We have two notable decisions this week; both are published opinions from the Seventh Circuit. The first is Rush v. GreatBanc Trust Co., No. 25-1736, __ F.4th __, 2026 WL 2071139 (7th Cir. July 17, 2026) (Before Circuit Judges Easterbrook, Jackson-Akiwumi, and Lee). The case involves the Segerdahl Corporation, a direct-mail printing company, which established an employee stock ownership plan (ESOP) in 2003. GreatBanc Trust Company served as the ESOP’s trustee.
Segerdahl was sold to a private equity firm in 2016. The sale process involved negotiations with several potential buyers, with ICV Partners ultimately winning the competition, purchasing Segerdahl for $265 million.
Bruce Rush, the company’s vice-president of manufacturing, was a shareholder in the ESOP and received significant cash payouts from stock appreciation rights when the sale was completed. However, he was dissatisfied. He brought this class action against GreatBanc and several Segerdahl board members, alleging that the sale was organized and approved for less than the company was worth, thus reducing post-sale distributions to ESOP participants and violating fiduciary obligations under ERISA. Rush contended that the sale was driven by the company’s desire to increase its liquidity and not to obtain the best price.
The case proceeded to a three-week bench trial which included testimony from thirteen fact witnesses and four experts, along with “approximately 500 pages of post-trial submissions.” The district court ruled in favor of defendants on all counts. (Your ERISA Watch covered this decision in our April 9, 2025 edition.) Rush appealed.
The Seventh Circuit affirmed, finding no clear error in the district court’s conclusions. In doing so, it addressed Rush’s challenges to the district court’s rulings that (1) defendants did not breach any fiduciary duties, (2) defendants did not have a conflict of interest that rendered the sale a “prohibited transaction” under ERISA, and (3) Rush failed to prove damages. (Rush also challenged the district court’s ruling that some of the board of director defendants were not fiduciaries, but the Seventh Circuit assumed they were for the purposes of the decision.)
First, the court agreed with the district court that the defendants did not breach their fiduciary duties under ERISA. It ruled that the district court applied the correct standard of review, which was deferential. Under this standard, the Seventh Circuit concluded that the defendants acted prudently and loyally, and considered Segerdahl’s financial performance and market conditions in effectuating the sale. The decision to prioritize “financial buyers” over “strategic buyers” was not a breach of fiduciary duty, as it was based on reasonable business judgments.
Second, the Seventh Circuit rejected Rush’s claim that the sale was a prohibited transaction under ERISA. It found no clear error in the district court’s determination that the company’s CEO did not act against her pecuniary interests, and that GreatBanc’s approval of the transaction did not violate ERISA’s prohibited transaction rules. Furthermore, defendants proved that the sale was for adequate consideration, which is an affirmative defense to prohibited transaction claims.
Finally, the court upheld the district court’s finding that Rush failed to prove damages. Rush’s arguments relied on an expert report which contemplated hypothetical buyers of the company. However, the Seventh Circuit found that “[t]he district court reasonably concluded that the price ICV paid after conducting diligence and arms-length negotiations with Segerdahl and JP Morgan was a better approximation of fair market value than [the expert’s] ‘hypothetical buyer’ analysis.” Rush also argued that the sale did not properly include other “sources of value,” but the court identified reasonable differences of opinion as to how much those sources were worth, which did not support a ruling that the district’s court’s valuation was clearly erroneous.
In the end, the Seventh Circuit recognized that “Rush has a different view of the facts. But our role on appeal is not to retry issues the district court permissibly resolved against him after applying the correct legal standard to the disputed facts.” Judgment for defendants was thus affirmed.
The second decision from the Seventh Circuit was in Havlik v. University of Chicago, No. 25-2821, __ F.4th __, 2026 WL 2084784 (7th Cir. July 20, 2026) (Before Circuit Judges Hamilton, Lee, and Taibleson). This case centered around Edward S. Lyon, a doctor who worked for the University of Chicago. Edward participated in the university’s ERISA-governed contributory and supplemental retirement plans, which were administered by the Teachers Insurance and Annuity Association (TIAA).
In 1998, Edward originally designated his wife, Valerie Lyon, and the Edward S. Lyon Trust as beneficiaries of his accounts, with Valerie’s consent. In 2014, Valerie executed a Wisconsin statutory form power of attorney, appointing her son-in-law, Daniel Davies, as her attorney-in-fact. This power of attorney gave him “a general grant of authority,” and even included special instructions allowing him to change beneficiaries under Valerie’s accounts. However, it did not explicitly give Davies the power to waive Valerie’s right to survivor annuity benefits under another person’s account, such as Edward’s.
In November of 2019, Edward attempted to change the beneficiaries to his grandchildren’s trust accounts, removing Valerie as a primary beneficiary. Davies signed the spousal consent form on Valerie’s behalf using the power of attorney. Edward died one month later. However, TIAA rejected the beneficiary change form because it contended that the power of attorney did not grant Davies the authority to execute Valerie’s spousal consent. Valerie died in December of 2020, after which plaintiffs submitted a claim for the benefits.
The university denied their claim, “concluding that Wisconsin law required a grant of specific authority for an agent acting under a power of attorney to give valid consent to waive spousal survivor benefits.” Plaintiffs’ appeal was unsuccessful and this action followed. It asserted the following claims: (1) a claim for plan benefits under 29 U.S.C. § 1132(a)(1)(B), (2) an alternative claim for breach of fiduciary duty against both the university and TIAA under 29 U.S.C. § 1132(a)(3), and (3) an alternative claim for negligence against TIAA.
The district court ruled in the university’s favor, “agreeing with the university that the power of attorney lacked a specific grant of authority required to consent to spousal waiver of survivor benefits and finding no merit in plaintiffs’ remaining claims.” (Your ERISA Watch covered this ruling in our October 1, 2025 edition.) Plaintiffs appealed.
Addressing the standard of review first, the Seventh Circuit noted that the plans gave the university discretionary authority, which would ordinarily lead to deferential review, but the district court’s ruling turned on an issue of law, so the appellate court employed the de novo standard instead.
Turning to the validity of the 2019 spousal waiver, the court examined Wisconsin law, specifically Wisconsin Statute § 244.41(1)(f), which provides that an agent can “[w]aive the principal’s right to be a beneficiary of a joint and survivor annuity, including a survivor benefit under a retirement plan” “only if the power of attorney expressly grants the agent the authority.” The Seventh Circuit found this law applicable: “Valerie’s power of attorney did not contain an express grant of power to her agent Davies for such an action. The 2019 spousal waiver was therefore invalid, and plaintiffs’ claim for benefits due under the plans fails.”
Plaintiffs argued that this section did not apply because Edward’s 1998 designation altered his benefit so that it was no longer “a joint and survivor annuity” for the purposes of the Wisconsin statute. The Seventh Circuit disagreed, ruling that Edward did not change the form of his benefits; instead, he only changed how the value of those benefits would be divided. Thus, “even after the 1998 form was accepted, the designated form of payment was still the default form of a joint and survivor annuity.” The court also rejected plaintiffs’ argument that other “more general” Wisconsin statutes applied, relying instead on the “more specific language” in Section 244.41(1)(f).
