McManus v. The Clorox Co., No. 4:23-CV-05325-YGR, 2025 WL 732087 (N.D. Cal. Mar. 3, 2025) (Judge Yvonne Gonzalez Rogers)

Our case of the week is one in a series of recently filed cases presenting novel challenges to “a practice by which retirement plan administrators use forfeited plan funds to reduce their own administrative expenses instead of offsetting administrative costs to plan participants.” Unsurprisingly, defendants in these cases have filed motions to dismiss. As Judge Rogers noted, “[r]easonable minds can differ, and several district courts do.” Thus, as previously covered in Your ERISA Watch, several courts have declined to dismiss while others have granted these motions, including this court on the first go-around.

In this decision, however, the court found that plaintiffs, in their amended complaint, sufficiently stated claims for fiduciary breach based on their somewhat more fleshed-out allegations that defendants – the Clorox Company and the benefits committee of Clorox’s 401(k) plan – acted disloyally and imprudently. Specifically, plaintiffs allege that defendants violated ERISA with respect to forfeited plan assets stemming from contributions Clorox made for employees who left employment before those contributions vested.

The plan gives its fiduciaries the discretion to choose between using forfeited plan assets to reduce the employer’s own required contributions or to reduce administrative costs that are borne by the plan and its participants. According to plaintiffs, the fiduciaries exercised that discretion by using the forfeited assets for the former purpose, thus benefiting themselves rather than the participants.

Plaintiffs amended the complaint to explain that the plan provision created a conflict between the interests of the employer and the participants, and thus the fiduciaries should have either resolved this conflict in favor of the participants or appointed an independent fiduciary to resolve it. In other words, the amended complaint plausibly alleged “that defendants were motivated solely by self-interest and conducted no reasoned and impartial decision-making process…given that no other justification is readily apparent.” The court concluded that the “new allegations, while sparse” were “sufficient for the Court to infer that defendants are liable for the misconduct alleged because courts look to motivation for loyalty claims and the thoroughness of an investigation for prudence claims.”

In so doing, the court rejected defendants’ contention “that plaintiff’s theory is not particularized because it would render ‘nearly every plan’ unlawful.” The court reasoned that the “fact that plaintiff’s theory applies to multiple defendants does not render it factually deficient.” Nor was the court convinced that defendants’ conduct was consistent with their duties merely because it was permitted by plan language.

The court likewise rejected defendants’ argument that plaintiffs’ conflict-of interest theory was too broad. The court disagreed with defendants that plaintiffs were seeking to impose a duty to maximize pecuniary benefits to participants in all instances, reading their complaint instead to allege that defendants, in exercising their fiduciary discretion to choose how to allocate the forfeitures, were required to use those assets for participants rather than for themselves.

Defendants countered that if plaintiffs’ theory was correct, this would eliminate defendants’ discretion since they would always have to use the forfeited assets for the benefit of plaintiffs. Again, the court was unpersuaded that this was a reason to dismiss. Instead, the court found the allegations of breach in the amended complaint sufficiently context-specific to state a claim, and also noted that plaintiffs pointed to at least one instance – if the company were insolvent – where defendants might legitimately choose to use the assets for contributions.        

