Dan C. v. Directors Guild of America – Producer Health Plan, No. 24-3203, __ F. App’x __, 2025 WL 1419920 (9th Cir. May 16, 2025) (Before Circuit Judges Owens, Bennett, and H.A. Thomas)

This week’s notable decision is an appellate victory by Kantor & Kantor in a case involving a troubled child who received intensive mental health treatment. In its decision the Ninth Circuit Court of Appeals upheld a ruling that the child’s treatment was medically necessary, and in the process offered useful information to future litigants in addressing both standard of review and “full and fair” claim review issues.

The plaintiff was Dan C., who had a son named R.C. (Pseudonyms were used to protect the son, who was a minor.) Dan C. was a participant in the Directors Guild of America – Producer Health Plan, an ERISA-governed self-funded multiemployer welfare benefit plan.

Unfortunately, R.C. had a challenging start to his life. He was born in Haiti, and placed in a orphanage as an infant, where he was malnourished. Dan C. and his wife adopted R.C. when he was three years old. Unfortunately, R.C. had difficulty regulating his emotions, was occasionally violent and destructive, and could not function adequately in school. R.C.’s adoptive parents sought treatment from numerous mental health professionals, who prescribed medication and attempted various types of therapy. These treatments were ineffective, and as a result R.C.’s providers ultimately recommended that R.C. undergo residential treatment.

During this treatment R.C. continued to have problems, including a lack of impulse control, violence, and other negative behavior. Regardless, Anthem Blue Cross, the Plan’s claim administrator, only approved benefits for three days of treatment. After that, Anthem contended that R.C.’s treatment was no longer medically necessary under the Plan and its guidelines.

Dan C. appealed, but to no avail. The benefits committee of the Plan’s board of trustees upheld the decision, and Dan C. was forced to file suit in federal court, alleging two claims for relief: one for plan benefits under ERISA Section 1132(a)(1)(B), and one for breach of fiduciary duty under Section 1132(a)(3).

After briefing and a hearing, the district court granted judgment to Dan C. on both claims under de novo review. On Dan C.’s first claim for benefits, the court ruled that the record showed R.C.’s “risky and dangerous behavior, impaired judgment, and emotional difficulties that could not have been managed without residential treatment, due to his violent and threatening nature and impaired daily functioning.”

The district court further found that Dan C. had not received a full and fair review. It ruled that the Plan disregarded relevant evidence, did not adequately engage with medical records, and failed to consult with R.C.’s treatment providers. Finally, the district court granted judgment on Dan C.’s second claim for relief, ruling that the Plan had breached its fiduciary duty by mishandling his benefit claim. (Your ERISA Watch covered this decision in its April 17, 2024 edition.)

The Plan appealed to the Ninth Circuit. Its primary argument on appeal was that the district court erred by using de novo review. According to the Plan, the district court should have used the more deferential abuse of discretion standard of review because the plan documents gave the board of trustees discretionary authority to make benefit determinations.

However, the Ninth Circuit agreed with Dan C. that de novo review was appropriate because the board “did not unambiguously ‘delegat[e] its discretionary authority’ to the Board’s Benefits Committee, which made the final decision at issue here.” The court stated that although “the Plan delegates the task of ‘determining claims appeals’ to the Committee and provides that the Committee ‘will have discretion to deny or grant the appeal in whole or part,’ this language falls short of the unambiguous delegation contemplated by our precedent.” This was because “[n]one of the Plan’s provisions expressly ‘grant [the Committee] any power to construe the terms of the plan[.]’”

Next, the Plan argued that the district court erred by evaluating “clinical criteria” instead of using the Plan’s definition of medical necessity. However, the Ninth Circuit observed that the district court simply examined the reasons offered by the Plan in denying Dan C.’s benefit claim, which involved a discussion of clinical criteria. Furthermore, those criteria were directly relevant to the two most contested medical necessity elements, i.e., whether R.C.’s “continued residential treatment was (1) inconsistent with generally accepted medical practice and (2) not the most cost-efficient.”

The Ninth Circuit further ruled that because the record demonstrated R.C.’s continued struggles during residential treatment, “[i]t…was not clear error for the district court to find, on the administrative record before it, that R.C. did pose a danger to himself and others and did experience serious problems with functioning ‘that could not have been managed without residential treatment.’”

Moreover, the appellate court ruled that even if the abuse of discretion standard of review applied, Dan C. did not receive a full and fair review because of the Plan’s “fundamental failure to explain to Plaintiff that the Plan’s operative definition of medical necessity required attempting lower levels of care – namely, an intensive outpatient program (‘IOP’) or partial hospitalized program (‘PHP’) – before residential treatment.” The Ninth Circuit ruled that the Plan’s “inadequate notice” regarding this requirement “deprived Plaintiff of the opportunity to ‘answer[] in time’ the Plan’s questions about lower levels of care, to engage in ‘meaningful dialogue’ on the issue of medical necessity, and to receive a ‘full and fair’ review of the denial of his claim.”

As a result, the Ninth Circuit affirmed the district court’s entry of judgment in Dan C.’s favor on his claim for plan benefits. It was not a complete success for Dan C., however, as the appellate court reversed the district court’s entry of judgment in his favor on his breach of fiduciary duty claim. The Ninth Circuit noted that the district court did not award any relief under that claim that was distinct from the relief it granted to Dan C. under his first claim for payment of plan benefits. Thus, “[b]ecause Plaintiff’s ‘claim under § 1132(a)(1)(B) … afford[ed] adequate relief’ for his injury, ‘relief is not available [to him] under § 1132(a)(3).’”

