McEachin v. Reliance Standard Life Ins. Co., No. 24-1071, __ F.4th __, 2024 WL 4759527 (6th Cir. Nov. 13, 2024) (Before Circuit Judges Sutton, Larsen, and Murphy)

Most ERISA-governed long-term disability benefit plans have limitations for various types of conditions, and one of the most common limitations is for disabilities caused by mental illness, which are typically restricted to 24 months. But what happens if you are disabled from a combination of physical and mental illnesses, or if you are disabled sequentially by physical and mental illnesses? Is coverage concurrent or consecutive? If benefits are payable, for how long? The Sixth Circuit addressed some of these questions in this week’s notable decision.

The plaintiff in the case is Annette McEachin, who was a human resources manager at Perceptron, Inc. in Michigan. In February of 2017 she was in an automobile accident that seriously injured her. To make matters worse, she had another car accident at the end of 2017.

As a result, McEachin underwent three major spinal surgeries over the next three years, attended physical therapy, and took injections and prescription medication for her pain and migraines. She also suffered from mental health issues, such as depression, anxiety, and disturbed sleep. In 2019, her situation worsened even further when her son committed suicide, resulting in post-traumatic stress disorder.

During this time, McEachin submitted a claim for benefits under Perceptron’s long-term disability employee benefit plan to defendant Reliance Standard Life Insurance Company, which insured the plan. Reliance approved her claim in June of 2017 and paid it for more than three years.

However, in October of 2020, Reliance terminated McEachin’s benefits, contending that she was no longer disabled. McEachin appealed, and Reliance reinstated her benefits. At that time Reliance contended that there were no mental health barriers preventing her from returning to work. However, based on the updated medical records, it agreed that “from a physical perspective” McEachin was still disabled.

Reliance terminated McEachin’s benefits again in April of 2021. McEachin appealed again. This time Reliance did not back down. It contended that McEachin could return to work “from a physical standpoint,” citing improvement in her medical records.

In its denial, Reliance acknowledged that McEachin still suffered from mental health issues as well, and even conceded that those issues were independently disabling. However, Reliance stated that the benefit plan had a 24-month limitation on benefits for mental disorders that “cause[d]…or contribute[d] to” her disability. Because McEachin had suffered from mental health issues since 2017, Reliance argued that the 24-month time period had expired and thus she was not entitled to any further benefits.

McEachin filed this action and the parties cross-moved for summary judgment. The district court agreed with Reliance that McEachin was no longer eligible for benefits due to a physical disability. However, the court also ruled that because McEachin remained disabled due to her mental health issues, she was entitled to an additional 24 months of benefits beginning in April of 2021. (Your ERISA Watch covered this decision in our March 29, 2023 edition.) Reliance tried to get the court to reconsider this ruling, but, as we reported in our February 7, 2024 edition, it was rebuffed. Neither party was very happy with the district court’s decision, so Reliance appealed and McEachin cross-appealed.

The Sixth Circuit began with Reliance’s appeal regarding the 24-month mental health disability extension. As usual, the court began with the text of the plan, which provided that “Monthly Benefits for Total Disability caused by or contributed to by mental or nervous disorders will not be payable beyond an aggregate lifetime maximum duration of twenty-four (24) months[.]”

The court noted that it had evaluated similar language in a previous case involving Reliance – Okuno v. Reliance Standard Life Ins. Co., 836 F.3d 600 (6th Cir. 2016) – and that this language required it to decide “whether McEachin’s total disability exists without regard to her mental-health conditions… If it does, if in other words her physical disabilities alone justify disability benefits, the mental-health 24-month clock does not start.” In doing so, the court noted that it was aligned with the Third, Fifth, Eighth, and Ninth Circuits.

Using this approach, the court agreed with the district court that the 24-month limitation period for mental health disability did not begin until April of 2021, when Reliance terminated McEachin’s benefits. In so ruling, the court emphasized that prior to that date Reliance had taken the position that McEachin was not disabled due to her mental health issues. Thus, it was not allowed to start the 24-month mental health clock any earlier than the date it terminated her benefits.

