Collins v. Northeast Grocery, Inc., No. 24-2339-CV, __ F.4th __, 2025 WL 2382948, 2025 WL 2383710 (2d Cir. Aug. 18, 2025) (Before Circuit Judges Walker, Wesley, and Bianco)

Standing issues pop up frequently in class actions against fiduciaries of retirement benefit plans. Everyone agrees that a plaintiff must demonstrate harm in order to bring such a suit. But what kind of harm? Does that harm have to be suffered personally, or be the same kind of harm that other people in the class suffered? How much proof is required?

The Second Circuit addressed these issues in this week’s notable decision. The plaintiffs were Gail Collins, Dean DeVito, Michael Lamoureux, and Scott Lobdell, who were all participants in The Northeast Grocery, Inc. 401(k) Savings Plan, a defined contribution ERISA-governed retirement plan. They alleged in a seven-count complaint that the defendants, all fiduciaries of the plan, breached various duties under ERISA in managing the plan.

Specifically, plaintiffs alleged that defendants (a) imprudently selected and monitored the plan’s investment options, (b) imprudently monitored the performance and expenses of the plan’s recordkeeper and investment manager, and (c) disloyally allowed excessive revenue-sharing arrangements with plan service providers.

The plaintiffs did not get far. Defendants filed a motion to dismiss, arguing, among other things, that plaintiffs did not have standing to assert some of their claims. The district court agreed and dismissed plaintiffs’ complaint without leave to amend. In doing so, the court held that plaintiffs did not suffer any injury, and thus did not have standing, in connection with some of the specific investment options they criticized because they did not invest in those options. (Your ERISA Watch covered this decision in our August 21, 2024 edition.)

In its ruling, the district court noted that “[t]he Second Circuit has not definitively resolved the issue of whether and to what extent participants of a defined contribution plan must demonstrate individual harm in order to bring claims concerning funds that they did not personally invest in.” Plaintiffs appealed, and the Second Circuit accepted the district court’s invitation to clarify its jurisprudence.

The Second Circuit began by explaining that there are three types of standing in cases like this: (1) statutory standing; (2) constitutional standing under Article III; and (3) class standing. There was “no dispute” that plaintiffs satisfied the first requirement because ERISA authorizes suits against plan fiduciaries.

As for constitutional standing, the Second Circuit observed that “defined contribution plan participants seeking to obtain monetary relief for alleged ERISA violations must allege a non-speculative financial loss actually affecting, or imminently threatening to affect, their individual retirement accounts.”

The court noted that some of plaintiffs’ allegations fit this bill. For example, they argued that recordkeeping fees were too high, which affected all the funds invested in by the plan, and thus affected them personally. Furthermore, plaintiffs Collins and Lobdell had personally invested in one of the funds that they contended was mismanaged.

However, the Second Circuit ruled that four of plaintiffs’ claims were not sufficiently tethered to a concrete harm to support constitutional standing. It addressed each of them separately.

First up was plaintiffs’ argument that defendants failed to investigate the availability of “lower-cost and equally or better performing share classes.” The court ruled that while this might be a viable argument in some circumstances, here plaintiffs “did not allege that they suffered any individual injury arising from Defendants’ failure to investigate the availability of lower-cost and equally or better performing share classes.” Plaintiffs identified three investment options that had cheaper share classes, but “the complaint did not allege that any Plaintiff invested in any of these imprudent funds,” or in any other fund where a cheaper share class was available.

Plaintiffs contended that by identifying these three flawed investment options, the court could reasonably infer that defendants were mismanaging the plan in general, and thus, all accounts were injured by defendants’ imprudence. However, the Second Circuit deemed this argument “conclusory.” The court “decline[d] Plaintiffs’ invitation to speculate that there were injuries to their own investment accounts based on the alleged retention of more expensive share classes in three of twenty-eight investment options, in which no Plaintiff chose to invest his or her retirement assets, and their similar invitation to speculate about harms that they did not plead with respect to their other claims.”

For the same reason, the Second Circuit rejected plaintiffs’ second argument that defendants should have invested in lower-cost, better-performing alternative funds. In their complaint plaintiffs identified two allegedly expensive and/or underperforming investment options, but once again, “No Plaintiff invested in either fund, and the complaint did not allege in a non-conclusory fashion that any of the funds in which Plaintiffs did invest suffered the same defects.”

Plaintiffs’ third claim was that defendants “acted imprudently by permitting the Plan’s recordkeeper…to receive excessive compensation through funds with a revenue sharing scheme that indirectly compensated [the recordkeeper].” However, as with their prior allegations, plaintiffs “did not plead that they were individually harmed by Defendants’ failure to monitor the revenue sharing scheme.” Plaintiffs identified only one fund that had engaged in improper revenue sharing, but no plaintiff had invested in that fund. Plaintiffs also did not allege that any of them had invested in other funds that engaged in such revenue sharing.

Plaintiffs’ fourth claim was that defendants breached their duty of loyalty “by including certain excessively costly funds with revenue sharing that benefited the Committee at the expense of Plan participants.” Again, plaintiffs identified two funds in their allegations, but “did not allege that they invested in either fund, or in any other specific high-cost fund with revenue sharing[.]” As a result, they “did not allege any injury[.]”

Having dispensed with plaintiffs’ constitutional standing, the Second Circuit then turned to the third type of standing: class standing. The court agreed that plan participants “may in certain circumstances bring claims on behalf of other participants that chose entirely different investment options.” However, under the court’s class standing test, plaintiffs have to plausibly allege “(1) that [they] personally ha[ve] suffered some actual injury as a result of the [purportedly] illegal conduct of the defendant, and (2) that such conduct implicates the same set of concerns as the conduct alleged to have caused injury to other members of the putative class by the same defendants.”

The court ruled that plaintiffs failed this test for the same reasons they did not have constitutional standing: “Plaintiffs failed the first step of our standing test because they did not plausibly plead that they suffered any individual injury in connection with the identified claims.” The court stated its test was “designed to ensure that a named plaintiff may ‘properly assert claims’ on behalf of absent class members because his litigation incentives ‘are sufficiently aligned with those of the absent class members.’” However, “without any showing of an individual injury, we cannot find that Plaintiffs have any proof of their own claims, let alone that proof supporting their claims would tend to prove the class claims.”

The court further rejected the idea that plaintiffs could create standing by alleging an injury to the plan as a whole, regardless of whether they had suffered an individual loss. The court stated that while losses to individual accounts are by necessity losses to the plan, because “all assets in a plan…are plan assets,” “that logic does not always work in reverse. Losses to plan assets arising from an ERISA violation are not necessarily losses to an individual participant, vesting that participant with a personal stake in a case or controversy.”

In short, the Second Circuit agreed with the district court that plaintiffs lacked constitutional and class standing to assert several of their claims because they did not adequately plead that they had suffered individual harm caused by defendants’ imprudence or disloyal management.