As the court acknowledged, however, this reversal was largely inconsequential because it “does not impact Plaintiff’s recovery” and would not “have any material impact” on his simultaneously pending request for attorney’s fees. Thus, the appeal was a resounding success for Dan C., whose benefit claims for his son’s treatment will now be approved on remand.

(Plaintiff Dan C. was represented on appeal by Kantor & Kantor attorneys Glenn R. Kantor and Your ERISA Watch co-editor Peter S. Sessions. In the district court Dan C. was represented by David M. Lilienstein and Katie J. Spielman of DL Law Group.)

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

Attorneys’ Fees

Tenth Circuit

M.S. v. Premera Blue Cross, No. 2:19-cv-199-DAK, 2025 WL 1370215 (D. Utah May 12, 2025) (Judge Dale A. Kimball). This action was brought by the parents of a minor child with autism seeking coverage for the treatment of their child under the family’s healthcare plan. The family sued their plan, the plan sponsor, Microsoft, and the claims administrator, Premera Blue Cross, alleging claims for payment of benefits, violation of ERISA’s mental health parity provisions, and for statutory penalties for failure to produce documents under which the plan was established or operated in violation of ERISA Section 502(a)(1)(A), (c). At the summary judgment stage the district court granted summary judgment in favor of defendants on the benefits claim, but in favor of plaintiffs on both their Parity Act and statutory penalties claims. It also awarded plaintiffs attorneys’ fees totaling $69,240 and costs of $400. Defendants challenged the district court’s ruling, to the extent it was unfavorable to them, in an appeal to the Tenth Circuit. In its decision the Tenth Circuit vacated the district court’s grant of summary judgment to plaintiffs on their Parity Act claim and remanded to the district court to dismiss the claim for lack of standing. However, the Tenth Circuit’s decision was not all bad news for the plaintiffs. The court of appeals reversed in part and affirmed in part the district court’s grant of summary judgment to plaintiffs on their statutory penalties claim, holding that defendants were not required to provide the family with certain medical policies, but were statutorily required to provide them with the administrative services agreement between the plan sponsor, Microsoft, and Premera Blue Cross, the claims administrator. The Tenth Circuit upheld the district court’s full award of $123,100 in statutory penalties. It also reviewed the district court’s award of attorneys’ fees and costs and affirmed the award in full. (You can read Your ERISA Watch’s full coverage of the Tenth Circuit’s decision, featured as the case of the week, in our October 9, 2024 issue). On remand from the Tenth Circuit, plaintiffs moved for an additional award of attorneys’ fees and costs for the time and effort incurred on appeal. In this decision the court followed the direction of the Tenth Circuit to dismiss plaintiffs’ Mental Health Parity Act claim for lack of standing, and granted plaintiffs’ motion for “reasonable fees and costs on appeal in the amount of $38,700.00” pursuant to Section 502(g)(1). Defendants argued that plaintiffs did not achieve “some degree of success” on appeal because the Tenth Circuit reversed the district court on the Parity Act claim and part of the statutory penalties claim. They further argued that plaintiffs cannot satisfy the Tenth Circuit’s Cardoza factors. The court, however, did not agree with defendants. Contrary to their assertions, the court held that plaintiffs concluded the appeal with the same judgment award in their favor and therefore achieved the requisite degree of success on appeal to seek attorneys’ fees on appeal. In addition, the court found that the Cardoza factors support an award of additional attorneys’ fees for the appeal. It concluded that defendants had some degree of culpability for failing to turn over the administrative services agreement “because it was plainly in the universe of documents that were required to be provided upon request. The refusal to turn over the document and subject itself to statutory penalties is more than mere procedural deficiencies or irregularities. The statutory penalties demonstrate culpability on Defendants’ part, and this factor weighs in favor of an award of attorneys’ fees to Plaintiffs.” Further, there was no question that defendants could satisfy an award of fees. The court also wished to incentivize defendants and other insurers and plans to produce administrative services agreements in similar circumstances, and thus this factor too weighed in plaintiffs’ favor. Plaintiffs, the court added, also resolved a significant legal question on appeal by obtaining a ruling of first impression from the Tenth Circuit establishing clearly that administrative services agreements are required to be produced under 29 U.S.C. § 1024(b)(4). The last Cardoza factor concerns the relative merits of the parties’ positions, and the court was confident that plaintiffs achieved enough success on appeal to have the judgment award undisturbed. The court thus found that this factor too supported an award of attorneys’ fees on appeal. Defendants did not challenge the $600 hourly rate of attorney Brian King or the 64.5 hours incurred on appeal. The court agreed that the billable hourly rate and amount of time spent on appeal were reasonable. Accordingly, the court granted plaintiffs’ fee motion and awarded them their full requested fees and costs on appeal.

