Pizarro v. Home Depot, Inc., No. 22-13643, __ F.4th __, 2024 WL 3633379 (11th Cir. Aug. 2, 2024) (Before Circuit Judges Branch, Grant, and Carnes)

Your ERISA Watch is cheating a little in this edition, as our case of the week is not actually from last week, but the week before. Rather than relegate this case to the sidelines last week (we highlighted two Texas decisions invalidating Department of Labor rulemaking instead), we decided to hold it over to this week for a fuller treatment.

As ERISA aficionados know, breach of fiduciary duty class actions against retirement plans and their fiduciaries have been all the rage in the last few years, and the courts have struggled in their efforts to clarify how exactly the parties should plead and litigate them. One recurring issue is the burden of proof – who has the burden to show what? Does the burden ever shift sides? The Eleventh Circuit offered some answers in this decision, but in doing so deepened a split among the federal courts.

The plaintiffs in the case are employees of Home Depot, Inc. and participants in the Home Depot FutureBuilder 401(K) Plan. The plan is massive, with about 230,000 participants and more than $9 billion in assets. It is run by two committees, the Investment Committee and the Administrative Committee. The plan contained multiple investment options, but only four were at issue in this case. One was a family of BlackRock “target date” funds, one was the JPMorgan Stable Value Fund, and the remaining two were funds that invested primarily in small-capitalization companies with long-term growth potential.

The plaintiffs filed this action in 2018, alleging two counts of breach of fiduciary duty against Home Depot and the two committees. In their first claim they contended that Home Depot “failed to adequately monitor the fees charged by the plan’s financial advisor for its investment advisory and managed account services, resulting in excessive costs for plan participants.” In their second claim, plaintiffs alleged that Home Depot “failed to prudently evaluate the four challenged investment options, and that this failure led Home Depot to keep the funds available despite their subpar performance.”

The district court certified a class of plan participants but ultimately ruled against the plaintiffs on summary judgment. Although the district court agreed that genuine disputes of material fact existed as to whether the defendants breached their fiduciary duty of prudence, it ruled that the plaintiffs could not show that any breach caused them a financial loss, and thus the defendants were entitled to judgment in their favor. (Your ERISA Watch covered this ruling in our October 12, 2022 edition.)

Plaintiffs appealed. The Eleventh Circuit began by identifying the two issues before it: “First, who bears the ultimate burden of proof on loss causation? And second, what must be proven to establish that element?”

On the first issue, the plaintiffs argued that the district court had gotten it wrong by placing the burden on them to prove loss causation. They contended that if a plan participant is able to prove that the fiduciary has breached its duty, the burden should shift to the fiduciary to prove that its breach did not cause any loss.

The Secretary of Labor agreed, weighing in with an amicus brief that argued that the common law of trusts, from which ERISA derives many of its principles, has a similar requirement. Indeed, both plaintiffs and the Secretary were able to point to cases from other circuits – namely the First, Fourth, Fifth, and Eighth – holding that the burden of proof on loss causation shifts to the breaching fiduciary.

The Eleventh Circuit was unimpressed. Citing its decision in Willett v. Blue Cross & Blue Shield of Alabama, 953 F.2d 1335 (11th Cir. 1992), the court held: “Our precedent already answers this question. ERISA does not impose a burden-shifting framework; instead, plaintiffs bear the ultimate burden of proof on all elements of their claims, including loss causation.”

The court reaffirmed Willett, stating that ERISA, like most federal statutes, “does not explicitly assign the burden of proof.” Thus, the “ordinary default rule” applies, i.e., “plaintiffs bear the burden of persuasion regarding the essential aspects of their claims.” Ruling otherwise “would turn the usual principles of civil liability on their head.”

The court acknowledged that “there are exceptions to this ordinary rule,” such as when the element of proof at issue can “fairly be characterized as affirmative defenses or exemptions.” However, the court did not agree that loss causation fell into this category, ruling that “causation is not an affirmative defense; it is an element of the plaintiff’s claim.”

The court further rejected the argument that the common law of trusts supported a reversal of the ordinary rule. The court admitted that burden-shifting was often employed under trust law because of “the trustee’s superior (often, unique) access to information about the trust and its activities.” However, “ERISA is not the common law.” The court stated that it was obliged to “give effect to the plain meaning of the statute” first, and only reluctantly incorporate trust law principles. This is because ERISA is “meaningfully distinct from the body of the common law of trusts,” and thus the court must “proceed carefully, and ‘only incorporate a given trust law principle if the statute’s text negates an inference that the principle was omitted deliberately from the statute.’”

Under this approach, the court could not find “any language suggesting that Congress’s omission of trust law’s burden-shifting framework for loss causation was anything but deliberate.” The court further noted that traditional trust law’s rationale for burden-shifting – i.e., the “informational advantage” of trustees – was less persuasive under ERISA because of ERISA’s “comprehensive scheme of mandatory disclosure and reporting,” which mitigated any such advantage. Thus, the court opined that “ERISA’s text, if anything, suggests that Congress dealt with the information imbalance problem by shrinking the gap, not shifting the burden.”

Having determined that plaintiffs retained the burden of proving loss causation at all times, the court turned to whether plaintiffs had satisfied that burden. The court split this issue up into two parts, as plaintiffs had argued that (1) they were charged excessive fees, and (2) defendants imprudently retained the four challenged funds after they underperformed.