In an unpublished companion order, the court addressed the other, non-standing issues raised by the case. The Second Circuit agreed with the district court that plaintiffs “failed to plausibly allege that Defendants imprudently selected and monitored the Plan’s investment options because certain investment options underperformed alternatives.” The court ruled that underperformance alone could not support a breach of fiduciary duty claim, and furthermore, the comparison funds cited by plaintiffs did not constitute “meaningful benchmarks.”

The Second Circuit also agreed with the district court that plaintiffs failed to adequately allege that the investment advisory fees and recordkeeping fees paid by the plan were excessive. “Plaintiffs cannot rely, as they in effect do here, on bare allegations that other plans paid lower fees.” The court admitted that “Defendants’ alleged failure to undertake competitive bidding for recordkeeping services was probative of imprudence,” but “that allegation was insufficient on its own to state a claim.”

The Second Circuit also rejected plaintiffs’ argument that because they had made allegations supporting a breach of fiduciary duty with respect to some plan processes, the court should conclude that defendants employed a flawed process in general. “[W]e cannot accept Plaintiffs’ invitation to infer from flaws in one investment option that the Committee’s plan-wide decision-making was imprudent and/or disloyal and thus ‘affected every other choice made for the limited participant menu of 28 offerings.’”

Plaintiffs had more success with their prohibited transaction claim. Following the Supreme Court’s recent decision in Cunningham v. Cornell Univ., 145 S. Ct. 1020 (2025), the Second Circuit held that the district court erred by ruling that plaintiffs were required to plead that the transactions at issue were “unnecessary” or “involved unreasonable compensation.” Pursuant to Cunningham, these are affirmative defenses that plaintiffs are not required to address in order to get past a motion to dismiss.

This was a pyrrhic victory, however, as the plaintiffs lost on every other issue, including whether the district court should have given them leave to amend their other claims. As a result, the case heads back to the district court a shell of its former self, with only the prohibited transaction claims remaining.

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

Breach of Fiduciary Duty

First Circuit

Taylor v. BDO USA, P.C., No. 25-10128, 2025 WL 2420941 (D. Mass. Aug. 21, 2025) (Judge Richard G. Stearns). Two years ago, on August 31, 2023, the privately held company BDO USA, P.C. created an Employee Stock Ownership Plan (“ESOP”). “At its inception, the ESOP purchased some 42% of BDO’s outstanding shares of stock from the Company’s principals for approximately $1.3 billion.” To finance the stock purchase, BDO procured a loan from the private capital firm Apollo Global Management at an interest rate of 11.36%. The plaintiff in this putative class action, Tristin Taylor, is a participant in the plan. He alleges that BDO, its board of directors, and the BDO ESOP trustees collectively orchestrated the ESOP transaction with the goal of causing the ESOP to pay for BDO stock at an artificially inflated price by providing inaccurate and misleading information about the company’s business affairs in order to personally enrich themselves. According to the complaint, this misleading information included inflated earnings and unreasonable projections which prompted the fiduciary tasked with representing the ESOP and scrutinizing the purchase, State Street Global Advisors Trust Company, to adopt the inflated valuation as the fair market value of the stock. Mr. Taylor maintains that this was a breach of fiduciary duty and caused the ESOP to engage in prohibited transactions in violation of ERISA. The defendants collectively moved to dismiss the complaint for lack of standing under Rule 12(b)(1) and for failure to state a claim under Rule 12(b)(6). Because the court agreed that there are currently issues with standing, the court dismissed the action under Rule 12(b)(1), but did so without prejudice. One of the major problems identified by the court was the fact that the complaint “does not allege that Taylor made any monetary contribution to the ESOP Transaction or that he was saddled with any obligation to repay the loan to Apollo, much less even venturing a guess as to the actual then and now value of Taylor’s ESOP account.” The court thus viewed the complaint as offering only mere speculation that Mr. Taylor suffered a cognizable injury. Even putting that issue aside though, the court also took issue with the complaint’s failure to allege any measure suggesting that the ESOP did in fact overpay for the BDO stock, such as, for instance, allegations that “outside purchasers or financing had been sought but were unavailable at terms preferable to those negotiated by State Street.” Further problematic to the court was the fact that the complaint does not contain any factual content to draw a plausible inference that the defendants personally contributed to State Street’s alleged overvaluation. For these reasons, and others, the court agreed with defendants that the complaint in its current form does not reasonably establish that Mr. Taylor suffered an injury-in-fact traceable to the conduct at issue. Accordingly, the court granted the motion to dismiss without prejudice.

Second Circuit

Humphries v. Mitsubishi Chemical Am., Inc., No. 1:23-cv-06214 (JLR), 2025 WL 2402281 (S.D.N.Y. Aug. 19, 2025) (Judge Jennifer L. Rochon). Plaintiffs Robert Humphries and Dennis Mowry bring this representative action on behalf of the Mitsubishi Chemical America Employees’ Savings Plan and a putative class of its participants alleging that their former employer, Mitsubishi Chemical America, Inc., the administrative committee of the plan, and the members of Mitsubishi’s board of directors have violated ERISA by falling short in their fiduciary obligations. Specifically, plaintiffs allege that defendants have breached their fiduciary duties by employing flawed selection and monitoring processes which resulted in the plan investing in high-cost share classes and paying too much for recordkeeping and administrative services. The court previously granted defendants’ motion to dismiss the initial complaint. Plaintiffs subsequently amended. Defendants then filed a motion to dismiss the amended complaint. In their motion defendants offered several grounds for dismissal. First, they challenged plaintiffs’ standing to assert share class claims and argued that they do not have standing to challenge the mutual funds they did not personally invest in. Second, defendants argued that the complaint fails to state share class and excessive fee fiduciary breach claims under ERISA. Finally, defendants argued that the complaint fails to plausibly allege that Mitsubishi Chemical and its board of directors functioned as fiduciaries with regard to the challenged conduct. The court addressed each of these arguments separately, beginning with the threshold issue of standing. Contrary to defendants’ position, the court concluded that plaintiffs asserted class standing under the requirements of the Second Circuit. The court held plaintiffs showed that (1) Mr. Mowry invested in two of the seven mutual funds at issue demonstrating he suffered an actual injury as a result of defendants’ conduct and (2) that such conduct implicates the same set of concerns as the rest of the putative class members who invested in the five other mutual funds plaintiffs did not themselves personally invest in. Thus, the court concluded that plaintiffs have Article III standing to bring all of their claims. It therefore turned to the merits of those claims. Focusing on the share class claims first, the court determined that it could plausibly infer fiduciary misconduct based on the well-pleaded allegations claiming defendants’ process for selecting and monitoring the menu of share-class investment options available in the plan was flawed, as any scrutiny would have revealed that cheaper versions of these funds were available. The court added that defendants’ arguments justifying their selection of the challenged funds go to the merits of the claims and are misplaced at this early stage in the proceedings, before discovery has commenced. The court therefore found that plaintiffs adequately pleaded fiduciary breach claims related to the share classes, and denied the motion to dismiss them. However, the recordkeeping fees were a different matter. Relying on two recent Second Circuit decisions, the court concluded that plaintiffs’ “virtually identical allegations” about the fungible and interchangeable services offered to large defined contribution plans simply misses the mark. Rather, under the precedent laid out in those decisions, plaintiffs in fee cases are required to detail the number of services provided as well as the quality of such services for both the plan and the identified comparators. “Indeed, ‘a plaintiff alleging excessive recordkeeping fees must provide meaningful benchmarks and cannot rely on bare allegations that other plans paid less.’” Finding that plaintiffs’ arguments have been foreclosed by the Second Circuit’s precedent, the court granted defendants’ motion to dismiss the fee claims. And its dismissal, this time, was with prejudice. Finally, the court discussed whether Mitsubishi and its board of directors can be considered fiduciaries of the plan for the purposes of the charged conduct. It found that Mitsubishi could be, but that the board of directors could not. With regard to Mitsubishi, the court agreed with plaintiffs that the company’s designation as plan administrator and its discretionary authority to control the operation, management, and administrator of the plan, suffice to plausibly establish that it was a fiduciary regarding the conduct at issue. However, the court determined that the board of directors did not enjoy the same fiduciary responsibility with respect to the plan. Instead, its role was limited to decision-making about committee member appointments. The amended complaint is devoid of any allegations of misconduct related to the board’s failure to adequately monitor or manage the advisory committee. As a consequence, the court agreed with defendants that plaintiffs had not adequately pleaded that the board of directors exercised discretionary authority over the investment decisions related to the share classes of the seven mutual funds. The court therefore dismissed the board of directors from the case. Again, this dismissal was with prejudice. Thus, as explained above, the court granted in part and denied in part defendants’ motion to dismiss.