Breach of Fiduciary Duty

Seventh Circuit

Lard v. Marmon Holdings, Inc., No. 22 cv 04332, 2025 WL 1383269 (N.D. Ill. May 13, 2025) (Judge Jeffrey I. Cummings). In this breach of fiduciary duty action seven participants of the Marmon Employees’ Retirement Plan allege that its fiduciaries mismanaged the plan, acted imprudently, and failed to monitor one another by selecting and retaining costly and underperforming proprietary Marmon target date funds as investment options in the plan in lieu of superior commercial alternatives. Defendants moved to dismiss the complaint for failure to state a claim. Their motion to dismiss was granted by the court in this decision. The court agreed with defendants that the allegations in the complaint fail to plausibly support the idea that the fiduciaries breached their duties by selecting and retaining the investments in question. Attached to the second amended complaint was an exhibit which showed that the relevant Marmon target date funds outperformed many of the comparator funds. The court stated that the depiction of performance shown in this exhibit “controls over the contrary allegations in the SAC itself.” Furthermore, the court agreed with defendants that the period of underperformance plaintiffs highlighted – two years – is simply too short to demonstrate sustained issues which a prudent fiduciary would have obviously investigated. Simply put, the court held that short term performance is not a reliable indicator of overall performance or a predictor of future performance. The court added that to the extent plaintiffs showed underperformance as compared with their closest comparator funds, such underperformance was de minimis, approximately two percent. Plaintiffs also alleged that the retention of the target date funds was imprudent because it ran afoul of certain provisions of the plan’s investment policy statement (“IPS”). But the court was not persuaded, noting the quoted portion of the IPS describes benchmark indices for the plan’s existing investment funds and “does not speak to the selection of funds.” The court thus found that plaintiffs failed to properly allege their claims for fiduciary breach. Absent an underlying viable fiduciary breach claim, the court also dismissed the derivative failure to monitor claim. Accordingly, the court granted defendants’ motion to dismiss, although its dismissal was without prejudice to plaintiffs amending their complaint.

Class Actions

First Circuit

Monteiro v. The Children’s Hospital Corp., No. 1:22-cv-10069-JEK, 2025 WL 1367413 (D. Mass. May 12, 2025) (Judge Julia E. Kobick). Four participants of the Children’s Hospital Corporation Tax-Deferred Annuity Plan filed this putative ERISA class action against the plan’s fiduciaries alleging they breached their fiduciary duties by retaining imprudent investments and permitting excessive plan costs. Following extensive discovery, the parties participated in private meditation. In April of 2025 the parties executed a settlement agreement with a proposed settlement of $3 million. Pending before the court was plaintiffs’ unopposed motion for preliminary approval of that class action settlement. In this decision the court granted the motion, preliminarily certified the proposed class, preliminarily approved of the proposed settlement, approved of the proposed notice, appointed class counsel and class representatives, and scheduled the final approval fairness hearing. To begin, the court held that plaintiffs sufficiently satisfied the requirements of Rule 23. Because the class of participants and beneficiaries during the class period consists of over 20,000 people, the court concluded that joinder of all members is impracticable and Rule 23(a)’s numerosity requirement was satisfied. The court further determined that there are many questions of law and fact that are common to all class members including whether the defendants breached certain fiduciaries duties owed to the plan and, if so, whether the plan suffered losses because of those breaches. Moreover, the court found that the named plaintiffs are typical of the other class members as their claims concern the same conduct that forms the basis of claims of the absent class members. The court was also confident that the representative parties would adequately protect the interests of the class because the plaintiffs’ interests are not in conflict with those of any of the class members’ and because counsel at Miller Shah LLP and Capozzi Adler, P.C. have “properly and vigorously” represented the class with their “extensive experience litigating ERISA cases.” Finally, the court found that the requirements of Rule 23(b)(1)(B) are satisfied because breach of fiduciary duty actions like this one, affecting the members of a large class of beneficiaries, are the classic example of Rule 23(b)(1)(B) cases. For these reasons the court preliminarily certified the class. It then approved preliminarily the terms of the $3 million settlement. The court agreed with plaintiffs that the settlement was the result of an informed arm’s length negotiation, and that the settlement amount provides adequate relief to the class when compared to the costs, risks, and delays of continued litigation. The court was additionally satisfied that the proposed settlement will treat class members equitably because each member’s allocation of the settlement will be proportional to their investments in the plan. The court found no issue with the contents or proposed method of distribution of the settlement notice and therefore approved it. Finally, the named plaintiffs were appointed class representatives, their counsel was appointed class counsel, and the parties’ desired professional claims administrator, Strategic Claims Services, was appointed the settlement administrator.

Disability Benefit Claims

Sixth Circuit

Goodwin v. Unum Life Ins. Co. of Am., No. 24-3321, __ F. 4th __, 2025 WL 1403640 (6th Cir. May 15, 2025) (Before Circuit Judges Thapar, Nalbandian, and Davis). Plaintiff-appellant Brandi Goodwin worked as a nursing assistant at a hospital until she contracted COVID-19 and needed to stop working. Ms. Goodwin applied for short-term disability benefits, citing shortness of breath and chest pain as her disabling symptoms. Unum Life Insurance Company of America approved Ms. Goodwin’s short-term disability claim and paid her benefits for the maximum period available under the short-term policy. Ms. Goodwin’s medical issues persisted. At the Cleveland Clinic she was diagnosed with postural orthostatic tachycardia syndrome (“POTS”), and it was the opinion of her treating neurologist that Ms. Goodwin couldn’t return to work. Nevertheless, Unum denied Ms. Goodwin’s claim for long-term disability benefits. It concluded that her vertigo diagnosis was a pre-existing condition, excluded from coverage under the policy, and that her remaining health problems did not render her disabled, as defined by the policy. Unum’s reviewing professionals referred to normal pulmonary function test results and chest X-ray results to observe that Ms. Goodwin had improved and was no longer functionally impaired from performing the duties of her work. Given these results, Unum’s reviewers determined that Ms. Goodwin’s chest pain, shortness of breath, and related post-COVID complaints were not borne out by the medical testing. Ms. Goodwin challenged Unum’s denial during an administrative appeal, but Unum upheld its decision, which prompted her to pursue litigation. The parties each moved for judgment on the administrative record. The district court concluded that Unum had not abused its discretion in denying the claim and therefore upheld its decision and granted judgment in its favor. Ms. Goodwin appealed. In this decision the Sixth Circuit concluded that Unum’s denial was both procedurally and substantively sound and thus affirmed the district court’s judgment. To begin, the Sixth Circuit addressed Ms. Goodwin’s procedural arguments. She maintained that Unum cherry-picked only the evidence in her file which supported its position, without considering all the evidence that cut against its denial. The appeals court disagreed, saying, “Unum and its file reviewers did engage with that evidence. They noted the reports of Goodwin’s irregular heart rates, exercise stress test results, POTS diagnosis, shortness of breath issues, and cognitive impairment.” Ms. Goodwin next argued that Unum failed to explain why it approved her short-term disability benefit claim but denied her claim for long-term disability benefits. Although Unum did not expressly state it was changing its disability determination, the Sixth Circuit nevertheless concluded that its decision to do so was permissible given new test results which justified the change. Ms. Goodwin also contended that Unum ignored the opinions of her treating providers. The Sixth Circuit responded to this argument by noting that one of the providers who evaluated Ms. Goodwin in person, a nurse practitioner, actually advised that she could return to work. Moreover, to the extent the rest of her treating doctors believed Ms. Goodwin was disabled, the court stressed that Unum was not required to defer to those opinions, so “this factor doesn’t cut against Unum.” As for her last procedural argument, Ms. Goodwin posited that Unum’s decision to deny benefits was the result of its conflict of interest. However, the Sixth Circuit was not receptive to this argument as it was not tied to any concrete or direct evidence that the conflict materially affected Unum’s decision. For these reasons, the Sixth Circuit was confident that Unum’s decision to deny Ms. Goodwin’s long-term disability benefits was procedurally reasonable. The court therefore moved on to consider whether it was also substantially so. It found it was. “Substantial evidence in the administrative record supports Unum’s decision to deny Goodwin long-term disability benefits. The numerous treatment records cited by Goodwin’s file reviewers documenting her exercise, normal test results, and normal performance on physical examinations are the most obvious examples. The professional opinions of Goodwin’s file reviewers bolster this finding.” Accordingly, the Sixth Circuit determined that Unum’s denial was both procedurally and substantively reasonable, and thus affirmed.

