The big news this week is not a decision, but the oral argument before the Supreme Court in Cunningham v. Cornell University, an excessive fee case brought by a class of 28,000 participants in Cornell’s 403(b) employee retirement plan. The case made its way to the Supreme Court on a seemingly narrow question: “Whether a plaintiff can state a claim by alleging that a plan fiduciary engaged in a transaction constituting a furnishing of goods, services, or facilities between the plan and a party in interest, as proscribed by § 1106(a)(1)(C), or whether a plaintiff must plead and prove additional elements and facts not contained in § 1106(a)(1)(C)’s text.”
What this really boils down to is whether plaintiffs alleging a prohibited transaction with a plan’s service provider under Section 406(a)(1)(C) have the additional burden to plead and prove that “no more than reasonable compensation” was paid for the services under ERISA Section 408(b)(2), one of ERISA’s prohibited transaction exemptions. Below, the Second Circuit ruled that plaintiffs have such a burden. (Your ERISA Watch covered that decision as the case of the week in our November 29, 2023 edition.) But the argument seemed to have been about quite a bit more than that.
The case was well argued by three seasoned appellate and Supreme Court practitioners: (1) Professor Xiao Wang of the University of Virginia School of Law for petitioners (the plaintiffs); (2) Yaira Dubin, an Assistant to the Solicitor General for the federal government as amicus curiae supporting the petitioners; and (3) Nicole Saharsky, a former Assistant Solicitor General and now a partner at Mayer Brown for the respondents.
In broad strokes, Professor Wang and the government argued that the 408(b)(2) exemption, like the other exemptions in ERISA Section 408, and the hundreds of exemptions issued by the Department of Labor, are not elements of a claim but are affirmative defenses that must be proven by defendants. This conclusion, they said, is supported by the text and structure of the statute, by precedent, and by the fact that the exemptions, unlike the categorical prohibitions, are based on information that, in most instances, plaintiffs “cannot know and do not know prior to discovery.” Many of the Justices seemed at least somewhat persuaded by the first argument (including Justice Alito, who said that the Court could write a “nice short opinion” on that basis).
Ms. Saharsky argued that the Section 408 exemptions (or at least this particular exemption) are not affirmative defenses, but elements of the claim. Although she proposed a textual hook for this position – pointing out that Section 406(a) begins, “Except as provided in Section 408” – the Justices (other than perhaps Justice Sotomayor) mostly didn’t seem to be biting on that particular angle. Ms. Saharsky garnered far more sympathy, including from Justice Kagan, with her contention that “petitioner’s position is intolerable” and that “it doesn’t make any sense to read this statute as allowing a cause of action to go forward with no allegation of wrongdoing” (ignoring that this is exactly what Congress seems to have been doing in enacting categorical prohibitions that went beyond the arms-length standard of the trust law). She stressed that so much of the conduct prohibited in 406(a), especially contracting with a service provider for recordkeeping or other services, is “innocuous,” “innocent,” or even “beneficial” (ignoring that often, or at least sometimes, it is not).
I won’t make a prediction about how this case will be resolved or do a blow-by-blow of the questioning and answers, as others have helpfully done already. Instead, I thought I would focus on a couple of big themes, and some omissions, that struck me as surprising or interesting.
First, many of the Justices seemed quite concerned with whether adopting the petitioners’ position would open the floodgates to a lot of baseless and expensive litigation. More broadly, many of the Justices seemed comfortable with the view that, because litigation is expensive, it ought to be a bit hard, or at least not easy, to plead a case. And surprisingly, I didn’t hear as much push-back to this notion as I might have expected. Excessive fees are also expensive to workers and retirees, and Congress appears to have made the call in favor of plan participants at least in this instance. Indeed, adopting respondents’ view, and affirming the Second Circuit’s decision, would essentially collapse prohibited transactions into fiduciary breaches, when clearly Congress had something else and more protective in mind in categorically prohibiting a wide range of activities with related parties.
Finally, although the sole issue on which the court granted certiorari, and on which courts of appeals have diverged, is a fairly narrow question concerning burdens of pleading and proof, a lot of time was spent on broader issues of pleading under Supreme Court precedent as set forth in the Twombly and Iqbal cases, on what plaintiffs might have to plead to establish Article III standing, and on possible ways to sanction plaintiffs’ lawyers who bring unsupported suits or to quickly dismiss such suits. I certainly hope the Court does not go down any of these paths, but again I have no predictions. Whatever the outcome, we’ll know by June and Your ERISA Watch will cover it.
Below is a summary of this past week’s notable ERISA decisions by subject matter and jurisdiction.