Third Circuit

Barragan v. Honeywell Int’l Inc., No. 24-cv-4529 (EP) (JRA), 2025 WL 2383652 (D.N.J. Aug. 18, 2025) (Judge Evelyn Padin). Plaintiff Luciano Barragan filed this putative class action lawsuit against his former employer, Honeywell International, Inc., alleging that it violated its fiduciary duties and engaged in prohibited transactions under ERISA by using forfeited employer contributions in its 401(k) plan to offset future employer contributions rather than to defray administrative costs. The court previously dismissed Mr. Barragan’s complaint, but in doing so afforded him the opportunity to amend. He did so, and Honeywell again moved for dismissal of the amended complaint. In this order the court dismissed Mr. Barragan’s action with prejudice. In dismissing the complaint the court concluded that Mr. Barragan’s allegations of fiduciary misconduct and improper handling of plan assets were implausible and stretched the law beyond its intended reach. Broadly, the court held that the participants received all the benefits to which they were entitled, that Honeywell abided by the terms of the plan, and that Honeywell’s use of the forfeitures did not harm the participants. The court stressed that ERISA does not impose any requirement to maximize pecuniary benefits and instead grants fiduciaries a great deal of leeway when it comes to plan design and administration. “Moreover, the Court fails to see how selection of an option afforded to Honeywell in its discretion, without more, constitutes a ‘conflict of interest.’” The court stated that it simply disagreed with Mr. Barragan’s overarching theories of fiduciary misconduct and concluded that his alleged wrongdoing amounted to little more than a difference in preference over how to use the forfeited funds. Finally, the court dismissed the Section 1106 prohibited transaction claims, finding that Mr. Barragan failed to allege any unlawful transaction that falls within § 1106(a)(1) or (b). Accordingly, the court dismissed all of Mr. Barragan’s claims, and because it had already afforded him the opportunity to amend and still continued to find his legal theories unpersuasive, the court dismissed the amended complaint with prejudice.

Fumich v. Novo Nordisk Inc., No. 24-9158 (ZNQ) (JBD), 2025 WL 2399134 (D.N.J. Aug. 19, 2025) (Judge Zahid N. Quraishi). Plaintiffs John Fumich Laura Mischley, Raphael Hinton, Ronnie McLean, and Thomas Chaffin, individually and on behalf of a proposed class, sued the fiduciaries of Novo Nordisk Inc.’s 401(k) Savings Plan, alleging they breached their fiduciary duties of loyalty, prudence, and monitoring, and violated ERISA’s anti-inurement provision. Plaintiffs’ allegations of misconduct fell into three categories: (1) claims related to recordkeeping and administrative fees; (2) claims relating to the underperformance of the Schwab Target Date Funds in the plan; and (3) claims related to Novo Nordisk’s use of forfeitures. Defendants moved for dismissal of the claims premised on the decisions to include the Schwab Funds as plan investments and the claims related to the use of forfeitures to offset employer contributions instead of paying recordkeeping fees. They did not seek dismissal of the fee claims. In this order the court agreed with defendants’ arguments in favor of dismissal and dismissed the fiduciary breach and anti-inurement claims, without prejudice, as requested by defendants. The court began with the investment claims. It determined that plaintiffs’ allegations relating to the Schwab Funds were “conclusory and speculative and fail to make out a claim that the Retirement Committee breached the fiduciary duty of prudence. Although Plaintiffs allege that the Schwab Funds significantly underperformed, they fail to plead allegations pertaining to the Retirement Committee’s process in arriving at its decision to use the Schwab Funds.” The court also noted that in its view the underperformance of the challenged investments “was only slight in comparison to other funds, militating against an inference that Defendants acted imprudently.” Next, the court addressed the claims stemming from defendants’ chosen use of forfeitures. Because the plan expressly allows for the use of forfeited funds to reduce the employer’s future contributions, the court stated that the plain text of the plan was fatal to plaintiffs’ allegations. Additionally, the court stated that requiring defendants to use forfeitures to pay administrative costs would “use the fiduciary duties of loyalty and prudence to create a new benefit to participants that is not provided in the plan document itself.” Moreover, although defendants benefitted from their chosen use of forfeitures, the court agreed with them that this benefit could not in and of itself constitute an anti-inurement violation because the assets never left the plan. The court therefore dismissed the fiduciary breach and anti-inurement claims concerning the use of the forfeited funds. For these reasons, the court dismissed the claims in exactly the way the defendants sought, and allowed only the excessive recordkeeping fee claims to proceed.