Ninth Circuit

McDermott v. Sun Life Assurance Co. of Can., No. C23-5676 BHS, 2025 WL 1360300 (W.D. Wash. May 9, 2025) (Judge Laura M. Provinzino). Plaintiff Courtney McDermott brought this action against Sun Life Assurance Company of Canada to challenge its denial of her claim for long-term disability benefits. Ms. McDermott, a clinical pharmacist, began experiencing unpredictable seizures and other severe symptoms like facial spasms, sweating, and hallucinations in early 2021. To try and reach a diagnosis Ms. McDermott went to the Cleveland Clinic, saw a host of doctors, and underwent various diagnostic tests and scans. The doctors could not conclusively say what was wrong with her. Some thought that functional neurological disorder (“FND”) was the most likely cause of her symptoms, others thought they were autoimmune related, while still more maintained that they could not rule out a neurological etiology. Sun Life latched on to the FND diagnosis, which is defined as a mental illness under the DSM-5-TR. Under the policy, if a condition is even partly psychological, it is a mental illness. Moreover, the policy requires psychological illnesses to be treated by psychiatric specialists. Specifically, the policy requires claimants to be under the continuing care of a physician with the “most appropriate specialty” to evaluate, manage or treat that individual’s condition. Given these provisions of the plan, Sun Life denied Ms. McDermott’s claim. Although it recognized that Ms. McDermott was not able to work due to her FND, the insurer nevertheless found that she was ineligible for benefits because she was being treated by a naturopath, not a mental health professional. Following an unsuccessful administrative appeal, Ms. McDermott brought this action seeking judicial review of Sun Life’s decision. Ruling on the parties’ cross-motions for judgment on the record under Federal Rule of Civil Procedure 52, the court concluded that Ms. McDermott failed to carry her burden of proving by a preponderance of the evidence that she is entitled to the benefits under the policy. The court concluded that Ms. McDermott’s disability is caused in substantial part by a psychological disorder and that she was not entitled to the benefits because she did not receive continuing care from the most appropriate specialist for her illness. The court noted that Ms. McDermott was thoroughly evaluated by a team of doctors for nearly two years and those doctors believed her symptoms to be caused, at least in part, by FND. Thus, the court determined that her disabling condition is at least partially psychological. Moreover, the court agreed with Sun Life that Ms. McDermott’s primary treating provider was not the appropriate specialist for the treatment of her psychiatric illness. For these reasons, the court found that Ms. McDermott failed to meet the policy’s conditions for payment of benefits, and accordingly upheld the denial and entered judgment in favor of Sun Life.