Attorneys’ Fees
Sixth Circuit
Williamson v. Life Ins. Co. of N. Am., No. 18-cv-00100-CRS, 2025 WL 283226 (W.D. Ky. Jan. 22, 2025) (Judge Charles R. Simpson III). In 2013, Larry D. Henning was declared missing at sea. Sadly, to this day, after more than eleven years since his disappearance, Mr. Henning remains missing. Not only has this been understandably distressing to the family, but it has also caused problems for them in their pursuit of accidental death benefits. The family long ago pressured the U.S. Coast Guard to issue an official letter of presumed death, but the Coast Guard declined, stating it lacked the authority to do so. Without a document officially declaring Mr. Henning presumably deceased, the family struggled to convince defendant Life Insurance Company of North America (“LINA”) to pay the death benefits. “In 2022, following years of litigation, the parties agreed to the entry of an order declaring that Henning had died in 2013.” The court then entered an order to that effect, the Estate finally obtained a death certificate, and LINA paid the $200,000 worth of accidental death benefits to the family. Before the court here was the Estate’s motion for an award of prejudgment interest and for attorneys’ fees. It argued that both awards were justified under ERISA because LINA wrongly delayed payment of the benefits. Specifically, the Estate asserts that LINA improperly conditioned the processing of the claim and payment of benefits on the receipt of the death certificate and failed to independently investigate Mr. Henning’s disappearance and that these actions caused undue delay and resulted in years of unnecessary litigation. The Estate “attributes wrongful delay to LINA’s breaching several terms of the policy.” However, the court was not convinced. “The record evidence before the Court does not support granting summary judgment to the Estate on any of these grounds. Thus, it does not support granting an award of prejudgment interest to the Estate. Further, because the Estate’s claim for attorneys’ fees under ERISA requires a showing of success on its claim for prejudgment interest, such an award is likewise inappropriate.” In particular, the court did not feel that LINA acted arbitrarily or capriciously by requiring a death certificate or failing to further investigate circumstantial evidence surrounding the death. To the contrary, the court found that LINA’s decisions were substantially reasonable as “LINA knew only that Henning had disappeared at sea after a boating accident and that both government agencies tasked with investigating Henning’s disappearance classified him as ‘missing.’” Moreover, the court stressed that the policy placed the burden of providing satisfactory proof of death on the insured, and concluded that LINA was therefore under no obligation to investigate. As a result, the court was unwilling to award plaintiff any prejudgment interest. Additionally, the court was not persuaded that the Estate achieved any success on the merits to justify an award of attorneys’ fees under Section 502(g)(1). The court was unconvinced that LINA failed to comply with ERISA or that the Estate was denied the kind of review to which it is entitled under the statute. Accordingly, the Estate’s motion for attorneys’ fees was denied too. Before the decision concluded the court took a moment to provide notice to the Estate that it was considering awarding summary judgment in favor of LINA on all of the Estate’s claims, and then provided the parties 21 days for simultaneous supplemental briefing on these issues, if desired. After almost a dozen years since the loss of their loved one, one imagines that this decision was not the satisfying resolution or ultimate result Mr. Henning’s family hoped it would be.
Breach of Fiduciary Duty
Third Circuit
Lewandowski v. Johnson, No. 24-671 (ZNQ) (RLS), 2025 WL 288230 (D.N.J. Jan. 24, 2025) (Judge Zahid N. Quraishi). On behalf of herself and a putative class of similarly situated plan participants, plaintiff Ann Lewandowski filed a lawsuit against the fiduciaries of the Johnson and Johnson Salaried Medical Plan and Salaried Retiree Medical Plan. Ms. Lewandowski takes aim at the plans’ prescription drug benefits program and alleges that its terms were such that no prudent fiduciary would have agreed to them. By way of example, Ms. Lewandowski cites the costs of both specialty and generic medications which are in some instances “two-hundred-and-fifty times higher than the price available to any individual who just walks into a pharmacy and pays out-of-pocket.” Because of the high payments, premiums, deductibles, coinsurance, and copays for prescription drugs, Ms. Lewandowski accuses the fiduciaries of not acting in the best interest of the participants and beneficiaries. In her complaint plaintiff asserts three counts, a claim for breach of fiduciary duties under Section 502(a)(2), breach of fiduciary duties under Section 502(a)(3), and failure to provide documents upon request in violation of Section1132(c). Johnson and Johnson and the Pension & Benefits Committee of Johnson and Johnson moved to dismiss the action. Defendants’ motion was granted in part and denied in part by the court in this decision. The court began its discussion by first addressing the threshold jurisdictional issue of whether Ms. Lewandowski has standing to proceed with her claims of fiduciary breach. It found she did not. The court adopted defendants’ position that Ms. Lewandowski lacked standing because she failed to allege that she was improperly denied benefits under the plan, simply claiming instead that the drug prices were too expensive in the form of both plan-wide overcharges and in personal out-of-pocket costs she incurred when she filled prescriptions for drugs she was prescribed. It viewed Ms. Lewandowski’s alleged injury in the form of higher premiums as “at best” “speculative and hypothetical.” The court stated that it could not plausibly infer that the premiums Ms. Lewandowski paid were, as she alleges, equivalent to 102% of the combined employer and employee contributions for individuals similarly situated in other healthcare plans. It found this accusation, without any references to defendants’ specific conduct, too conclusory to meet the requirements of Article III standing. As for the out-of-pocket costs for the medication, the court concluded that Ms. Lewandowski lacked standing to assert this form of financial harm “because it is not redressable by an order from this Court.” Specifically, the court referred to defendants’ factual challenge to her standing that she reached her prescription drug cap for each year she asserts in the complaint, meaning, in “straightforward terms, a favorable decision would not be able to compensate Plaintiff for the money she already paid. Even if Defendants were to reimburse Plaintiff for her out-of-pocket costs on a given drug – that is, the higher amount of money she spent as a result of Defendants’ breaches – that money would be owed to her insurance carrier to reimburse it for its expenditures on other drugs that same year. In short, there is nothing the Court can do to redress Plaintiff’s alleged injury.” Based on these holdings, the court granted defendants’ motion to dismiss the two fiduciary breach causes of action for lack of standing. Dismissal of these claims was, however, without prejudice. The court then considered whether to dismiss the claim for failure to provide documents upon written request. This aspect of defendants’ motion was denied, as the court concluded that the complaint plausibly alleges defendants failed to provide documents within thirty days after Ms. Lewandowski requested them in writing. Thus, the motion to dismiss was granted as to counts one and two and denied as to count three.