Fourth Circuit

Carter v. Sentara Healthcare Fiduciary Comm’ee, No. 2:25-cv-16, 2025 WL 2427614 (E.D. Va. Aug. 11, 2025) (Judge Jamar K. Walker). Plaintiffs in this action are participants of Sentara Healthcare’s defined contribution retirement plan. They seek to represent a class of plan participants and beneficiaries in a case alleging that the fiduciaries of the plan violated their duties under ERISA by imprudently managing a stable value investment option in the plan – the Guaranteed Interest Balance Contract. Defendants moved to dismiss. First, they argued that one of the named plaintiffs, Bonny Davis, should be dismissed for lack of standing. Next, they argued that the complaint fails to state a claim for fiduciary breach under ERISA because it does not allege that they made unreasonable judgments as fiduciaries. The court addressed Ms. Davis’s standing first. Although it was somewhat of a technicality, the court granted the motion to dismiss Ms. Davis. The court did so as the complaint does not plead that she was invested in the stable value fund at issue. However, the court noted that after defendants submitted their motion, plaintiffs provided documentation which showed that Ms. Davis’s assets were invested in the Guaranteed Interest Balance Contract. Because the court was bound to consider the motion by looking solely at the complaint, it agreed with defendants that dismissal was appropriate. But in light of the evidence plaintiffs provided after the fact, the court concluded that it is appropriate to grant them leave to amend the complaint to correctly plead Ms. Davis’s standing. Defendants’ motion to dismiss under Rule 12(b)(6), meanwhile, was entirely unsuccessful. The court stated that it would “allow both claims to survive because the plaintiffs plead that the defendants had no process to evaluate whether their stable value option was a reasonable investment decision.” Given that the complaint alleges defendants had no viable, documented process or methodology to monitor the investments, the court determined that the complaint clears the pleading bar. The court also rejected defendants’ challenge to the funds plaintiffs offered in comparison to the stable value fund. Such an exercise, the court concluded, would require factual determinations not appropriate to address at this stage. Accordingly, the court denied the motion to dismiss plaintiffs’ fiduciary breach causes of action.

Class Actions

Eleventh Circuit

Marrow v. E.R. Carpenter Co., Inc., No. 8:23-cv-02959-KKM-LSG, 2025 WL 2390734 (M.D. Fla. Aug. 18, 2025) (Judge Kathryn Kimball Mizelle). In this putative class action plaintiff Saroya Marrow alleges that her former employer, E.R. Carpenter Co., failed to comply with the governing regulations of the Consolidated Omnibus Budget Reconciliation Act (“COBRA”) in the notice she was given after her termination which resulted in her decision not to elect continuing health coverage, causing her economic harm. Ms. Marrow moved to certify two classes, a nationwide class and a Florida class, made up of thousands of potential class members. On the present record, the court was not convinced that Ms. Marrow has demonstrated Article III standing to sue. The court also had serious reservations about commonality under Rule 23(a) because of standing issues. Combined, these problems with standing prevented the court from certifying the classes. The decision began with an analysis of Ms. Marrow’s personal standing. The court noted at the outset that Ms. Marrow alleges both informational and economic injuries. But the court found that information developed during discovery called into question many of the downstream consequences she suffered because of the allegedly noncompliant COBRA notice. Though Ms. Marrow referred to medical bills related to a hospitalization following her termination and the costs of treatment for an ongoing chronic condition, these bills are absent from the record and have not been produced. Moreover, Ms. Marrow claims that her daughter lost coverage after her termination, but evidence contradicts this account and seems to indicate that her daughter was never enrolled in Carpenter’s health plan in the first place. But even assuming that Ms. Marrow did suffer an injury, the court stated that it continues to have questions about traceability. The court could not piece together from the current record how the notice’s errors caused Ms. Marrow’s stated injuries. Moreover, Ms. Marrow’s testimony that she consulted with legal counsel about the COBRA notice before Carpenter ever sent it suggested to the court that she may already have been aware of her COBRA rights before she received the notice. Taken together, these issues prevented the court from conclusively finding that Ms. Marrow has Article III standing. The court therefore ordered Ms. Marrow to submit evidence proving her standing to sue by no later than September 2, 2025. However, there was more. In addition to personal standing problems, the court had larger concerns regarding the two proposed classes. It concluded that individualized standing issues for each of the thousands of class members prevents certification under Rule 23. The court took the view that it would need to determine for each class member whether they suffered an injury-in-fact traceable to the COBRA notices, which would require reviewing insurance records and medical expenses for each and every person. Further, for each individual who suffered a cognizable economic injury, the court determined that it would need to consider whether that harm resulted from the alleged deficiencies in the notice or if it was the result of some other reason the individual had for not electing continued coverage. Thus, the court felt that before awarding relief, it “would have to conduct hundreds, if not thousands, of individualized mini trials on the first two elements of the standing test.” Accordingly, the court found that individual issues predominate over common ones. For these reasons, the court denied Ms. Marrow’s motion for class certification.

Discovery

Fourth Circuit

In re: Blackjewel, LLC, No. 19-30289, 2025 WL 2382815 (S.D.W.V. Aug. 15, 2025) (Judge Benjamin A. Kahn). In July of 2019 the industrial coal mining companies Blackjewel, LLC and Revelation Energy, LLC filed for chapter 11 bankruptcy. At the time of the initial bankruptcy filing these companies employed approximately 1,700 employees. Blackjewel and Revelation were in a tight spot after they failed to secure debtor-in-possession financing at the outset of their case, which forced them to suspend operations and furlough almost all of their workers. They then needed to rehire a subset of these employees in order to liquidate their assets and wind-down their operations. Everything got messy when it came to the operations of the companies’ self-funded ERISA healthcare plans. This prompted the Department of Labor (“DOL”) to get involved. On August 8, 2019, the DOL filed a claim in the bankruptcy case on behalf of the prior healthcare plans regarding money due under them for any and all unpaid amounts resulting from the post-petition operation of the plans, including damages arising from their operation subsequent to the bankruptcy petition date, as much as $14 million. Before the court here was the DOL’s motion to compel the Trust to comply with certain requests for production. The purpose of this discovery is solely to determine the administrative priority of the DOL claim. In this decision the court granted the Labor Department’s motion in part and denied it in part. Importantly, the parties did not dispute that the health plan claims of the employees who returned post-petition are entitled to administrative priority. Rather, they disputed whether to include post-petition claims of furloughed employees who did not return to work. “The DOL contends that the health plan claims of furloughed employees are also entitled to administrative priority because no benefit to the estate needs to be shown when a claim arises from a violation of the law and, alternatively, even if a benefit to the estate needs to be shown, that requirement is met because the continued operation of the Prior Health Plan for furloughed employees provided substantial value to Debtors’ estates.” The court held that the DOL must demonstrate a benefit to the estate to entitle the claims of the furloughed employees to administrative expense priority. Additionally, the court found that the benefit to the estate provided by the furloughed employees “must be actual and not speculative.” The Department of Labor argued that the continued operation of the healthcare plans provided a benefit to the estate as it gave the furloughed employees an incentive to remain with the company, which in turn made the companies more attractive to potential arguments. But the court found this argument speculative and insufficient to confer an actual benefit on the estate. Instead, the court determined that an actual benefit to the estate only exists if the actual purchases made continued healthcare benefits to furloughed employees as a condition of their consummation of a purchase. “Thus, to the extent that the requests for production seek documents and communications related to the negotiations of potential purchasers, or documents and communications related to actual purchasers that do not discuss continued health benefits to furloughed employees, the requests are overly broad.” The court therefore decided that it would limit the production request so as only to permit discovery related to the communications with actual purchases. It stated that it would therefore allow the DOL’s requests for production to the extent relevant to a determination of the benefit to the estates. The court compelled the Trust to produce all documents from July 1, 2019 through August 31, 2019 that refer to maintaining or terminating the prior health plans, as well as any and all documents that discuss or are related to maintaining the plans in connection with a transaction or contemplated transaction with any actual purchases of assets from the estates, or that discuss or relate to continuing to provide healthcare benefits to furloughed employees. Finally, the court ruled on the applicability of ERISA’s fiduciary exception to the attorney-client privilege. It held that “[e]ven if the fiduciary exception might apply to an operating debtor in possession who is acting as a plan fiduciary, it does not apply in this liquidating case.” The court explained that “[t]he fiduciary exception is grounded in the premise that, when performing fiduciary functions, the beneficiary, rather than the fiduciary, is the ultimate client who is entitled to claim privilege. The agreed topic for discovery in this case is solely what amount, if any, of the DOL Claim is entitled to administrative priority… Determination of administrative priority is not an ERISA enforcement action or a claim for damages under ERISA, and any putative breach of ERISA is not relevant to the priority determination for the reasons stated above. Entitlement to administrative expense priority arises under the Bankruptcy Code, not ERISA. Thus, whether Debtors or the Trust upheld any respective fiduciary duties or complied with ERISA is not relevant to determining what portion, if any, of the DOL Claim provided an actual benefit to the estates and might be entitled to administrative priority.” The court therefore determined that the fiduciary exception is inapplicable. Accordingly, the court held that its production order applies only to all non-privileged documents responsive to the requests for production. Thus, as explained above, the court granted the DOL’s discovery motion in part and ordered the Trust to produce the specified documents. 