Mendoza v. First Unum Life Ins. Co., No. 3:24-cv-00834-H-VET, 2025 WL 1393871 (S.D. Cal. May 5, 2025) (Judge Marilyn L. Huff). In January of 2021 plaintiff Siam Mendoza was hospitalized for COVID-like symptoms, including inflammation of the lungs, severe hypoxia with saturation levels as low as 70%, and ventricular systolic dysfunction causing his heart to pump blood ineffectively. Eventually doctors stabilized Mr. Mendoza, and following surgical procedures his cardiac issues improved. But many of Mr. Mendoza’s issues persisted. Despite returning to his work as a senior insurance underwriting consultant in November 2021, Mr. Mendoza was still not doing well. He had problems at work which he attributed to his continuing symptoms. Ultimately, Mr. Mendoza stopped working and applied for disability benefits. After exhausting short-term disability benefits, he applied for long-term disability benefits. Defendant First Unum Life Insurance Company denied his claim, stating that its reviewing doctors did not believe that the record supported that he was precluded from performing his sedentary job duties for the entirety of the elimination period. After an unsuccessful administrative appeal, Mr. Mendoza brought this action to challenge First Unum’s denial. The parties filed cross-motions for judgment under Rule 52 based on the administrative record. Mr. Mendoza argued that he was entitled to the benefits because he lacked the physical stamina and cognitive capacity to perform the occupational demands of his job. First Unum responded that its decision to deny benefits during this time period was correct and it is entitled to judgment in its favor. In this decision the court conducted a de novo review and determined that Mr. Mendoza could not meet his burden of proving entitlement to long-term disability benefits. The court broke down its analysis into four parts: (1) whether any physical symptoms including cardiac issues prevented Mr. Mendoza from performing the duties of his work; (2) whether his psychiatric symptoms, insomnia, and headaches did; (3) whether he could not work due to fatigue; and (4) whether cognitive impairments including brain fog and concentration deficits were disabling under the policy. To begin, the court held that Mr. Mendoza’s cardiac function was normalized following his surgical procedures and therefore it would not preclude sedentary work capacity. Next, the court found there was insufficient evidence in the record to support the conclusion that major depressive disorder, anxiety, insomnia, and headaches prevented Mr. Mendoza from performing the essential requirements of his occupation. As for fatigue, the court concluded that Mr. Mendoza’s narrative of his exhaustion was not well supported by other evidence in the record and he could offer no explanation for this apparent inconsistency. And, although Mr. Mendoza complained consistently of cognitive deficits of long COVID, the court zeroed in on the results of neuropsychological evaluations performed by his treating neurologist which found that his processing and comprehension skills were average and within normal limits. In light of these results the court could not say that cognitive issues prevented Mr. Mendoza from performing the material and substantive duties of his occupation. Finally, the court addressed Mr. Mendoza’s remaining arguments. He argued that First Unum approved his short-term disability benefits for largely the same time frame as the elimination period in question but failed to distinguish this decision with its denial of his long-term disability benefit claim. The court concluded that the two plans were governed by different terms which could explain the different outcomes in the respective claims. Mr. Mendoza also emphasized his personal narrative that he submitted with his appeal speaking to the severity of his fatigue, memory loss, and forgetfulness. In response the court stated that the personal narrative could not overcome the fact that there was insufficient medical evidence of functional disability within the administrative record. Finally, Mr. Mendoza maintained that First Unum improperly relied on reviewing physicians that never examined him in person to support its denial. The court replied that its review was de novo and therefore not reliant on First Unum’s decision. For these reasons the court granted First Unum’s motion for judgment and denied Mr. Mendoza’s motion for judgment.

ERISA Preemption

Fifth Circuit

Prime Healthcare Serv. Mesquite v. Cigna Healthcare of Tex., Inc., No. 3:25-CV-0316-D, 2025 WL 1397165 (N.D. Tex. May 14, 2025) (Judge Sidney A. Fitzwater), Prime Healthcare Serv. Mesquite v. Cigna Healthcare of Tex., Inc., No. 3:24-CV-3213-D, 2025 WL 1397208 (N.D. Tex. May 14, 2025) (Judge Sidney A. Fitzwater). The plaintiffs in these two actions are a group of acute care hospitals in Dallas, Texas. The hospitals filed two lawsuits against Cigna Health and Life Insurance Company in state court. In the first action Prime Healthcare is seeking to recover payments for their out-of-network services provided to 100 patients insured under healthcare plans issued or administered by Cigna. In the second action, it seeks to recover payments for their out-of-network services provided to 67 different patients with healthcare plans insured or administered by Cigna. Cigna removed both actions to federal court when it realized that a substantial percentage of the claims in each lawsuit related to ERISA-governed healthcare plans. In response to Cigna’s removal, plaintiffs amended their complaints and voluntarily removed the state law claims of those patients whom Cigna identified as receiving their health insurance through ERISA-governed plans. The hospitals further stipulated that to the extent there were any further patients with ERISA plans whom they missed, they would not pursue those claims either. Instead, for both lawsuits, the hospitals strictly chose to pursue state law claims for reimbursement relating to plans not governed by ERISA. Plaintiffs then moved to remand their actions against Cigna back to state court. In two nearly identical decisions issued this week the court granted plaintiffs’ motions to remand. The court recognized that under the well-pleaded complaint rule the hospitals are permitted to choose not to pursue recovery on any claims that involve ERISA-governed health benefit plans in order to avoid federal jurisdiction. Because the hospitals removed the claims involving ERISA plans from their complaints, the court agreed with them that ERISA preemption no longer applies. Moreover, the court saw no reason to exercise supplemental jurisdiction over the state law claims, finding instead that remand would best promote the values of economy, convenience, fairness, and comity. For this reason, the court granted the hospitals’ motions to send their actions back to state court.

Tenth Circuit

Long v. Blue Shield of Cal., No. 24-cv-03352-PAB-CYC, 2025 WL 1397581 (D. Colo. May 14, 2025) (Magistrate Judge Cyrus Y. Chung). Pro se plaintiff Jacob C. Long receives health insurance under a policy with Blue Shield of California governed by ERISA. Mr. Long received medical care for which he paid out of pocket. He then submitted claims to Blue Shield for reimbursement. Although Mr. Long eventually received reimbursement checks from defendant for some of his claims, others were never processed and remain unpaid. As a result, he commenced this action seeking payment of those claims. Mr. Long asserted three state law causes of action against Blue Shield: breach of contract, breach of the implied covenant of good faith and fair dealing, and bad faith denial of insurance claim. Blue Shield moved for dismissal, contending that these state law claims are preempted by ERISA. Magistrate Judge Cyrus Y. Chung issued this report and recommendation recommending the court dismiss the claims as preempted, but without prejudice so that Mr. Long may replead to assert causes of action under ERISA Section 502(a). Magistrate Chung’s discussion of preemption was short and straightforward. Because there is no question that Mr. Long’s plan is governed by ERISA, and no dispute that he seeks payment of benefits under that plan, it was obvious to Judge Chung that his state law causes of action are preempted by the federal statute. Nevertheless, the Magistrate Judge disliked defendant’s suggestion that Mr. Long’s claims should be dismissed with prejudice. Doing so, he wrote, “would undermine the purposes of ERISA.” Instead, Judge Chung recommended the court grant Mr. Long the opportunity to assert claims under ERISA.