Plaintiffs presented a backup argument in which they advocated for certifying a question to the Wisconsin Supreme Court to address the issue. However, the Seventh Circuit disagreed. The court found that plaintiffs’ proposed framing of their question “misstates the issue here,” and that the issue was not one of “broad, general significance… The validity of the 2019 waiver is a case-specific issue that turns on the scope of Valerie’s power of attorney and the type of benefit at issue under the plans.”
Finally, the Seventh Circuit addressed plaintiffs’ alternative claims. The court found that plaintiffs’ breach of fiduciary duty claim failed because the university acted in accordance with the law and the plans’ requirements, and there was no unreasonable delay in notifying plaintiffs of the rejection of the beneficiary designation form. The negligence claim failed for the same reason. Furthermore, plaintiffs’ negligence claim was preempted by ERISA, regardless of whether TIAA acted as a fiduciary. Thus, the district court’s decision below was affirmed in its entirety.
Below is a summary of this past week’s notable ERISA decisions by subject matter and jurisdiction.
Attorneys’ Fees
Second Circuit
Hammell v. Pilot Products, Inc. Defined Benefit Pension Plan, No. 21-CV-0803 (BMC), 2026 WL 2042477 (E.D.N.Y. July 15, 2026) (Judge Brian M. Cogan). This case is a contentious dispute between family members over the management of the pension plan for the family-owned business Pilot Products, Inc. It pitted one daughter, plaintiff Elizabeth Hammell, against her sister, Carolyn Hammell, the company, and the plan. In 2024 the court held a bench trial and largely ruled in favor of Elizabeth. The case went up to the Second Circuit Court of Appeals, which affirmed. (For more information about the complex facts underlying the dispute, and a discussion of the Second Circuit’s decision, check out our March 11, 2026 issue.) Now the case is on remand and Elizabeth has filed a motion to recover her attorneys’ fees and costs incurred on appeal. She sought a fee award of $368,978.20 (which she had voluntarily reduced by 15% in alignment with the court’s fee award after trial) and $7,233.16 in costs. The court found that Elizabeth was eligible for such fees because she was “‘overwhelmingly successful’ in terms of damages recovered despite failing on three out of four claims,” and because the Second Circuit “fully affirmed this Court’s ruling,” thus meaning that she “satisfied the standard of attaining ‘some degree of success’ at the proceedings in connection with the appeal.” Defendants argued that Elizabeth had already been “made whole” and thus any additional award would be a “windfall,” but the court stated that “[t]his argument doesn’t make much sense,” noting that defendants chose to appeal and thus Elizabeth was entitled to fees for defending her victory. Defendants also argued that Elizabeth’s fees should be reduced because she did not prevail on her cross-appeal, but the court noted that it had rejected a similar argument when it awarded fees after trial and would reject it again for the same reason: “Her cross-appeal and defendants’ appeal ‘involved the same core set of facts…and the same ERISA fiduciary-duty legal framework,’ and were, fundamentally, two parts of the same (successful) whole.” The court thus turned to numbers, and applied the “presumptively reasonable fee” standard, which involved calculating the lodestar by multiplying a reasonable hourly rate by the reasonable number of hours expended. The court found the hours reasonable: “Plaintiff [represented by King & Spalding] used a leanly staffed legal team which spent roughly 350 combined hours on briefing, oral argument preparation, and mandatory mediation, all to protect the substantial $1.78 million judgment for an individual plaintiff.” The requested rates, however, “warrant closer inspection.” Two partners and two associates worked on the case and requested hourly rates of $1,194, $1,466, $850, and $829 respectively (after the 15% reduction). These rates “greatly exceed the upper bound of the prevailing rates for ERISA cases in this District.” The court recognized that “this was no run-of-the-mill ERISA” case because it involved “thorny questions of ERISA law” and was litigated by “two international mega-firms,” and thus higher rates were to be expected. Still, the court found the requested rates too high, concluding that “the proposed rates of plaintiff’s four timekeepers are reasonable when reduced by 25% from their original rates.” After this reduction, Elizabeth’s reasonable fees totaled $325,569. As for costs, the court found $7,233.16 to be reasonable and compensable. Thus, Elizabeth walked away with $332,802.16 for her appellate efforts.
Tenth Circuit
B.C. v. United Healthcare Ins. Co., No. 2:21-CV-00032-DBB, 2026 WL 2030872 (D. Utah July 14, 2026) (Judge David Barlow). R.C., a minor, received mental health care at a residential treatment facility starting in June of 2019. However, United Healthcare Insurance Company, the administrator of R.C.’s ERISA-governed medical benefit plan, denied benefits for his treatment. This case ensued against United and the plan, and the parties filed cross-motions for summary judgment. In 2024, the court denied defendants’ motion and granted in part R.C.’s motion. It found that United acted arbitrarily in denying R.C.’s claim by failing to address the opinions of his treatment providers and making inaccurate statements about safety issues. Because United did not give an adequate explanation for its denial, the court remanded the case for further evaluation. On remand, United reversed its denial and R.C. filed a motion in which he requested “(1) the payment of the ERISA benefits that Defendants have approved, (2) prejudgment interest on the benefits, and (3) attorney’s fees and costs.” Issue one was quickly resolved, as defendants agreed that $356,718 was the correct total, and thus the court ordered them to pay that amount. On prejudgment interest, R.C. requested a 10% interest rate. Defendants argued that this rate “would essentially constitute punitive damages against them and that the lower federal rate is more appropriate.” The court agreed with R.C., finding it appropriate to compensate him for the deprivation of benefits over several years, and determined that a 10% interest rate “is reasonable and does not rise to the level of punitive damages.” It noted that the Tenth Circuit “has previously approved even higher interest rates in ERISA cases when specified by state law,” and “courts in this district routinely apply Utah’s 10% rate in ERISA cases.” The court further determined that interest began accruing 60 days after the midpoint of R.C.’s treatment period, as proposed by R.C., rejecting defendants’ argument that it should only accrue from the date of their remand determinations. As for attorney’s fees, the court found that R.C. had achieved “some success on the merits,” and was thus eligible for fees, because he had convinced the court that defendants violated ERISA through arbitrary and capricious denials. The court then applied the Tenth Circuit’s five-factor test to determine the appropriateness of awarding fees, and found that most favored R.C., particularly noting defendants’ culpability and the deterrent effect of such an award. As for the amount, the court reduced the requested hours slightly for time spent before the case began and on discovery related to R.C.’s unsuccessful Parity Act claim. The court also reduced the requested $650 hourly rate of counsel Brian S. King to $600, citing recent cases using the same rate. In the end, the court ordered defendants to pay $356,718 in benefits, $97.73 in prejudgment interest per day since accrual, $66,265 in attorney’s fees, and $400 in costs.