ERISA Preemption

Ninth Circuit

Beach Dist. Surgery Ctr. v. EP Wealth Advisors, LLC , No. 2:25-cv-01313-ODW (RAOx), 2025 WL 2420815 (C.D. Cal. Aug. 19, 2025) (Judge Otis D. Wright, II). Plaintiff Beach District Surgery Center is a California healthcare provider that performed surgery on a patient in February of 2023 for which it believes it was not fully compensated based on oral promises guaranteeing that medical services would be paid at usual and customary rates rather than Medicare rates during pre-authorization phone calls with a representative of defendant EP Wealth Advisors, LLC. Beach District sued EP Wealth Advisors in California state court, asserting state law claims of negligent misrepresentation and promissory estoppel arising from this communication. EP removed the case to federal court based on complete preemption under ERISA Section 502(a). Beach District responded by moving to remand its action. EP then filed a motion to dismiss pursuant to conflict preemption under ERISA Section 514(a). In this decision the court concluded that Beach District’s claims are not completely preempted under Section 502(a), and that it therefore lacks federal subject matter jurisdiction. The court reached this conclusion by relying on Ninth Circuit precedent set in Marin General Hosp. v. Modesto & Empire Traction, 581 F.3d 941 (9th Cir. 2009). In Marin the Ninth Circuit held that when an oral promise, rather than ERISA plan terms, provides the basis for recovery of a provider’s state law claims, those claims are wholly independent of ERISA. The court held “that Marin controls the outcome here.” Moreover, it stated Beach District’s action fails both prongs of the Davila preemption test. First, it held that, “[a]s Beach District could not have brought its claims under ERISA § 502(a)(1)(B), EP does not satisfy the first Davila prong.” Second, it found that “Beach District unambiguously asserts an entitlement to recovery that is based on an independent legal duty – namely state law negligent misrepresentation and promissory estoppel arising from the February 3, 2023 communication in which EP’s representative promised payment for medical services at the UCR rate rather than under the Medicare Fee Schedule.” Accordingly, the court held that EP failed to establish that both prongs of Davila are satisfied and, by extension, that complete preemption applies. The court therefore concluded that it lacks jurisdiction over this action. Consequently, the court granted Beach District’s motion to remand, denied as moot EP’s motion to dismiss, and remanded the case back to state court.

Life Insurance & AD&D Benefit Claims

Seventh Circuit

Presnal v. Dearborn Nat. Life Ins. Co., No. 3:23-CV-290-CCB, 2025 WL 2390485 (N.D. Ind. Aug. 15, 2025) (Judge Cristal C. Brisco). Decedent Maribeth Presnal was an employee of Beacon Health System, Inc. and a participant in Beacon’s term life and accidental death and dismemberment plan insured by Dearborn National Life Insurance Company. The group life insurance policy states that coverage under it will terminate when a participant is no longer actively at work, at which time a participant will have 31 days to convert the policy to an individual life insurance policy. The conversion period is extended by an additional 60 days if the terminated employee did not receive a notice of his or her conversion rights. To convert the coverage, the participant must submit to Dearborn a written application along with the first premium payment for the individual life insurance policy. In late 2016, Ms. Presnal’s health started to decline and she was terminated from her position at Beacon at the end of the year. It is undisputed that Beacon did not provide notice to Ms. Presnal of her conversion rights, so she was afforded an additional 60 days to convert life insurance coverage to an individual policy. It is also undisputed that Ms. Presnal did not do so. She died five years later, in December of 2021. After her death, Ms. Presnal’s spouse, Edwin Presnal, submitted a claim for life insurance benefits. Dearborn denied the claim because Ms. Presnal had never converted her coverage under the group policy to an individual policy, since she did not timely send in the requisite application and premium payment. Edwin sued Dearborn and Beacon under ERISA, seeking to recover the life insurance benefits. He argued that the time for his late wife to pay her premiums and convert her basic life coverage to an individual policy was equitably tolled due to her mental incapacity from her illness. In an earlier order granting in part Beacon’s motion to dismiss, the court held that while the employer had no duty to inform Ms. Presnal of her conversion rights, “there exists a plausible claim that Maribeth’s right to convert or make her premium payments was equitably tolled because of her mental capacity.” Defendants and Mr. Presnal filed cross-motions for summary judgment. In their motions defendants asked the court to reconsider its earlier determination that equitable tolling could apply to extend the conversion period. They offered a case from the Fourth Circuit, Hayes v. Prudential Ins. Co. of Am., 60 F.4th 848 (4th Cir. 2023), in support of their position. In that decision the Fourth Circuit held that equitable tolling can only apply to time periods that operate as a statute of limitations and that a life insurance conversion deadline is not a statute of limitations. The court of appeals reasoned, “[s]tatutes of limitations establish the period of time within which a claimant must bring an action…no cause of action for benefits accrues when a participant misses a conversion deadline. Indeed, a participant whose policy has expired, unconverted, has no benefits due under the plan for any later occurrence because that participant lacks coverage.” In this decision the court found the logic of the Hayes decision, which directly addresses the applicability of equitable tolling to a conversion period, persuasive. It then stated that Mr. Presnal did “not provide any caselaw or statutory authority to support the conclusion that a deadline to convert under a plan’s terms can be equitably tolled, or that the doctrine of equitable tolling can apply to extend deadlines in a plan other than a limitations period.” Therefore, the court found that the doctrine of equitable tolling cannot extend the deadline to convert the group policy to an individual policy under the plan’s terms. Moreover, the court determined that this is a case seeking benefits under a plan, not a case for equitable relief, and as a result plaintiff’s claim for benefits does not provide legal authority to alter the plan’s terms. Accordingly, the court concluded that because Ms. Presnal did not timely convert her coverage to an individual policy and the deadline to do so cannot be equitably tolled, her widower cannot assert a claim for the life insurance benefits. Therefore, the court determined that Dearborn and Beacon are entitled to judgment as a matter of law. The court thus granted defendants’ motions for summary judgment on all of Mr. Presnal’s claims and denied Mr. Presnal’s cross-motion for summary judgment.