The court ruled against plaintiffs on both issues. Regarding the fees, the court noted that they fell during the relevant time period, other large plans paid the same fees, and the comparators offered by plaintiffs were unhelpful. Specifically, the court observed that the plan’s service providers offered seamless integration with the plan’s recordkeeper, which justified a higher price, and that even in a worst-case scenario – i.e., using plaintiffs’ method of calculating fees – Home Depot’s fees were not an outlier and in fact were “at or better than the median in two years during the class period, and…never worse than the second quintile.”

As for the four challenged funds, the court ruled that plaintiffs’ arguments “suffer from a common flaw,” which was that their evidence was “drawn only from short time periods during which the funds underperformed their peers. A few here-and-there years of below-median returns, however, are not a meaningful way to evaluate a plan’s success as a long-term investment vehicle.”

Furthermore, the court stated that (1) “the BlackRock target date funds’ returns matched those of their peers and market benchmarks almost perfectly,” (2) the JPMorgan fund delivered positive returns throughout the time period, “met expectations,” and mostly outperformed its benchmarks, and (3) the two remaining small cap funds only had “short periods of relative underperformance” and were consistently monitored by Home Depot.

In short, the court ruled that “plaintiffs cannot show that a prudent fiduciary in the same position as Home Depot would have made different choices on either the plan’s service providers or the four challenged funds.” Thus, it affirmed in its entirety the district court’s summary judgment ruling in Home Depot’s favor.

The Eleventh Circuit acknowledged in its decision that its approach was different from that of other circuits. However, it only did so in a footnote, apparently attempting to underplay the fact that it was further accentuating a circuit split. Will the plaintiffs take the opposite approach, highlight this difference of opinion, and try to take this issue up to the Supreme Court? Stay tuned to Your ERISA Watch to find out.

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

Breach of Fiduciary Duty

Eighth Circuit

Ruebel v. Tyson Foods, Inc., No. 5:23-CV-5216, 2024 WL 3682230 (W.D. Ark. Aug. 6, 2024) (Judge Timothy L. Brooks). The court wrote in this decision ruling on the Tyson Foods Inc. defendants’ motion to dismiss, “When a case involves ERISA fiduciary claims, the level of scrutiny applied to the alleged facts is higher than in other types of cases.” This heightened pleading burden ultimately stymied plaintiffs’ action here, wherein they allege that the fiduciaries of the Tyson Foods, Inc. Retirement Savings Plan failed to act “with care, skill, prudence, and diligence” to ensure that the bundled recordkeeping and administrative fees paid to the plan’s service provider, Northwest Plan Services, were reasonable. The participants allege that defendants failed to solicit competitive bidding or take remedial actions to deal with the fees, and as a result, the per-participant recordkeeping fees paid were exorbitant and ended up hurting the participants investing for retirement. But in the Eighth Circuit, the analysis does not so much focus on whether the participants plausibly hurt by the alleged actions, but more on whether the services and plans offered in a complaint as comparators are adequately similar to the plan at issue. In the instant matter, the court concluded they were not. With regard to the services provided, the court latched onto the fact that Tyson informed plan participants in a fee disclosure notice that Northwest Plan Services provided legal, audit, investment guidance, and investment management services, in addition to the basic bundled recordkeeping services. The court saw this allegation as an “admission that the comparator plans were charged certain fees for basic Bundled RKA services, but Tyson may have been charged higher fees for extra services means that Plaintiffs have failed to state a plausible recordkeeping-fee claim.” Moreover, the court identified a second, independent problem with plaintiffs’ allegations: “Plaintiffs’ case must be dismissed…because the comparator plans are not similar enough to Tyson’s in terms of asset size to allow for meaningful comparisons.” The court disagreed with plaintiffs that the plans they provided as comparisons were similar enough to Tyson’s plan because they had roughly the same number of plan participants. Rather, the court viewed asset size as key to determining whether two plans are similar. In this case, the court found that because the assets of the five comparator plans were either much larger or much smaller than the assets of Tyson 401(k) plan, they were not similar enough to provide meaningful benchmarks. For these two reasons, the court determined that the complaint failed to meet the Eighth Circuit’s specific ERISA fiduciary breach pleading standards necessary to take the excessive fee claims from possible to plausible. The court therefore granted the motion to dismiss under Rule 12(b)(6), albeit without prejudice.

