberally construed to protect the statutory purpose of vindicating employee benefits rights.” It therefore wished to fully compensate attorneys Brian King, Robert Liebross, Samuel Hall, and Tara Peterson for their work. Plaintiffs submitted the following rates per hour: Brian King, lead counsel – $600, Robert Liebross, local counsel – $600, Samuel Hall, associate – $325, and Tara Peterson, associate – $325. In addition, plaintiffs submitted the following numbers of hours each attorney worked on the matter: King – 66.8 hours, Liebross – 4.6 hours, Hall – 0.7 hours, and Peterson – 15.5 hours. Defendants did not dispute that the hourly rates were reasonable, but argued in favor of a 50% reduction in the number of hours to reflect that plaintiffs were only successful on half of their claims. The court agreed that the hourly rates were reasonable and in line with prevailing rates and therefore did not reduce the rates. But the court disagreed with defendants’ assertion that partial success should result in a severe reduction of plaintiffs’ award. And more generally, the court found the time spent on the complaint was reasonable. The only reduction the court applied to the requested fee award was a 10% reduction in response to counsel’s decision to put their most senior attorney on tasks like legal research and preparing initial drafts of case documents, which were tasks the court found more suitable for more junior lawyers. Accounting for this $4,810.50 reduction, the court was left with an attorneys’ fee award totaling $43,294.50. The court did not, however, reduce the requested $400 in costs, as this amount was simply the cost of the complaint’s filing fee in the case and defendants did not object. Finally, the court agreed with plaintiffs that 8.5 percent interest fairly compensates them and therefore granted their request for prejudgment interest at this rate.

Breach of Fiduciary Duty

Third Circuit

Kruchten v. Ricoh U.S., Inc., No. 23-1928, __ F. App’x __, 2024 WL 3518308 (3d Cir. Jul. 24, 2024) (Before Circuit Judges Shwartz, Rendell, and Ambro). Relying on its decisions in Sweda v. University of Pa., 923 F.3d 320 (3d Cir. 2019), and, more recently, in Mator v. Wesco Distrib. Inc.,102 F.4th 172 (3d Cir. 2024), clarifying the pleading standards for excessive investment fee claims under ERISA, the Third Circuit Court of Appeals reversed the district court’s dismissal of this fiduciary breach fee action asserted against the fiduciaries of the Ricoh USA, Inc. defined contribution plan. Upon consideration of its own precedents, the Third Circuit agreed with the participant plaintiff-appellants that their allegations closely matched those of the Sweda and Mator plaintiffs and that they therefore sufficiently pleaded plausible claims alleging defendants breached their responsibilities and fiduciary duties under ERISA. Specifically, the appellate court found plaintiffs established meaningful benchmarks by compiling a list of retirement plans and the recordkeeping and administrative fees they paid and comparing those figures to the Ricoh plan. Moreover, the court stated that, contrary to defendants’ position, “the Complaint’s allegations that the RK&A services market is commodified and competitive are not mere ‘conclusions’ that we must reject… While Defendants contend that there are varying types of RK&A services and the charges logically diverge, this is a factual claim that must be determined at a later stage in the case.” Further supporting the court’s conclusion that plaintiffs stated claims for fiduciary breach was the fact that plaintiffs alleged other wrongful behavior and supporting circumstantial evidence, such as defendants’ failure to solicit bids from competing recordkeeping providers. While the Third Circuit clarified that these allegations on their own are not enough to state plausible claims, they nevertheless found them to be important supporting evidence of plan mismanagement. The court of appeals also rejected defendants’ attempts to pick apart plaintiffs’ calculations, reminding the parties that at this early stage in the litigation “plaintiffs will necessarily be limited to calculations based on publicly available data.” Finally, the Third Circuit said any differences in the particular details between this action and those of the Sweda and Mator cases were immaterial. “Instead, the lesson from Mator is that plaintiffs need to establish that the comparisons they provide are appropriate. We believe Plaintiffs here satisfied this requirement with factual allegations showing how peer plans were indeed similar.” For this reason, the district court’s order dismissing the complaint was reversed and the action was remanded for further proceedings.