Reliance raised three arguments in response. First, Reliance argued that the plan’s “caused or contributed to” language meant that the clock should have started earlier because McEachin’s mental health issues “contributed to” her disability prior to April of 2021. The Sixth Circuit rejected this, noting that this argument had already been answered by Okuno. Furthermore, the court noted that the key question was “whether [McEachin’s] mental-health conditions ‘contributed’ to her ‘Total Disability’ during the relevant period. Until April 2021, it’s fair to say, they did not. Before then, her physical limitations alone sufficed to establish her ‘Total Disability,’ making the mental-health 24-month limitation irrelevant until then.”

Second, Reliance attempted to distinguish Okuno, but the Sixth Circuit stated that Reliance’s “approach requires squinting at Okuno so narrowly that it creates a mirage.” The court emphasized the broader applicable message of Okuno, which was that “the mere presence of mental-health symptoms does not trigger the start of a mental-health limitations period.” The court stated, “We must respect our decision in Okuno. Under that decision, a mental-health disability does not ‘cause or contribute to’ a ‘total disability’ if existing physical disabilities suffice by themselves to cause it.”

Third, Reliance relied on the decision of the Social Security Administration to approve McEachin’s claim for disability benefits. An administrative law judge ruled that depression and anxiety were components of McEachin’s disability, thus showing, according to Reliance, that McEachin’s disability from mental health issues had started earlier than April of 2021. However, the Sixth Circuit was not impressed. The court stated that the SSA’s decision “does not answer the question whether physical limitations alone created the ‘total’ disability,” and in any event “Social Security benefits operate differently[.]” The court noted that Social Security benefits do not have “similar on-off switches if the individual’s physical limitations improve but her mental-health limitations do not.” Instead, the SSA simply considers “the combined effect of all of the individual’s impairments…without regard to whether any such impairment, if considered separately, would be of such severity.”

The Sixth Circuit thus rejected Reliance’s appeal and moved on to discussing McEachin’s appeal. McEachin made two arguments. First, she challenged the district court’s finding that she was no longer disabled due to physical issues in April of 2021. Second, she argued that even if she was no longer physically disabled at that time, she was allowed to toll the 24-month mental health limitation.

The court flatly rejected McEachin’s first argument, agreeing with the district court that “[t]he record indicates that her physical conditions significantly improved… The frequency and severity of her migraines declined, physical therapy helped McEachin regain ‘full strength’ to her extremities, and MRI and x-ray scans displayed positive results.” McEachin herself had told her doctors that she felt better and could walk without a limp. Indeed, she “had returned to many physical activities, including a rafting trip a few months earlier.”

McEachin had more success with her second argument. She contended that the district court should have allowed her to use medical evidence after the date of her benefit termination to “toll the 24-month mental-disability clock after April 1, 2021.” Thus, even if she could not establish that she was disabled due to physical illness as of that date, the evidence “could be used to show that the mental-disability clock should not have run for certain months during the two-year period.”

The Sixth Circuit noted that McEachin had not made this argument below, but Reliance had not objected to it on appeal and thus it was not forfeited. Regardless, the court was not inclined to rule on it: “The district court should look at this point in the first instance.” However, the court observed that “nothing in the policy prohibits applicants from showing physical disabilities create a total disability at any point that the total disability exists. That suggests that McEachin may use her post-April 2021 evidence for a distinct reason – to show that the 24-month clock should have been tolled at certain points between April 2021 and April 2023, and that her eligibility for benefits thus may go beyond April 2023.” The Sixth Circuit concluded that “the district court should consider this argument and the application of it to the existing medical evidence in the record.”

As a result, it appears that Reliance’s appeal backfired. It got no relief while McEachin was able to obtain a remand, with favorable instructions, on her appeal. We now wait to see what the district court will do. As always, Your ERISA Watch will keep you posted on the results.