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

Attorneys’ Fees

Third Circuit

Mullins v. The Consol Energy, Inc., No. 2:20-CV-1883, 2025 WL 712931 (W.D. Pa. Mar. 5, 2025) (Judge J. Nicholas Ranjan). Plaintiff Timothy Mullins sued The Consol Energy, Inc. Long Term Disability Plan, alleging it wrongfully denied his claim for benefits. At first, the court entered judgment in favor of Consol. However, Mr. Mullins appealed the decision to the Third Circuit, and the court of appeals vacated the district court’s entry of summary judgment for Consol, remanding the case for the lower court to enter summary judgment in favor of Mr. Mullins instead. On remand, the court acted as instructed, the summary judgment order was flipped, and the parties were ordered to confer on the issue of Social Security offsets. Mr. Mullins subsequently moved for an award of attorneys’ fees. The court granted that motion in this order. As a threshold matter, the court agreed with Mr. Mullins that he achieved some degree of success on the merits. The court then evaluated the fee motion under the Third Circuit’s Ursic framework. The Ursic factors are: (1) the offending party’s culpability or bad faith; (2) its ability to satisfy an award of fees; (3) the deterrent effect of any fee award; (4) benefit conferred upon the members of the plan as a whole; and (5) the relative merits of each parties’ positions. The court agreed with Mr. Mullins that the first factor weighed in favor of a fee award because the Third Circuit found the denial of benefits arbitrary and capricious. The second factor also weighed in favor of awarding fees as it was undisputed that Consol had the ability to pay. As for the third factor, the court found that a fee award would incentivize better behavior in the future and that it too weighed in favor of a fee award. The fourth factor was more of “a close call,” but the court did not conclude that it weighed against a fee award. Finally, the court found the fifth factor “is met” as Mr. Mullins won his lawsuit, overturning the adverse benefit decision. Accordingly, the court held that Mr. Mullins was entitled to attorneys’ fees under ERISA. However, the court slightly reduced the requested $243,568.50 in fees and $9,590.34 in costs. At the outset, the court rejected Consol’s argument that Mr. Mullins could not recover fees for his local counsel. It held that it was “not unreasonable for Mr. Mullins to have two attorneys here,” and that it was basically “inconsequential where they reside,” because both attorneys have national ERISA practices. Nor did the court reduce the attorneys’ hourly rates of $600 and $645 per hour. The court’s reductions came instead in the form of time entry alterations. The court applied the following reductions: 5.4 hours for summary judgment-related time entries that occurred after the summary judgment brief was filed, 1 hour for time spent reviewing routine filings, 4.6 hours for time spent on administrative tasks, 4.4 hours on time spent researching ERISA case law in the district and circuit, and 2 hours for the attendance of one of the attorneys at mediation. After applying these reductions, the court awarded Mr. Mullins $241,746 in attorneys’ fees. Finally, the court reduced the requested award of costs by $1,312.50, which was 50% of the cost of mediation, as each party agreed to bear half. The court thus awarded Mr. Mullins $8,277.84 in costs.

Breach of Fiduciary Duty

Fourth Circuit

Enstrom v. SAS Inst., No. 5:24-CV-105-D, 2025 WL 685219 (E.D.N.C. Mar. 3, 2025) (Judge James C. Dever). Three participants of the SAS Defined Contribution Retirement Plan filed this putative class action under ERISA against the plan’s fiduciaries, alleging they breached their duties to the participants by selecting and maintaining underperforming funds. After plaintiffs amended their complaint, defendants moved to dismiss it for failure to state a claim and lack of standing. In this decision the court granted defendants’ motion to dismiss the amended complaint. First, the court held that plaintiffs failed to plausibly allege an ERISA fiduciary breach claim based on the JPMorgan Chase Bank Target Date Funds (“TDF”). The court stated that the TDF claims were not plausible on their face and could not be made so by combination of hindsight and expert analysis. Even when it assumed that plaintiffs’ selected funds were valid comparators, the court stressed that “underperformance against these funds, without more, cannot support a breach of prudence claim.” Although there was a period of underperformance, the court was unconvinced that the decision to maintain investment in these funds in favor of the better performing ones throughout that period was per se imprudent “because past performance is no guarantee of future success.” Nor was the court convinced that the fiduciaries failed to follow their own Investment Policy Statement (“IPS”) when they selected or continued to invest in the TDFs. The court disagreed with plaintiffs that the provisions of the IPS requiring the fiduciaries to “[m]aximize return within reasonable and prudent levels of risk” meant the fiduciaries had to offload the JPMorgan TDFs. In sum, the court agreed with defendants that selecting and maintaining the TDFs in the retirement plan was well within “the range of reasonable judgments a fiduciary may make,” and that plaintiffs failed to plausibly allege fiduciary breach claims with respect to these funds. The court also agreed with defendants that the participants lacked standing to assert their claims regarding the investment and retention of the American Funds Fundamental Investor R6 Share Class Fund, their other challenged investment option. Plaintiffs argued that they had standing concerning the American Fund because they were invested in at least one challenged fund and therefore had standing to assert fiduciary breach claims for all of the challenged funds. The court was of a different view. It stressed that “there is no ERISA exception to Article III,” which means even when plaintiffs sue on behalf of a plan they are not absolved of the requirement to show individualized concrete and particularized harm. While there is a definite split on this issue among the courts, the court in this case was adamant. It found that because the “American Fund assets never touched their individual accounts,” plaintiffs were not harmed individually and therefore do not have standing to challenge these funds. It also rejected plaintiffs’ contention that they had standing to challenge the American Fund because they had to pay their share of its fees. The court responded that a “share of consulting fees’ charged to all plan participants…is not ‘fairly traceable’ to the Committee’s decision to select and maintain the American Fund in the SAS retirement plan,” because plaintiffs would have had to pay “their share of unspecified consulting fees regardless of whether they invested in the American Fund.” The court thus fundamentally rejected the idea that “any Plan member would have standing to challenge any fund whether he had personally invested in the fund or not.” Thus, the court granted the motion to dismiss in its entirety, although it did so without prejudice.