Life Insurance & AD&D Benefit Claims

First Circuit

Slim v. Life Ins. Co. of N. Am., No. 24-1162(GMM), 2025 WL 1413973 (D.P.R. May 15, 2025) (Judge Gina R. Méndez-Miró). Plaintiff Jack Slim is a general manager at the El Conquistador Resort and is employed by Royal Blue Hospitality, LLC. As part of his employment with Royal Blue, Mr. Slim was eligible to elect certain employee benefits for himself and his family, including the opportunity to enroll in a voluntary spouse life insurance plan for his wife Stephanie. Mr. Slim enrolled Stephanie in the plan and elected to increase coverage up to the maximum of $250,000. Under the plan, supplemental coverage elections beyond the guaranteed issue amount of $30,000 require documentary submission of “evidence of good health.” Mr. Slim did not comply with the plan’s insurability requirement. Notwithstanding this shortcoming, Life Insurance Company of North America (“LINA”), accepted the premiums that Royal Blue deducted from Mr. Slim’s earnings for his wife’s supplemental life insurance coverage. Sadly, Stephanie died on February 16, 2023. After her death, Mr. Slim submitted a claim for voluntary supplemental insurance benefits in the amount of $250,000. LINA ultimately paid Mr. Slim just the $30,000 in guaranteed benefits. It denied his claim above and beyond that amount for failure to submit the required evidence of good health. Mr. Slim sued both LINA and Royal Blue to challenge the lower payment of life insurance benefits. Although he originally asserted claims for benefits and fiduciary breaches, the court granted defendants’ motion to dismiss the fiduciary breach claims. Before the court here were the parties’ motions for judgment on the administrative record on the remaining cause of action under Section 502(a)(1)(B). As an initial matter, the court concluded that the plan grants LINA discretionary authority to adjudicate claims for benefits. “Hence, the Court must determine whether LINA’s decision, as the Claim Fiduciary, is arbitrary and capricious or, looked at from another angle, whether that decision is reasonable and supported by substantial evidence on the full record.” With the standard of review set, the court began by assessing Mr. Slim’s claim as to LINA. The court began by stating “that to obtain the supplemental coverage the Plan unequivocally requires proof that the spouse satisfies the Insurability Requirement.” Here, there was no dispute that Mr. Slim did not meet this requirement. In fact, the record clearly showed that it was only after Stephanie’s death that LINA received a copy of an evidence of insurability form. Thus, the court was forced to agree with LINA that, however unfair, Mr. Slim was not entitled to supplemental coverage because he failed to provide evidence of insurability as required by the plan. The court further disagreed with Mr. Slim that LINA waived the requirement of evidence of insurability through its collection of premiums. “Unfortunately for Slim, such contention finds no support in the Administrative Record, nor in the applicable law.” To the contrary, the court explained that established precedent cuts against Mr. Slim’s waiver argument. Instead, the sole remedy for LINA’s action is a refund of the premiums that were deducted, not a finding that the denial of benefits under the clear terms of the plan was arbitrary and capricious. The court therefore entered judgment in favor of LINA. It then quickly took a look at the claim as to Royal Blue. Without much fuss the court concluded that Royal Blue was not the proper defendant to his wrongful denial of benefits claim, as it played no role in the decision making. Instead, LINA made all eligibility determinations as to Mr. Slim’s requested spousal supplemental coverage. Therefore, Royal Blue was dismissed as a defendant. Finally, because the court affirmed the administrative decision to deny benefits, it denied Mr. Slim’s motion for judgment.

Medical Benefit Claims

Ninth Circuit

Pessano v. Blue Cross of Cal., No. 1:24-cv-01189-JLT-EPG, 2025 WL 1419743 (E.D. Cal. May 16, 2025) (Magistrate Judge Erica P. Grosjean). Shortly after she was born, Calliope Pessano-Maldonado required emergency air ambulance transportation for medical treatment. In this ERISA action, the now two-year-old’s mother, Emily Pessano, sued Blue Cross of California to pay for the cost of that transportation. Luckily, the parties were able to reach a settlement wherein Blue Cross will pay the costs to the air ambulance company, REACH, plus Ms. Pessano’s attorneys’ fees and costs. Ms. Pessano therefore filed an unopposed petition for approval of minor’s compromise. The presiding district court judge referred this petition to the magistrate judge to prepare a report and recommendation. In this report and recommendation Magistrate Judge Erica P. Grosjean recommended the court grant Ms. Pessano’s petition. Upon review, and under the circumstances, Judge Grosjean concluded that the settlement is fair, reasonable, and adequate, and in Calliope’s best interests. “Notably, Plaintiffs’ complaint only sought coverage for Calliope’s air transportation costs, and under the settlement, Defendant will pay a sufficient amount to more than cover the amount that REACH currently seeks, which has been lowered from the original billed amount after negotiation with Plaintiffs’ counsel. Accordingly, Plaintiffs will receive everything that they could have hoped for as far as legal relief.” Judge Grosjean was thus satisfied that the settlement represents a just and favorable outcome because the family will not have to pay the air ambulance bill. Judge Grosjean therefore recommended the court approve the petition for approval of minor’s compromise and direct Blue Cross of California to pay the settlement amount.