Class Actions

Seventh Circuit

Holloway v. Kohler Co., No. 23-CV-1242-JPS, 2024 WL 3518644 (E.D. Wis. Jul. 24, 2024) (Judge J.P. Stadtmueller). Four participants of the Kohler Co. Pension Plan initiated this action both individually and on behalf of a putative class of similarly situated participants and beneficiaries receiving pension benefits in the form of a joint survivor annuity from the plan. Plaintiffs allege that the Kohler Co. and the pension plan are violating ERISA by using outdated mortality tables and actuarial assumptions to calculate joint and survivor annuity benefits, thereby miscalculating benefits which are not the actuarial equivalent of the single life annuity benefits offered under the plan. This April, the parties notified the court that they had reached a settlement. Plaintiffs subsequently moved for preliminary approval of class action settlement. In this decision the court granted the motion, conditionally certified the 500-member class, and preliminarily approved the parties’ proposed $2.45 million settlement agreement. Starting with the proposed non-opt out settlement class of participants and spouse beneficiaries receiving a joint and survivor annuity, the court agreed that “at this juncture, there is no barrier to conditional certification of the proposed class.” It also found the definition of the settlement class clear and based on objective criteria. Moreover, the court agreed with plaintiffs that the class satisfies Rule 23(a)’s numerosity, commonality, typicality, and adequacy requirements. The court was additionally persuaded that certification of the non-opt out class under Rule 23(b)(1) was appropriate as failure to certify the class would run the risk of individual claims resulting in contradictory and inconsistent rulings. Thus, the court found that certification will prevent differential treatment of class members by the plan. Accordingly, the court preliminarily certified the proposed class. Turning to the terms of the proposed settlement, the court concluded that it is “within the range of possible approval’ with respect to the criteria set forth in Rule 23(e)(2) and that the Court ‘will likely be able to…approve the proposal under Rule 23(e)(2).’” While stipulating that it was reserving full examination of the settlement until the final approval stage of the proceeding, the court stated that it generally agreed on first inspection that the settlement, representing approximately one-third of the damages calculated by plaintiffs’ actuarial expert, is a favorable result for the class, and noted that “Judge Lynn Adelman recently approved a similar settlement in a virtually identical case.” The court also completely held off considering the proposed award of attorneys’ fees and class representative awards. The decision concluded with instructions on sending notice to the class members and outlining the protocols for submitting objections at the fairness hearing.

Disability Benefit Claims

Eleventh Circuit

Sami v. The Guardian Life Ins. Co. of Am., No. 23-cv-20168-ALTMAN/Reid, 2024 WL 3495322 (S.D. Fla. Jul. 22, 2024) (Judge Roy K. Altman). Plaintiff Hari Sami brought this action to challenge The Guardian Life Insurance Company of America’s termination of his long-term disability benefits. Mr. Sami contends that Guardian’s decision was wrong on the merits. Mr. Sami also maintains that he did not receive a full and fair review of his appeal because Guardian failed to timely provide him with new evidence, including medical file review reports from two reviewing doctors and a vocational transferability of work skills report, and thus denied him “a reasonable opportunity to respond” to this information it relied upon in upholding its denial on appeal. In fact, Guardian provided this additional evidence to Mr. Sami on the very same day that it issued its final denial of his claim. Guardian’s handling of Mr. Sami’s administrative appeal was the central focus of this decision, ruling on the parties’ cross-motions for summary judgment on Mr. Sami’s Section 502(a)(1)(B) claim. To begin, the court clarified that Mr. Sami’s long-term disability benefit claim, originally filed on October 20, 2016, was “under the purview of the [Department of Labor’s] 2018 Amendment’s procedures.” As such, the court specified that Guardian was required to supply “any new or additional evidence considered, relied upon, or generated…in connection with the claim…sufficiently in advance” of the determination deadline to give the claimant the opportunity to engage and respond to that evidence. Here, the court was unequivocal that Guardian failed to do that and thus “unlawfully deprived Sami of ‘a full and fair review of his claim and adverse benefit determination.’” Before issuing its final ruling, the court engaged with Guardian’s three arguments advancing its view that the delay in furnishing the vocational and doctors’ reports was not improper. These three arguments were: (1) the reports were provided “as soon as possible” as required under the regulation because they were provided to Mr. Sami as soon as they were completed; (2) Mr. Sami should not be able to argue that Guardian deprived him of the opportunity to respond to the review because he denied its request for an extension of review-period deadline; and (3) even if its lateness in supplying Mr. Sami with the new evidence was a technical procedural violation, such a violation was de minimis. The court disagreed on all three points. First, it reminded Guardian that the statute mandates that new evidence be provided both as soon as possible and sufficiently in advance of the date of the final adverse benefit determination to give the claimant the opportunity to respond. In this instance, the evidence was not provided in advance at all. The court therefore concluded that Guardian did not meet its requirements under the regulation. Second, the court flatly rejected Guardian’s attempt to shift the blame for its untimely disclosure onto Mr. Sami, stating, “it was Guardian’s responsibility – not Sami’s – to ensure that the appeal was given a full and fair review within the prescribed period.”  It clarified that it would not “rewrite the regulation’s timing requirements to add an exception for claimants who consent to further delays.” Third, the court held that Guardian’s “technical procedural violation” argument was absurd and wrote that “[b]y definition, this failure deprived Sami of a full and fair review within the meaning of ERISA.” For these reasons, the court agreed with Mr. Sami that Guardian failed to conduct a full and fair review of his claim under ERISA and thus entered judgment in his favor and against Guardian. However, the court stressed that Guardian’s failure resulted in an incomplete administrative record, leaving it unable to rule at this juncture on the merits of Guardian’s decision to deny Mr. Sami’s claim. As a result, the court found that remanding to Guardian was the proper remedy under the circumstances. Finally, the court denied Mr. Sami’s request at this time for attorney’s fees under ERISA Section 502(g)(1), as it concluded that it would be inappropriate to award fees prior to Guardian’s review on remand. 