Disability Benefit Claims

Sixth Circuit

Lechner v. Mut. of Omaha Life Ins. Co., No. 3:23-cv-410-RGJ, 2025 WL 697673 (W.D. Ky. Mar. 3, 2025) (Judge Rebecca Grady Jennings). Plaintiff Ted Lechner applied for short-term disability benefits under an ERISA policy with defendant Mutual of Omaha Life Insurance Company on May 9, 2022 due to a combination of severe psychiatric and cognitive symptoms. His claim for benefits was approved and he received benefits through October 16, 2022, one week before the date when his short-term benefits would expire and his claim would transition to long-term disability benefits. Mutual of Omaha terminated the benefits at this time because it determined that Mr. Lechner failed to provide satisfactory proof of continuous disability as required by the policy. Specifically, it based its denial on the fact that Mr. Lechner’s providers did not refer him for a neuropsychological evaluation, that Mr. Lechner was not seeing a psychiatrist for treatment, and on some of Mr. Lechner’s own statements regarding his physical and mental capabilities, including his exercise regime. After an unsuccessful administrative appeal of the adverse short-term disability decision, Mr. Lechner sued Mutual of Omaha under ERISA as to both his short-term and long-term benefits. The parties each moved for summary judgment in their favor. In this decision the court denied Mr. Lechner’s motion and granted Mutual of Omaha’s motion for judgment. Because the parties agreed that the plan grants Mutual of Omaha discretionary authority, the court evaluated the decision under the arbitrary and capricious standard of review. It concluded that the insurer’s decision resulted from a principled decision-making process as it reviewed significant evidence when deciding to terminate the short-term benefits, including the evidence that supported Mr. Lechner’s claim. In addition, Mutual of Omaha employed both external and internal physician consultants in the relevant fields of medicine to opine on Mr. Lechner’s claim. The court therefore found that the denial of the short-term claim was reasonable, based on substantial evidence, and “neither arbitrary nor capricious.” Mr. Lechner retorted that there were significant issues with Mutual of Omaha’s decision, including that it failed to properly account for all of his diagnoses, it disregarded substantial medical evidence, and it failed to consider the combined impact of his conditions. Counterintuitively, the court did not disagree with these points. Nevertheless, it found that Mutual of Omaha’s decision was in line with the plan’s provisions and that it was reasonable for it to deny the claim based on a finding that the medical documentation failed to provide sufficient evidence to substantiate restrictions that would preclude him from performing the material duties of his regular work. As a result, the court upheld Mutual of Omaha’s termination of the short-term disability claim and entered judgment in its favor. This left only the long-term disability benefits. There was no dispute that Mr. Lechner did not file a claim for these benefits and therefore did not exhaust his administrative remedies. However, Mr. Lechner argued that exhaustion would have been futile because Mutual of Omaha cut off his short-term benefits just a week before he would have been eligible for long-term benefits. The court was not convinced. Rather, it noted that eligibility under the long-term disability policy does not require an employee to exhaust short-term disability benefits and emphasized that courts in the Sixth Circuit have held that the denial of short-term disability benefits alone cannot excuse failure to exhaust the administrative process of a long-term disability claim. For these reasons, the court granted summary judgment in favor of Mutual of Omaha on the long-term disability claim as well.