Fifth Circuit
Kamboj v. Shell U.S., Inc., No. Civil Action H-24-3458, 2025 WL 254113 (S.D. Tex. Jan. 21, 2025) (Judge Lee H. Rosenthal). In August of 2018, husband and wife Summant and Shireen Kamboj were in a serious car crash. Mr. Kamboj had to have surgery as a result of his injuries and needed to stay in a hospital for a period of time. The Shell USA, Inc. Health and Wellbeing Plan, which covered Mr. Kamboj, approved payments to reimburse the hospital, the internist, the surgeon, and the surgical assistant. Most of the payments made sense to the family, but the payment to the surgical assistant was 20 times more than the payment to the surgeon. This confused and worried the Kambojs, who were about to pursue a personal injury lawsuit, as the plan contained a subrogation provision, and the Kambojs were concerned that the large payment to the surgical assistant would decrease their recovery from the third-party lawsuit. Mr. Kamboj sent a letter to Shell and the Plan inquiring why the assistant had been paid so much more than the hospital and other healthcare providers. Neither Shell nor the Plan responded in writing, despite multiple requests from the family. On September 17, 2024 the Kambojs filed this ERISA lawsuit against Shell and the Plan asserting two causes of action, a claim for breach of fiduciary duty under Section 502(a)(3) and a claim seeking statutory penalties for the alleged failure to supply the documents they requested under 29 U.S.C. § 1132(c). Defendants moved to dismiss the complaint for failure to state a claim. In this order the court granted in part and denied in part the motion to dismiss. As a preliminary matter, the court dismissed the claims against the Plan. The court agreed with defendants that the Plan could not be a fiduciary of itself nor its own administrator and that neither cause of action could be sustained as asserted against the Plan. Further, because the Plan could not be a proper defendant to either of the Kambojs’ claims, the court determined that amendment would be futile and so dismissed the claims against the Plan with prejudice. Next, the court examined the breach of fiduciary duty claim asserted against Shell. Although somewhat unusual, as the claim alleges the Plan overpaid a medical provider instead of underpaying plaintiffs, the court nevertheless agreed with plaintiffs that the relief they seek under their fiduciary breach claim “can plausibly be characterized as ‘appropriate equitable relief’ available under 29 U.S.C. § 1132(a)(3).” The court rejected Shell’s arguments that plaintiffs could not recover individual relief from a fiduciary breach claim, stating that the “Supreme Court, the Fifth Circuit, and district courts in this circuit have allowed breach of fiduciary duty claims under 29 U.S.C. § 1132(a)(3) that seek equitable relief in the form of monetary compensation inuring only to the benefit of the individual plaintiff.” Additionally, the court found that it could infer that Shell overpaid the surgical assistant based on the “significant discrepancy between the amount paid to the surgical assistant and the amounts paid to the other medical providers.” The court would not permit Shell to shift responsibility for the alleged overpayment onto the Plan’s claims administration, UnitedHealthcare, as the Plan reserves to Shell the discretion to control, manage, and operate it and to interpret provisions. Nor was the court persuaded that plaintiffs could not maintain their claim based on Shell’s argument that the requested relief would diminish the Plan’s resources. “Adopting that logic,” the court said, “would lead to the dismissal of any claim in which a beneficiary seeks compensatory monetary damages for fiduciary breaches.” The court therefore denied Shell’s motion to dismiss the breach of fiduciary duty claim against it. In the last section of the decision the court took a look at plaintiff’s document penalty claim. The court permitted plaintiffs to maintain this cause of action insofar as it they fall within the scope of documents plan administrators are required to provide upon request under 29 U.S.C. § 1024(b)(4), but dismissed, with prejudice, the claim as it relates to documents falling more broadly under the Department of Labor’s claims procedure regulations. Thus, as described above, the motion to dismiss was granted in part and denied in part.