Breach of Fiduciary Duty
First Circuit
Manoharan v. Maersk Inc., No. CV 25-12422-LTS, 2026 WL 2042219 (D. Mass. July 15, 2026) (Judge Leo T. Sorokin). In this putative class action participants in Maersk Inc.’s defined-contribution retirement plan contend that Maersk and affiliated defendants have mismanaged the plan. They allege that during the time period at issue the plan had assets exceeding $900 million, and over ten percent of that amount was invested in a single fixed annuity product referred to as the “Hancock FA.” Plaintiffs allege that Maersk “obfuscated and hid” information about the Hancock FA from participants, “making it difficult for Plan participants to identify and understand the investment.” Their complaint asserts three claims under ERISA: (1) breach of the duties of loyalty and prudence, (2) causing the plan to engage in an impermissible party-in-interest transaction with John Hancock, and (3) co-fiduciary liability against each defendant. They allege that the Hancock FA consistently underperformed comparable alternatives and that Maersk maintained the fund without engaging in a process to periodically investigate, monitor, or replace the offering. Defendants moved to dismiss, arguing that plaintiffs lacked Article III standing and that their claims are barred by a release in an earlier lawsuit. At the center of their motions was a startling argument that “the Plan has not offered, and does not offer, a John Hancock fixed annuity product.” Defendants suggested that perhaps plaintiffs had mistaken their alleged fund for a different New York Life product instead. The court ordered limited discovery on the issue, reviewed a joint report on the results, and then issued this order. The court agreed that plaintiffs were mistaken, noting that the Form 5500s “describe a New York Life product, not a John Hancock fund,” and plaintiffs’ “account statements refer to the product as ‘NYL Insurance Anchor IV.’” For the court, “That failure is fatal to their complaint.” The court ruled that plaintiffs lacked Article III standing to bring claims against John Hancock because they could not show any injury traceable to John Hancock’s conduct. However, the court found that plaintiffs had standing to bring claims against Maersk and plan advisor Mercer Investments LLC, as they alleged inadequate oversight and selection of the stable-value fund. Regarding the settlement agreement in the prior class action (Leon v. Maersk), the court rejected Maersk’s argument that it barred the claims in this action. The court found that the claims in this case were different from those in the Leon case, which centered on excessive and discriminatory recordkeeping and administration fees. On the merits, the court concluded that plaintiffs failed to state any of their claims because they could not plausibly allege that the plan offered a John Hancock investment product. As a result, the comparators they presented in their complaint were “meaningless.” The court thus granted defendants’ motion to dismiss, although it allowed plaintiffs to seek leave to amend.
Fifth Circuit
Guenther v. BP Retirement Accumulation Plan, No. 24-20551, __ F. App’x __, 2026 WL 2031828 (5th Cir. July 14, 2026) (Before Circuit Judges Haynes, Higginson, and Ho). In this ten-year-old case the plaintiffs, former and current employees of the oil giant BP, allege that BP and related defendants violated ERISA by misinforming them about their retirement benefits. In 1989 BP replaced its “America, Inc. Retirement Plan” (ARP) with a “Retirement Accumulation Plan” (RAP), which used a different formula for calculating benefits. BP communicated information about the new plan to employees, and it is these communications that form the core of the parties’ dispute. Plaintiffs requested relief under ERISA § 502(a)(3), claiming BP breached its fiduciary duties under ERISA § 404(a) by misrepresenting that employees would receive at least the same benefits under the RAP as the ARP. They also alleged BP failed to make disclosures required by ERISA §§ 102 and 204(h). Below, the district court denied BP’s motions for summary judgment and to dismiss for lack of standing, and after a bench trial, it ruled in favor of plaintiffs. (This ruling was Your ERISA Watch’s notable decision for the week of April 3, 2024.) BP appealed, raising a number of issues, including whether plaintiffs had standing. The Fifth Circuit zeroed in on the issue of Article III standing, which requires a plaintiff to demonstrate an “injury in fact,” causation, and redressability. The parties agreed that the “illegal conduct” at issue was BP’s communications about the RAP, and that there was an injury. However, “there is disagreement about what exactly that injury is.” The district court found that plaintiffs “suffered from ‘a mistaken understanding’ about retirement benefits,” while BP argued that “the real injury here is the difference between the benefits which the employees would have received under the ARP, and those actually received under the RAP.” The Fifth Circuit stated, “The only credible theory of an injury in this case is the decreased benefits under the new retirement plan. A broken contractual promise is not an injury – it is a ‘violation of federal law.’ The injury is the diminution of the employees’ retirement funds caused by the broken promise.” Thus, a “mistaken understanding” on its own was insufficient to create standing: “There must be ‘downstream consequences’ from this lack of information.” For the same reason, the Fifth Circuit found a lack of evidence to demonstrate traceability. Because the district court “did not identify the correct injury in this case…it’s not surprising that it neglected to make the relevant findings with respect to traceability – namely, whether the diminution of funds was caused by the alleged breach of fiduciary duty.” Ultimately, because the district court’s standing analysis was flawed, the Fifth Circuit vacated the judgment below and remanded with instructions to reevaluate the issue. Judge Higginson, in a concurring opinion, agreed that a more complete analysis was required, but “wr[o]te separately to clarify that on remand, this case is not simply one of a mistaken understanding because the Plaintiffs did allege downstream consequences.” Judge Higginson noted that plaintiffs “alleged at least four tangible consequences and harm from BP’s unlawful conduct,” including that they were induced not to seek alternative employment and were prevented from making informed decisions about retirement savings. Thus, this was not a case of “a ‘mistaken understanding’ alone… BP’s failure to execute its fiduciary duties left its employees disempowered to plan for their long-term financial health, often as concrete and devastating an injury as workers can suffer.” As a result, Judge Higginson was convinced that plaintiffs had suffered an Article III injury. However, traceability was still required and Judge Higginson agreed with the majority that this element was not fully addressed by the district court. Thus, remand was necessary. Judge Higginson suggested discovery might be necessary “to determine the extent of the downstream consequences of Plaintiffs’ reliance on BP’s financial misrepresentations.”