Class Actions

Eighth Circuit

Fritton v. Taylor Corp., No. 22-CV-00415 (JMB/TNL), 2024 WL 3717351 (D. Minn. Aug. 8, 2024) (Judge Jeffrey M. Bryan). The court entered final approval of class action settlement, certification of the settlement class, and the plan of allocation, and granted plaintiffs’ motion for award of attorneys’ fees, reimbursement expenses, and class representative service awards in this class action against the fiduciaries of the Taylor Corporation 401(k) plan for plan mismanagement and breach of fiduciary duties with respect to investment fees. The court ruled that the $485,000 settlement was the result of a good-faith negotiation conducted at arm’s length, and that it was favorable to plaintiffs. Accordingly, the court granted final approval to the settlement, which it was satisfied was fair, reasonable, and adequate. Additionally, the court certified the non-opt-out settlement class of plan participants and beneficiaries pursuant to Federal Rules of Civil Procedure 23(a) and 23(b)(1) for the class period, which was defined as February 14, 2016 through April 24, 2024. The court further determined that the class notice sent to the settlement class was reasonable and sufficient, and met all of the applicable requirements of the Class Action Fairness Act, the Federal Rules of Civil Procedure, due process, and any other applicable law. Pursuant to Federal Rule of Civil Procedure 23(g), the court confirmed its appointment of Edelson Lechtzin LLP and Capozzi Adler, P.C. as co-lead counsel and Gustafson Gluek PLLC as local counsel, as it found class counsel adequately represented the class. Accordingly, the court granted final approval of the settlement, thereby releasing plaintiffs’ claims against defendants. The court also awarded class counsel attorneys’ fees of thirty percent of the common fund, equaling $145,500, as well as $19,574.41 in litigation expenses, which it stated was reasonable in light of the success achieved and the complexity and uncertainty of the case. Finally, the court awarded class representative awards of $5,000 to each of the named plaintiffs, which it held was just compensation for the time and effort they devoted to this litigation. The parties’ dispute thus reached its final resolution with this order.

Eleventh Circuit

Pettway v. R.L. Zeigler Co., No. 7:23-CV-00047-LSC, 2024 WL 3656750 (N.D. Ala. Aug. 2, 2024) (Judge L. Scott Coogler). Plaintiffs filed an unopposed motion for preliminary approval of class settlement and preliminary class certification in this putative ERISA class action seeking statutory penalties for failure to provide annual pension benefit statements. Plaintiffs also claimed that defendants failed to provide minimum funding notices, but moved to drop this claim. In fact, the court’s decision began there, by analyzing the parties’ agreed-upon dismissal of this cause of action brought under Section 502(c). Although the court noted there is not consensus around whether Rule 23(e) applies to precertification dismissals, it found that even assuming Rule 23(e) applies, there was nothing that would warrant the court disapproving the dismissal, as there is no evidence of collusion and putative class members would not be prejudiced by dismissal of the claim. Accordingly, the court agreed to dismiss this claim without the need to send notice of the dismissal to the absent class members. The court then turned to conditional class certification for settlement purposes of the one remaining cause of action. Plaintiffs moved to certify a class of all participants of the R.L. Zeigler Co., Inc. Money Purchase Pension Plan, excluding defendants. As a preliminary matter, the court found that the class representative has standing as a plan participant who did not receive annual pension benefit statements. Next, the court conditionally found that the proposed class is adequately defined and clearly ascertainable. With these matters addressed, the court proceeded to analyze the class under Rule 23(a). It held that the 178-member class is sufficiently numerous, that plaintiffs’ allegations stem from defendants’ common failure to provide annual pension benefit statements, that the claim of the class representative is typical of those of the class, and that there is every indication that the class representative and class counsel, David Martin and Brad Ponder, are adequate representatives. For these reasons, the court determined that preliminary certification of the class is appropriate under Rule 23(a). And the same was true for Rule 23(b)(3). The court ruled that common questions regarding defendants’ failure to furnish pension benefit statements predominate over any individual questions, and the relative advantages of a class action lawsuit strongly outweigh any other available methods of adjudicating the matter and making class resolution inherently superior. Accordingly, the court conditionally certified the settlement class under Rule 23(b)(3). The decision then pivoted to its consideration of the proposed $253,700 settlement and the separate $265,000 attorneys’ fee fund. Given the “strong presumption favoring the settlement of class action lawsuits,” and the uncertain and entirely discretionary damages plaintiffs sought under Section 1132(c)(1), the court was strongly inclined to find the settlement fair, reasonable, equitable, and adequate. While reserving final judgment, the court preliminarily found the terms of the settlement acceptable, favorable, and adequate relative to the alleged harm. Thus, the court granted preliminary approval to the settlement. The court also agreed to the proposed method, form, and content of giving notice to the class and stated that it considered the notice program “the best practicable notice under the circumstances,” and satisfactory under “all applicable requirements of law.” For the foregoing reasons, plaintiffs’ unopposed motion for preliminary class certification and preliminary approval of class settlement was granted by the court.

Disability Benefit Claims

Third Circuit

Zuckerman v. Fort Dearborn Ins. Co., No. 2:22-cv-01993-JDW, 2024 WL 3696469 (E.D. Pa. Aug. 7, 2024) (Judge Joshua D. Wolson). Plaintiff Brian Scott Zuckerman was diagnosed with follicular lymphoma in September of 2020 and began receiving chemotherapy treatments the following month. At the time, Mr. Zuckerman was employed by Domus, Inc. and was a participant in a group long-term disability policy insured by defendant Fort Dearborn Life Insurance Company. On November 20, 2020, the plan terminated. Accordingly, Dearborn would not cover a disability that arose after that date. When Mr. Zuckerman applied for long-term disability benefits on July 21, 2021, Fort Dearborn denied the claim, explaining that he did not qualify as disabled under the plan before the plan terminated on November 30, 2020, because he continued to receive 100% of his regular weekly salary until May of 2021. Mr. Zuckerman challenged that decision in this action. As the plan granted Fort Dearborn full discretionary authority, the court applied deferential review in its adjudication of the parties’ cross-motions for summary judgment. Under an arbitrary and capricious review standard, the court ruled in favor of Fort Dearborn. It concluded that even if Mr. Zuckerman was correct that he was disabled as of October, 2020, and unable to perform the essential duties of his work, it would not make a difference because Fort Dearborn’s decision was supported by substantial evidence as Mr. Zuckerman was receiving his full salary despite his disability and “there is no gap to close” with insurance benefits. “Long-term disability insurance is premised on a need to replace lost wages due to an employee’s disability. But Mr. Zuckerman received his full pay for many months, rendering him not disabled as defined in the Plan, and therefore ineligible for LTD benefits. Substantial evidence supported Dearborn’s decision to deny his claim for benefits, so Dearborn is entitled to summary judgment, absent any evidence that it abused its discretion in rendering its decision.”