Class Actions
Eighth Circuit
Randall v. Greatbanc Tr. Co., No. 22-cv-2354 (LMP/DJF), 2025 WL 260160 (D. Minn. Jan. 22, 2025) (Judge Laura M. Provinzino). Plaintiffs Aryne Randall, Scott Kuhn, and Peter Morrissey are former employees of Wells Fargo & Co. and participants in the company’s 401(k)/Employee Stock Ownership Plan (“ESOP”). Plaintiffs allege that the fiduciaries of the plan have breached their duties to its participants by overvaluing preferred stock when obtaining convertible Wells Fargo stock for the ESOP and then using the dividend income from the preferred stock to meet Wells Fargo’s employer matching contributions obligations, inuring the plan assets to the benefit of the employer, not the plan. Plaintiffs assert that these decisions and actions involving the stock transactions constitute prohibited transactions and fiduciary breaches under ERISA. Plaintiffs previously survived defendants’ motions to dismiss their action. They now move, unopposed, for class certification and appointment of class representatives and class counsel. The proposed class is defined as all participants in the plan, during the relevant six year period, who held any portion of their plan accounts in the Wells Fargo ESOP Fund, excluding defendants and their immediate family members. In this decision the court granted plaintiffs’ motions, stating, “[a] close review of the materials submitted in support of the unopposed motion and other relevant materials in the case file shows that this class satisfies the prerequisites of Fed.R.Civ.P. 23(a) and 23(b)(1), making certification appropriate.” To begin, the court found the four requirements of Rule 23(a) – numerosity, commonality, typicality, and adequacy of representation – met. The court expressed it was “self-evident” that joining the more than 300,000 putative class members to this action would be extremely impracticable, especially given plaintiffs’ geographic dispersion across the country. The court was also convinced that plaintiffs satisfied commonality because if they win it will be to the benefit of the plan and everyone in it. Similarly, plaintiffs’ claims brought on behalf of the entire plan are typical of those of the putative class members because they are all united by the common actions of the plan’s fiduciaries. “Accordingly, a declaration that Defendants breached their fiduciary duties or engaged in prohibited transactions ‘would affect all class members equally,’ even if there are some factual variations among class members with respect to their specific injuries and damages.” The court was also secure that the named plaintiffs are adequate class representatives, sufficiently similar to all members of the class and devoid of any conflicts of interest with putative class members. As for plaintiffs’ counsel at Feinberg Jackson, Worthman & Wasow LLP, Nichols Kaster, PLLP, and Baily & Glasser LLP, the court found the attorneys at these respective firms to be experienced, competent ERISA practitioners, who have vigorously engaged in litigating on their clients’ behalf. Turning to its analysis of certification under Rule 23(b)(1), the court concluded that separate lawsuits by various individual plan participants would run the risk of establishing incompatible standards of conduct for defendants and that the plan-wide relief plaintiffs are seeking ignorantly impacts all the putative class members who participate in the plan such that individual actions would substantially impair or impede their ability to protect their collective interests. The court therefore concluded that plaintiffs’ claims are properly resolved in a class action and that certification of the class was appropriate. Finally, referring to its previously stated positions regarding the adequacy of representation, the court quickly appointed the named plaintiffs class representatives and their attorneys class counsel.
Tenth Circuit
Harrison v. Envision Mgmt. Holding, No. 21-cv-00304-CNS-MDB, 2025 WL 295009 (D. Colo. Jan. 24, 2025) (Judge Charlotte N. Sweeney). This case concerns the Envision Management Holding Employee Stock Ownership Plan (“ESOP”) and the terms of a stock transaction involving the plan which took place in 2016 and 2017. Two former employees of Envision who have vested Envision stock in their ESOP accounts have sued the plan’s fiduciaries and others involved with the transaction and have asserted seven causes of action against them under ERISA. Plaintiffs moved to certify a class of approximately 1,000 similarly situated plan participants and beneficiaries under Federal Rule of Civil Procedure 23. The court granted plaintiffs’ motion and certified the proposed class in this order. Looking at Rule 23(a) first, the court concluded that its requirements of numerosity, commonality, typicality, and adequacy of representation were all satisfied here. First, the court stated that plaintiffs comfortably met the numerosity requirement given the size of the class, and further determined that the class is ascertainable. Second, the court agreed with plaintiffs that there are numerous questions of fact common to everyone in the proposed class, “including whether the ESOP paid more than fair market value for company stock; whether each Defendant is a fiduciary, and if so, whether each Defendant breached his or her fiduciary duties owed to the Plan; and whether the Plan suffered losses from these breaches.” Third, the court determined that the named plaintiffs have claims which are typical of the claims of absent class members because they are all based on the same underlying facts and allegations. Fourth, the court was satisfied that the plaintiffs and their counsel satisfy the requirement they be adequate representatives of the class. The court was not persuaded by defendants that any conflict exists between plaintiffs and their counsel and the other members of the class or that any plaintiff would benefit at the expense of the other class members. The court said it was confident that plaintiffs and their counsel will vigorously prosecute this action on behalf of the class. With the requirements of Rule 23(a) met, the court segued to certification under Rule 23(b). The court referred to the “trust-like nature of ERISA cases,” which makes them generally appropriate for plan-wide class actions as individual adjudications would run the risk of creating incompatible standards of conduct for the trustee and because the interests of the members of the plan are “indivisible.” Thus, the court was confident that certification under either subsection 23(b)(1)(A) or 23(b)(1)(B) was wholly appropriate. Following this analysis, the court concluded that plaintiffs satisfied the requirements of both parts of Rule 23 and that certification of the class was appropriate. Therefore, the court granted plaintiffs’ motion and certified the class.