Eleventh Circuit

Rubin v. Life Ins. Co. of N. Am., No. 24-10433, __ F. App’x __, 2025 WL 689691 (11th Cir. Mar. 4, 2025) (Before Circuit Judges Newsom, Branch, and Grant). Plaintiff-appellant Deborah Rubin stopped working in her position as a telephone sales representative in the summer of 2021 due to depression and anxiety. Ms. Rubin applied for short-term disability benefits under her ERISA-governed disability policy through Life Insurance Company of North America (“LINA”). LINA’s denial of her claim for benefits and its decision to uphold its denial on appeal is the subject of this litigation. Ms. Rubin argued that LINA’s decision was the result of its structural conflict of interest and that the medical record supports a finding of disability such that its denial was arbitrary and capricious. The district court disagreed. First, it denied Ms. Rubin’s motion for extra-record discovery pursuant to the Eleventh Circuit’s decision in Harris v. Lincoln Nat’l Life Ins. Co., 42 F.4th 1292 (11th Cir. 2022) which states that when “conducting a review of an ERISA benefits denial under an arbitrary and capricious standard” review is limited to the administrative record because the court’s function is to determine whether there was a reasonable basis for the decision based on the facts known to the administrator at the time. The district court then entered summary judgment in favor of LINA, concluding that LINA reasonably construed the submitted medical evidence and found that it did not support an award of benefits. Ms. Rubin appealed both decisions. In this decision the Eleventh Circuit affirmed. As an initial matter, the court of appeals agreed with the lower court that the appropriate standard of review is arbitrary and capricious given the unambiguous grant of discretionary authority to LINA in the policy. Moreover, under this deferential standard of review, the appellate court agreed with the district court that LINA’s decision was a reasonable interpretation of the evidence in the administrative record. Specifically, both courts highlighted the fact that Ms. Rubin was well enough to perform the strenuous care-giving duties for her husband who was cognitively disabled. Additionally, the reviewing doctors emphasized their opinion that Ms. Rubin’s mental status exams were inconsistent with functional disability, particularly considering that her treating physician was unable to provide any concrete examples of work duties that her mental state prevented her from performing. Given the opinions of the reviewing doctors and the lack of diagnostic psychological or neuropsychological testing to support Ms. Rubin’s claim of disability, the Eleventh Circuit was comfortable affirming the position of the district court that LINA’s denial of her short-term disability claim was reasonable and justified. Further, the court of appeals commented that Ms. Rubin “failed to provide evidence either below or on her many administrative appeals that LINA’s decision was influenced by its own financial interests.” It said there was simply nothing to suggest that LINA’s decision was tainted by its conflict of interest, and that to the contrary, the record showed LINA carefully handled the case and appropriately reviewed all of the medical evidence “multiple times.” The Eleventh Circuit therefore affirmed the grant of summary judgment to LINA. Finally, the court of appeals affirmed the magistrate judge’s denial of Ms. Rubin’s request for discovery outside the administrative record in light of Harris and the arbitrary and capricious standard of review. Ms. Rubin’s appeal was thus wholly unsuccessful as the Eleventh Circuit affirmed the decisions of the lower court in their entirety.

ERISA Preemption

Second Circuit

Handy v. Paychex, Inc., No. 6:24-cv-06206 EAW, 2025 WL 712751 (W.D.N.Y. Mar. 5, 2025) (Judge Elizabeth A. Wolford). Plaintiff Dylan Handy had a 401(k) account through his employer, defendant Paychex, Inc., with a balance of over $100,000. In April 2023, Mr. Handy requested that Paychex transfer his funds to an account he maintained at another financial institution. However, it is Paychex’s policy to only facilitate distribution requests by issuing paper checks, not by wire transfer or any other electronic funds transfer. Paychex mailed Mr. Handy two paper checks. Mr. Handy received the checks and mailed them to his other financial institution but they were intercepted in the mail by an unknown third party. Mr. Handy informed Paychex that the checks never reached their intended destination and sought the company’s help in investigating the matter. Paychex denied liability for the intercepted checks, informed Mr. Handy that it was his responsibility to work with the banks, and metaphorically walked away from the situation. Mr. Handy responded by suing Paychex in state court asserting state law claims for breach of contract, breach of fiduciary duty, and negligence arising out of the intercepted disbursement of the 401(k) funds. Paychex removed the action to federal court asserting ERISA preemption. Paychex then moved to dismiss the state law claims. Mr. Handy opposed, and moved to remand his action. As an initial matter, the court declined to consider exhibits Paychex attached to its motion to dismiss, because the record did not clearly establish that they were authentic and accurate. The court then assessed the issue of ERISA preemption. The court found it clear that Mr. Handy’s state law claims were rooted in the terms of the employee benefit plan, including Paychex’s fiduciary responsibilities under the plan, and that the lawsuit seeks benefits due to Mr. Handy under the plan. As a result, the court agreed with Paychex that all three state law causes of action could be asserted under ERISA and do not implicate any independent legal duty. Further, the court agreed that the claims were conflict-preempted under Section 514(a) because they necessarily relate to the ERISA-governed 401(k) plan. Accordingly, the court determined that the state law claims had to be dismissed, and so granted Paychex’s motion requesting it do so. The court also denied Mr. Handy’s motion to remand because the court has subject matter jurisdiction over the case. Finally, the court permitted Mr. Handy to file a formal motion for leave to amend should he wish to replead his complaint under ERISA.