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

Attorneys’ Fees

Sixth Circuit

Davita Inc. v. Marietta Mem’l Hosp. Emp. Health Benefit Plan, No. 2:18-cv-1739, 2024 WL 4783910 (S.D. Ohio Nov. 14, 2024) (Magistrate Judge Kimberly A. Jolson). This action was brought by dialysis providers who allege that the terms of the Marietta Memorial Hospital Employee Benefit Plan set discriminatory and depressed rates of reimbursement for dialysis services. The parties were engaged in a protracted discovery dispute that ultimately found its way to the Sixth Circuit Court of Appeals. Plaintiffs won the day, as both the district court and the appeals court determined they were entitled to further discovery into defendants’ motive for instituting the unique reimbursement terms specific to dialysis treatment. Even after the Sixth Circuit’s decision, defendants resisted providing discovery, forcing plaintiffs to file a further motion to compel. Plaintiffs were again victorious. On May 8, 2024 the parties reported that their discovery disputes were resolved at long last, and on June 28, 2024 the court granted plaintiffs’ motion for attorneys’ fees and costs for defendants’ failure to engage in discovery and for their efforts to frustrate normal discovery proceedings. In this decision the court awarded plaintiffs $59,629.38 in fees and costs incurred between March 6 and May 8, 2024, which was less than the $114,065.16 plaintiffs requested. First, the court adjusted the hourly rates of plaintiffs’ five attorneys and one paralegal. Plaintiffs requested hourly rates of $1,372.80 per hour for partner James Boswell of King & Spalding, LLP, $1,328.80 per hour for partner Darren Shuler of King & Spalding, $968 per hour for associate Edward Benoit of King & Spalding, and $420.75 per hour for paralegal Jason Seufert of King & Spalding, as well as hourly rates of $570 and $880 per hour for the two local counsel, Kristine Wolliver and Traci Martinez of Squire Patton Boggs, LLP. The court cut these rates to $725 per hour each for attorneys Boswell, Shuler, and Martinez, $570 per hour for attorney Wolliver, $480 an hour for attorney Benoit, and $210 per hour for paralegal Seufert. The court relied on its own knowledge and experience, as well as other fee awards in the district, to set these hourly rates, which it felt were appropriate for partners at top law firms with decades of experience. Aside from the hourly rate reductions, the court also reduced the award of fees by 25 percent for the fees they incurred in moving for fees. The court rejected defendants’ argument that plaintiffs could not recover fees and expenses for the preparation of motions for fees at all, and otherwise declined to reduce the 71.6 hours they spent on the matter from March 6 until May 8, which it found reasonable and sufficiently recorded. With these reductions the court reached its total award of $59,629.38, which it ordered defendants to pay within 30 days.

Disability Benefit Claims

First Circuit

Barnes v. Unum Life Ins. Co. of Am., No. 2:23-cv-00280-LEW, 2024 WL 4751710 (D. Me. Nov. 12, 2024) (Judge Lance E. Walker). Plaintiff Lori Barnes brought this long-term disability benefit action to challenge Unum Life Insurance Company’s decision to discontinue the disability benefits that it had been paying her over the preceding twenty years. Ms. Barnes formerly worked for Unum as an executive account manager. She continued in this position until degenerative spinal conditions, scoliosis and radiculopathy incapacitated her to point where she could no longer sit, stand, or travel, and by extension, could no longer perform the essential duties of her occupation. For two decades, Unum classified Ms. Barnes’s conditions as sustained, chronic, and permanently incapacitating. Despite its long-term recognition that Ms. Barnes was permanently disabled, Unum changed course in 2022 when it redefined her former occupation and its essential duties, and sent a letter to her treating physician requesting the doctor’s opinion regarding Ms. Barnes’s limitations as recently redefined by Unum. The letter offered three possible responses, and the treating physician chose the “no opinion” option. This was a critical development for Unum, which relied on the response to terminate benefits, interpreting it to mean that no medical professional currently believed Ms. Barnes was disabled from her occupation. During the appeals process, the same doctor sent a letter clarifying her opinion, stating clearly that she believed Ms. Barnes could not perform her occupation. Unum did not give any weight to this, and affirmed its termination decision. In her litigation, Ms. Barnes argued that Unum acted arbitrarily and capriciously in her case. Although her medical condition remained unchanged over decades, and Unum deemed her disabled for decades, Ms. Barnes maintained that Unum acted in a self-serving manner to redefine her occupation to its own advantage. She argued that Unum acted unreasonably by overreacting to her doctor’s short-lived “no opinion” response, disregarding evidence in her medical record that reflected a disabling condition, and then by putting pressure on its own agents to support the denial. The court agreed with Ms. Barnes in every respect in this decision ruling on the parties’ competing motions for judgment on the administrative record. In rather remarkable language, the court wrote of its own disappointment “to review such an approach to claims handling by one of the nation’s leading providers of long-term disability benefits. All that I can assume on this record is that Unum hoped that nobody would notice, for even at the final stage of its vocational work around, the vocational consultant would not go so far as to suggest that the travel duties do not entail static standing and sitting demands.” The court was not only persuaded that Ms. Barnes had “produced meaningful and probative evidence to substantiate her disability,” but was also struck by “Unum’s concerted effort first to tilt and then reject the record presented by Barnes (as well as its own, long-standing, contrary record of finding disability year after year, which is never addressed),” and stated plainly that Unum’s action were “not only unreasonable but also arbitrary and capricious.” The court not only rejected Unum’s termination decision, but also concluded that remanding to Unum for a renewed evaluation would be inappropriate given the circumstances. Accordingly, the court brought “this matter to a conclusion with a retroactive reinstatement of benefits.” This decision was therefore an unequivocal victory for Ms. Barnes, and proof that deferential reviews are sometimes not “no review at all.”