Eighth Circuit

Kleinsteuber v. Metropolitan Life Ins. Co., No. 23-3494 (JRT/DTS), 2025 WL 2403123 (D. Minn. Aug. 19, 2025) (Judge John R. Tunheim). Plaintiff Charles Kleinsteuber’s wife Dana died in a tragic accident administering her own at-home dialysis treatment which resulted in acute blood loss. Defendant Metropolitan Life Insurance Company (“MetLife”) paid life insurance benefits to Mr. Kleinsteuber after her death but declined to pay benefits under an accidental death and dismemberment policy. After exhausting his administrative remedies, Mr. Kleinsteuber filed this action seeking judicial review of MetLife’s denial of the accidental death benefit claim. Both parties moved for summary judgment under arbitrary and capricious standard of review. The question before the court was whether MetLife’s denial of the claim under the policy’s exclusion for loss caused or contributed to by illness or the treatment of such illness was an abuse of discretion. Sympathy for Mr. Kleinsteuber notwithstanding, the court found that the denial was not an abuse of discretion. It determined that MetLife’s interpretation of the relevant provision was reasonable, that the application of that interpretation was supported by substantial evidence, and that MetLife’s conflict of interest did not outweigh these other factors. Ultimately, the court held that it was reasonable to conclude that the botched self-administered dialysis treatment directly contributed to the acute blood loss which caused Ms. Kleinsteuber’s death. Accordingly, the court held that the plan exclusion applied and that MetLife did not act arbitrarily or capriciously by denying Mr. Kleinsteuber’s claim. Therefore, the court denied Mr. Kleinsteuber’s motion for summary judgment and granted MetLife’s motion for summary judgment.

Medical Benefit Claims

Tenth Circuit

S.F. v. Cigna Health & Life Ins., No. 1:22-cv-68-HCN, 2025 WL 2402032 (D. Utah Aug. 19, 2025) (Judge Howard C. Nielson, Jr.). Plaintiffs S.F. and E.F. sued their healthcare plan, Slalom LLC Healthcare Benefit Plan, and its claims administrator, Cigna Health and Life Insurance Company, after defendants denied their claim for E.F.’s stay at a residential treatment center, concluding it was not medically necessary. Plaintiffs asserted two causes of action under ERISA: (1) a claim for payment of wrongfully denied benefits, and (2) a claim seeking equitable relief for violations of the Mental Health Parity and Addiction Equity Act. E.F. was admitted to the facility in question in January of 2020 following a near-fatal overdose. The family maintains that Cigna’s denial of their claim was an abuse of discretion. They further assert that the plan is being applied in a way which violates the Parity Act. Plaintiffs argue that Cigna requires a showing of acute symptomology for mental health and substance use care to be deemed medically necessary, which it does not do for other types of medical or surgical treatments. The parties filed competing motions for summary judgment. The court addressed the benefit claim first. Because the plan grants Cigna with discretionary authority, the parties agreed that the court must apply the arbitrary and capricious standard of review. The court scrutinized both Cigna’s initial denial letter and its handling of the family’s appeal, and concluded that both failed to adequately explain “the scientific or clinical judgment for the determination.” In particular, the court criticized Cigna’s failure to provide any explanation to the family based on E.F.’s personal medical circumstances, backed up with reasoning and citations to the medical record. It stated that Cigna did not provide any reasoned analysis explaining how its generalized assertions about its medical necessity criteria related to E.F.’s treatment or how those conclusory holdings supported the ultimate conclusion that the care was not medically necessary. Moreover, Cigna did not provide its internal case notes to the family when asked, and its decision upholding its initial benefits determination did not refer to or address the information and medical documents provided by the family on appeal in an attempt to perfect their claim. For these reasons, the court concluded that Cigna acted arbitrarily and capriciously. To remedy Cigna’s failures, the court determined that the proper course of action is to remand the case to Cigna for a renewed evaluation of the claim. The court held that remand was appropriate as there is evidence in the record which supports an award of benefits and evidence that points the other way, in support of denial. Finally, the court addressed the Parity Act claim. It determined that the family failed to produce any evidence about how Cigna evaluates claims for medical and surgical treatment in practice, nor any evidence, beyond their own experience, of how Cigna evaluates claims for mental healthcare at residential treatment centers in practice. Without such evidence, the court concluded that it was not in a position to find that Cigna’s actions violated Mental Health Parity requirements. As a result, it concluded that plaintiffs’ as-applied challenge necessarily fails. For this reason, the court granted defendants’ motion for summary judgment with respect to the Parity Act claim.