Exhaustion of Administrative Remedies

Fifth Circuit

Holcomb v. Blue Cross & Blue Shield of Tex., No. 4:22-cv-947, 2025 WL 693254 (E.D. Tex. Mar. 4, 2025) (Judge Amos L. Mazzant). Plaintiff Amy Holcomb has long suffered from lower back issues. Eventually, her pain became so severe that she stopped working and decided to undergo a surgical procedure in the hopes of alleviating her suffering. Ms. Holcomb sought preauthorization for the surgery from her insurance provider, defendant Blue Cross and Blue Shield of Texas. Blue Cross denied the preauthorization request, finding the surgery not medically necessary. The parties dispute whether Ms. Holcomb appealed this decision. Either way, she went ahead with the procedure, incurring costs of just under $100,000. Neither Ms. Holcomb nor her healthcare provider submitted a claim for benefits related to the surgery. Instead, Ms. Holcomb went straight to court. Blue Cross moved to dismiss the lawsuit for failure to exhaust administrative remedies. Ms. Holcomb did not argue that she submitted a claim for benefits, and instead contended that it would not have made sense to require her to submit a claim because Blue Cross had already rejected her preauthorization request for the procedure. She thus argued the court should either deny Blue Cross’s motion to dismiss or else abate the case until she submits her medical bills. The court granted the motion to dismiss in this decision, agreeing with Blue Cross that Ms. Holcomb needed to first administratively exhaust before she could sue as the policy requires that she submit a claim after the surgery. Moreover, Ms. Holcomb missed her twelve-month window to do so under the plan. “Therefore,” the court stated, “Holcomb’s claims in this lawsuit are barred because she failed to exhaust her administrative remedies.” The court dismissed Ms. Holcomb’s lawsuit with prejudice.

Life Insurance & AD&D Benefit Claims

Sixth Circuit

Unum Life Ins. Co. of Am. v. Crane, No. 5:24-CV-00230-MAS, 2025 WL 664174 (E.D. Ky. Feb. 28, 2025) (Magistrate Judge Matthew A. Stinnett). Plaintiff Unum Life Insurance Company of America filed this interpleader action seeking judicial resolution of competing claims for life insurance benefits arising from the death of John D. Crane under an ERISA-governed group policy. Various family members of Mr. Crane allege that his designated beneficiary, defendant Sarah Carta, fraudulently named herself as beneficiary and “that Carta has previously engaged in similar fraudulent acts with her prior deceased partner.” The policy provides that insurance fraud disqualifies a named beneficiary from receiving the death benefits and states that the proceeds will be instead paid either to the member’s estate or his first surviving family member. Faced with multiple competing claims and allegations that Ms. Carta committed insurance fraud, Unum filed this interpleader action. Unum subsequently moved to deposit the death benefits with the court, sought approval of stipulated attorneys’ fees of $7,000 and costs of $405, and requested that it be dismissed from this action and discharged from liability in connection with the disbursement of Mr. Crane’s funds. In addition, Unum further moved for entry of default judgment against defendant Rhianna Bowlin, Mr. Crane’s daughter, as Ms. Bowlin has not filed an answer or otherwise participated in this litigation. Before resolving any of Unum’s motions, the court first addressed the threshold question of jurisdiction. The court agreed with the parties that it has subject matter jurisdiction over this interpleader action because the case involves competing claims for life insurance benefits under an ERISA-governed employee welfare plan. The court also agreed with the parties that interpleader is warranted given the multiple claimants and the allegations of fraud and/or forgery. Thus, the court found that interpleader was the appropriate tool under the circumstances. Having made this determination, the court then concluded that Unum qualifies a disinterested stakeholder, willing to pay the benefits to the proper recipient as determined by the court. Accordingly, the court was comfortable granting Unum’s motions to deposit the death benefits with it, discharge it from further liability, and dismiss it with prejudice. The court also enjoined the parties from initiating or continuing any related litigation outside this proceeding involving the death benefits at issue. As for attorneys’ fees and costs, the court again agreed with the parties’ consensus that Unum was entitled to these awards because it is a disinterested stakeholder, it concedes liability, it will deposit the disputed funds with the court, and it seeks a discharge from liability. Moreover, the court was fine with awarding the stipulated amounts agreed to by the parties, as it found the $7,000 in attorneys’ fees and $405 in costs reasonable. Finally, the court granted Unum’s motion for default judgment against Ms. Bowlin because many months have passed and she has failed to even file an answer to the complaint or in any other way participate in this litigation. Thus, Ms. Bowlin has forfeited any claim to entitlement that she may otherwise have asserted and her interest in the death benefits is terminated.