Third Circuit

Brown v. Covestro LLC Welfare Benefits Plan, No. 24-1043, __ F. App’x __, 2024 WL 4751199 (3d Cir. Nov. 12, 2024) (Before Circuit Judges Chagares, Porter, and Chung). Plaintiff-appellant Douglas Brown appealed the district court’s summary judgment order affirming Standard Insurance Company’s determination that he was not totally disabled under the Covestro LLC Welfare Benefits Plan, and thus was no longer entitled to continuing long-term disability benefits. On appeal, Mr. Brown challenged the district court’s use of a deferential review standard, as well as its determination that substantial evidence supported the administrator’s adverse benefits decision. Mr. Brown’s arguments failed to persuade the Third Circuit. The Third Circuit stated that under the most plaintiff-friendly approach adopted by other courts of appeals, deferential review is only taken away from plan administrators who commit severe procedural violations. The court of appeals ruled that even if it were to adopt this approach as its own, it simply couldn’t find severe procedural errors in the handling of Mr. Brown’s claim. First, Mr. Brown argued that plan insurer Standard Insurance Company failed to set forth the specific reasons for its termination decision in the denial letter. The appeals court disagreed. It found that the letter clearly demonstrated that Mr. Brown was no longer disabled “in light of the definition of total disability under the plan,” and that the committee denied his claim because “he did not meet the criteria for disability from Any Occupation,” quoted from the plan’s requirements, and identified the evidence that supported its decision. The Third Circuit therefore held that the letter adequately explained the reasons for the decision to terminate benefits. Next, the Third Circuit addressed defendants’ failure to disclose a supplemental report from its reviewing doctor. The court of appeals determined that the committee wasn’t required to disclose this report because it didn’t tread any new ground and simply “analyzed information already known to Brown” with “no new facts or diagnosis.” Even if the committee ought to have disclosed the report, the Third Circuit said the failure to do so was a minor misstep and in no way a severe procedural violation. Mr. Brown was similarly unable to convince the appeals court that de novo review was required after the Department of Labor’s 2018 update to ERISA’s regulations because the defendants did not strictly adhere to the applicable procedural requirements as they failed to set forth the time he had to challenge their decision. The Third Circuit was clear that the updated ERISA regulation doesn’t compel de novo review because the Department of Labor itself seemed to walk back any implication that it intended the update “to establish a general rule regarding the level of deference that a reviewing court may choose to give a fiduciary’s decision.” For these reasons, the appellate court reiterated that the abuse of discretion standard of review was the appropriate review standard in the present matter. Under deferential review, the Third Circuit could see no reason to reverse the administrator’s decision. “The record contains ample evidence supporting the administrator’s determination that Brown was not totally disabled… The plan explains that an individual is only totally disabled if he cannot ‘work at any job’ when taking into account whether reasonable accommodations are available. Notably, Brown stated that he did not believe that he was disabled and continued to work as a teacher.” Given this record, the court of appeals found that substantial evidence supported defendants’ conclusion that Mr. Brown could perform light or sedentary work, such as his current teaching position, and therefore affirmed the termination decision and by extension the district court’s summary judgment order entering judgment in favor of defendants.

