
This was one of the lightest weeks in recent memory for ERISA decisions in the federal courts, with only a handful of cases reported. Have the courts finally figured out all of ERISA’s issues? Have benefit plans simply decided to approve every claim? Or is this merely a respite before the deluge? 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.
Class Actions
Fourth Circuit
McDonald v. Laboratory Corp. of Am. Holdings, No. 1:22CV680, 2024 WL 4513580 (M.D.N.C. Oct. 17, 2024) (Judge Loretta C. Biggs). Plaintiff Damian McDonald brings this ERISA breach of fiduciary duty action on behalf of the Laboratory Corporation of America Holdings Employees’ Retirement 401(k) Plan and a putative class of its beneficiaries and participants against defendant Laboratory Corporation of America Holdings (“LabCorp”). Mr. McDonald alleges that plan mismanagement has led to exorbitant costs in terms of recordkeeping fees, share classes, and revenue sharing. After his complaint survived pleading challenges (as Your ERISA Watch reported in our August 9, 2023 edition), Mr. McDonald filed the instant motion for class certification under Rule 23. LabCorp opposed certification. The court swiftly made two prerequisite findings: (1) there is a precisely defined class of plan participants and beneficiaries; and (2) Mr. McDonald is a member of the class he seeks to represent. With these matters settled, the court proceeded to evaluate the class under Rule 23(a). First, as the class contains over 55,000 members, there was no question that numerosity was satisfied. Second, the court found that common questions over fiduciary behavior and plan losses unite the class and the answers to those questions will resolve the central issue of whether LabCorp violated ERISA by breaching its fiduciary duties. Third, the court held that Mr. McDonald and the class members are bringing the same claims under the same legal theories, making him typical of the absent members. The court engaged in its longest discussion over the adequacy of representation prong in Rule 23(a). LabCorp argued that neither Mr. McDonald nor his counsel, attorneys Brand J. Hill and Michael McKay, satisfy the adequacy requirement because “the suit is being controlled entirely by Plaintiff’s counsel and Plaintiff’s counsel ‘has demonstrated a lack of integrity.’” The court addressed each of these arguments and found them unpersuasive. With regard to Mr. McDonald the court did not find the fact that he received information about the suit from his counsel as equating to a lawsuit controlled by the attorneys, as LabCorp represented. The court was confident that Mr. McDonald possesses a basic understanding of the facts of the case and the basics of the claims he is asserting regarding allegedly high plan expenses. As for the adequacy of proposed class counsel, the court characterized LabCorp’s argument as “a mere disagreement on the evidence surrounding the merits of the case,” and refused “to find that Plaintiff’s counsel is inadequate based on differing perspectives surrounding what appears to be the heart of Plaintiff’s claim.” Instead, the court felt assured that counsel are experienced and competent ERISA class action partitioners, capable of representing the interest of the class. Having ticked off the requirements of Rule 23(a), the court proceeded with certification under Rule 23(b)(1). With little hesitation, the court agreed with Mr. McDonald that failure to certify the class would create a risk of inconsistent and varying adjudications in individual actions that would establish incompatible standards of conduct for LabCorp. The court emphasized that this action is brought on behalf of the plan and adjudicating these claims therefore requires a determination as to the plan as a whole, not on individual claims by separate participants of the plan. The court therefore found certification proper under Rule 23(b)(1)(B) and consequently granted Mr. McDonald’s motion and certified the proposed class.