Medical Benefit Claims

Tenth Circuit

Allison M. v. The Mueller Indus., No. 2:23-cv-00421, 2025 WL 674769 (D. Utah Mar. 4, 2025) (Judge David Barlow). Plaintiffs Allison and Christopher M. sued The Mueller Industries, Inc. Welfare Benefit Plan under ERISA to challenge its denials of claims the family submitted for their son C.M.’s mental and behavioral health treatment at two residential treatment centers. The parties filed cross-motions for summary judgment. Before the court could assess the denials, it first needed to resolve the dispute over the applicable standard of review. The family acknowledged that the plan contains discretionary language but argued that the court should nevertheless apply de novo review because Blue Cross forfeited its deference by failing to engage in a meaningful dialogue by committing various procedural violations, including two untimely denial letters. The court was not persuaded. Although it agreed with the M. family that two of the denial letters were late, it concluded that the tardiness “was not of the level that the Tenth Circuit has found results in a de novo standard of review.” The court also acknowledged the presence of certain procedural violations, including letters which confused the claims of the two treatment centers at issue and the fact that Blue Cross switched the bases of denial in every letter. But again, it simply did not agree that these missteps were so egregious as to warrant a change in the standard of review. However, the leniency of deferential review didn’t end up helping the plan administrator in the end. The court ultimately agreed with the family that the denials relating to both treatment centers were arbitrary and capricious for at least six reasons: Blue Cross (1) provided shifting rationales as to why the treatment was excluded; (2) did not attempt to apply the plan’s terms specifically to the treatment centers; (3) swapped the names of the two facilities; (4) failed to address or engage with the opinions of C.M.’s treating providers; (5) ignored evidence in the medical record that could have justified awarding benefits; and (6) did not cite with specificity any of C.M.’s medical records. Because of these shortcomings, the court concluded that Blue Cross did not give plaintiffs a full and fair review and did not provide them with the meaningful dialogue to which they were entitled. Accordingly, the court denied Blue Cross’s motion for summary judgment, and entered judgment in favor of the family on their claim for benefits. The one remaining issue was the proper remedy for the arbitrary and capricious denials. The court stated that it could not conclude the “record clearly shows Plaintiffs are entitled to the benefits, nor can it say that Plaintiffs are clearly not entitled to the claimed benefits.” Thus, it determined that remand was the proper remedy.

Pleading Issues & Procedure

Third Circuit

Harper v. United Airlines, No. 23-22329 (ZNQ) (JBD), 2025 WL 719394 (D.N.J. Mar. 6, 2025) (Judge Zahid N. Quraishi). In October of 2023, pro se plaintiff Daniel Harper sued United Airlines in the Superior Court of New Jersey alleging that its refusal to disenroll him from insurance coverage under the United Airlines Consolidated Welfare Benefit Plan caused him $15,000 in damages resulting from monthly premium deductions out of his paycheck. United Airlines removed the action to federal court and the court denied Mr. Harper’s motion to remand the action back to state court. It agreed with the airline that it had subject matter jurisdiction over the parties’ dispute because the claims alleged in the complaint relate to the ERISA-governed welfare plan. United then moved to dismiss the complaint under Rule 12(b)(6). On July 11, 2024, the court granted the motion and dismissed the complaint without prejudice. (You can read Your ERISA Watch’s coverage of that decision in our July 17, 2024 newsletter.) Following that order, Mr. Harper amended his complaint. In his amended complaint Mr. Harper seeks $16,726 in damages. United responded by once again filing a motion to dismiss. In this decision the court granted the motion to dismiss the first amended complaint, dismissing the action with prejudice. Mr. Harper specified that the alleged damages stem from the hours he spent attempting to rectify the problem of failing to terminate coverage under the plan. United argued that the complaint fails to assert any legal basis and that the only avenue for relief is under ERISA’s civil enforcement mechanism. Moreover, it stated that the money Mr. Harper seeks is for time incurred during the administrative process and these fees and costs are not recoverable under ERISA. The court agreed that fees incurred during the prelitigation process are not available under Section 502(g)(1). “Accordingly, Plaintiff here is not entitled to fees for the 124 hours attributed in the FAC to the time [he] allegedly spent on the phone seeking to cancel coverage during the internal administrative process under the Plan.” Separately, the court found that Mr. Harper could not recover fees for his own work in this litigation under ERISA “because such fees are not available to pro se litigants.” The only remaining damages were for physical therapy services that Mr. Harper claims he incurred because of overlapping healthcare coverage due to the failure to disenroll him. The court agreed with United Airlines that Mr. Harper failed to plead that he exhausted his administrative remedies as to these healthcare claims or that it would have been futile to try to. Based on the foregoing, the court agreed with United that Mr. Harper failed to plead a claim for relief under Section 502(g) or 502(a)(1)(B) and therefore granted the motion to dismiss his first amended complaint.