Eighth Circuit

Radle v. Unum Life Ins. Co. of Am., No. 4:21CV1039 HEA, 2024 WL 4751307 (E.D. Mo. Nov. 12, 2024) (Judge Henry Edward Autrey). The American poet Robert Frost once quipped about what a wonderful organ the brain is: “[i]t starts working the moment you get up and does not stop until you get into the office.” Plaintiff Michael Radle could likely relate. Mr. Radle began experiencing problems with his brain following a jogging accident in 2016 in which he hit his head on the concrete sidewalk. Something changed after that injury. Mr. Radle began experiencing persistent neurocognitive symptoms, including difficulty concentrating, headaches, light sensitivity, and personality changes. But neurology is a limited field of medicine, and the doctors couldn’t give Mr. Radle a satisfying diagnosis beyond “conversion/functional neurologic disorder” and “post-concussive syndrome,” both elimination disorders. As a result, Mr. Radle was only paid long-term disability benefits under his ERISA-governed policy for 24 months, at which time Unum Life Insurance Company of America determined that he had exhausted maximum lifetime benefits for mental illness coverage. In this lawsuit, Mr. Radle alleges Unum wrongfully terminated his benefits and seeks reinstatement of them. Unum conversely moved for judicial affirmance of its adverse decision. Unum won the day in this summary judgment decision. The court laid out its view that Unum’s determination was not de novo wrong because conversion disorder is a mental illness, and it was the conversion disorder which caused his disabling symptoms. The court disagreed with Mr. Radle that his physical conditions, post-concussion syndrome, and post-traumatic vision syndrome were responsible for an inability to work, citing normal neurological examinations. Therefore, the court found that Mr. Radle failed to establish by a preponderance of the evidence that Unum’s determination that his disability arose from a mental illness was in error. Accordingly, the court affirmed the length and amount of benefits Unum paid under the policy and entered judgment in favor of Unum.

ERISA Preemption

Fifth Circuit

Abira Med. Labs v. Wellmed Med. Mgmt., No. SA-24-CV-00578-XR, 2024 WL 4756909 (W.D. Tex. Nov. 12, 2024) (Judge Xavier Rodriguez). Plaintiff Abira Medical Laboratories, LLC alleges in this action that defendant WellMed Medical Management, Inc. failed to pay or underpaid for hundreds of lab tests it provided to insured patients between 2017 and 2021 which has resulted in damages valued at $443,790.43. Plaintiff originally filed suit in Texas state court, and asserted state law causes of action for breach of contract, quantum meruit, and account stated. WellMed subsequently removed the case to federal court pursuant to complete ERISA preemption and later moved for dismissal arguing that ERISA completely preempted the state law claims and that these claims also failed on the merits. The court only partially agreed and granted the motion to dismiss in this decision, with leave for Abira to replead. To begin, the court disagreed with WellMed that the state law causes of action are completely preempted by ERISA based on the current allegations. It wrote that Abira “alleges that the patients’ rights stem from WellMed’s insurance offering, not insurance provided by the patients’ employers.” WellMed argued that because the case involves several hundred patients it insures, it is all but certain that some of the plans must be employer-sponsored health insurance plans. The court found this argument too speculative. “Absent evidence of the plans themselves – which WellMed did not introduce – the Court cannot conclude that complete ERISA preemption applies.” Nevertheless, the court independently concluded that each of the state law causes of action fails on the merits. It determined that Abira could not sustain its breach of contract claim because it fails to allege a contractual relationship between itself and WellMed, that its quantum meruit claim is not viable under Texas state law, and that the account stated claim falls short of alleging a plausible agreement, either express or implied, by WellMed to pay these amounts. Accordingly, although the court did not adopt WellMed’s ERISA preemption arguments, it still agreed that Abira’s current complaint fails to state claims and therefore granted the motion to dismiss the claims against WellMed, with 30 days leave to amend.