Pleading Issues & Procedure

Third Circuit

Muhammad v. Shelton, No. 24-3178, __ F. App’x __, 2025 WL 1409475 (3d Cir. May 15, 2025) (Before Circuit Judges Restrepo, Freeman, and Nygaard). In late 2023, Lukunda Muhammad filed a pro se complaint naming the Living Trust of Lukunda Muhammad as the sole plaintiff alleging claims against several individuals and entities in connection with certain pension benefits he did not receive. The district court dismissed the complaint without prejudice, explaining to Mr. Muhammad that an entity cannot represent itself and that he needed to secure counsel. The district court warned that failing to do so would result in dismissal with prejudice. Mr. Muhammad did not heed the district court’s warning, and after more than six months had elapsed from the court’s initial order of dismissal, the court issued a final order dismissing the case with prejudice. Mr. Muhammad appealed. The Third Circuit summarily affirmed in this decision. The court of appeals stated that the “District Court did not abuse its discretion in dismissing Muhammad’s complaint with prejudice. It is well-settled that ‘artificial entities’ like corporations and trusts ‘may appear in the federal courts only through licensed counsel.’” Thus, the Third Circuit found that the lower court appropriately advised Mr. Muhammad that he needed to find an attorney to assume control of the litigation. Mr. Muhammad did not do so, therefore the appeals court held that the district court committed no error by dismissing the case with prejudice.

Provider Claims

Second Circuit

Guardian Flight LLC v. Aetna Life Ins. Co., No. 3:24-cv-00680-MPS, 2025 WL 1399145 (D. Conn. May 14, 2025) (Judge Michael P. Shea). Six out-of-network air ambulance companies brought this action against Aetna Life Insurance Company, Aetna Health and Life Insurance Company, and Cigna Health and Life Insurance Company to enforce Independent Dispute Resolution (“IDR”) determinations under the No Surprises Act. In addition, plaintiffs also allege violations under ERISA and the Connecticut Unfair Trade Practices Act. Defendants moved to dismiss plaintiffs’ action under Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). The court denied defendants’ motion, except with respect to plaintiffs’ claim for equitable relief under ERISA Section 502(a)(3). Beginning with the No Surprises Act, the court found that the statute creates a private cause of action to enforce IDR award payments as “[a]ny other interpretation would render IDR awards meaningless.” Next, the court discussed plaintiffs’ claims for benefits under ERISA Section 502(a)(1)(B). The court held that plaintiffs have constitutional Article III standing to pursue their claim under Section 502(a)(1)(B) as assignees, and also that they stated a plausible claim for wrongful denial of benefits under this provision. The court agreed with the air ambulance companies that the No Surprises Act is not “some separate or standalone obligation,” and that it does not “create an independent payment obligation untethered to ERISA or ERISA regulated health plans.” The court therefore denied the motion to dismiss the Section 502(a)(1)(B) claim. However, it did dismiss the equitable relief claim under Section 502(a)(3). The court determined that plaintiffs’ requested relief requiring defendants to comply with ERISA and the No Surprises Act by paying all future IDR awards within thirty days, was “in essence, a claim for monetary compensation” which “falls comfortably within the scope of § 502(a)(1)(B).” Accordingly, the court dismissed the claim for equitable relief under Section 502(a)(3). Finally, the court determined that plaintiffs stated a viable claim under Connecticut’s Unfair Trade Practices Act, and that this cause of action was neither preempted by the No Surprises Act nor by ERISA. Defendants argued that this claim related to ERISA plans because the ERISA plans were an essential part of the state law claim. But the court disagreed. The court stated that this claim did not derive from any particular rights or obligations established by any ERISA-governed plan, and that it would not interfere with the relationships among any core ERISA entities, or attempt to control their functions. As a result, with the exception of plaintiffs’ Section 502(a)(3) claim, the court denied defendants’ motion to dismiss their complaint.

Eighth Circuit

Keith Feder, M.D., Inc. v. U.S. Bancorp, No. 24-cv-4236 (LMP/SGE), 2025 WL 1371891 (D. Minn. May 12, 2025) (Judge Laura M. Provinzino). Plaintiff Kevin Feder, M.D., Inc. brought this action as a provider assignee to recover benefits due under the terms of a patient’s ERISA-governed health plan sponsored by defendant U.S. Bancorp. The claims at issue cover a range of medical services, including surgery, which Feder provided to the patient over a nearly three-year period. The U.S. Bank Medical and Wellness Plan paid just a fraction of the billed expenses for these services, and largely denied the claims. Feder sent numerous appeal letters to the claims administrator, United Healthcare Services, Inc., along with a copy of the assignment that Feder obtained from the patient which transferred the patient’s right to receive benefits from the plan to Feder. The assignment document sent to United during the appeals process told the insurance company that if the plan had an anti-assignment provision the plan should inform Feder. Neither U.S. Bancorp nor United Healthcare ever informed Feder of the plan’s anti-assignment provision. But the plan does contain such a provision. Therefore, U.S. Bancorp moved to dismiss plaintiff’s complaint, alleging the healthcare provider could not sue under ERISA Section 502(a)(1)(B) in light of the valid anti-assignment provision. Feder did not contest the existence of the plan’s prohibition on assignments, but asserted instead that U.S. Bancorp waived enforcement of the anti-assignment clause by failing to raise it during the claims appeal process, despite his express request it do so. Ruling on the enforceability of the anti-assignment clause, the court noted that federal courts have adopted different approaches to evaluating waiver in the context of anti-assignment clauses in ERISA health plans. Although the Eighth Circuit has not yet defined the contours of waiver with any specificity, it has suggested that a plan may waive an anti-assignment clause through its conduct. The court was willing to assume that the conduct alleged in the complaint substantively pleads waiver, just not against U.S. Bancorp. As U.S. Bancorp points out, the document containing the request to confirm the existence of an anti-assignment provision was sent to United, the claims administrator, not directly to U.S. Bancorp. “Because Feder did not send the assignment notice to U.S. Bancorp directly, it cannot show waiver based ‘on the actions of the party against whom waiver [is] sought’ – here, U.S. Bancorp.” The court added that the complaint currently contains no factual allegations demonstrating that United was U.S. Bancorp’s agent for the purposes of administering the provider’s claims or responding to its inquiries regarding the existence of the anti-assignment provision. Therefore, the court agreed with U.S. Bancorp that Feder fails to plead waiver based on U.S. Bancorp’s own actions. Accordingly, the court granted the motion to dismiss the complaint because Feder is not authorized to bring its claim for benefits under ERISA. However, the court granted Feder leave to amend its complaint as the court did not find the deficiencies it identified necessarily incurable. As a result, the complaint was dismissed without prejudice.