Disability Benefit Claims
Sixth Circuit
Liggett v. Principal Fin. Grp., No. 22-cv-11183, 2025 WL 275119 (E.D. Mich. Jan. 23, 2025) (Judge Sean F. Cox). In 1975 plaintiff Anthony Liggett was diagnosed with a traumatic brain injury for which he underwent surgery. Both the brain injury and the surgery to treat it led to complications, and Mr. Liggett developed migraines. Years later, while working as a paralegal at a law firm, Mr. Liggett began complaining of worsening migraine symptoms following a COVID-19 infection. Suddenly, he could not think clearly, he developed problems reaching and grasping, his pain worsened, and he was off-balance. Mr. Liggett applied for short-term disability benefits as a result. The administrator of the plan, Principal Life Insurance Company, denied the claim. Before exhausting his administrative appeals process, and before Principal Life had made any decision on his long-term disability benefit claim, Mr. Liggett filed a civil lawsuit. The court stayed the action and required Mr. Liggett to complete the administrative appeals process. Principal Life ultimately upheld the denial of the short-term disability claim, and denied the long-term disability benefit claim as well. Mr. Liggett never administratively appealed his long-term disability claim, and abandoned it in litigation after the court lifted the stay. Following the close of discovery in this action, Mr. Liggett moved for summary judgment on his short-term disability claim, while Principal Life moved for summary judgment on both the short-term and long-term disability claims. As Mr. Liggett effectively abandoned his long-term disability claim, the court entered summary judgment in favor of Principal Life on that claim. But the same was not true for the short-term disability benefit claim. “Liggett’s STD claim is a different story,” the court said, because the administrative record showed that Principal Life’s decision was not the result of a principled and deliberate reasoning process. According to the court there were several flaws with Principal Life’s decision making. First, the policy required Mr. Liggett to show that he couldn’t work for eight consecutive days (the elimination period) after he stopped working, not “eight consecutive months.” But Principal Life nevertheless concluded that Mr. Liggett did not qualify for any benefits because “he wasn’t disabled from February 5 through September 5, 2022.” Also problematic to the court was Principal Life’s failure to address the treating provider’s findings “without adequate explanation.” Principal Life simply refused to credit this doctor’s reliable evidence and opinions, and “instead credited the opinion of a non-treating physician who never examined Liggett and did not seriously engage with Liggett’s treating physician’s contrary conclusions.” Moreover, Principal Life’s hired doctor arrived at conclusions that were directly contracted by the medical records and failed to properly acknowledge Mr. Liggett’s subjective complaints of pain. “And Principal Life was apparently conflicted when it did these things.” As a result, the court concluded that Principal Life acted arbitrarily and capriciously when it denied Mr. Liggett’s short-term disability benefit claim and that Mr. Liggett was entitled to judgment on this claim as a matter of law. However, the court did not award benefits. Instead, it concluded that remand to the administrator was the proper remedy here as the abuse of discretion was the flaw in Principal Life’s decision-making process.