Pleading Issues & Procedure

Eleventh Circuit

Lopez v. Embry-Riddle Aeronautical Univ., No. 6:22-cv-1580-PGB-LHP, 2024 WL 4769632 (M.D. Fla. Nov. 13, 2024) (Judge Paul G. Byron). Plaintiff Guillermina Lopez is a former employee of Embry-Riddle Aeronautical University, Inc. and a participant in its defined contribution retirement plan. In this putative class action, Ms. Lopez alleges that the university mismanaged its plan by selecting costly, and predominantly actively-managed, investment options when cheaper alternative investments were available, and by failing to monitor and control the plan’s recordkeeping fees. Defendant Embry-Riddle Aeronautical University moved for summary judgment. It argued that Ms. Lopez could not sustain her action because she lacks Article III standing. Specifically, defendant contends that Ms. Lopez cannot demonstrate two elements of Constitutional standing – injury in fact and redressability. The court agreed with the university that Ms. Lopez failed to demonstrate both elements. First, the court determined that Ms. Lopez failed to demonstrate she suffered a concrete and particularized injury in fact. In fact, the court agreed with defendant that not only did Ms. Lopez not personally invest in any of the challenged funds, but the evidence in the record firmly demonstrates that she paid what her own expert attests to be a reasonable amount in annual recordkeeping fees. Consequently, the court held that “there is no genuine issue of material fact as to Plaintiff’s lack of Article III standing.” The court further rejected Ms. Lopez’s arguments regarding class-wide damages, which in this case have been calculated to exceed $7 million. The court stated clearly that there is no ERISA exception to Article III nor any class action workaround to excuse a named plaintiff’s individual standing problems. Although the court could have ended its analysis with its finding that the university is entitled to summary judgment due to Ms. Lopez’s failure to demonstrate an injury in fact, it went on with its standing analysis of redressability. Here too the court agreed with defendant and its argument that a judicial remedy in this action might not make her better off, and to the contrary it is conceivable that Ms. Lopez is benefitting from the very practices she alleges are imprudent. Accordingly, the court determined that the university is entitled to summary judgment based on Ms. Lopez’s lack of Article III standing. However, the case was dismissed without prejudice.

