As expected, it has been a slow start to 2025 with only a handful of ERISA-related decisions in the federal courts. Nonetheless, these rulings touched on some unusual and interesting topics. Read on to learn how Illinois’s Genetic Information Privacy Act interacts with ERISA, whether a claimant can reopen a case after an insurer denies a claim after a court-ordered remand, and whether a claimant is entitled to discovery if the administrator’s denial refers to facts not present in the administrative record.
Below is a summary of this past week’s notable ERISA decisions by subject matter and jurisdiction.
Discovery
Tenth Circuit
Bessinger v. Cimarex Energy Co., No. 23-cv-00452-SH, 2025 WL 26148 (N.D. Okla. Jan. 3, 2025) (Magistrate Judge Susan E. Huntsman). Plaintiff Jay Bessinger alleges in this action that he was wrongfully denied benefits under a change of control severance plan offered by his former employer, defendant Cimarex Energy Co. Because Cimarex is both the plan administrator and the payor of plan benefits, Mr. Bessinger contends that its inherent conflict of interest affected its decision-making and thus has moved for extra-record discovery. Additionally, Mr. Bessinger contends that the administrative record is incomplete because Cimarex’s denial referenced facts not found in the current record. He therefore also moved for production of documents and interrogatories to complete the administrative record. In response to Mr. Bessinger’s discovery motion, Cimarex voluntarily produced documents in response to two of his requests, and voluntarily responded to several of his interrogatories. Beyond these responses, however, Cimarex opposed the motion and argued that no further discovery is warranted either to complete the record or explore its conflict of interest. In this decision the court agreed with the employer and denied Mr. Bessinger’s motion regarding the remaining discovery requests. Insofar as the administrative record may be incomplete, the court held that the proper reaction to this would be a court-ordered remand to the plan administrator for further consideration, rather than an “attempt to reassemble the administrative record” through court-ordered discovery. “This is because ‘ERISA’s interests are not served by federal court review of an incomplete administrative record,’ where procedural irregularities result in an incomplete record, ‘the appropriate remedy is remand.’” The court was further unwilling to open up discovery into Cimarex’s conflict of interest as it found the remaining requests in Mr. Bessinger’s motions to be overly broad, going far beyond what is necessary for the court to make an informed decision regarding how to weigh the seriousness of the conflict of interest in its eventual abuse of discretion review. Finally, to the extent that Cimarex failed to provide Mr. Bessinger with a full and fair review of his claim, the court stated that it will address this alleged failure in its arbitrary and capricious review and that it does not need further information to assess whether the denial of benefits meets that standard. Accordingly, the court concluded that none of Mr. Bessinger’s assertions support the need for additional discovery beyond that voluntarily provided by Cimarex. As a result, the court denied Mr. Bessinger’s motion.
ERISA Preemption
Third Circuit
Essex Surgical, LLC v. Aetna Life Ins. Co., No. 23-03286-WJM-AME, 2024 WL 5264892 (D.N.J. Dec. 31, 2024) (Magistrate Judge André M. Espinosa). Four healthcare providers who are out-of-network with Aetna Life Insurance Company, Aetna Health Insurance Company, and Aetna Health Inc. sued the three Aetna entities in New Jersey state court seeking to hold them to their alleged oral promises of usual and customary rate reimbursement for healthcare services provided to insured patients. Plaintiffs asserted claims for breach of implied contract, breach of the covenant of good faith and fair dealing, quantum meruit, promissory estoppel, negligent misrepresentation, negligence, and tortious interference with economic advantage. The Aetna defendants responded to the lawsuit by removing it to federal court pursuant to ERISA preemption. In addition, the removing defendants further argued that diversity jurisdiction exists because of the fraudulent joinder of non-diverse defendants, namely the parent company Aetna Health Inc. The providers disagreed with these positions, and moved to remand their action back to state court. In this decision the court sided with the plaintiffs and granted their motion to remand. It found that defendants could not demonstrate the state law claims are completely preempted by ERISA, as neither prong of the two-part Davila test were met. One basic problem the court identified was the plans’ unambiguous anti-assignment provisions. Given these clauses, the court concluded it would be impossible for the healthcare providers to bring claims under ERISA Section 502(a). Furthermore, the court stated that the complaint was not seeking a right to recover payments pursuant to the terms of the plan. Rather, the court agreed with the providers that they assert claims based only on alleged oral pre-authorization agreements with the defendants into which they entered as out-of-network third-party providers. “Therefore, Plaintiffs’ claims cannot be construed as colorable claims for benefits under ERISA” and any legal duties that the Aetna defendants might owe to them relate to the alleged oral pre-authorization contracts and are therefore independent. The court thus agreed with plaintiffs that their claims could arise regardless of the existence of any of the ERISA plans, and that the state court will not need to consider any ERISA plan to interpret the alleged agreements between the parties. Finally, the court disagreed with defendants regarding diversity jurisdiction and fraudulent joinder for the purposes of establishing federal jurisdiction. Accordingly, the court granted plaintiffs’ motion to remand, and the case will proceed in state court.