Eleventh Circuit

McCollum v. AT&T Servs., No. 2:22-cv-1513-AMM, 2024 WL 3656742 (N.D. Ala. Aug. 2, 2024) (Judge Anna M. Manasco). Plaintiff William McCollum worked for AT&T Services for over 34 years, until he was hospitalized due to risk of suicide in the summer of 2020, and subsequently applied for short-term, and later, long-term disability benefits. Mr. McCollum’s short-term disability benefit claim was approved from July 20 to October 20, 2020, but was denied thereafter. The AT&T defendants denied the claim at this point, determining that Mr. McCollum was no longer disabled under the terms of the plan because the medical records did not show he continued to have suicidal ideation or psychotic symptoms, and did not suffer from limited cognitive impairment or an inability to perform the activities of daily living. Mr. McCollum appealed, but AT&T ultimately upheld its conclusion that Mr. McCollum’s mental health diagnoses did not prohibit him from fulfilling any of the essential duties of his job. Additionally, defendants denied Mr. McCollum’s claim for long-term disability benefits, concluding that he was ineligible to receive them because he did not receive 26 weeks of short-term disability benefits. Mr. McCollum challenged both denials in this action asserted under ERISA Section 502(a)(1)(B). The parties filed dueling motions for summary judgment. In this decision, the court affirmed the denials under arbitrary and capricious review and entered judgment in favor of the AT&T defendants. It found that the denial was not wrong as a de novo matter, and that even if it were, it was not unreasonable or unsupported by substantial evidence. The court found that the reviewing psychiatrist had an accurate understanding of Mr. McCollum’s job description and that the doctor reasonably concluded that the medical records lacked documented functional impairments. Insofar as this case presented conflicting opinions by the parties’ doctors, the court expressed that it need not credit the opinion of Mr. McCollum’s treating providers over the opinion of the reviewing medical professional, particularly in light of a deferential review standard. Accordingly, the court affirmed defendants’ decision, granted defendants’ motion for summary judgment, and denied Mr. McCollum’s cross-motion.

Tunkle v. Reliastar Life Ins. Co., No. 2:23-cv-10-SPC-NPM, 2024 WL 3638011 (M.D. Fla. Aug. 2, 2024) (Judge Sheri Polster Chappell). Dr. Alyosha S. Tunkle brought this action for judicial review of defendant ReliaStar Life Insurance Company’s denial of his claim for long-term disability benefits. Before the onset of disabling hand tremors, Dr. Tunkle worked as a general surgeon for an oncology center. The dispute between the parties is a narrow one: whether ReliaStar properly determined that Dr. Tunkle was not actively employed from March 15-May 23, 2020, and, as a result, whether Dr. Tunkle’s tremors were a preexisting condition excluded from coverage when he applied for benefits in July, 2020. Dr. Tunkle maintains that he was actively employed, i.e., working more than 30 hours per week, until the end of July, 2020, and this odd gap in March, April, and May of 2020 was the result of a strange work pivot caused by the COVID-19 pandemic. He claims that he remained on-call as a surgeon, and that the roughly five hours per week that were recorded as his work hours during this time was simply a record of the number of hours he was actively performing surgery. Beyond those hours, Dr. Tunkle states he worked at home on various other tasks like reviewing patient medical records, communicating with the patients telephonically, researching, and consulting with other doctors. Thus, he asserts that his hand tremors were not a preexisting condition, and ReliaStar manipulated the coverage start date in order to deny coverage. Reviewing the parties’ cross-motions for summary judgment de novo, the court found that the administrative record supported defendant’s conclusion as “all documentation indicates Plaintiff was not actively employed from March 15th to May 23rd. Perhaps most compelling are the hourly logs that show Plaintiff worked only 9.5 hours each pay period during these two months (despite 72-80 hours recorded the rest of the year).” The court found ReliaStar sufficiently handled Dr. Tunkle’s claim because it diligently requested further documentation from him during the appeals process to support his actual hours worked. On the other hand, the court noted that Dr. Tunkle failed to address “what he believes is missing from the record.” And while the court stated it was reasonable to assume that Dr. Tunkle had performed extra work duties outside of his surgery and appointments during this two-month period, it nevertheless stressed that Dr. Tunkle failed to produce any documents reflecting this extra work. “Perhaps Plaintiff did, in fact, work the extra duties and hours, as he claims. But if he did, he failed to validate it sufficiently. So the court agrees with Defendant’s determination that Plaintiff was not actively employed from March 15th to May 23rd.” Taking things one step further, the court stated that it agreed with defendant that Dr. Tunkle was not actively employed as of mid-March, 2020, meaning May 25th, the date he returned to active employment, became his new coverage-effective date. Since Dr. Tunkle sought treatment for hand tremors on May 14th, this date occurred during the lookback period, and the tremors were thus a preexisting condition precluded from long-term disability coverage. Accordingly, the court held that defendant’s decision to deny benefits was proper. Based on the foregoing, the court affirmed the denial of benefits and entered summary judgment in favor of ReliaStar.