Remedies

Eighth Circuit

Krebsbach v. The Travelers Pension Plan, No. 24-257 (DWF/TNL), 2024 WL 4792310 (D. Minn. Nov. 14, 2024) (Judge Donovan W. Frank). Plaintiff Judith M. Krebsbach began working for The Travelers Companies, Inc. almost fifty years ago, and continues to work for the company today. As a long-time employee of Travelers, Ms. Krebsbach is a participant in its defined benefit pension plan. The present action arises from the parties’ dispute over how to calculate Ms. Krebsbach’s benefits. Ms. Krebsbach’s complaint asserts two causes of action. First, Ms. Krebsbach states a claim for benefits due under Section 502(a)(1)(B) to determine which calculation is correct and by extension what benefits she is owed. Second, Ms. Krebsbach asserts a claim for breaches of fiduciary duty under Section 502(a)(3). Ms. Krebsbach seeks relief for three alleged breaches: (1) she alleges that defendants breached their duty of loyalty by choosing parts of the plan most favorable to Travelers; (2) she contends that defendants breached their fiduciary duty to provide a summary plan description (“SPD”) that complies with ERISA’s requirements; and (3) she alleges that defendants failed to provide her with prompt, complete, and accurate information. Ms. Krebsbach’s second cause of action seeks to obtain equitable relief in the form of surcharge, reformation, a remand to permit a full and fair review, and attorneys’ fees and costs. Defendants moved for partial judgment on the pleadings with respect to count two. They argued that Ms. Krebsbach is not entitled to any of the equitable remedies which she seeks for the alleged breaches of fiduciary duties. Ms. Krebsbach opposed defendants’ 12(b)(6) motion. The court did not wholly agree with either party, and in this decision granted the motion in part and denied it in part. As a basic principle, the court cited the long line of cases, including the Supreme Court’s Amara decision, establishing that plaintiffs are permitted to plead alternative claims, even when the relief the plaintiff seeks is benefits owed. Moreover, the court stated, “[e]ven if Defendants’ calculation of benefits is correct, there may still be a breach of fiduciary duty. Krebsbach may claim equitable relief in addition to lost benefits.” Not only did the court feel that Ms. Krebsbach’s claims arise under two distinct legal theories here – the improper denial of benefits under the terms of the plan and breaches of fiduciary duties – but that they also seek distinct relief – benefits due under the plan and equitable remedies arising from defendants’ failures to fulfill fiduciary duties. As a result, the court rejected defendants’ position that Ms. Krebsbach will be made whole by count one alone which would render her second cause of action improperly duplicative. Furthermore, setting aside the aspects of Ms. Krebsbach’s fiduciary breach claim that potentially intertwine with her benefit claim, the court took time to state that her claim that the SPD was insufficient has no issue of duplication as Ms. Krebsbach’s only available remedy is in equity. Similarly, the court rejected defendants’ assertion that attorneys’ fees awarded under count two would be duplicative of any attorneys’ fee award through count one. The court found that defendants were taking too myopic a view here. The court instead agreed with Ms. Krebsbach that attorneys’ fees “fall under the umbrella of equitable remedies,” and that her fee request is not duplicative of relief under count one. For these reasons the court declined to dismiss the second cause of action as duplicative. The court then moved on to the issue of surcharge. First, the court denied the motion to dismiss Ms. Krebsbach’s claim for surcharge under a theory of lost rights to remedy the alleged breaches of fiduciary duty. The court, however, concluded that defendants met their burden for a motion for judgment on the pleadings with respect to Ms. Krebsbach’s claim for surcharge under a theory of detrimental reliance. “Because Krebsbach does not identify a harm caused by detrimental reliance that would not be duplicative of lost benefits remedy, this Court cannot support detrimental reliance as a pathway to harm for purposes of awarding surcharge.” There was one more aspect of the court’s decision that was unfavorable to Ms. Krebsbach. The court agreed with defendants that reformation is not an available remedy to Ms. Krebsbach because her complaint fails to allege that the plan failed to express the agreement of the parties. Instead, the court understood the complaint as discussing competing interpretations of the same language. “Dueling interpretations of the same language is inconsistent with the necessary requirements to award reformation.” As Ms. Krebsbach alleges no fraud or mutual mistake in her complaint, the court found that she was precluded from seeking reformation. Therefore, the court granted defendants’ motion as to the claims for surcharge under a theory of detrimental reliance and for reformation, and dismissed these claims with prejudice, but otherwise denied defendants’ motion for judgment on the pleadings.

Statute of Limitations

Fifth Circuit

Reese v. Royal Audio/Video Supply Co., No. 24-1809, 2024 WL 4751493 (E.D. La. Nov. 12, 2024) (Judge Sarah S. Vance). Plaintiff Bradly Reese worked as an independent contractor for Royal Audio/Visual Supply Co. Inc. for over twenty-four years before being furloughed in 2021, and then eventually terminated in 2022 during the COVID-19 pandemic. Mr. Reese sued his former employer, alleging that Royal Audio discriminated against him on the basis of age and disability by hiring younger, less qualified people over him. In this action Mr. Reese asserts claims under the Age Discrimination in Employment Act, the Americans with Disabilities Act, the Fair Labor Standards Act (“FLSA”), and ERISA. With regard to his ERISA and FLSA causes of action, Mr. Reese attests that his former employer willfully misclassified him as an independent contractor and refused to provide him basic employee benefits and overtime pay for over twenty years of employment. Royal Audio moved to dismiss the FLSA and ERISA claims as untimely. Mr. Reese did not oppose the motion to dismiss. In this order, the court granted the motion to dismiss. It agreed with defendant that Mr. Reese could not sustain these two causes of action and that each was time-barred under the applicable statute of limitation. For the ERISA claim, the court concluded that the applicable statute of limitation governing his claim was the ten-year limitations period under Louisiana state law for breach of contract. Mr. Reese alleges that Royal Audio misclassified him as an independent contract over 24 years ago. The court understood that this claim began to accrue when he was first hired as an independent contractor and was informed he would not receive benefits in 1997. Therefore, the court held that the ten-year prescriptive period expired in 2007, and that his 2024 ERISA claim was untimely. 