Discovery

Ninth Circuit

Truong v. KPC Healthcare, Inc., No. 8:23-cv-01384-SB-BFM, 2024 WL 3496865 (C.D. Cal. Jul. 17, 2024) (Magistrate Judge Brianna Fuller Mircheff). Plaintiff Sandra Truong moved to compel defendants to provide documents in response to her requests for production of documents in this employee stock ownership plan case. In Ms. Truong’s first motion, she requested the court order the KPC defendants to supplement their responses to provide documents reflecting internal discussions between committee members in response to Ms. Truong’s letters, as well as documents discussing the filing or anticipated filing of any Department of Labor Form 5500s. In her second motion, Ms. Truong sought production of engagement agreements between the plan and its trustee, defendant Alerus. The court granted both discovery motions, with the caveat that it did not agree with Ms. Truong that defendants had waived the ability to assert attorney-client privilege. However, the court agreed with Ms. Truong that the documents she seeks are relevant and proportional to the needs of the case and thus discoverable. To the extent that defendants wish to assert privilege, the court instructed that they have the burden of proving that privilege applies to each specific document or communication and that they must strictly follow the Ninth Circuit’s rules when producing the privilege log identifying the withheld documents. Finally, the court denied Ms. Truong’s motion for sanctions, holding that it did not find defendants’ conduct sanctionable.