Ninth Circuit
Clark v. Centene Corp., No. 25-CV-09743-RFL, 2026 WL 2069784 (N.D. Cal. July 16, 2026) (Judge Rita F. Lin). Victoria Clark is a participant in the Centene Management Corporation Retirement Plan who alleges in this action that Centene has mismanaged the plan. She has asserted four claims in her complaint: (1) violation of the prohibited transactions provision under 29 U.S.C. § 1106; (2) breach of fiduciary duties under 29 U.S.C. § 1104(a)(1); (3) violation of the anti-inurement provision under 29 U.S.C. § 1103(c)(1); and (4) failure to monitor fiduciaries. Centene filed a motion to dismiss. In this order the court first addressed Clark’s theory that Centene violated ERISA by selecting Collective Investment Trusts (CITs) for the plan instead of mutual funds. The court ruled that Clark lacked standing to bring this claim: “it is not reasonable to infer that Clark paid higher fees just because the CITs are ‘structurally opaque’ and Fidelity entities are both the Plan’s recordkeeper and manager of the CITs.” Clark argued that participants were exposed to “massive unmonitored liquidity risks,” but “she does not explain how those risks materialized or threaten imminent harm… Without allegations as to how the CITs’ characteristics caused harm, she has not plausibly alleged standing.” Turning to Clark’s administrative and recordkeeping fees claims, the court concluded that she lacked standing regarding the Strategic Advisors managed account fees because “she does not allege that she enrolled in such an account” and did not plausibly allege that all participants were charged the fees. Regarding the other challenged fees, Clark compared them to those in other “jumbo-classified” plans, but the court found that “she provides no characteristics by which the plans can be compared, other than her characterization of them all as ‘jumbo’ plans. Without more, the three other plans are not plausibly alleged to be reasonable comparators.” As a result, “it is not plausible that Fidelity’s fees were excessive and therefore that Centene breached its duty of prudence[.]” The court further dismissed Clark’s prohibited transaction claims regarding the fees, ruling that she lacked standing. If her theory was that the fees were too high, the court had already found that she had failed to plead such a claim, and if her theory was that Fidelity was a party in interest, “Clark has not sufficiently alleged how Fidelity’s role caused her injury, absent any increase in the fees, and thus has not adequately alleged Article III standing to bring such a claim.” On Clark’s forfeiture claim, the court ruled that Centene’s use of forfeitures to reduce its own contributions did not plausibly allege a breach of fiduciary duties. The court noted that Clark failed to specify which IRS regulations she alleged were violated and did not provide sufficient facts to show that Centene’s actions were imprudent or disloyal. The court also found that Clark did not plausibly allege a prohibited transaction or a violation of ERISA’s anti-inurement prohibition, as she did not demonstrate a reversion or diversion of plan assets. Finally, the court dismissed Clark’s failure to monitor claim because it was derivative of her other failed claims. The court thus granted Centene’s motion in full, but with leave to amend.
Disability Benefit Claims
Seventh Circuit
Scorzo v. Unum Life Ins. Co. of Am., No. 23-CV-3836, 2026 WL 2070002 (N.D. Ill. July 17, 2026) (Judge Jeffrey I. Cummings). Tiffany Scorzo was a store manager for Starbucks Corporation when she was diagnosed with multiple sclerosis in 2016. She continued working with her disease until 2020, when she made a claim for benefits under Starbucks’ employee long-term disability benefit plan, which was insured by Unum Life Insurance Company of America. Unum initially approved her claim, but it terminated benefits in 2023, contending that Scorzo no longer met the definition of disability because she was capable of performing alternative gainful occupations. Scorzo unsuccessfully appealed and then brought this action under ERISA. The case proceeded to cross-motions for judgment on the record, where the court applied a de novo standard of review because the plan did not grant Unum discretionary authority to determine benefit eligibility. The parties differed as to how to interpret the plan’s disability provision; Scorzo argued that “gainful occupation” should be interpreted in a manner that allowed her to maintain the same “station in life” and standard of living. However, the court disagreed, critiquing her reliance on California law and further ruling that Unum was not required to use an income threshold (of 60%) in evaluating her ability to return to work. The court noted that “the ‘any occupation’ standard is not demanding’…and Scorzo’s burden to overcome it ‘is an especially heavy one.’” According to the court, she did not meet that burden for several reasons. First, the court stated that Scorzo’s treating physician did not conclusively state that she was unable to work in any capacity. Second, Unum’s reviewing physicians concluded that Scorzo’s MS did not prevent her from performing sedentary-level occupations. The court found these opinions well-reasoned and supported, and disagreed that they misinterpreted her medical records or engaged in “cherry-picking.” Third, vocational experts consulted by Unum identified several sedentary occupations that Scorzo could perform. The court found no basis to question the reliability of these opinions. Fourth, the court found that Scorzo’s MRI results showed no active disease and “the atrophy shown in Scorzo’s MRIs is not indicative of an inability to work.” Fifth, the court acknowledged Scorzo’s self-reported symptoms, but found that “the record as a whole reflects a mixed picture that counterbalances” those symptoms, including a lack of active symptoms and a refusal to try disease-modifying therapies. Finally, the court observed that the Social Security Administration had denied Scorzo’s claim for disability benefits, which weighed against her, especially because the agency found that she “had the functional capacity to perform alternative ‘representative occupations,’ including mail clerk, merchandise marker, and office helper.” As a result, the court granted Unum’s motion for judgment and denied Scorzo’s.
Ninth Circuit
Cyr v. Reliance Standard Life Ins. Co., No. 2:23-CV-06286-DSF-RAO, 2026 WL 2056667 (C.D. Cal. July 15, 2026) (Judge Dale S. Fischer). Practitioners in the Ninth Circuit will likely have a jolt of recognition when reading the name of this case. In 2011, Laura Cyr and Reliance Standard Life Insurance Company squared off in front of the Ninth Circuit after Reliance denied Cyr’s claim for ERISA-governed long-term disability benefits. In an en banc decision the Ninth Circuit held that “potential defendants in actions brought under § 1132(a)(1)(B) should not be limited to plans and plan administrators,” and thus, as the insurer and claim administrator of the plan at issue, Reliance was a proper defendant. The en banc court returned the case to the assigned three-judge panel, which affirmed the district court’s ruling in Cyr’s favor, whose benefits were reinstated…until 2021. In that year Reliance denied Cyr’s claim again, contending that she no longer met the definition of disability in the plan, which required her to be unable to perform the material duties of her “regular occupation” as a Vice President of Administration. The case proceeded to a bench trial on the administrative record; the court employed a de novo standard of review. In this ruling Cyr prevailed once again, convincing the court that she met her burden of proving entitlement to benefits under the plan. The court found that Cyr’s medical conditions, which included seizures, memory loss, speech difficulty, and migraines, impaired her cognitive function, rendering her unable to perform the material duties of her job. The court emphasized that Cyr’s occupation was a demanding one that required regular cognitive engagement, and her impairments precluded her from meeting its demands. The court also found that Cyr was unable to perform the physical requirements of a sedentary position, as her doctors reported severe pain and limitations in her ability to sit, stand, and lift. The court gave greater weight to the opinions of Cyr’s treating physicians, who had conducted in-person evaluations, over the “paper review” conducted by Reliance’s reviewing physician. The court also criticized Reliance for “assessing Cyr’s capacity to perform only the duties of a sedentary job rather than her specific duties, including non-physical duties[.]” The court was unimpressed by reports that Cyr had engaged in physical activities such as skiing, hiking, and golfing because these activities did “not indicate her ability to perform the material duties of her occupation.” The court also ruled that Reliance could not challenge Cyr’s credibility because it had not done so in its denial letters. As a result, the court concluded that Cyr’s diagnoses and symptoms precluded her from performing the material duties of her occupation, and she was entitled to reinstatement of her benefits.