Subrogation/Reimbursement Claims

Ninth Circuit

Gallen v. Liberty Life Assurance Co. of Bos., No. 8:22-cv-02031-WLH-JDE, 2024 WL 4751576 (C.D. Cal. Nov. 12, 2024) (Judge Wesley L. Hsu). On July 16, 2020, plaintiff Revital Gallen and her husband were involved in a serious car accident. In the accident Ms. Gallen sustained a traumatic brain injury which left her unable to continue working as an attorney at Ernst & Young U.S. LLP. As a result, she applied for benefits through Ernst & Young’s long-term disability employee benefit plan, which was insured through a group policy issued by defendant Lincoln Financial Group. Ms. Gallen continues to receive long-term disability benefits to this day under the policy. The subject of the present dispute between the parties is the policy’s reimbursement provision. The provision requires that an insured reimburse Lincoln for sums she receives from personal injury settlements “to the extent they are losses for which compensation is paid to the Covered Person by or on behalf of the person at fault.” On May 16, 2022, Ms. Gallen’s counsel spoke with the senior claims examiner for subrogation at Lincoln to discuss Ms. Gallen’s personal injury litigation. Lincoln had already informed Ms. Gallen that it intended to assert a lien on any settlement proceeds recovered from the responsible party as a result of her brain injury. Ms. Gallen informed Lincoln that she did not believe that any benefits she would receive from her own insurer, Progressive, under her underinsured motorist coverage, were subject to reimbursement and that Lincoln was not entitled to a lien on this recovery pursuant to the policy language. Lincoln disagreed. It took the contrary position that it was entitled to a lien on the underinsured motorist benefits. Ms. Gallen thus brought the present action seeking payment of disability benefits unreduced by amounts received from Progressive as a result of her underinsured motorist benefits, and declaratory judgment stating that such sums are not subject to a lien or recovery by Lincoln. In this decision the court granted judgment in favor of Ms. Gallen, ordered Lincoln not to reduce payments by any amounts she received or will receive as a result of her underinsured motorist claims, and concluded that the underinsured motorist benefits are not paid “on behalf of” the tortfeasor, and therefore are not subject to the plan’s reimbursement provision. The court concluded that the common sense reading of the policy’s language supports Ms. Gallen’s interpretation. “Insurance companies providing [underinsured motorist coverage] to their insured are not acting ‘in the interest of’ or ‘as a representative of’ the tortfeasor, nor are insurance companies acting ‘in the place of’ the tortfeasor. Insurance companies, in these contexts, are merely acting pursuant to a contract with the insured. Indeed, [the insurers] have no defined relationship to the underinsured motorist, beyond the fact that the benefits are triggered once the motorist’s policy limit is exhausted.” Beyond finding that the plain language of the policy’s provision does not encompass reimbursement of the underinsured motorist benefits, the court stated that to the extent the phrase “on behalf of” is ambiguous, any ambiguity has to be resolved in favor of the beneficiary of the plan, rather than the drafter, leading to the same result. The decision ended by stating that if Lincoln had wished for the reimbursement provision to cover underinsured motorist benefits, it needed to do so with explicit language. Absent such language, the court concluded that the provision does not encompass underinsured motorist benefits. Thus, the court entered judgment in favor of Ms. Gallen, who was represented by Kantor & Kantor attorneys Glenn R. Kantor and Your ERISA Watch co-editor Peter S. Sessions.