Pleading Issues & Procedure
Ninth Circuit
Paieri v. Western Conference of Teamsters Pension Tr., No. 2:23-cv-00922-LK, 2024 WL 4519963 (W.D. Wash. Oct. 17, 2024) (Judge Lauren King). Plaintiff Michael Paieri brought this putative ERISA class action against the Western Conference of Teamsters Pension Trust and its board of trustees alleging that the plan is using outdated mortality assumptions resulting in joint and survivor annuity benefits that are not the actuarial equivalent of single life annuity payments. Mr. Paieri’s complaint advances claims of breach of fiduciary duty and violations of ERISA’s anti-cutback provision and notice requirements. Defendants previously filed a motion to dismiss Mr. Paieri’s action. In their motion defendants focused heavily on arguments that Mr. Paieri lacks Article III standing to sue. The court, however, rejected these arguments and denied the motion to dismiss on June 21, 2024. (Your ERISA Watch’s summary of that decision can be found in our July 3, 2024 edition.) Discovery, which has been ongoing since September 2023, continued, and on June 30, 2024, Mr. Paieri received a voicemail from a putative class member, Stanley Sawyer. Mr. Paieri wishes to amend his complaint to add Mr. Sawyer as a named plaintiff and possible representative of one of the three potential classes, if necessary, to dispel defendants’ future arguments about representation and standing. “Like Paieri, Sawyer ‘challenges Defendants’ utilization of unreasonable actuarial factors to compute joint and survivor benefits’; however, unlike Paieri, Sawyer ‘elected the Optional employee and spouse benefit form and alleges that as a result of Defendants’ unlawful conduct, he has been underpaid and is receiving benefits that are less than the actuarial equivalent of the single life annuity.’” Because the deadline to amend pleadings set by the court’s scheduling order has passed, Mr. Paieri moved for leave to amend his complaint under Rule 16(b) and its “good cause” standard. The court determined that Mr. Paieri met that standard given the circumstances described above, which the court found demonstrated that Mr. Paieri acted diligently without undue delay. It also concluded that leave to amend was supported by the factors under Rule 15(a), including the interests of justice. The court differentiated the conditions here from those in Lierboe v. State Farm Mutual Ins. Co., 350 F.3d 1018 (9th Cir. 2003), and rejected defendants’ argument that Paieri lacks standing and therefore cannot amend his complaint to add a new plaintiff to fix that problem. The court held, “this is not a situation like Lierboe where standing [as to every claim], and therefore subject matter jurisdiction, was absent from the outset.” Furthermore, the court disagreed with defendants’ assertion that amendment would be futile because Mr. Sawyer would not be an adequate class representative, and stated that “denying leave to amend on these grounds would require [it] to leap ahead to a Rule 23 certification analysis.” The court found this inappropriate, especially as Rule 15(a) has a more generous standard than Rule 23 does. Finally, the court found that amendment would not cause much delay, and that it would in fact promote judicial efficiency, because it would not require a “lawsuit from scratch.” For these reasons, the court granted Mr. Paieri’s motion for leave to amend.
Provider Claims
Eleventh Circuit
Worldwide Aircraft Servs. v. Worldwide Ins. Servs., No. 8:24-cv-02020-WFJ-AAS, 2024 WL 4492230 (M.D. Fla. Oct. 15, 2024) (Judge William F. Jung). Health provider actions do not fit neatly in the world of ERISA. This is particularly true for providers that are out-of-network with a given insurance company. Although ERISA does not expressly name providers in its list of entities with the authority to sue directly for relief under the statute, ERISA’s complete preemption doctrine preempts any state law cause of action “that duplicates, supplements, or supplants” any exclusive ERISA civil enforcement remedy. This creates obvious tension whenever a healthcare provider wants or needs to take civil legal action against an insurance company to sue for reimbursement. Where does the obligation to pay arise – is it from state law or from the terms of an ERISA-governed plan? To help answer this somewhat amorphous question, courts have distinguished provider cases that challenge the rate of payment pursuant to a provider-insurer agreement and those challenging the right to payment under the terms of an ERISA beneficiary’s welfare plan. Although there are exceptions, courts typically agree that right of payment claims fall within the scope of ERISA Section 502(a), while rate of payment claims do not. Such was the thinking there. In this action an emergency transportation services provider, Worldwide