Discovery
Second Circuit
De Mello v. First Unum Life Ins. Co., No. 25-CV-7933 (LJL), 2026 WL 2032059 (S.D.N.Y. July 14, 2026) (Judge Lewis J. Liman). Dominic De Mello is a participant in an ERISA-governed long-term disability benefit plan sponsored by his employer, Schulte Roth & Zabel LLP. The plan is insured by First Unum Life Insurance Company. De Mello contracted COVID-19 in 2021, was diagnosed with long COVID, and submitted a claim for benefits under the plan to Unum. Unum denied his claim, relying on the opinions of two doctors, Drs. Lyon and Bright. De Mello appealed, and his claim was reviewed by a third doctor, Dr. Greenstein. Unum denied the appeal and this action followed in which De Mello alleged entitlement to plan benefits under ERISA Section 502(a)(1)(B). De Mello propounded interrogatories and requests for production, some of which sought information regarding (a) payments to the doctors involved in his claim review, (b) the number of claims reviewed and denied, and (c) documents related to financial incentives for claim determinations. Unum responded to some of the requests, but resisted others, so De Mello filed a motion to compel. The court emphasized that the party seeking discovery must show relevance and the discovery must be “proportional to the needs of the case.” The court explained that review of claim denials is typically limited to the administrative record unless “good cause” is shown to consider additional evidence, and noted that De Mello’s requests went outside the record. De Mello contended that discovery was warranted based on the conflict of interest inherent in Unum’s dual role as both evaluator and payer of claims. However, the court noted that most claims involve such a conflict, and thus a conflict can only “rise to the level of ‘good cause’ when bolstered by specific allegations.” The parties agreed that the appropriate standard for discovery was “reasonable cause,” which was lower than “good cause,” but the court ruled that even if it used an ordinary non-ERISA standard of review, it would still deny the motion. The court found it “questionable whether plaintiff has identified any ‘additional factor’ that would suggest that Defendant’s structural conflict affected its consideration of Plaintiff’s claim.” De Mello cited errors in the doctors’ opinions, and the poor track record in court of Dr. Lyon, but “[e]vidence that the plan administrator relied on evidence that is counter to the evidence submitted by the claimant cannot alone be sufficient to allow extra-record discovery.” The court also determined that De Mello’s requests for information regarding payments to doctors and denial rates were not sufficiently relevant or proportional to the case’s needs. The court further concluded that the requested reserve information was irrelevant because Unum asserted that its reserves are not calculated on a claim-by-claim basis. Thus, the court denied De Mello’s motion to compel.
ERISA Preemption
Third Circuit
SM Medical Holdings Corp. v. Aetna, Inc., No. CV 25-17581 (MAS) (RLS), 2026 WL 2042981 (D.N.J. July 15, 2026) (Judge Michael A. Shipp). Plaintiff SM Medical Holdings purchased the receivables of several medical facilities and then brought this action in state court against numerous defendant insurers and plan administrators. Aetna removed the action, citing federal question jurisdiction under ERISA and diversity jurisdiction. The parties then filed three motions: plaintiff filed a motion to remand, Aetna filed a cross-motion to sever plaintiff’s claims, and AmeriHealth and Independence Blue Cross filed a motion to dismiss. The court ruled on all three in this order. Addressing jurisdiction first, the court found that Aetna failed to satisfy the two-prong Third Circuit Pascack test for complete preemption under ERISA. Aetna did not demonstrate that plaintiff had standing to assert a claim under Section 502(a) of ERISA, as the complaint did not allege that the right to payment stemmed from a patient’s plan or an assignment thereof. “Here…the Complaint alleges that Plaintiff was assigned certain accounts receivable due pursuant to a bill of sale and that Aetna is indebted to Plaintiff in the amount of $2,277,892.60 on a book account… The Complaint does not allege that the right to payment stems from a patient’s plan or an assignment thereof.” Furthermore, Aetna did not show that plaintiff’s claims were “conditioned upon the terms of an ERISA plan… There is no indication that Plaintiff’s claim for account stated is based upon an obligation under an ERISA plan, nor does the Court need to interpret any provisions within an ERISA plan to determine whether Plaintiff can recover the amount it claims it is owed.” The court thus turned to diversity jurisdiction. The court noted that “complete diversity of citizenship is lacking on the face of the Complaint” because both plaintiff and defendant Horizon Blue Cross Blue Shield of New Jersey were New Jersey citizens. Aetna contended that the court could disregard BCBS under the “fraudulent misjoinder” doctrine. However, the court declined to adopt this doctrine, noting that it is not recognized by the Third Circuit and has been criticized for expanding federal jurisdiction improperly and resulting in an “unpredictable and complex jurisdictional rule.” The court emphasized that removal statutes should be strictly construed, and all doubts resolved in favor of remand. As a result, the court concluded that it did not have subject matter jurisdiction over the action and thus could not rule on any of the other pending motions. The case was remanded to state court.
Sixth Circuit
Williams v. MemberSelect Ins. Co., No. 24-CV-12700, 2026 WL 2042484 (E.D. Mich. July 15, 2026) (Judge Linda V. Parker). Plaintiffs Dionne Williams and Anthony Williams are beneficiaries of a self-funded health plan administered by TeamCare. Dionne purchased a Michigan no-fault automobile insurance policy from MemberSelect Insurance Company and opted out of personal injury protection allowable expense coverage because, plaintiffs allege, TeamCare misrepresented to them that they possessed “qualified health coverage” under Michigan’s No-Fault Insurance Act (the Act). Plaintiffs were injured in a motor vehicle accident after which TeamCare paid medical benefits for their treatment. TeamCare then asserted subrogation and reimbursement rights, as well as a lien against any recovery, thus prompting this action. Plaintiffs contended that the reimbursement and subrogation requirement in the TeamCare plan constitutes a “limit” on coverage in violation of the Act. Plaintiffs also contended that TeamCare’s lien on noneconomic damages, including pain and suffering awards, “limits” coverage in violation of the Act “because it effectively requires them to pay for their own expenses out of an award intended to make them whole.” The court ordered the parties to brief whether TeamCare’s plan satisfied the criteria for “qualified health coverage” under the Act. It concluded that it did. The court’s reasoning was based on the interpretation of the term “limit” in the Act, which was not defined. The court applied the plain and ordinary meaning of “limit” and concluded that the plan did not “limit” coverage because it did not “alter[] the scope or availability of their benefits simply because their injuries arose from a motor vehicle collision.” The court further found that the subrogation and reimbursement provisions did not affect the scope of coverage, as coverage is determined when a plan pays for medical expenses. “[A] later effort to recoup those payments does not retroactively limit or diminish the coverage previously provided.” The court further noted that the Act’s text did not indicate that subrogation or post-payment reimbursement provisions constituted a “limit” on coverage. In any event, the court observed that ERISA preempts state laws that attempt to regulate the reimbursement or subrogation rights of self-funded employee benefit plans, and thus “Michigan’s no-fault act cannot invalidate such provisions. Thus, even under a hypothetical interpretation treating reimbursement as a coverage limit, ERISA preemption prevents Michigan law from disqualifying a self-funded plan on that basis.” As a result, the court concluded that the Plan constituted “qualified health coverage” under the Act. Defendants’ motion to dismiss was granted, and plaintiffs’ motion for summary judgment was denied.