Provider Claims

Second Circuit

Rowe v. Aetna Life Ins. Co., No. 23 civ. 8527 (CM)(OTW), 2025 WL 692051 (S.D.N.Y. Mar. 4, 2025) (Judge Colleen McMahon). Plastic surgeon Norman Rowe has brought many lawsuits against many health insurance providers alleging that oral promises made during verification of benefits phone calls constituted enforceable promises to pay his fees for surgeries he performed as an out-of-network provider. Dr. Rowe asserts his claims under state law. In this decision the court firmly held that “[e]ach of the claims – breach of contract, unjust enrichment, promissory estoppel, and fraudulent inducement – seek[ing] reimbursement for surgeries performed by insureds under ERISA Plans,” was unquestionably preempted by ERISA Section 514(a). This is so, the court explained, because the amounts paid by the insurance providers “were calculated by the plan administrators pursuant to the terms of the respective plans,” and any claim for the payment of these benefits therefore necessarily refers to those plans and depends upon the language of them. “Therefore,” the court said, “no claim lies under any state or common law theory, including those pleaded in the proposed amended complaints. Any argument to the contrary is, frankly, frivolous – as Rowe and his counsel ought to know.” Moreover, the court was irritated by the notion that it “ought not consider the plans because they were not attached to the complaint.” It said this statement was “too ridiculous to warrant serious consideration,” as the plans provide the insurance coverage for the patients which makes them obviously integral to the complaint that seeks to recover for the surgeries performed on them. The court also took judicial notice of the transcripts of the verification of benefits call that the complaint alleges constituted the promise to pay 80% of charges. It found that those calls did not say what Dr. Rowe claims they do, and that on them the employees from the insurance companies do not guarantee payment in any specific amount or pursuant to any particular formula, but instead refer to the terms of the relevant ERISA plans. In sum, the court was confident that the state law causes of action cannot go forward. And it said it was not alone in reaching this conclusion because an identical lawsuit brought by Dr. Rowe was already dismissed by another court and the dismissal was affirmed by the Second Circuit in Rowe Plastic Surgery of New Jersey, L.L.C, v. Aetna Life Insurance Co., 23-8083, 2024 WL 4315128 (2d Cir. Sept. 27, 2024). Having so found, the court dismissed the cases before it with prejudice and denied the doctor’s motion for leave to amend his complaint. Finally, in case the language of the decision was in any way unclear, the court put things into focus by ending its decision informing Dr. Rowe and his attorneys that any effort to bring any further lawsuits of this nature “will be considered sanctionable conduct, and in the case of counsel may result in a referral to the Grievance Committee of the Southern District of New York.”

Retaliation Claims

Third Circuit

Volynsky v. Prudential Ins. Co. of Am., No. 23-cv-16710 (MEF)(JSA), 2025 WL 684027 (D.N.J. Mar. 3, 2025) (Judge Michael E. Farbiarz). Pro se plaintiff Igor Volynsky worked for the Prudential Insurance Company of America for 13 years. He was fired from his job at the age of 51. When he was let go, Mr. Volynsky was ineligible for the company’s Retiree Medical Savings Account (“RMSA”), which would have paid his medical premiums, because he had not reached the age of 55. Three years went by and then Mr. Volynsky learned something. Shortly after his termination, Prudential offered a Voluntary Separation Plan which would have given him access to the RMSA. When he learned this Mr. Volynsky came to believe that Prudential terminated him in order to prevent him from enrolling in the Voluntary Separation Program and accessing the retiree medical benefits. He sued. The court understands Mr. Volynsky’s complaint as alleging one cause of action under ERISA Section 510. Prudential moved to dismiss the complaint for failure to state a claim. On May 20, 2024, the court denied Prudential’s motion. The company responded by moving for reconsideration. It argued that the court overlooked three arguments for dismissal: (1) on the face of the complaint Mr. Volynsky acknowledges that he was not entitled to the RMSA funds because he was younger than 55 at the time of termination; (2) Mr. Volynsky fails to state a viable claim under Section 510 because he does not allege direct evidence of specific intent to interfere or establish the necessary elements of a prima facie case for retaliation; and (3) the claim is untimely under the analogous state law statute of limitations because it was filed more than two years after Mr. Volynsky was let go. The court did not see eye to eye with Prudential. To begin, the court stated that a defendant can be liable for unlawful interference before a participant becomes entitled to benefits under the terms of the plan under Section 510. Therefore, the court rejected defendant’s first argument that the claim must be dismissed because Mr. Volynsky was not already entitled to RMSA benefits. Next, the court held Mr. Volynsky alleged enough to plausibly infer that the employer chose to fire Mr. Volynsky rather than offer him access to the Voluntary Separation Plan. The court thus declined to dismiss the complaint for failure to allege a prima facie case for retaliation and interference. Finally, the court disagreed with Prudential’s statute of limitations argument. While it agreed that New Jersey’s law against discrimination is the most analogous state statute and that the limitations period for claims brought under it is two years, the court nevertheless disagreed with Prudential on when the two-year clock started to run. The court stated that it could not borrow a statute of limitations from state law without also borrowing its relevant tolling principles. The court concluded that Mr. Volynsky’s claim was tolled until he learned of the Voluntary Separation Program in 2022, and only then found out about Prudential’s alleged unlawful desire not to offer the program to him. On this theory, it was unclear to the court that the face of the complaint demonstrates that the claim is untimely and therefore it did not dismiss on this basis. For these reasons, Prudential’s motion for reconsideration was denied.