Tenth Circuit

Phillips v. Boilermaker-Blacksmith Nat’l Pension Tr., No. 19-2402-TC-BGS, 2024 WL 3471333 (D. Kan. Jul. 19, 2024) (Magistrate Judge Brooks G. Severson). In this certified class action former boilermaker workers allege that the fiduciaries of a multi-employer defined benefit pension plan, the Boilermaker-Blacksmith Pension Trust, violated ERISA when they terminated early retirement benefits by employing a new manner of interpreting the plan language to implement an unwritten “90-day separation of service rule” which makes retirees ineligible for pension benefits when they engage in any postretirement work for employers who contribute to the plan within 90 days after retiring from their boilermaker jobs. The matter at issue here was plaintiffs’ motion to compel recordings of defendants’ phone calls with class members related to pension benefit administration discussing the 90-day rule. Despite using these recordings thirty times during depositions and attaching a transcript of one of the recordings to their answer, defendants objected to producing them and have stonewalled plaintiffs’ prior attempts at obtaining the calls. In response to plaintiffs’ motion, defendants argued that the phone calls are irrelevant, and that producing them would impose an undue burden that is disproportionate to the needs of the case. It is important to note, however, that each party’s absolutist views regarding the calls – plaintiffs’ insistence that they are entitled to them as part of the administrative record and defendants’ contention that they are wholly irrelevant – stand in stark contrast to a compromise the parties reached over production of the written call logs in late March/early April of this year wherein defendants agreed to produce the call logs for ten class members identified by plaintiffs, a total of 144 out of the 2,963 calls related to all 111 class members. In this decision ruling on plaintiffs’ discovery motion, the assigned magistrate judge decided the proper course of action was to hold the parties to what was already agreed upon and order defendants to produce the remaining 135 recordings requested in the initial sample of 144 (defendants previously produced 9 of the call logs in question). The magistrate ruled that the calls are unquestionably relevant and beneficial to plaintiffs’ action as they “readily bear on a central issue of Plaintiffs’ case…and Defendants, themselves, have used calls relating to Plaintiffs’ benefits administration on numerous prior occasions.” The court nevertheless determined that production of all 2,963 call logs would be unduly burdensome and time consuming, estimating production would take approximately 1,753 hours and cost as much as $740,750. Instead, the court viewed the compromise already reached as just and appropriate and therefore ordered production of the sampling as previously agreed upon. Plaintiffs’ motion to compel was thus granted in part to reflect this decision.

ERISA Preemption

First Circuit

Buiaroski v. State St. Corp., No. 1:23-cv-12241-JEK, 2024 WL 3509884 (D. Mass. Jul. 23, 2024) (Judge Julia E. Kobick). Plaintiff Debapriya Buiaroski was substituted as the plaintiff in this action after her husband, Robert Buiaroski, died. Ms. Buiaroski alleges that her husband’s former employer, State Street Corporation, and its severance plan violated ERISA and state law by failing to pay severance benefits and other forms of promised compensation following Mr. Buiaroski’s resignation from State Street. Defendants moved to dismiss the breach of contract claim on the grounds that it is preempted by ERISA. The court granted the motion to the extent the claim seeks to recover severance benefits under the plan, but concluded that the claim survives to the extent it seeks to recover the non-plan forms of compensation allegedly promised to Mr. Buiaroski. The court did not agree with defendants that the breach of contract claim seeking promised bonuses, compensation, and moving expenses functioned as an “end run around ERISA.” To the contrary, the court held that “such a claim is not an alternative enforcement mechanism to ERISA’s civil enforcement scheme,” but instead “concerns an independent legal duty allegedly created by the separate oral contract.” The court disagreed with defendants that the breach of contract claim will duplicate or supplant an ERISA claim, require interpreting the plan, or relate to the plan or plan administration in any way. Thus, the court permitted the breach of contract claim to proceed insofar as it seeks other forms of compensation not related to the ERISA-governed severance plan.

Fourth Circuit

Western Va. Reg’l Emergency Physicians v. Anthem Health Plans of Va., No. 3:23-cv-781, 2024 WL 3497920 (E.D. Va. Jul. 22, 2024) (Judge M. Hannah Lauck). Plaintiffs are a collection of ER staffing groups who are out-of-network with the Anthem Blue Cross defendants. They initiated their state law action in state court in Virginia. Prior to defendants’ removal of this action, the state court dismissed all but one of plaintiffs’ claims with prejudice. Only their claim for quantum meruit remains. In this count, plaintiffs assert that they are entitled to restitution for providing emergency medical services to patients insured with Anthem Blue Cross. Defendants removed the action, arguing the quantum meruit claim is completely preempted by ERISA. The ER groups moved to remand their action. Their motion to remand was granted in this decision. The court agreed with plaintiffs that their claim was not completely preempted because they lack both statutory and derivative standing to sue under ERISA Section 502(a), notwithstanding the fact that they are assignees of benefits of some ERISA-governed health plans, “because the ER Groups assert no claims based on those assignments. In fact, the ER Groups expressly disclaim them.” And because complete preemption requires plaintiffs to have standing to assert their claims, the court concluded that it need not analyze whether the claims fall within the scope of any provision of ERISA or whether the claim is capable of resolution without interpreting the terms of any ERISA-governed welfare plan. Accordingly, the court granted the motion to remand the action back to state court for further proceedings.