Pension Benefit Claims
Third Circuit
Jones v. Eastern Atlantic States Carpenters Pension Fund, No. CV 25-1511, 2026 WL 2066382 (E.D. Pa. July 17, 2026) (Judge Juan R. Sánchez). Bryan Jones was a union carpenter for 33 years and a participant in the pension plan of the Eastern Atlantic States Carpenters Pension Fund. He contacted the Fund and informed it that he intended to retire effective August 1, 2023. However, the Fund discovered “unresolved equitable distribution issues” from Jones’ 1997 divorce and requested a court order or an affidavit from his ex-spouse waiving her rights. Jones submitted a draft domestic relations order to the Fund in January of 2024, which the Fund conditionally qualified in March of 2024. The Fund obtained a court-entered qualified DRO (QDRO) the next month and proceeded to calculate benefits for an August 1, 2024 benefit start date. Jones initially agreed to this plan, but changed his mind and appealed, arguing that the QDRO process should not have delayed his benefits and thus they should have started in 2023 as he originally requested. The Fund denied his appeal, and this action followed in which Jones sought retroactive benefits under 29 U.S.C. § 1132(a)(1)(B). The parties filed cross-motions for summary judgment. Jones argued for a de novo standard of review because “in his view, the Plan documents do not specifically authorize the Fund to delay commencement of his benefits while the QDRO issue is resolved.” However, the court disagreed and applied an arbitrary and capricious standard of review. The court found that discretionary authority was granted to the Fund by the plan, and the “the administrative record shows the Fund interpreted the terms of the Plan in reaching its decision.” On the merits, the court found that the Fund’s decision was reasonable and supported by the administrative record. The plan required “more than a phone call to complete an election” for benefits; it required a formal application and proof of entitlement, which Jones did not provide until 2024. The court found that the Fund’s requirement for a QDRO or waiver was reasonable due to unresolved issues from Jones’ divorce. Jones emphasized that he was eligible for his benefits in 2023, but the court noted that “eligibility to receive a pension and satisfaction of the requirements to commence payment of the pension are distinct.” The court also rejected Jones’ argument that the plan did not allow the QDRO process to delay his benefit commencement date, finding that the plan provisions he relied on for this proposition did not apply in his situation. Jones further criticized the delay in receiving his benefits, but the court noted that “the record does not show the delay resulted from arbitrary conduct by the Fund.” As a result, the court granted the Fund’s motion for summary judgment and denied Jones’.
O’Brian v. Board of Trustees, Plumbers & Pipefitters Local 7 Pension Fund, No. CV 25-598-GBW-SRF, 2026 WL 2070318 (D. Del. July 17, 2026) (Magistrate Judge Sherry R. Fallon). Karen O’Brian is an alternate payee under the Board of Trustees, Plumbers & Pipefitters Local 74 Pension Fund pursuant to a qualified domestic relations order (QDRO) entered by Delaware family court after her divorce from plan participant Gregory Hudson. The family court awarded O’Brian 50% of the marital portion of Hudson’s accrued pension benefit. O’Brian began receiving her benefit in 2015, but the Fund allegedly reduced it due to her age. O’Brian contends that the Fund “failed to provide a written election form, a written explanation for the reduction, or a citation to a pension plan provision authorizing the reduction before reducing her payments.” She made several inquiries about the reduction in 2016, 2018, and 2024, and submitted a formal appeal in 2025. O’Brian alleges that in response she received a package containing pension plan documents and summary plan descriptions, but no “benefit election forms, written correspondence or notices explaining the actuarial reduction in Plaintiff’s benefit, the actuarial calculation used to determine Plaintiff’s monthly benefit, or the pension fund’s QDRO procedures.” She thus filed this pro se action alleging five claims for relief under ERISA: (1) recovery of benefits under Section 502(a)(1) of ERISA; (2) failure to provide a full and fair review under Section 503; (3) statutory penalties for failure to provide pension plan documents; (4) breach of fiduciary duty under Sections 502(a)(2) and 409(a); and (5) “violation of Plaintiff’s procedural rights based on Defendant’s alleged failure to obtain informed consent.” The Fund moved to dismiss for failure to state a claim. The assigned magistrate judge recommended granting the motion to dismiss counts 3 and 4 of the complaint. Count 3 was dismissed because ERISA’s statutory penalty provisions apply to plan administrators, and O’Brian had only named the plan as a defendant. Count 4 was dismissed for similar reasons; the claim was brought against the plan only and did not name a fiduciary. Furthermore, Count 4 did not identify a loss to the plan, which is necessary to state a claim for breach of fiduciary duty under Section 502(a)(2). However, the magistrate recommended denying the motion to dismiss Counts 1, 2, and 5. The Fund argued that these counts should be dismissed based on the statute of limitations, but the court stated, “Defendant sets forth the law governing the applicable statute of limitations without applying the law to the facts of the case. The court declines to recommend dismissal of these claims in the absence of any substantive argument supporting dismissal.” Furthermore, the Fund’s arguments for dismissing Counts 2 and 5 were based on matters outside the complaint (including correspondence with O’Brian and QDRO-related documents), which the court would not consider on a motion to dismiss. (The court declined to convert the motion to dismiss into one for summary judgment in order to consider the documents.) As a result, the magistrate recommended granting the motion to dismiss Counts 3 and 4 without prejudice, and denying the remainder.
Seventh Circuit
Little v. Essex Grp., Inc., No. 1:25-CV-456-HAB-ALT, 2026 WL 2052016 (N.D. Ind. July 14, 2026) (Judge Holly A. Brady). Ty Little is a former employee of Essex Group, Inc. and a vested participant in the company’s Retirement Income Plan for Salaried Employees. In 2022 Little filed an action in state court seeking payment of pension benefits, which was removed to federal court for ERISA preemption reasons. The case was dismissed without prejudice to allow Little to exhaust his administrative remedies. After doing so, and receiving another unsatisfactory decision, Little filed this pro se action in which he alleges that his former employer and other related defendants, including Principal Life Insurance Company, improperly calculated and limited his accrued pension benefits by failing to correctly apply the plan’s formula, credited service provisions, and offset methodology. Little’s complaint cited ERISA § 502(a)(1)(B), but the court also construed it as alleging a claim for equitable relief under ERISA § 502(a)(3). Principal and the Essex defendants each filed motions to dismiss. Principal contended that it could not be sued because its involvement with the plan was “limited to ministerial duties or processing of claims.” However, the court concluded that Little’s allegations were sufficient because he pleaded that Principal exercised discretionary authority and control over the plan, which could make it a fiduciary under ERISA or a proper defendant under § 1132(a)(1)(B). “[W]hether Little will ultimately have sufficient factual support for this characterization of Principal’s role in relation to the Plan is a question for a later stage in this litigation.” The court thus turned to the Essex defendants’ motion. The court denied their motion to dismiss Little’s claim for wrongful denial of benefits under § 502(a)(1)(B). The Essex defendants argued that Little’s claim lacked sufficient information about “his status as a vested participant, his years of service, and the discrepancy” that formed the basis for his claim. They also argued that his claim was improperly based on the summary plan description rather than the plan itself. However, the court found that Little’s allegations were adequate under the less stringent standard warranted by his pro se status, and that he had done enough to put defendants on notice that they had improperly calculated his benefits. However, the court granted the Essex defendants’ motion as to Essex Group, ruling that the employer was not a proper party to the claim. Finally, the court dismissed Little’s claim under ERISA § 502(a)(3) as duplicative because § 502(a)(3) is a catch-all provision for equitable relief not available under other sections, and Little “appears to only include facts alleging a denial of benefits claim under § 502(a)(1)(B).” As a result, defendants’ motions to dismiss were only granted in part and the case will proceed.