Discovery

Seventh Circuit

Havlik v. Univ. of Chicago, No. 23 C 2342, 2024 WL 3650153 (N.D. Ill. Aug. 5, 2024) (Magistrate Judge Jeffrey T. Gilbert). Plaintiffs are the thirty-six grandchildren trustees of the Edward S. Lyon Trust, who filed this action against the University of Chicago to challenge its denial of their claim for retirement benefits under ERISA. Plaintiffs assert that the Trust was the named beneficiary at the time of Mr. Lyon’s death and thus they are therefore entitled to benefits. However, as plan administrator, the University of Chicago denied plaintiffs’ claim for benefits after it determined that the spousal waiver signed by Mrs. Lyon’s power of attorney was invalid under Wisconsin state law because her power of attorney did not expressly delegate to her agent the authority to waive her spousal rights under any retirement plans. Plaintiffs assert two causes of action: a claim for benefits under Section 502(a)(1)(B) and a claim for breach of fiduciary duty under Section 502(a)(3). The matter before the court here was plaintiffs’ motion for leave to conduct oral discovery. Plaintiffs’ motion was denied by the court in this decision. “In the Court’s view and in its discretion, Plaintiffs need no additional discovery.” The court emphasized that the University of Chicago’s denial based on the spousal waiver signed by Mrs. Lyon’s agent “is the crux of this dispute,” and that the issue appears to be a legal rather than factual one. Accordingly, the court did not consider discovery likely to be helpful in the ultimate resolution of the case. The court elaborated that the information already contained in the administrative record is sufficient to resolve the parties’ dispute. Moreover, it expressed that it saw plaintiffs’ discovery motion as “impermissibly seeking discovery into the basis of the Plan Administrator’s decision…which is not permitted under ERISA.” Why the administrator reached its decision was, in the court’s view, immaterial to deciding “whether that decision was right or wrong.” Accordingly, the court denied plaintiffs’ discovery motion.

Medical Benefit Claims

Seventh Circuit

Midthun-Hensen v. Grp. Health Coop. of S. Cent. Wis., No. 23-2100, __ F. 4th __, 2024 WL 3646149 (7th Cir. Aug. 5, 2024) (Before Circuit Judges Skyes, Easterbrook, and Kirsch). The parents of a minor child with autism appealed one aspect of an unfavorable summary judgment decision issued last year in this lawsuit challenging their healthcare plan’s denials for speech and sensory therapies between 2017 and 2019 as experimental, unproven treatments for autism. Specifically, the family focused their appeal on the argument that the insurer, Group Health Cooperative, placed limits on autism treatment that violated the Mental Health Parity and Addiction Equity Act. Although Group Health Cooperative has since deemed these therapies eligible for coverage (having determined that updated medical literature supports both treatments as effective), it maintains that its denials at the time were not a violation of Mental Health Parity, because any differences between benefits for autism and for physical musculoskeletal conditions were attributable to differences in the underlying medical literature on which it relied, and not to any difference in its overall treatment of mental or physical conditions writ large. The Seventh Circuit agreed with Group Health Cooperative’s position and the district court’s findings in its decision here. The court of appeals broadly held that insurance providers are entitled to rely on medical literature and to limit coverage to “evidence-based treatments,” even when that medical literature has divergent recommendations for mental health conditions, “so long as its process for doing so applies to mental-health benefits and medical benefits alike.” Here, the Seventh Circuit concluded that the restrictions on coverage for autism therapies were a reflection of what the source literature said, and therefore not a violation of the Parity Act. Moreover, the appeals court ruled that the parents’ challenge failed for an even more basic reason: they identified only a single medical benefit that was handled differently from the mental health benefits they sought for their child. The court of appeals emphasized that the statutory provision requires mental health benefit treatment limitations not be more restrictive than treatment limitations applied to “substantially all medical and surgical benefits covered by the plan.” Without defining exactly what “substantially all” means for the purposes of successful Mental Health Parity claims, the Seventh Circuit stated that “[n]o matter how much space ‘substantially’ leaves, a showing that an insurer limits a mental-health benefit more than it does one medical benefit cannot show that it so limits substantially all such benefits.” It went on to clarify that ERISA plaintiffs cannot get around this statutory language simply because a district court denied them the opportunity to pursue discovery. Underscoring “discovery is not required before summary judgment,” the Seventh Circuit held that the district court had not abused its discretion and that plaintiffs failed to show error and prejudice. Accordingly, the court of appeals did not disturb the lower court’s rulings and affirmed.