Pension Benefit Claims

Fifth Circuit

Pedersen v. Kinder Morgan Inc., No. 4:21-CV-03590, 2024 WL 3541583 (S.D. Tex. Jul. 25, 2024) (Judge Keith P. Ellison). This class action lawsuit concerns retirement plan changes affecting early and normal retirement pension benefits for the retirees of Kinder Morgan Inc. The plans, now known as the Kinder Morgan Retirement Plans A and B, have changed hands several times over the years through a series of corporate mergers and acquisitions. Various iterations of the plans were created through these series of corporate transactions over the decades. The parties’ dispute in this action concerns four separate features of the Kinder Morgan retirement plans: (1) the formula used to calculate benefit accrual of normal retirement benefits which plaintiffs contend violates ERISA’s prohibition on backloading benefit accruals; (2) an amendment ending the plan’s previous policy of granting early retirement eligibility to employees who turned 55 and completed five years of service, which plaintiffs maintain violates ERISA’s anti-cutback rule; (3) a plan provision that was interpreted to reduce monthly retirement benefits for participants who began working for the company before the age of 35; and (4) the plan’s chosen mortality tables and interest rate which plaintiffs contend violate ERISA’s actuarial equivalence requirement. Four motions were before the court. Plaintiffs moved for summary judgment. Defendants cross-moved for summary judgment and also moved to exclude the testimony of plaintiffs’ expert and for leave to file a sur-reply in opposition to plaintiffs’ summary judgment motion. In its decision the court granted in part and denied in part each party’s motion for summary judgment and denied defendants’ motions to exclude and for leave to file a sur-reply. Plaintiffs bring six causes of action under ERISA; (1) violation of ERISA’s anti-backloading provisions; (2) violation of ERISA’s anti-cutback provision for normal retirement benefits; (3) failure to provide participants with proper notice of plan changes as required by ERISA’s disclosure requirements; (4) impermissible elimination of early retirement benefits in violation of ERISA’s anti-cutback provision; (5) wrongful interpretation of plan provisions to deprive participants access to their accrued early retirement benefits; and (6) violation of ERISA’s actuarial equivalence requirement (count six was pled in the alternative to counts four and five). The court entered judgment in favor of defendants on counts one and two, dismissed count six without prejudice as moot, and entered judgment in favor of plaintiffs on counts three, four, and five. Before addressing the merits of the six claims, the court specified that claims one and five involve issues of plan interpretation subject to abuse of discretion review, while claims two, three, four, and six present questions of statutory interpretation reviewed de novo. Also, the court denied defendants’ motion to exclude the testimony of actuarial expert Michael L. Libman, a pension actuary with over forty years of experience and expertise on pension issues. The court stated it found Mr. Libman’s testimony reliable and helpful. With these preliminary matters addressed, the court transitioned to assessing the merits of the six claims. First, the court found that defendants’ interpretation of the plan provisions permitting the “projected Credited Service” figure to allow for it to exceed a 30-year maximum and concluding there is no limit on credited service projected to the normal retirement was not an abuse of discretion or a violation of ERISA’s anti-backloading rule, Section 204. The court ruled that the plan language was clear and that it could have imposed a 30-year limitation on the relevant provision, but did not. Therefore, the court concluded that the administrator’s determination was correct and that the plan complied with ERISA’s fractional rule. Next, the court disagreed with plaintiffs that defendants retroactively changed the plan’s formula to decrease any already-accrued benefits in violation of ERISA’s anti-cutback provision for normal retirement benefits. The court accordingly granted judgment in favor of defendants on counts one and two. However, the court agreed with plaintiffs that defendants failed to understandably disclose to participants how the fraction used to compute retirement benefits worked in the summary plan descriptions “to communicate to an average participant that employees hired before age 35 would not earn benefits equal to 2% of their average pay, as described in the normal retirement benefit formula.” It held that the SPD’s “lack of clarifying examples and illustrations has the effect of misleading participants.” The court also agreed with plaintiffs that defendants violated ERISA’s anti-cutback provision with regard to early retirement benefits and that the challenged plan amendments “unlawfully eliminated their ability to accumulate service that would make them eligible for early retirement benefits.” The court also interpreted the plan “such that Plaintiffs [are] entitled to unreduced benefits at age 62,” and thus concluded that defendants’ most recent interpretation of the plan holding otherwise amounts to an abuse of discretion. Thus, judgment was granted in favor of plaintiffs on these three causes of action. Finally, because the court granted plaintiffs’ motion for summary judgment as to claims four and five, it declined to address plaintiffs’ alternative arguments advanced under claim six and therefore dismissed this claim as moot. Complex ERISA cases have complex ends.