L.R. v. Blue Cross Blue Shield of Ill., No. 2:22-cv-119, __ F. Supp. 3d __, 2025 WL 2426693 (D. Utah Aug. 22, 2025) (Judge Howard C. Nielson, Jr.). Plaintiffs L.R. and M.R. sued their healthcare plan, Mayer Brown LLP Benefit Plan, and its claims administrator, Blue Cross Blue Shield of Illinois, under ERISA after the plan denied the family’s claims for M.R.’s mental health treatment at two residential facilities. Defendants denied claims at these facilities under a relevant coverage provision of the plan which limits coverage to residential treatment centers that provide 24-hour onsite nursing for patients. Neither facility at issue meets this requirement. In their ERISA action the family asserts two causes of action. First, they bring a claim seeking the benefits they contest were improperly denied. Second, plaintiffs assert a claim for violations of the Mental Health Parity and Addiction Equity Act. Each side offered expert opinions, filed a motion for summary judgment, and moved to exclude the expert opinions proffered by the opposing side. In this order the court entered summary judgment in favor of defendants and denied both parties’ expert exclusion motions as moot. Because the plan does not grant Blue Cross discretionary authority, the court applied de novo review to the claim denial. Ultimately, the court found that because the facilities that treated M.R. did not provide 24-hour onsite nursing to their patients as required under the unambiguous language of the plan, “it follows that the Plan did not cover the inpatient mental health treatment that M.R. received.” Moreover, the court declined to reach the issue of whether Blue Cross provided the family with a full and fair review, because even if it were to make such a finding, a remand would serve no purpose. The court took considerably more time addressing the Parity Act claim. Plaintiffs argued that the plan’s 24-hour nursing requirement violates the Parity Act for three reasons: (1) the plan expressly requires a 24-hour onsite nursing requirement for residential treatment centers, but does not do so for facilities that provide analogous medical or surgical treatment; (2) the requirement exceeds state and federal licensing requirements only for residential treatment centers; and (3) the requirement exceeds the generally accepted standards of care for residential treatment centers, but not for facilities that provide equivalent non-psychiatric related treatments. The court rejected each argument. First, the court noted that while the plan only expressly requires residential treatment centers to be staffed around the clock with an onsite nurse, it requires that skilled nursing facilities be duly licensed, and licensing requirements for skilled nursing facilities include this same provision. “It follows that the Plan’s terms, when interpreted in context, impose the same treatment limitation on care in a residential treatment center and analogous medical and surgical care. That limitation thus survives a facial challenge under the Parity Act.” Next, the court disagreed with plaintiffs that the plan’s imposition of extra licensure requirements on residential treatment centers forms the basis for an as-applied challenge. Under the relevant regulations implanting the Parity Act, the court found that “so long as the same requirement is imposed ‘consistently’ across the board, a plan does not violate the Parity Act even if the requirement exceeds the licensure requirements for ‘certain mental health providers’ and thus has ‘a disparate impact’ on them.” As for plaintiffs’ third argument, the court held that the fact the requirement exceeds generally accepted standards for mental health care is irrelevant under the Parity Act, and what matters is simply that the plan imposes the same requirements for mental health and medical/surgical care. Moreover, the court disagreed that the 24-hour onsite nursing requirement does exceed the generally accepted standards of care, noting that under the American Academy of Child and Adolescent Psychiatry’s Principles of Care for Treatment of Children and Adolescents with Mental Illnesses in Residential Treatment Centers, 24-hour onsite nursing is one way that a facility can satisfy staffing requirements. Thus, “24-hour onsite nursing may thus fall at the high end of the range of generally accepted practices – but it certainly does not exceed that range.” Finally, the court addressed what may be plaintiffs’ real issue with the plan’s 24-hour onsite nursing requirement, which is that it has a disparate impact on the availability of mental health care under the plan by functionally eliminating 80% of all facilities from coverage. The court, however, viewed it as unlikely that a disparate-impact theory such as this supported a Parity Act claim. But even assuming it could, the court held that it did not do so here because there are legitimate reasons to impose such a requirement that go beyond financial incentives to limit the availability of this costly type of mental healthcare. One such reason, for instance, may be in order to ensure adequate safety, quality control, and professionalism in these programs. As a result, the court could not “say that the balance struck by the Plan is arbitrary and wholly unjustified.” Based on these reasons, the court granted defendants’ motion for summary judgment, and denied plaintiffs’ cross-motion, on both causes of action.

Pension Benefit Claims

Federal Circuit

King v. United States, No. 2023-1956, __ F. 4th __, 2025 WL 2382871 (Fed. Cir. Aug. 18, 2025) (Before Circuit Judges Dyk, Chen, and Stark). The plaintiffs in this takings case are pensioners of the New York State Teamsters Conference Pension & Retirement Fund who had vested benefit rights and were receiving payments under the plan when it was amended in 2017 to reduce the benefits of retirees by 29% and the benefits of actively employed participants by 18% under the recently enacted Multiemployer Pension Reform Act (“MPRA”). The pensioners sued the United States government, maintaining that the MPRA effected an uncompensated taking in violation of the Fifth Amendment. The district court granted summary judgment in favor of the government, concluding that, contrary to plaintiffs’ arguments, the enactment of the MPRA and the resulting reduction in their pension benefits, did not constitute a taking under the Fifth Amendment. (Your ERISA Watch covered this decision in our May 3, 2023 edition.) The retirees appealed. Unfortunately for them, the Federal Circuit agreed with the district court and affirmed its holdings in this decision. The court of appeals began its analysis by considering whether plaintiffs have a cognizable Fifth Amendment property interest in their pension benefits. Rather than definitively resolve this issue, the court instead assumed, without deciding, that they did, although they do not hold a property interest in the assets of the plan itself. Next, the Federal Circuit weighed whether the identified property interest was “taken” within the meaning of the Fifth Amendment. The government may effectuate a taking by either acquiring a property interest for itself or for a third party, or by imposing regulations that restrict an owner’s ability to use his own property. The first is a physical taking while the second constitutes a regulatory taking. The court of appeals quite comfortably decided that plaintiffs could not demonstrate that they suffered a physical taking. Rather, the court held that this case involves allegations concerning the modification of contractual obligations owed by third parties, meaning that under the MPRA, the United States took nothing for its own use. “In effect, the MPRA broadened the definition of insolvency under ERISA, allowing the administrators of especially troubled plans to restructure a plan’s contractual obligations to some beneficiaries to stave off the further diminishment of the plan’s assets. Thus, the Claims Court did not err in declining to apply the physical takings analysis to plaintiffs’ claims.” However, this still left the issue of whether the government modified the contractual rights of the pensioners in such a way as to constitute a regulatory taking under the Fifth Amendment. So, the court turned to that analysis. It looked to three factors: “(1) ‘the economic impact of the regulation on the claimant’; (2) ‘the extent to which the regulation has interfered with distinct investment-backed expectations’; and (3) ‘the character of the governmental action.’ ” First, the court concluded that the 29% reduction of the pensioners’ vested benefits was not so severe as to support a conclusion that a regulatory taking has occurred. Next, the court turned to the degree of interference upon plaintiffs’ expectations. It concluded that because ERISA’s anti-cutback rule is itself a legislative creation, one that has always had exceptions to it, the expansion of these exceptions in order to guard against insolvency did not interfere unduly with plaintiffs’ expectations. Last, the court considered the character of the MPRA. It held that the MPRA “advanced a substantial public purpose: protecting failing multiemployer pension plans, like the Plan here, from insolvency defined as liabilities exceeding assets.” The financial harm that plaintiffs experienced, the court concluded, was minimal and narrowly tailored to ensure the solvency of their plan which was in critical and declining status. The Federal Circuit determined that the enactment of the MPRA plainly served a legitimate Congressional objective, one that was aligned with ERISA’s long-standing regulatory goals. Under the circumstances, the court was of the opinion that the relevant factors all favor the government and as a result there was no regulatory taking. Accordingly, despite the court’s sympathy with the retirees, it nevertheless determined that they did not suffer a taking in violation of their constitutional rights. For this reason, the appeals court affirmed the judgment of the lower court in favor of the federal government.