Pleading Issues & Procedure
Second Circuit
Fellows v. Universal Servs. of Am., LP, No. 25-CV-10659 (GHW) (BCM), 2026 WL 2085727 (S.D.N.Y. July 20, 2026) (Magistrate Judge Barbara Moses). Three weeks ago, in a different case, Magistrate Judge Barbara Moses granted a motion to stay discovery while a motion to dismiss was pending in a case alleging that fiduciaries of an ERISA-governed employee benefit plan breached their fiduciary duties in managing the plan. (See our July 1, 2026 edition for more on the ruling, in Rajappan v. Bloomberg L.P.) In this case the defendants are fiduciaries of an ERISA-governed employee benefit plan who have been accused of breaching their fiduciary duties in managing the plan, have filed motions to dismiss, and want to stay discovery pending that motion. You’ll never guess how this ends! This time the defendants are Universal Services of America, LP (doing business as Allied Universal) and related entities. Plaintiffs allege “‘misconduct and self-dealing,’ related in part to the ‘commission fee structures’ for Allied Universal’s voluntary benefits insurance, causing employee participants to ‘overpa[y] for premiums.’” Defendants’ pending motion to dismiss argues that plaintiffs lack standing and that some of the defendants are not fiduciaries under ERISA. As in the Rajappan case, the court granted defendants’ motion to stay discovery, focusing on three factors: ““(1) the breadth of discovery sought, (2) any prejudice that would result, and (3) the strength of the motion.” First, the court noted that the discovery process would involve voluminous document production and review, as plaintiffs had requested 110 categories of documents spanning seven years. The court stated that “discovery is often one-sided” in cases like this, which creates a significant burden for defendants. This burden is “arguably appropriate once the court has determined that plaintiffs have pleaded a cognizable claim under ERISA,” but if not, “a plaintiff with a largely groundless claim [will] simply take up the time of a number of other people, with the right to do so representing an in terrorem increment of the settlement value, rather than a reasonably founded hope that the discovery process will reveal relevant evidence.” As for prejudice, the court found that plaintiffs did not identify any specific prejudice they would suffer if discovery were delayed. Plaintiffs’ claims relied largely on document production, and defendants were “of course under a duty” to preserve all relevant documents. The court also stated that any alleged harm, including higher premiums, could be remedied through a damages award, and plaintiffs could obtain relevant discovery later if the motions to dismiss were denied. Finally, the court determined that defendants’ motions to dismiss raised “substantial arguments for dismissal.” Defendants questioned the traceability of their conduct to the alleged higher premiums and argued that some defendants were not acting as fiduciaries. The court acknowledged that plaintiffs “raised significant opposition” to the motions to dismiss, but concluded that “[o]n balance…‘the scales tip in favor of a discovery stay.’” Defendants’ motion was thus granted, and discovery will have to wait.
Provider Claims
Third Circuit
Hudson Hospital OPCO, LLC v. Cigna Health & Life Ins. Co., No. 24-2830, __ F. App’x __, 2026 WL 2057076 (3d Cir. July 16, 2026) (Before Circuit Judges Shwartz, Freeman, and Rendell). The plaintiffs in this case are three New Jersey-based hospitals who allege that health insurer Cigna underpaid them for healthcare services they provided to Cigna subscribers from 2016 through 2021. Specifically, the hospitals contend that the underpayments violated the terms of Cigna’s health insurance plans, which required reimbursement at certain rates, based on one of three methodologies: MRC-1, MRC-2 (“maximum reasonable charges”), or R&C (“reasonable and customary”). Plaintiffs brought claims under ERISA for failure to pay benefits due under the plans and for violations of fiduciary duties. The latter claim alleged that Cigna breached its fiduciary duty through its “cost-containment program,” which resulted in self-dealing and financial arrangements that benefited Cigna at the expense of plan beneficiaries. The district court granted Cigna’s motion to dismiss in 2024, determining that plaintiffs failed to plead that Cigna did not pay the lesser of their normal charges or the plan-established rates. The court also dismissed plaintiffs’ fiduciary-duty claim because it was dependent on the underpayment allegations. (Your ERISA Watch covered this decision in our September 18, 2024 edition.) Plaintiffs appealed, and in this nonprecedential decision the Third Circuit affirmed in part and vacated in part. Cigna led with a standing argument, contending that 36 of its plans contained anti-assignment provisions which prohibited plaintiffs from asserting claims assigned to them by their patients. However, the court agreed with plaintiffs that 29 of these plans contained additional provisions that “allow[ed] policyholders to assign the right to payment, and these provisions function as a carve-out to the general anti-assignment rule.” The court quoted one example of a carve-out: “You may, however, authorize Cigna to pay any healthcare benefits under this policy to a Participating or Non-Participating Provider.” The Third Circuit thus remanded for the district court to address the remaining seven plans at issue. On the merits, the appellate court vacated the dismissal of some of plaintiffs’ claims for underpayment of benefits. The court found that plaintiffs sufficiently alleged that the MRC-1 and MRC-2 methods required reimbursement at the lesser of their normal charges or the 80th to 90th percentile of the FAIR Health database. The district court had criticized plaintiffs for conflating their billed charges with their normal charges, but the Third Circuit found that plaintiffs had pled “that their billed amount was their normal charge,” which was sufficient to state a claim under the MRC-1 and MRC-2 methods. However, plaintiffs’ claims regarding R&C reimbursement “miss the mark.” The court affirmed the dismissal of these claims due to variations in plan language and the “high degree of discretion” provided to Cigna in setting rates. “Given the variation in the language of these Plans and the discrepancies in how they operate we cannot reasonably draw the inference that the Hospitals were routinely underpaid for R&C claims.” Finally, the court affirmed the dismissal of plaintiffs’ fiduciary duty claims. The appellate court found that plaintiffs failed to establish that they had a right to the cost-containment fees, which Cigna paid itself pursuant to agreements with the plans. The hospitals did not allege a right to be paid more than the amounts negotiated with Cigna, and thus they did not demonstrate a concrete injury necessary for standing. Thus, the case was partly revived and will head back to the district court.