Sixth Circuit
Ennis-White v. Nationwide Mut. Ins. Co., No. 2:24-cv-1236, 2024 WL 5244464 (S.D. Ohio Dec. 30, 2024) (Judge Sarah D. Morrison). Plaintiff Rusty Ennis-White and his husband Jonathon Ennis-White, proceeding pro se, filed this lawsuit in Nevada state court alleging state law causes of action against Rusty’s former employer, Nationwide Mutual Insurance Company. Because much of the complaint pertained to Rusty’s participation in Nationwide’s ERISA-governed disability plan, his claim for disability benefits under the plan, Nationwide’s handling of his claim, and the plan’s eventual denial of benefits, Nationwide removed the action to the federal court system believing many of the state law causes of action were preempted by ERISA. The district court in Nevada agreed that the claims were preempted because they related to the ERISA-governed plan, and then transferred the case to the Southern District of Ohio pursuant to the policy’s forum selection clause. This district court however remained uncertain. Given its uncertainty, the court ordered the parties to submit supplemental briefing on the issue of ERISA preemption. It expressed concerns that the Nevada federal court improperly conflated express and complete preemption by adopting Nationwide’s position that the claims were preempted because they “relate to” Rusty’s benefits under the plan. However, in this decision the court quieted its doubts and concluded that removal to the federal court system was proper because five of the plaintiffs’ eight causes of action were indeed completely preempted by the federal statute. Specifically, the court found that the claims of intentional and negligent infliction of emotional distress, negligent supervision, disability discrimination, and retaliation were based either entirely or in part on allegations that depend on the plan, and that these claims can only be asserted as causes of action under ERISA, as either claims for benefits, retaliation and discrimination under Section 510, or for violations of ERISA’s claims handling procedures resulting in a denial of a full and fair review. Finally secure of its jurisdiction over the matter, the court also took this opportunity to exercise supplemental jurisdiction over the non-preempted state law claims. As for the causes of action it found to be preempted, the court directed plaintiffs to file an amended complaint reasserting these claims as causes of action under ERISA.
Seventh Circuit
Harris-Morrison v. Sabert Corp., No. 1:23-CV-16120, 2024 WL 5264702 (N.D. Ill. Dec. 31, 2024) (Judge Edmond E. Chang). Plaintiff Tamiko Harris-Morrison filed this putative class action complaint in Illinois state court alleging that her former employer, Sabert Corporation, violated Illinois’s Genetic Information Privacy Act by requiring its employees to submit to physical examinations in which they were forced to disclose private genetic information and family medical histories as a condition of employment. Sabert removed the action to federal court based on federal-question jurisdiction, arguing that Ms. Harrison-Morrison’s claims are preempted by ERISA. Ms. Harris-Morrison conceded that removal was proper, but only because the court has diversity jurisdiction under the Class Action Fairness Act as the class has more than 100 class members, the parties are diverse, and there is possibly $15 million in damages. Sabert, insisting on ERISA preemption, moved to dismiss the complaint under Rule 12(b)(6), or alternatively, moved for a more definite statement under Rule 12(e). The court began its order by first agreeing with Ms. Harris-Morrison that it has diversity jurisdiction over the matter, and that removal was therefore proper. It then turned to its discussion of Sabert’s motions. First, the court held that ERISA preemption is not grounds for dismissal. The court focused on the notable lack of mention of any ERISA plan in the complaint, and while it acknowledged that a plaintiff cannot avoid preemption by simply omitting critical details, it nevertheless found that the connection to any ERISA welfare plan is currently unclear and far too tenuous to permit an inference that ERISA completely preempts the claims asserted under the state genetic privacy law. The court disagreed with Sabert that the physical examination “necessarily relates to an employee benefit plan.” The court was especially hesitant to adopt Sabert’s arguments regarding complete preemption under ERISA. And while it found conflict preemption less of a stretch, it nevertheless concluded that Sabert’s conflict preemption arguments also fail at this stage for basically the same reason: “it is not obvious from the Complaint that an ERISA plan is involved. The Complaint never mentions an ERISA plan, let alone its terms or administration. Without further discovery, the Court can neither ‘interpret or apply the terms’ of any ERISA plan, nor analyze the connection between the alleged GIPA violation and ERISA plan administration.” However, the court was careful to state that should discovery reveal that an ERISA plan is involved, Sabert will have the opportunity to reassert a renewed preemption argument later in the proceedings, and thus denied the motion to dismiss without prejudice to a potential summary judgment motion based on ERISA preemption. The court further permitted the parties to conduct limited discovery on whether an ERISA plan was the basis for the collection of genetic information and on what role the employer had in collecting the genetic information of Ms. Harris-Morrison. Finally, the court flatly rejected Sabert’s motion for a more definite statement. “Sabert’s argument, in essence, is that the Complaint lacks the factual detail for it to make an ERISA preemption argument.” This use of Rule 12(e), the court stated, is inappropriate, as Rule 12(e) is only intended to strike unintelligible pleadings and clear up confusion, “not to replace traditional discovery.”
Pleading Issues & Procedure
Tenth Circuit
M.Z. v. Blue Cross Blue Shield of Ill., No. 1:20-cv-00184-RJS, 2025 WL 18700 (D. Utah Jan. 2, 2025) (Judge Robert J. Shelby). In December of 2020, mother and son plaintiffs M.Z. and N.H. filed this action against Blue Cross Blue Shield of Illinois challenging its denial of benefit claims for mental health treatment N.H. received at two residential treatment centers. In April of 2023, the court entered judgment finding in favor of each party in part, and remanding the claims relating to one of the two residential treatment facilities back to Blue Cross for reconsideration. On remand, the claims administrator upheld the denial of benefits for N.H.’s care at the facility. In response, the family moved to reopen their case to challenge the denial. Plaintiffs further sought leave to file an amended complaint. In this very succinct order the court granted plaintiffs’ motions, finding it appropriate to reopen the case to evaluate the most recent denial and necessary for plaintiffs to amend their complaint “as the facts of the case have changed significantly following the court-ordered remand.”