C.W. v. United Healthcare Servs., No. 23-cv-04245, 2024 WL 3718203 (N.D. Ill. Aug. 8, 2024) (Judge Sharon Johnson Coleman). The pleading standard for asserting a claim for violation of the Mental Health Parity and Addiction Equity Act is fluid across the country at the moment. In the Seventh Circuit there is no clear pleading standard for a Parity Act claim. However, many courts within the Seventh Circuit have declined to implement the strict standard that defendants United Healthcare Services, Inc. and United Behavioral Health sought to impose here, where they argued that ERISA plaintiffs must identify a specific mental health benefit limitation, identify analogous medical or surgical care covered by the plan, and allege a disparity between the two in order to state such a claim. The court here “follow[ed] suit,” and denied defendants’ motion to dismiss plaintiff C.W.’s Section 502(a)(3) Parity Act violation claim. The court was satisfied that C.W. “plausibly alleged facts and hypotheses” that his health insurance plan applies more stringent and restrictive treatment limitations to mental healthcare and substance abuse treatment services than it does for medical and surgical services. The court noted that C.W. alleges that the plan depends on “generally accepted standards” of care, but imposes more restrictive guidelines to evaluating the medical necessity of residential treatment centers for the treatment of addiction and mental healthcare than it does for facilities that provide other types of medical rehabilitation. Thus, the court found that the complaint alleges a plausible disparity, and that such facts are enough at this stage to plead a claim that a plan violates the Mental Health Parity Act. For these reasons, the court declined to dismiss the Parity Act claim at this early juncture in the litigation.

Tenth Circuit

G.W.-S. v. United Healthcare Ins., No. 2:19-cv-810-RJS-DAO, 2024 WL 3652029 (D. Utah Aug. 5, 2024) (Judge Robert J. Shelby). In 2016 and 2017, plaintiff C.L. was a minor in need of psychiatric interventions, as he was experiencing suicidal ideation, auditory hallucinations, and fantasies involving satanic worship. After an acute hospital stay, C.L. received treatment at a residential treatment center for approximately eight months from July 2016 to March 2017. This case arises from United Healthcare’s denials of coverage for that treatment. C.L. and his mother, G.W.-S., asserted two causes of action against United Healthcare and its affiliates: a claim for wrongful denial of benefits under Section 502(a)(1)(B), and a claim for violation of the Mental Health Parity and Addiction Equity Act under Section 502(a)(3). The parties submitted competing motions for summary judgment. Following a succession of recent similar decisions from the District of Utah, the court entered judgment in favor of the plaintiffs under arbitrary and capricious review of the benefits claim, determined that remand was the proper remedy, concluded the Parity Act claim was moot in light of the reversal and remand, and held off deciding the matters of attorney’s fees, costs, and interest. Beginning with the plan benefit denials, the court concluded that United’s processing of the claims for benefits deprived the family of a full and fair review by not engaging with C.L.’s specific medical circumstances, ignoring the opinions of his treating providers, failing to adequately explain the basis for the denials, and by failing to engage in a meaningful dialogue to articulate why it chose not to credit the information the family submitted which supported the medical necessity of the treatment C.L. received. In addition, the court disagreed with United’s broad assertion that ERISA does not require the level of specificity plaintiffs argue for in claims denial letters. Without drawing a line describing exactly how much detail and engagement is required for denial letters to be adequate, the court said it was clear under governing Tenth Circuit precedent that United didn’t even approach the line in this instance. “What D.K. and David P. make clear is that ERISA requires something more than nothing.” Matters were only made worse, the court stated, by the fact that United arbitrarily denied the family two levels of internal appeals provided by the terms of the plans for 88% of C.L.’s claims. Accordingly, the court determined that United’s denials of the benefits for C.L.’s residential treatment was an abuse of discretion and reversed the denials. However, because the court reversed the benefit denials based on United’s failure to engage with C.L.’s medical information and failure to adequately explain its denial rationales, the court determined that remanding to United to conduct a proper review was the appropriate remedy. Nevertheless, the court cautioned United that it may only consider medical necessity on remand, as it conveyed no other rationale to the family when denying the claim for benefits. Finally, in view of the reversal and remand of the benefits claim, the court determined that the Parity Act claim was moot, and ruled that the issues of fees, costs, and interests were premature.

Pension Benefit Claims

Third Circuit

Carr v. Abington Mem’l Hosp., No. 23-1822, 2024 WL 3729861 (E.D. Pa. Aug. 8, 2024) (Judge Harvey Bartle III). Plaintiff Alice M. Carr sued Thomas Jefferson University and its defined benefit plan under ERISA after her claim for pension benefits was denied. Ms. Carr asserts two causes of action. In count one of her complaint she asserts a claim for wrongful denial of benefits pursuant to Section 502(a)(1)(B). In count two she alleges that Jefferson, as plan administrator, failed to timely furnish her with copies of her pension benefit statements, pension valuation, and personnel and wage records, and seeks daily penalties of $110 per day for each of the three items withheld under Section 502(c)(1). The parties filed cross-motions for judgment. As a preliminary matter, the court concluded that Ms. Carr’s action was timely under the terms of the benefit plan as she filed her complaint three days before the six-month window closed after she exhausted the plan’s administrative claims procedures. Having established that the claim for benefits was not time-barred, the court turned to the parties’ cross-motions for summary judgment relating to Ms. Carr’s Section 502(a)(1)(B) claim. The parties agreed that Jefferson has discretionary authority. The court therefore reviewed the denial of benefits under the arbitrary and capricious standard of review. Under this deferential review standard, the court concluded that the denial was reasonable and supported by substantial evidence, namely the employer’s contemporaneous records of Ms. Carr’s total hours of work annually. Although Ms. Carr pointed to Social Security records as evidence that she worked more than 1,000 hours for each of the five years at issue, the court noted that the records do not record her number of hours and that the documents she provided simply draw an inference that she worked 1,009 hours in 1998 based on her hourly wage. Because the administrator relied on its hourly employment records, and explained why those hours had a 59-hour mismatch with the Social Security records, the court stated that it was not unreasonable for the plan administrator to rely on those records, and that defendants afforded Ms. Carr a full and fair review of her claim. Accordingly, summary judgment was granted in favor of defendants on count one. However, the court entered judgment in favor of Ms. Carr on her statutory penalties claim and awarded her $4,070 for Jefferson’s delay in furnishing her a pension benefit statement. While the court stated that Ms. Carr may not have been prejudiced by the delay, it nevertheless found Jefferson’s conduct intentional and inexcusable, and noted the duty imposed by Congress on plan administrators under Section 502(c) to provide pension benefit statements in a timely fashion. However, because the statute does not expressly require administrators to provide personnel and wage records and pension valuations, the court declined to award additional statutory penalties for Jefferson’s failure to provide these documents to Ms. Carr.