Statute of Limitations

Fourth Circuit

Messer v. Garrison Investment Grp. LP, No. 1:24-CV-00037, 2025 WL 1399215 (W.D. Va. May 14, 2025) (Judge James P. Jones). Plaintiffs are former employees of a manufacturing plant operated by Bristol Compressors International, LLC who won a class-action money judgment of many millions of dollars against Bristol Compressors for failure to give proper notice of the plant’s closing in violation of the WARN Act and for failure to validly eliminate a severance plan prior to their terminations in violation of ERISA. Because the plaintiffs have been unable to collect their damages awarded against Bristol Compressors, they now bring a lawsuit against Garrison Investment Group, LP, Bristol’s alleged parent company, and multiple other related companies and various individuals, based on alter ego or veil-piercing theories. Defendants moved for dismissal. Relying on Supreme Court precedent in Peacock v. Thomas holding that federal courts do not have “ancillary jurisdiction over new actions in which a federal judgment creditor seeks to impose liability for a money judgment on a person not otherwise liable for the judgment,” the court ruled that it was required to grant defendants’ motion. The court stressed that neither ERISA nor the WARN Act contain an independent cause of action to pierce the corporate veil and that there must be an underlying violation of the statutes to sustain subject matter jurisdiction. Plaintiffs argued that Peacock didn’t apply because the complaint includes ERISA violations and defendants have liability by refusing the pay the severance owed by declaring the plan was terminated when it was not. “The plaintiffs’ argument, in other words, appears to be that Garrison violated ERISA and Peacock was found to not have done so, so Peacock does not apply.” However, the court explained that the statute of limitations has run for any ERISA or WARN Act claim the plaintiffs may have against any of the named defendants. Under the WARN Act plaintiffs had two years to bring their claim, and because the plant closed in 2018, the court found that the statute of limitations has run. As for the ERISA claims, the court concluded that plaintiffs had actual knowledge of their claims on October 19, 2018, the date when they filed their first lawsuit. Even accommodating COVID-19 tolling, the court found the three-year limitations period has passed. Moreover, the court plainly stated that the liability of the named defendants in this action was not decided in the class action against Bristol Compressors. “Because the defendants here are ‘not already liable’ for the previous judgment, this court does not have the claimed subject-matter jurisdiction.” For the foregoing reasons, the court dismissed plaintiffs’ complaint without prejudice.

Venue

Fourth Circuit

International Painters & Allied Trades Industry Pension Fund v. Miller Painting Co., Inc., No. ELH-24-3441, 2025 WL 1382900 (D. Md. May 13, 2025) (Judge Ellen Lipton Hollander). The fiduciaries of two multi-employer funds, the Southern Painters Welfare Fund and the International Painters and Allied Trades Annuity Plan, banded together to bring this ERISA action against Miller Painting Co., Inc. seeking millions of dollars in unpaid contributions. Miller Painting moved to transfer venue from Maryland to the Southern District of Georgia. As a threshold issue, the court considered whether venue was proper in Maryland, plaintiffs’ chosen venue. The problem was that the two funds maintain their principal places of business in and are administered in two different places: Maryland and Tennessee. To deal with this fact, plaintiffs argued that the court should apply the pendent venue doctrine because the issues, claims, and law are all the same as to both funds. But the court did not agree. It concluded that ERISA does not carve out this exception advanced by plaintiffs. “In sum, venue in Maryland is proper as to the IUPAT Plaintiffs. But, nothing in the ERISA statute permits the SP Plaintiffs to lodge their claims in Maryland merely because the IUPAT Plaintiffs can properly assert venue in Maryland, and the claims of the SP Plaintiffs happen to involve the same defendant, the same documents, and the same audit.” Because of this holding, the next question was what to do about the claims for the two sets of plaintiffs. The court considered whether the interests of justice were better served by severing the case or transferring the entire case to a jurisdiction where there is proper venue as to all plaintiffs, the relief sought by defendant Miller. In the end the court chose the latter option. The court stated that “plaintiffs make a compelling argument for litigating this case in one action,” making severance unappealing given that it would result in the burden of two separate civil litigations a few hundred miles apart. On the other hand, the court liked the idea of transferring the case to the Southern District of Georgia, where Miller is incorporated and transacts business. Not only is the Southern District of Georgia less congested than the District of Maryland, but it is the one venue which is proper for the entirety of the case because it is where the defendant resides and where the alleged breach took place. As a result, the court was convinced that the interests of justice will be served by keeping the case intact and transferring the whole of it to defendants’ proposed venue. The court therefore granted Miller’s motion to move the case to the Southern District of Georgia.