Pleading Issues & Procedure

Second Circuit

Rolleri & Sheppard CPAS, LLP v. Knight, No. 3:22-CV-1269 (OAW), 2025 WL 2403074 (D. Conn. Aug. 19, 2025) (Judge Omar A. Williams). John Rolleri, Ryan Sheppard, and Michael Knight are the eponymous partners of the accounting firm Knight Rolleri Sheppard CPAs, LLP, and were trustees and fiduciaries of the firm’s retirement plan. Mr. Rolleri and Mr. Sheppard allege that when Mr. Knight retired he wrongfully transferred $1.4 million over and above the maximum distribution from the plan allowable by law to personal accounts owned by him and his wife, Darlene Knight. In this ERISA action Mr. Rolleri and Mr. Sheppard have sued Mr. and Mrs. Knight in connection with these transfers from the plan into defendants’ personal accounts. The Knights have countersued, asserting seven state law counterclaims. Plaintiffs moved to dismiss the Knights’ counterclaims. Defendants, meanwhile, filed a motion for order and immediate hearing in connection with a letter plaintiffs’ counsel sent to their financial institution, Vanderbilt, requiring Vanderbilt to retain the alleged $1.4 million overpayment and freeze these funds. Mr. and Mrs. Knight argue that this letter amounted to a violation of the court’s denial of any prejudgment remedy and they asked the court to order plaintiffs to cease their campaign to restrict their usage of the funds. In this short decision the court granted the motion to dismiss, without prejudice, and denied defendants’ motion for order. With regard to the motion to dismiss, the court held that the Knights failed to show that their counterclaims arise from a common nucleus of operative facts such that it would be appropriate to exercise supplemental jurisdiction over them. “Plaintiffs’ claims deal with certain specific transfers of funds from the Plan into Defendants’ personal retirement accounts. The counterclaims have nothing to do with these transfers or the Plan. Rather, the counterclaims accuse Mr. Rolleri and Mr. Sheppard of some financial malfeasance after Mr. Knight already had retired (and for the most part, after the date Plaintiffs contend they expelled Mr. Knight from the partnership). But these appear to be two separate and distinct courses of allegedly unlawful conduct. The prosecution of one may be done completely divorced from the prosecution of the other, and each would involve a separate body of evidence and a separate set of laws. Thus, exercising jurisdiction over the counterclaims in this action would not yield the efficiencies that supplemental jurisdiction is supposed to afford the parties and the court.” Accordingly, the court granted the motion to dismiss all seven of the Knights’ counterclaims. As for the motion for order, the court determined that it does not have the authority to order any relief in connection with the letter to Vanderbilt. Nevertheless, the court instructed the parties to meet and confer to discuss negotiating a stipulation to safeguard the funds plaintiffs assert a right to, and only those funds, and to publish any agreed upon stipulation to Vanderbilt “with due haste.”

Provider Claims

Fifth Circuit

Columbia Hospital at Medical City of Dallas Subsidiary, L.P. v. California Physicians’ Service, No. 4:24-cv-924, 2025 WL 2412353 (E.D. Tex. Aug. 20, 2025) (Judge Amos L Mazzant). This dispute involving ERISA and contract law was brought by a group of hospitals in the state of Texas against insurers affiliated with Blue Cross and Blue Shield of Texas alleging they are in breach of contract and in violation of ERISA plan terms because they wrongfully rejected the hospitals’ submitted claims for medically necessary services provided to insured patients. Defendants moved to dismiss the complaint. In a brief order the court granted the motion to dismiss, without prejudice, as it agreed with defendants that the current complaint fails to establish the court has federal question jurisdiction over this matter. Defendants argued, and the court agreed, that in order to demonstrate standing to bring claims under ERISA, the providers must “put forth evidence of valid and enforceable assignments of benefits from the ERISA plan participants and/or beneficiaries,” rather than just allege the existence of such assignments. Because the hospitals have not currently done so, the court dismissed their action under Rule 12(b)(1). However, the court found that this flaw can potentially be addressed through amendment if plaintiffs simply present the assignments. Thus, while the court found that it currently lacks subject matter jurisdiction, it also held that the providers should be granted leave to amend to correct this deficiency.

Statute of Limitations

Eleventh Circuit

Ahanotu v. The Retirement Bd. of Bert Bell/Pete Rozelle NFL Player Retirement Plan, No. 24-11442, __ F. App’x __, 2025 WL 2427591 (11th Cir. Aug. 22, 2025) (Before Circuit Judges Jordan and Newsom, and District Judge Timothy J. Corrigan). In 2006, after playing for the National Football League for twelve seasons, plaintiff-appellant Chidi Ahanotu applied for two types of disability benefits under the Bert Bell/Pete Rozelle NFL Player Retirement Plan. The Plan awarded him only the less generous benefit, without mentioning the more generous total and permanent disability benefits, nor did it state that Mr. Ahanotu had 180 days to request the Board’s review of any adverse benefit determination. Mr. Ahanotu did not request any review of the benefit determination or otherwise follow up regarding the application until fifteen years later, in 2021, when he requested from the plan a copy of his 2006 application. It was then, he alleges, that he discovered that someone had tampered with his application by crossing out his request for the total and permanent disability benefits. He then submitted a new claim demanding that the plan make up for this malfeasance by retroactively paying him total and permanent disability benefits retroactively to when he first applied. The plan denied the request, responding that its 2006 decision was final and not subject to further review. This response prompted Mr. Ahanotu to sue under ERISA. The district court dismissed Mr. Ahanotu’s lawsuit because it concluded that he failed to exhaust his administrative remedies given the complaint’s admission that he did not appeal the 2006 decision. Mr. Ahanotu appealed. In this unpublished decision the Eleventh Circuit concluded that even assuming, without deciding, that Mr. Ahanotu exhausted his administrative remedies, the district court was correct to dismiss his complaint, “not only because his suit was barred by the Plan’s 42-month contractual limitations period but also because he failed to plead a plausible claim to relief.” The court of appeals discussed each of these grounds for dismissal in turn. First, it concluded that under its own precedent Mr. Ahanotu’s suit is untimely by a considerable margin. “For Ahanotu’s complaint to have been timely, the decision must not have become final until November 2019 – i.e., 42 months before he filed his complaint. Ahanotu’s position, therefore, must be that for 13 years he had no idea that the defendants denied his claim for [total and permanent disability] benefits. Under Witt, that’s too tall an order. At some point in those 13 years, the defendants’ refusal to pay him his requested benefits – even without a formal denial letter – constituted ‘a clear and continuing repudiation of [Ahanotu’s] rights.’ That’s especially true because, by then, Ahanotu had reapplied several times for [these] benefits. Because Ahanotu’s suit thus was untimely, the district court was right to dismiss it.” Nevertheless, putting aside the issue of untimeliness, the Eleventh Circuit also concluded that Federal Rule of Civil Procedure 8 would still compel dismissal. The court found that the complaint lacks any details to plausibly show that Mr. Ahanotu was entitled to the higher level disability benefits he seeks, and that it also fails to provide enough factual content to allow an inference that defendants are liable for the misconduct he alleges. Based on the foregoing, the court of appeals affirmed the district court’s dismissal of Mr. Ahanotu’s second amended complaint.