Advanced Gynecology & Laparoscopy of N. Jersey P.C. v. Cigna Health & Life Ins. Co., No. 24-2212, __ F. App’x __, 2026 WL 2030368 (3d Cir. July 13, 2026) (Before Circuit Judges Shwartz, Freeman, and Rendell). This case will sound very familiar to the previous one, as it involves the same defendant insurer, the same trio of Third Circuit judges, and similar issues involving the alleged underpayment of providers. The plaintiffs in this case are nearly two dozen New Jersey-based medical providers that provide out-of-network healthcare services to Cigna subscribers. Plaintiffs contend that “Cigna has underpaid them for thousands of out-of-network elective and emergency claims, in violation of the terms of Cigna’s insurance plans.” Again, the heart of the case was the MRC-1 and MRC-2 reimbursement calculation methods. Plaintiffs asserted claims under ERISA, the Racketeer Influenced and Corrupt Organizations Act (RICO), and state law claims including quantum meruit and violations of New Jersey’s Health Claims Authorization, Processing and Payment Act (HCAPPA). Under ERISA, plaintiffs further alleged that Cigna “violated its ERISA-imposed fiduciary duties of loyalty and due care by engaging in prohibited transactions and acts of self-dealing.” As in the previous case, plaintiffs alleged a complex scheme involving Cigna’s “cost-containment fees” (a percentage of “net savings” earned from negotiating rates with providers) in which Cigna convinced third-party repricing companies to misrepresent to providers how much Cigna paid on claims, to the financial detriment of providers. The district court was ultimately unconvinced by any of plaintiffs’ theories and dismissed their third amended complaint with prejudice. (Your ERISA Watch covered this ruling in our July 3, 2024 edition.) Plaintiffs appealed to the Third Circuit, which issued this nonprecedential opinion. The appellate court reversed in part as to plaintiffs’ ERISA underpayment claims. As before, the district court had ruled that plaintiffs inappropriately conflated “billed” charges with “normal” charges. However, the Third Circuit found that under the MRC-1 formula, plaintiffs had properly alleged that “their billed amount was their ‘normal’ charge,” which was sufficient to defeat a motion to dismiss. However, plaintiffs were less successful with their MRC-2 and emergency treatment claims. The court noted that these claims allowed for other methods of calculation, and that plaintiffs had not satisfactorily alleged that those methods were invalid. The Third Circuit also issued a split decision on plaintiffs’ breach of fiduciary duty claim. The court ruled that “The Practices lack standing to bring any fiduciary duty claims related to cost-containment fees and the use of Cigna Plan funds, regardless of the type of relief they seek.” The court acknowledged that while the “cost-containment fees incentivized Cigna to negotiate to pay the Practices less, the Practices do not allege that they had a right to be paid more than the amounts that they negotiated with Cigna.” However, the court ruled that plaintiffs might have a claim regarding Cigna’s alleged fraudulent misrepresentations “that the Practices were not entitled to the full value of the claims accepted by the Plans.” The district court’s ruling to the contrary was based on its conclusion that plaintiffs had not alleged their normal charges, but because the Third Circuit had already found this conclusion deficient, reversal on this claim was required as well. Finally, the appellate court addressed plaintiffs’ RICO, quantum meruit, and HCAPPA claims, ruling that (1) plaintiffs’ success on their underpayment appeal required reevaluation of their RICO claim, (2) plaintiffs’ quantum meruit claim was preempted by ERISA, and (3) the HCAPPA claim was properly dismissed because the statute does not confer a private right of action. As a result, the appeal was a partial win for the providers and the case will continue.
Ninth Circuit
SpecialtyCare, Inc. v. Kaiser Foundation Health Plan, Inc., No. 24-CV-09342-JST, 2026 WL 2043194 (N.D. Cal. July 15, 2026) (Judge Jon S. Tigar). This is yet another case arising from the No Surprises Act (NSA), which was designed to protect patients from unexpected medical bills. It may have had this effect, but it has also generated an avalanche of disputes between providers and insurers, who are required by the NSA to undergo an Independent Dispute Resolution (IDR) process to try and resolve their differences. In this case plaintiff SpecialtyCare provided out-of-network care to several Kaiser enrollees and was awarded $114,813 against Kaiser through the IDR process, but Kaiser did not pay the award within 30 days as required by the NSA. SpecialtyCare thus brought this action, demanding payment and alleging that Kaiser intentionally delays payments so it can benefit financially from the interest or investment income generated by the delayed payments. SpecialtyCare’s complaint included the following claims: (1) a statutory claim for nonpayment of IDR determination, (2) an implied right of action under the NSA, (3) a claim to confirm the IDR award under the Federal Arbitration Act (FAA), (4) a claim for improper denial of benefits under ERISA, and (5) various state law claims including account stated, open account, bad faith, unjust enrichment, and violation of the California Unfair Competition Law (UCL). Kaiser filed a motion to dismiss in which it did not contest the issuance of the award but argued that “SpecialtyCare has no private means to enforce the award.” The court began with counts II and III, and agreed with Kaiser that the NSA does not provide an implied private right of action. The court reasoned that Congress intended for the NSA to be enforced by federal agencies, not through private lawsuits, as indicated by the law’s delegation of enforcement authority to the Departments of Health and Human Services, Labor, and the Treasury. As for Count I, the court dismissed SpecialtyCare’s claim to confirm the IDR award under the FAA because there was no written arbitration agreement between the parties, which is a requirement under the FAA. Additionally, the NSA explicitly bars judicial review of IDR awards except under specific circumstances, which does not include confirmation of awards. Under Count IV, Kaiser argued that SpecialtyCare lacked standing to bring ERISA claims on behalf of Kaiser enrollees because the enrollees suffered no injury from the non-payment of an IDR award; only the provider was harmed. However, the court disagreed and ruled that SpecialtyCare had standing because Kaiser’s members “have Article III standing when their insurer fails to pay their provider, even when there is no threat that they will have to pay the bills themselves.” However, the court still dismissed Count IV because “it does not identify the ‘specific plan term that confers the benefit in question’ to it or its assignor… SpecialtyCare has not alleged that it was ‘wrongfully denied benefits owed under the plan,’ given that the IDR award was issued through a process entirely outside and independent of ERISA.” (The court thus did not address Kaiser’s exhaustion argument: “The Court need not reach Kaiser’s argument that SpecialtyCare failed to exhaust administrative remedies, because there was no claim under the plan to exhaust.”). As for the remaining state law claims, the court denied Kaiser’s motion to dismiss them on preemption grounds, ruling that the NSA did not preempt them. The court ruled that state law penalties for failure to pay IDR awards do not create obstacles to the NSA’s purposes and objectives, which were solely designed to prevent “surprise billing practices.” However, all of SpecialtyCare’s state law claims failed on the merits regardless. The court dismissed the claims for account stated, open account, and bad faith due to insufficient pleading of necessary elements, such as an agreement between the parties or a contract creating a duty of good faith. The unjust enrichment claim was dismissed because any benefit conferred on Kaiser was incidental to SpecialtyCare’s obligations to its patients. The UCL claim was dismissed because SpecialtyCare failed to allege that its remedies at law were inadequate. As a result, Kaiser’s motion to dismiss was granted in its entirety. All claims were dismissed with prejudice except for the UCL claim.