Statutory Penalties

Fifth Circuit

Jones v. AT&T, Inc., No. 24-30187, __ F. App’x __, 2025 WL 720939 (5th Cir. Mar. 6, 2025) (Before Circuit Judges Haynes, Duncan, and Wilson). Retiree Connie Marable had health insurance benefits through AT&T’s ERISA-governed medical benefits plan for current and retired employees. In 2012, Ms. Marable sustained serious injuries in a car accident. AT&T paid hundreds of thousands of dollars in accident-related medical benefits. Eventually, there was a settlement over the 2012 car accident wherein a third party was found liable and Ms. Marable received settlement proceeds. AT&T then filed a lawsuit in the Eastern District of Louisiana seeking a constructive trust or equitable lien over the settlement proceeds seeking reimbursement. Ms. Marable passed away in 2018 while the litigation was still ongoing. The executor of her estate, plaintiff-appellant William Jones, took her place in the reimbursement litigation and his counsel sent AT&T a request pursuant to 29 U.S.C. § 1024(b)(4) seeking plan documents concerning the health plan’s benefits, rights, and payments. AT&T produced 12,000 pages of information in response, along with descriptions of the documents requested and the rationale for their production, but it did not produce the documents themselves. Eventually the parties resolved the reimbursement litigation and that lawsuit was dismissed. Three months later, Mr. Jones filed the present action seeking statutory penalties under 29 U.S.C. §1132(c)(1) for failure to produce the required documents. In September of 2022, the court held a bench trial during which Mr. Jones contended that AT&T failed to comply with § 1024(b)(4) because it failed to produce three requested documents, including the medical plan itself. The district court ultimately found that the alleged violations did not warrant penalties under §1132(c)(1) because AT&T did not act with the intent to exclude or withhold the relevant documents, it did not act in bad faith, it exercised reasonable care to ensure that it produced the documents to Mr. Jones, and Mr. Jones was not prejudiced or unduly harmed as a result of AT&T’s failure to provide the excluded documents in its production. It thus entered judgment in favor of AT&T. Mr. Jones appealed. He argued to the Fifth Circuit that the district court erred in its ultimate conclusion about the penalties under ERISA. In addition, Mr. Jones disputed discovery rulings issued earlier in the case and also the denial of his motion for leave to amend. In this unpublished per curiam decision the court of appeals affirmed. The decision addressed three issues: (1) whether the district court abused its discretion by limiting the scope of discovery; (2) whether it abused its discretion by denying Mr. Jones leave to amend; and (3) whether Mr. Jones is entitled to statutory penalties under ERISA for AT&T’s failure to comply with the statute. It took up the discovery issue first. The Fifth Circuit held that neither the magistrate judge nor the district court judge acted improperly when ruling on Mr. Jones’s motion to compel. It stated that each judge “carefully parsed through the requests at issue and reached a measured conclusion about which documents would be relevant to resolving the narrow issue in this case.” Thus, the court of appeals held that Mr. Jones failed to establish that the lower court abused its wide discretion in determining the scope of discovery in the present matter. The Fifth Circuit further found that the district court acted within its discretion by denying Mr. Jones leave to amend his complaint fifteen months after filing suit and nine months after the deadline to amend pleadings. On appeal, Mr. Jones argued that he met each of the factors to show good cause, but the Fifth Circuit noted that he failed to reply to AT&T’s arguments on the issue or to clearly demonstrate that the district court acted arbitrarily or capriciously when it came to a different conclusion. The court finally reached the merits issue. Even assuming that AT&T did violate § 1024(b)(4), the Fifth Circuit ruled that the district court did not abuse its discretion by refusing to impose penalties based on technical violations. It stressed that penalties under the statute are discretionary and that courts in their discretion may order them as they deem proper. The Fifth Circuit agreed with the lower court that bad faith factors are relevant, even if they are not mandatory factors in a penalty assessment. Under the circumstances, the court of appeals was persuaded that AT&T’s actions did not warrant penalties under §1132(c)(1), and thus the lower court did not abuse its discretion when declining to award them to Mr. Jones.