Ninth Circuit
Berg v. The Lincoln Nat’l Life Ins. Co., No. 2:24-CV-00097-SAB, 2025 WL 252481 (E.D. Wash. Jan. 21, 2025) (Judge Stanley A. Bastian). As the result of a medical condition, plaintiff Barbara Berg suffered nerve damage in her dominant right hand which caused numbness and pain affecting her ability to grip, lift, hold objects, and perform other activities. Ms. Berg stopped working at her position at Walmart and submitted a claim to The Lincoln National Life Insurance Company for disability benefits under the Walmart disability plan. Although her claim for benefits was approved, the present action stems from Lincoln’s later decision to terminate benefits. Notably, during this same time period the Social Security Administration approved Ms. Berg’s claim for disability benefits, in part because the vocational expert consulted by the administrative law judge attested that there were no jobs in the national economy that she could perform with her given functional limitations. Lincoln’s termination letter did not discuss the Social Security Administration’s decision, even though it was clearly aware of Ms. Berg’s award because it demanded retroactive repayment of double recovery of benefits, which Ms. Berg repaid in full. On appeal, Lincoln stated that it was aware of the Social Security Administration’s favorable ruling, but simply argued that “an award of Social Security Benefits is not determinative of entitlement under the specific terms and conditions of the Walmart Inc.’s Group Disability Income Policy.” Doctors, including Lincoln’s hired reviewing physicians, all acknowledged that Ms. Berg had limitations as a result of her hand condition. However, the reviewing doctors concluded that these limitations could be accommodated, and that Ms. Berg could perform certain sedentary occupations. No one believed that Ms. Berg was embellishing her descriptions of her pain, which she consistently reported as being intense and frequently disabling in its own right. Nevertheless, Lincoln maintained that the pain was not in and of itself disabling. After exhausting the administrative appeals process to no avail, Ms. Berg commenced this civil action. On December 12, 2024, the court heard argument on Ms. Berg’s motion for declaratory judgment on her claim for disability benefits under Section 502(a). The court reviewed the administrative record de novo and concluded that Ms. Berg is disabled and cannot perform any occupation as defined by the Walmart disability policy, qualifying her for long-term disability benefits. Early in the decision, the court stressed that ERISA was enacted to promote the interests of workers enrolled in employee benefit plans and to protect their contractually defined benefits. Courts in the Ninth Circuit have been repeated reminded by the appeals court “that ERISA is a remedial legislation that should be construed liberally to protect participants in employee benefit plans.” With these principles in mind, the court considered the particulars of Ms. Berg’s case. Starting off, the court stated that it gave full credit to Ms. Berg’s treating physician and his opinions and expertise. In addition, the court stated that it agreed with the administrative law judge who declared Ms. Berg fully disabled under the Social Security Act and gave his findings significant credit. To the court, it was significant that Ms. Berg qualified for Social Security benefits at the same time Lincoln was evaluating her condition and when it ultimately terminated her benefits under its policy. In contrast, the court rejected the opinions set forth by one of Lincoln’s hired doctors. Despite having access to the Social Security decision, this doctor did not refer to its analysis of Ms. Berg’s medical file. Further, the court was confused as to why the doctor “also states no restrictions and limitations were recommended by treating providers,” when Ms. Berg’s doctor “noted restrictions on Plaintiff’s use of her right hand and how many hours she could be on her feet during a workday.” The court was also quick to point out that none of the doctors or experts hired by Lincoln examined Ms. Berg in person. The court therefore found Lincoln’s conclusion that Ms. Berg no longer qualified for continued benefits under the policy “unsupported by the record.” Additionally, the court criticized Lincoln’s denial, which it found to be a violation of ERISA’s claims procedures, as it did not provide adequate notice, specific reasons why her claim was denied, and it failed to discuss “its basis for disagreeing with views presented by Plaintiff, the views of the medical professionals such as Dr. Bacon, and the SSA decision by Judge Rolph as required by 29 U.S.C. §§ 1133(1) and 2560.503-1(g)(1).” Based on these findings, the court concluded that Ms. Berg is disabled from any occupation as defined by the Walmart plan and thus qualified for continued benefits. Consequently, the court granted Ms. Berg’s motion for declaratory judgment and directed her to file a motion for attorneys’ fees and costs.
Eleventh Circuit
Allen v. First UNUM Life Ins. Co., No. 23-11039, __ F. App’x __, 2025 WL 289490 (11th Cir. Jan. 24, 2025) (Before Circuit Judges Rosenbaum, Lagoa, and Wilson). In a sparse per curiam decision the Eleventh Circuit considered and rejected plaintiff-appellant Dr. Marcus Allen’s appeal of an unfavorable long-term disability decision. The Eleventh Circuit disagreed with Dr. Allen that the lower court erred in its denial of his motion for summary judgment on his breach of contract claim, in its grant of First Unum Life Insurance Company’s motion for summary judgment on his bifurcated ERISA Section 502(a)(1)(B) claim, or in its denial of his motions for judgment on his claim under his individual disability income insurance policies. Nor did the Eleventh Circuit agree with Dr. Allen that the district court had abused its discretion when it admitted evidence at trial of an eye examination from before the termination of benefits, admitted evidence that Dr. Allen intended to step away from his job, excluded evidence from the Social Security Administration’s favorable disability decision, or when it admitted evidence from the treating physician as a lay opinion witness. Providing no insight into its thinking, the Eleventh Circuit stated only, “we find no reversible error and, therefore, affirm.”