Ninth Circuit

Metaxas v. Gateway Bank F.S.B., No. 20-cv-01184-EMC, 2024 WL 3488247 (N.D. Cal. Jul. 18, 2024) (Judge Edward M. Chen). This action was filed in 2020, when plaintiff Poppi Metaxas challenged a denial of benefits under a supplemental executive retirement plan, a top-hat plan, following her disability-related retirement in 2013. Ms. Metaxas filed claims under ERISA Sections 502(a)(1)(B) and (a)(3). In August of 2022, the court granted summary judgment in favor of Ms. Metaxas on her claim for benefits and remanded to the plan’s administrative committee for reconsideration. In March 2023, the committee found that Ms. Metaxas was entitled to monthly benefits of $9,252.95 since the date of her retirement on May 1, 2013. Ms. Metaxas appealed this decision. She believes she is entitled to benefits of $19,626.16 per month as well as interest on back benefits. In addition, she maintains that she is entitled to statutory penalties for failure to produce plan documents and relevant claim information upon written request under Section 502(a)(1)(A), as well as equitable relief for breach of the duty of good faith under ERISA Section 502(a)(3). The court reopened the case this March and permitted Ms. Metaxas to file a supplemental complaint asserting these three claims. Defendant Gateway Bank moved to dismiss for failure to state a claim. Its motion was granted without prejudice. First, the court concluded that to state a claim for benefits alleging entitlement to higher benefits and interest Ms. Metaxas will need to include a statutory basis, ERISA provision, or Plan term that entitles her to these benefits. It therefore granted dismissal of the claim in part with leave to amend. Next, the court found that Ms. Metaxas failed to establish that the relief she seeks under Section 502(a)(3) is appropriate equitable relief against a non-fiduciary. In particular, the court stated that the additional monetary relief beyond the plan benefits amounts to an equitable surcharge against the bank to compensate her for financial losses resulting from its breach and “a claim for equitable surcharge lies only against a fiduciary.” Again, this claim was dismissed without prejudice and Ms. Metaxas was instructed “to provide additional cases that support her use of duty of good faith in contract law for top-hat plans under ERISA sufficient to support a claim for equitable relief as sought here.” Finally, the court identified two issues with the claim for failure to produce required documents. One, it agreed with the bank that it is not a proper defendant under section 502(c) because it is not the plan administrator. Two, it determined that Ms. Metaxas failed to allege which documents she requested and the specific ERISA provision that governs disclosure of those documents. Like Ms. Metaxas’ first two claims, this claim too was dismissed with leave to amend to address these deficiencies.

Plan Status

Tenth Circuit

Bessinger v. Cimarex Energy Co., No. 23-cv-00452-SH, 2024 3498489 (N.D. Okla. Jul. 22, 2024) (Magistrate Judge Susan E. Huntsman). Plaintiff Jay Bessinger commenced this lawsuit in state court after he was denied severance benefits he alleges he is due under the Cimarex Energy Co. Change in Control Severance Plan following a corporate merger and a relocation of his job from Tulsa, Oklahoma to Houston, Texas. Cimarex removed the action to federal court and then promptly moved to dismiss Mr. Bessinger’s two state law claims. In its motion Cimarex argued that the severance plan is governed by ERISA and that the state law claims seeking benefits under the plan are preempted by ERISA. Mr. Bessinger disputes that the benefit plan is governed by ERISA and maintains that the plan does not require ongoing administration. However, Mr. Bessinger did not dispute that the plan is a welfare benefit plan established and maintained by his employer that provides benefits to a class of beneficiaries with a source of financing and claims procedures in place. As Mr. Bessinger did not dispute these other elements of the plan, the court focused its discussion on whether the severance plan requires ongoing administration. It concluded that it does for several reasons. First, the court noted that benefits under the severance plan are triggered by at least two events, including first a change in control and second any number of secondary triggering events varying from person to person which could be a reduction in pay, change in position, termination without cause, or, as in Mr. Bessinger’s case, relocation of employment beyond a 50-mile radius. Next, the court highlighted that the severance plan benefits consist of both a lump-sum bonus payment and monthly compensation for up to 24 months, as well as an obligation that Cimarex provide medical, dental, vision, disability, and life insurance benefits. “The monthly payments contemplated by the Severance Plan – along with the provision of medical, dental, vision, disability, and life insurance benefits to participants and their dependents over a potential four-year period – is enough to indicate that an ongoing administrative scheme was necessary.” But there was more. The court also pointed out that the plan has an administrative regime in place, that it grants discretionary authority, and that it requires individual analysis of benefit claims for each employee applying for benefits, meaning the benefits are contingent in nature. Taken altogether, the court was confident that the severance plan had all of the hallmarks of an ongoing administrative scheme and therefore found the plan to be governed by ERISA. Finally, the court agreed with Cimarex that Mr. Bessinger’s state law claims seeking benefits under the severance plan were clearly preempted by ERISA. Accordingly, the court dismissed the state law causes of action. Nevertheless, the court freely granted Mr. Bessinger leave to amend his complaint to plead causes of action under ERISA.