Pleading Issues & Procedure

First Circuit

Llanos-Torres v. Home Depot P.R., Inc., No. Civ. 24-01058 (MAJ), 2024 WL 3639202 (D.P.R. Aug. 2, 2024) (Judge Maria Antongiorgi-Jordan). Plaintiff Evelyn Llanos-Torres sued her former employer, defendant Home Depot Puerto Rico Inc. and Home Depot USA, Inc., seeking payment of disability benefits under ERISA. Home Depot moved to dismiss the complaint, arguing it is not the proper party to this action because it does exercise control over the disability policy underwritten by Aetna Life Insurance Company. Home Depot attached the benefit plan to its motion to dismiss. It argued that the policy language clearly indicates that Aetna has the authority to review benefit claims and to make final claims decisions. Because Ms. Llanos-Torres did not dispute the authenticity of the document Home Depot attached, and as it is central to her claim for benefits, the court considered it while ruling on the motion to dismiss. Based on the unambiguous terms of the disability policy, as well as the allegations in the complaint stating that “the insurance company discontinued the processing of the claim,” the court concluded that Home Depot was not the entity that controls the plan and thus not a proper defendant in this action. Accordingly, the court determined that the complaint fails to state a claim against Home Depot under Section 502(a)(1)(B). Finally, to the extent that Ms. Llanos-Torres sought to assert a claim for breach of fiduciary duty under Section 502(a)(2), the court stated that such a claim also fails because suits under 502(a)(2) are derivative in nature and there is no indication that Ms. Llanos-Torres is bringing her action on behalf of the benefit plan. Home Depot’s motion to dismiss was thus granted.

Fourth Circuit

DeCoe v. CommScope, Inc., No. 5:24-CV-00025-KDB-DCK, 2024 WL 3659312 (W.D.N.C. Aug. 5, 2024) (Judge Kenneth D. Bell). Plaintiff James DeCoe sued his former employers in North Carolina state court after his employment at CommScope, Inc. of North Carolina was terminated on April 21, 2023. In his complaint, Mr. DeCoe alleges that he was wrongfully terminated, and denied wages and benefits owed under the company’s severance plan. Mr. DeCoe asserted claims for tortious interference with employment, wrongful termination, unpaid wages in violation of North Carolina’s wage and hour law, and wrongful denial of benefits under ERISA Section 502(a)(1)(B). Mr. DeCoe did not allege an ERISA interference claim under Section 510, although his complaint alleges that the company had a history of laying off employees “for cause” in order to deny them the opportunity of collecting severance benefits under the policy. Because Mr. DeCoe asserted an ERISA claim for benefits, defendants removed the action to federal court, and contended that ERISA provides the exclusive remedy for Mr. DeCoe’s unpaid wage and wrongful termination claims. In response to defendants’ removal, Mr. DeCoe moved to remand his action. Defendants, in turn, moved to dismiss the complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). In this decision, the court denied both motions. Beginning with jurisdiction, the court stated, “because DeCoe’s complaint asserts a separate claim for denial of unpaid benefits under ERISA, thereby satisfying federal-question jurisdiction, Defendants properly removed his Complaint to this Court and Plaintiff’s Motion to Remand will be denied.” The court then swiftly addressed defendants’ motion to dismiss. It concluded that at this early stage in litigation, Mr. DeCoe “alleged facts which make his claims plausible” and that matters of ERISA preemption, the parties’ intent, the employers’ past practices and application of the severance policy, and other issues along these lines would “no doubt benefit from a full period of discovery.” Accordingly, the court said these disputes are not properly resolved on a motion to dismiss, and, as a result, left Mr. DeCoe’s complaint as is by denying the motion to dismiss it.