ERISA Preemption
Second Circuit
Fox v. Sound Fed. Credit Union, No. 3:24-cv-1622 (KAD), 2025 WL 252846 (D. Conn. Jan. 21, 2025) (Judge Kari A. Dooley). The former president and CEO of Sound Federal Credit Union, plaintiff Edward Fox, sued his former employer and its upper management for allegedly breaching their employment contract with him, wrongfully terminating him, and failing to pay his wages and benefits as required by law. Mr. Fox commenced his action in Connecticut state court and alleged eight state law causes of action broadly relating to these complaints. Defendants removed the action from state court, alleging that Mr. Fox’s claims derive from an employee welfare benefit plan governed by ERISA and that ERISA completely preempts several of his causes of action. Mr. Fox disagreed, and subsequently moved to remand his action. Mr. Fox principally argued that the court lacks federal question jurisdiction over the state law causes of action because they are not substantially dependent upon the terms of the ERISA plan at issue but rather stem from his employer’s breach of a separate promise that references the plan benefits. The court agreed with Mr. Fox that defendants’ asserted liability rests not upon the terms of the ERISA plan but upon an independent legal duty deriving from the terms of the employment contract between the parties. Thus, the court agreed with Mr. Fox that the plan was “not at the heart of this matter, or even the basis upon which [he] sought relief.” This was particularly evident as Mr. Fox has separately submitted a formal claim for benefits under the plan pursuant to its administrative claims and reviews process, supporting the conclusion that Mr. Fox isn’t seeking to enforce the plan in his state law case. Accordingly, the court found that the “benefits purportedly due under the Split Dollar Agreement are germane only to the question of damages should Plaintiff prevail on his breach of contract claim,” and thus “the claim is not completely preempted.” Absent federal subject matter jurisdiction, the court concluded that the case must be remanded back to state court and so granted Mr. Fox’s motion to do so.
Medical Benefit Claims
Second Circuit
Zoia v. United Health Grp., No. 24-CV-2190 (VEC), 2025 WL 278820 (S.D.N.Y. Jan. 23, 2025) (Judge Valerie Caproni). In a complaint asserting a single claim under ERISA, plaintiff Adam Zoia alleges that UnitedHealth Group Inc., United Healthcare Services, Inc., United Healthcare, Inc., and United Healthcare Insurance Company wrongfully denied a claim he submitted for reimbursement of over $600,000 for air ambulance transport from Boise, Idaho to NYU Langone Medical Center following a serious skiing accident. The United defendants moved to dismiss the complaint for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). The court granted defendants’ motion in this decision. The court agreed with defendants that “the unambiguous, uncontested terms of the Plan are outcome determinative” because the plan states in no uncertain terms that air ambulance services are only covered in medical emergencies to transport the insured “to the nearest hospital where Emergency Health Care Services can be performed.” The court agreed with United that there was no question Mr. Zoia “could have been transferred to a closer hospital, namely UCSF Medical Center in San Francisco, California.” And although the plan clearly grants discretionary authority to its administrator, the court cautiously added that even under a de novo standard of review Mr. Zoia could not recover the benefits at issue. Thus, the court held that there was simply no getting around the fact that the plan limits emergency air ambulance transportation travel to the nearest hospital at which the needed medical care can be provided, and NYU was not the closest Level I Trauma Center capable of providing the required care. Accordingly, the court agreed with the United defendants that Mr. Zoia failed to plausibly state a claim upon which relief could be granted and thus dismissed his complaint. Finally, because the court was adamant that amendment could not cure this deficiency, the dismissal was with prejudice.
Pension Benefit Claims
Eleventh Circuit
McKinney v. Principal Fin. Servs., No. 5:23-cv-01578-HNJ, 2025 WL 283210 (N.D. Ala. Jan. 23, 2025) (Magistrate Judge Herman N. Johnson, Jr.). This lawsuit, brought by the Estate of Dorothy Carolyn Smith Davidson, seeks to rectify an error made in the payment of 401(k) plan assets made by defendant Principal Financial Services. There doesn’t seem to be any dispute that Principal Life improperly distributed the funds from the Beneficiary Account of Mrs. Davidson’s husband, Julian Davidson. Principal itself recognizes that the benefits it paid to Mrs. Davidson’s nieces was not in accordance with the plan’s provision explaining the next of kin beneficiary, in this case the Estate. The confusion came about because Mrs. Davidson had two 401(k) accounts, one of her own as an employee of Davidson Technologies, Inc., and one as the beneficiary of her husband’s account (“the Beneficiary Account”). Mrs. Davidson’s personal account designated her nieces as her beneficiaries. However, the Beneficiary Account did not. Thus, the payment of funds from the Beneficiary Account to the nieces was in error. Despite acknowledging that it improperly distributed the proceeds from the Beneficiary Account to the nieces, Principal has failed to correct its mistake and pay the amount owed to the Estate. Accordingly, in this litigation the Estate seeks those funds, plus declaratory judgment, interest, and attorneys’ fees and costs. Plaintiff asserts two causes of action: a claim for benefits owed under the plan asserted under Section 502(a)(1)(B) against both Principal and Davidson Technologies, and a claim for breach of fiduciary duty under Section 502(a)(3). Defendant Principal moved to dismiss both claims against it. Its motion was granted in part and denied in part in this order. The court clarified that the inquiry turned on two factors – (1) whether Principal was a de facto plan administrator and (2) whether it functioned as a fiduciary. The first question was addressed first. Eleventh Circuit precedent on the topic is a little tricky. Essentially, the Circuit recognizes that an entity can be a de facto administrator even when it is not designated as the plan administrator when it has sufficient decisional control over the claim process, but a third party administrator cannot function as a de facto plan administrator if and when the actual plan administrator retains the final authority to determine eligibility for benefits. Such was the case here, as “the record clearly portrays [Davidson Technologies] retains authority on benefits claims.” Thus, the court concluded that the complaint failed to sufficiently allege that Principal operated as de facto plan administrator when it issued the payments from Mrs. Davidson’s Beneficiary Account, and therefore the court agreed with Principal that this warranted dismissal of the Section 502(a)(1)(B) claim against it. Nevertheless, the Estate retains this cause of action against the named plan administrator, Davidson Technologies. It also maintained its fiduciary breach claim against Principal, as the court was convinced that the complaint alleges Principal functioned as a fiduciary when it handled plan assets, exercised discretion, and when it refused to pay the Beneficiary Account funds to the Estate. Not only did the court decline to dismiss the Section 502(a)(3) cause of action, but it also rejected Principal’s categorization of the Estate’s request for declaratory relief as a separate cause of action. Rather, the court understood the pleadings as raising declaratory judgment and equitable surcharge as types of relief meaning to redress the alleged fiduciary breach. Finally, the court lifted the stay on discovery.