Pleading Issues & Procedure

Third Circuit

Bennett v. Schnader Harrison Segal & Lewis LLP, No. 24-592, 2024 WL 3511618 (E.D. Pa. Jul. 22, 2024) (Judge John Milton Younge). Attorney Jo Bennett brings this action on behalf of herself and a putative class against the fiduciaries of her old law firm’s 401(k) plan alleging numerous violations of ERISA. Broadly, Ms. Bennett alleges that during a period of financial difficulty the law firm failed to remit withheld compensation to the plan, improperly commingled funds meant to be plan contributions with the firm’s general assets, and used these deferred funds for the firm’s own purposes during the dissolution of the firm. Ms. Bennett further alleges that even prior to this period of financial stress and eventual dissolution the law firm allowed the funds to remain commingled for unreasonably long periods of time, which was inconsistent with plan terms, and thereby deprived participants of the opportunity to earn greater interest. Ms. Bennett asserts claims under ERISA Sections 102, 404(a)(1)(A), 404(a)(1)(D), 404(a)(1), 406(b), 405(a), and 502(a)(3). Defendants moved to dismiss the action pursuant to Federal Rules of Civil Procedure 12(b)(6) and 12(b)(1). Their motion was denied in this order. The court concluded that Ms. Bennett’s complaint plausibly states claims for interrelated violations of ERISA and expressed that the legal sufficiency of these claims could only be appropriately “assessed following discovery.” It added that there are disputes of fact between the parties, including whether the contributions in question are employee or employer contributions, what knowledge and involvement each of the relevant parties had, what inconsistencies may exist between the plan, policies and practices the fiduciaries engaged in, and the extent and length of the commingled funds. Given these factual issues present in the case, the court stated that dismissal would be inappropriate. Finally, the court stated that defendants’ arguments related to Ms. Bennett’s standing in her class action claims are premature and clarified they will be addressed later at the class certification stage.

Tenth Circuit

Jamie C. v. Health Care Servs. Corp., No. 24-2229-JAR-GEB, 2024 WL 3511532 (D. Kan. Jul. 23, 2024) (Magistrate Judge Gwynne E. Birzer). This is an ERISA health care benefits dispute involving the denial of claims for the residential treatment of a minor suffering from mental health conditions. Plaintiff Jamie C., the mother of the minor, moved for leave to proceed anonymously. She argued that this case is of a highly sensitive and personal nature, involving the private mental health history of her son, and that proceeding under a pseudonym herself is the only way to protect his privacy and prevent further trauma for them both. The court agreed with plaintiff and granted her motion. In reaching this decision, the court stressed the need to protect the identity of a minor with a history of severe mental health problems including suicide attempts and drug addiction, which are both highly sensitive and personal issues. The court was sensitive to the need to protect the family from further trauma, particularly the child, and also recognized that the insurance company knows the identity of the family and will not be prejudiced in the defense of this case with the plaintiff proceeding under a pseudonym. Accordingly, the court exercised its discretion to allow Jamie C. to proceed anonymously.