Aircraft Services, Inc., is seeking reimbursement for water ambulance transportation from a cruise ship to the Bahamas from a health insurance policy provided by defendants Geoblue and CareFirst. Plaintiff’s action was filed in state court and raised three counts under state law for theft of services under a Florida insurance statute, quantum meruit, and civil conspiracy. Defendants removed the action to federal court arguing the state law claims are completely preempted by ERISA. Before the court here was defendants’ motion to dismiss pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). But the court never got there. Instead, it embarked on an independent investigation of its own subject matter jurisdiction, which it found wanting. Analyzing the action under the Supreme Court’s Davila preemption test, the court concluded that Worldwide Aircraft Services’ claims fall outside the scope of ERISA. The court found plaintiff’s claims “more akin to the rate of payment claims,” as plaintiff “takes issue with the amount of payment made.” The court stressed that plaintiff makes no allegation that the defendants completely denied reimbursement based upon the terms of the patient’s ERISA policy or that they failed to comply with any of the procedural requirements of ERISA. Instead, the provider insists that it was “not fully compensated when Defendants only paid $115,409 for the ground and air transportation but not the remaining $22,500 for the water transportation.” Thus, the court understood the provider’s challenge over the alleged underpayment as seeking compensation for rates that are reasonable pursuant to Florida law “regardless of whether such compensation is allowed under the plan administered by Defendants. The issue does not require an interpretation of an ERISA plan, but rather whether [plaintiff] can obtain the remaining amount of $22,500 under Florida law.” Fundamentally, the court disagreed with defendants’ assertion that this dispute is about their failure to discharge their duties under the ERISA-governed plan. Accordingly, the court concluded that it does not have subject matter jurisdiction and therefore denied defendants’ motion to dismiss as moot and remanded the suit for further proceedings in Florida state court.
Subrogation/Reimbursement Claims
First Circuit
Groden v. Epstein, No. 24-cv-10303-ADB, 2024 WL 4519724 (D. Mass. Oct. 17, 2024) (Judge Allison D. Burroughs). Joan Krupen was a beneficiary of the New England Teamsters Pension Fund who died on September 5, 2020. The Fund, however, did not learn of Mr. Krupen’s passing until November 2023. Although Ms. Krupen’s $1,725 monthly benefit was only payable for her lifetime, the Fund continued to make 38 monthly payments after her death, totaling $65,550. The executive director of the Fund, plaintiff Edward Groden, initiated this action, bringing claims under ERISA Section 502(a)(3), and for unjust enrichment under state law, seeking to recover the misappropriated pension funds. Defendant Dina Krupen Epstein, Joan Krupen’s daughter, has failed to appear in the action. Accordingly, plaintiff moved for default judgment against her in the amount of $76,140.39, comprised of the $65,500 in principal, pre-judgment interest of 12% or $5,244, and $5,346.39 in attorney’s fees and costs. Plaintiff’s motion was granted in this order. To begin, the court found that it has subject matter jurisdiction over this ERISA dispute. It then turned to the issue of liability and determined that the complaint states an appropriate equitable relief claim under ERISA against Ms. Krupen Epstein. “Specifically, the Complaint establishes that ERISA applies to the pension account in question, and it also establishes that Groden is a fiduciary within the meaning of Section 502(a)(3)…The monthly benefits that were incorrectly paid into Ms. Krupen’s account are indisputably pension plan assets, and the loss of these assets is a concrete injury.” However, the court determined that Mr. Groden’s state law unjust enrichment claim “relates to” the ERISA plan and is therefore preempted under ordinary ERISA preemption. Having established default liability under Mr. Groden’s ERISA claim, the court moved on to scrutinizing the requested damages. Mr. Groden supported his request for the principal amount with an affidavit that the court credited. In addition, the court exercised its discretion to grant pre-judgment interest based on Massachusetts’ twelve percent rate, also adopting plaintiff’s request. Finally, the court relied on plaintiff’s time entries for work spent on this matter, and upon review of that document found that attorney’s fees and costs in the amount of $5,346.39 was reasonable. Thus, the court granted plaintiff’s motion and entered default judgment against Ms. Krupen Epstein in the amount of $76,140.39.