Kimner v. Duke Energy Corp., No. 3:23-cv-00369-FDW-DCK, 2024 WL 3708901 (W.D.N.C. Aug. 7, 2024) (Judge Frank D. Whitney). In a pro se complaint, plaintiff Audrey Kimner sued Duke Energy Corporation seeking benefits under two ERISA-governed 401(k) retirement plans belonging to her ex-husband. Defendant moved to dismiss the complaint. The court granted the motion to dismiss, concluding that Ms. Kimner failed to state a claim upon which relief can be granted. Specifically, the court identified two flaws in Ms. Kimner’s complaint. First, the court agreed with defendant that Ms. Kimner failed to exhaust administrative remedies available to her under the plans before initiating this lawsuit. In fact, Ms. Kimner does not allege, and it does not appear, that she submitted a claim for benefits under either plan before suing under ERISA. Second, the court stated that Ms. Kimner failed to present a valid Qualified Domestic Relations Order (“QDRO”) entitling her to alienation of her ex-husband’s retirement benefits. As Ms. Kimner admitted in her complaint, neither the South Carolina family court judge nor her ex-husband signed a domestic relations order. In addition, defendant introduced evidence that Ms. Kimner was not entitled to alienate her former spouse from the plans, as the judge issued an order relieving her ex-husband of any financial obligation associated with the retirement plans in April of 2018. Given the lack of a valid QDRO entitling Ms. Kimner to 401(k) plan assets, the court dismissed the complaint with prejudice pursuant to Federal Rule of Civil Procedure 12(b)(6).

Standard of Review

Third Circuit

Hawks v. PNC Fin. Servs. Grp., No. 23-2636, __ F. App’x __, 2024 WL 3664599 (3d Cir. Aug. 6, 2024) (Before Circuit Judges Bibas, Freeman, and Rendell). PNC Financial Services Group, Inc. and its long-term disability plan appealed the district court’s grant of summary judgment in favor of plaintiff-appellee Rhonda Hawks in this ERISA benefits action. On appeal, PNC argued that the district court misapplied the applicable standard of review, inappropriately considered evidence outside the administrative record, and failed to consider the plan’s language by essentially ignoring the “in the national economy” language with regard to the plan’s “own occupation” disability definition. The Third Circuit agreed on all three points and accordingly vacated and remanded. To begin, the court of appeals stated that defendants did not act arbitrarily and capriciously in looking to the Dictionary of Occupational Titles to assess whether Ms. Hawks could perform sedentary work given that the plan’s disability definition “expressly calls for an analysis of how the participant’s job is ‘normally performed in the national economy.’” Next, the Third Circuit disagreed with the lower court’s conclusions that defendants failed to consider all of the medical evidence and that the plan’s insurer engaged in “self-servingly selective use and interpretation of the medical records and fail[ed] to give appropriate weight to assessments and opinions of treating physicians.” To the contrary, the Third Circuit said that the denial was supported by substantial evidence and that defendants’ review was not an abuse of discretion. Finally, the appeals court held that the denial was not arbitrary and capricious even though defendants failed to subject Ms. Hawks to an independent medical examination and their initial claim determination letter was silent regarding the Social Security Administration’s favorable determination. Taken together, the Third Circuit concluded that the district court failed to give appropriate deference to the administrator’s decision, and that it incorrectly overturned a denial that was supported by substantial evidence. Accordingly, PNC was successful on its appeal as the summary judgment decision, as well as the district court’s accompanying fee decision, were overturned by the Third Circuit. 

Statute of Limitations

Ninth Circuit

Construction Laborers Pension Tr. for S. Cal. v. Meketa Inv. Grp., No. 2:23-cv-07726-CAS (PVCx), 2024 WL 3677278 (C.D. Cal. Aug. 5, 2024) (Judge Christina A. Snyder). Plaintiffs Construction Laborers Pension Trust for Southern California and its Board of Trustees sued the pension plan’s former investment counseling services provider, Meketa Investment Group Inc., and its managing principal, Judy Chambers, for breaches of fiduciary duties under ERISA, and, in the event the court determines defendants are not ERISA fiduciaries, alternative claims for breach of contract, breach of common law fiduciary duty, and negligence/gross negligence. In a previous order, the court granted in part and denied in part defendants’ motion to dismiss the complaint. The court granted defendants’ motion as to fiduciary breaches that were barred by ERISA’s six-year statute of limitations, and also granted dismissal of plaintiffs’ state law claims, which the court concluded were preempted by ERISA. The court otherwise denied defendants’ motion to dismiss as to the remainder of plaintiffs’ ERISA fiduciary breach claim. The court’s dismissal was without prejudice, and plaintiffs filed a second amended complaint asserting the same four claims for relief. Defendants once again moved to dismiss. Unlike the prior complaint, the court concluded that the second amended complaint alleges throughout that “defendants took affirmative steps to conceal their imprudent vetting of [the chosen fund manager] and its principals following the execution of the [contract],” and that defendants engaged in a multi-year concealment of the fund manager’s fraud, inexperience, and ill-advised investment decisions. The court found that these additional factual allegations “satisfy the concealment exception and [] toll the statute of limitations.” In addition, the court expressed that it views the issue of whether defendants took steps to hide the alleged fiduciary breaches to be a question of fact, inappropriate for resolution on a motion to dismiss. Finally, the court reaffirmed its earlier conclusions that plaintiffs otherwise stated a plausible claim for breach of fiduciary duty under ERISA and that the state law claims are preempted by ERISA. Accordingly, the court denied defendants’ motion to dismiss the ERISA fiduciary breach claim in its entirety, but again granted the motion to dismiss the three state law claims. Dismissal of the state law causes of action was without prejudice to plaintiffs reasserting them in the event that the court ultimately finds defendants are not ERISA fiduciaries.