Pleading Issues & Procedure
Fifth Circuit
Kelly v. UMR, Inc., No. CIVIL 3:23-cv-02676-K, 2025 WL 268107 (N.D. Tex. Jan. 22, 2025) (Judge Ed Kinkeade). Plaintiff Brianne Kelly, individually and as next friend of a minor, sued UMR, Inc. and United Healthcare Services, Inc. in state court alleging state law causes of action. Defendants removed the action pursuant to federal question jurisdiction, and the court previously denied a motion by Mr. Kelly to remand his action, finding that his state law claim for negligent misrepresentation was completely preempted by ERISA as it necessarily depends upon ERISA and was essentially a claim for ERISA estoppel. After the court issued that decision, defendants moved for judgment on the pleadings. Upon careful review and viewed in the light most favorable to Mr. Kelly, the court found that the state court complaint states a valid claim for relief under ERISA and therefore denied defendants’ motion without “commenting on whether Plaintiff’s claim will survive a determination on the merits.”
Provider Claims
Second Circuit
Da Silva Plastic & Reconstructive Surgery, P.C. v. Empire Healthchoice HMO, Inc., No. 22-CV-07121 (NCM) (JMW), 2025 WL 240917 (E.D.N.Y. Jan. 17, 2025) (Judge Natasha C. Merle). The plaintiff in this action is an emergency plastic surgery practice that provides medically necessary reconstructive surgical procedures to hospital patients. The practice is out-of-network with defendant Empire Healthchoice HMO, Inc. d/b/a Empire Blue Cross Blue Shield, and alleges that Empire Blue Cross was required to reimburse at usual and customary and maximum allowable rates for the plans it insures and administers under three categories of plan provisions. First, plaintiff alleges it is entitled to reimbursements for medically necessary services provided to patients who are covered by Empire plans with out-of-network benefits. Second, the provider asserts entitlement from plans that do not provide out-of-network benefits except when those out-of-network providers are rendering emergency care. In the third group of plans, which like the second group excludes out-of-network coverage, plaintiff claims entitlement through an exception which covers out-of-network providers where no in-network physician can provide the services the insured patient requires. In its action, plaintiff alleges claims under state law and ERISA and seeks over $10 million in reimbursement for over 1,000 medical claims for services it provided to 366 patients. The size of Da Silva’s action was in many ways its downfall. Defendant’s Federal Rule of Civil Procedure 12(b)(6) motion to dismiss the complaint was granted wholly with regard to the ERISA claims in this order. The court identified three categories of shortcomings for the ERISA claims: (1) a failure to adequately plead exhaustion with respect to each claim; (2) a failure to tie the claims for reimbursement to specific plan terms; and (3) the applicability of express anti-assignment clauses for a large subset of claims. To begin, the court rejected the provider’s use of blanket language covering all the claims at issue when speaking about the exhaustion of administrative remedies. “Plaintiff’s attempt to describe general similarities between the more than 1,000 failed appeals in this case does not cure its pleading deficiencies. Broad allegations that plaintiff ‘followed a similar pattern of attempted negotiations and appeals in connection with the services provided to all [patients]’ are ‘certainly insufficient to withstand a motion to dismiss.’” This same problem of the scale doomed the provider’s allegations trying to tie its claims for reimbursement to specific plan terms. At issue in this litigation were the terms of over 140 different welfare benefit plans. The court wrote that, “[u]nfortunately, and perhaps inevitably, for plaintiff these generalizations are too conclusory to plausibly state a claim for any one alleged ERISA violation.” Finally, the court agreed with defendant that the unambiguous anti-assignment provisions within a subset of the plans caused a standing problem. In light of these provisions the court agreed with defendant that the provider was not a valid assignee. In sum, the court concluded that despite the vastness of the claims at issue and relief sought, the complaint was simply too light on substantive facts to properly or plausibly allege entitlement to reimbursement for the claims at issue under ERISA. The court therefore granted the motion to dismiss the ERISA causes of action, without prejudice, and declined to exercise supplemental jurisdiction over the remaining state law claims.