As expected, it has been a slow start to 2025 with only a handful of ERISA-related decisions in the federal courts. Nonetheless, these rulings touched on some unusual and interesting topics. Read on to learn how Illinois’s Genetic Information Privacy Act interacts with ERISA, whether a claimant can reopen a case after an insurer denies a claim after a court-ordered remand, and whether a claimant is entitled to discovery if the administrator’s denial refers to facts not present in the administrative record.

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

Discovery

Tenth Circuit

Bessinger v. Cimarex Energy Co., No. 23-cv-00452-SH, 2025 WL 26148 (N.D. Okla. Jan. 3, 2025) (Magistrate Judge Susan E. Huntsman). Plaintiff Jay Bessinger alleges in this action that he was wrongfully denied benefits under a change of control severance plan offered by his former employer, defendant Cimarex Energy Co. Because Cimarex is both the plan administrator and the payor of plan benefits, Mr. Bessinger contends that its inherent conflict of interest affected its decision-making and thus has moved for extra-record discovery. Additionally, Mr. Bessinger contends that the administrative record is incomplete because Cimarex’s denial referenced facts not found in the current record. He therefore also moved for production of documents and interrogatories to complete the administrative record. In response to Mr. Bessinger’s discovery motion, Cimarex voluntarily produced documents in response to two of his requests, and voluntarily responded to several of his interrogatories. Beyond these responses, however, Cimarex opposed the motion and argued that no further discovery is warranted either to complete the record or explore its conflict of interest. In this decision the court agreed with the employer and denied Mr. Bessinger’s motion regarding the remaining discovery requests. Insofar as the administrative record may be incomplete, the court held that the proper reaction to this would be a court-ordered remand to the plan administrator for further consideration, rather than an “attempt to reassemble the administrative record” through court-ordered discovery. “This is because ‘ERISA’s interests are not served by federal court review of an incomplete administrative record,’ where procedural irregularities result in an incomplete record, ‘the appropriate remedy is remand.’” The court was further unwilling to open up discovery into Cimarex’s conflict of interest as it found the remaining requests in Mr. Bessinger’s motions to be overly broad, going far beyond what is necessary for the court to make an informed decision regarding how to weigh the seriousness of the conflict of interest in its eventual abuse of discretion review. Finally, to the extent that Cimarex failed to provide Mr. Bessinger with a full and fair review of his claim, the court stated that it will address this alleged failure in its arbitrary and capricious review and that it does not need further information to assess whether the denial of benefits meets that standard. Accordingly, the court concluded that none of Mr. Bessinger’s assertions support the need for additional discovery beyond that voluntarily provided by Cimarex. As a result, the court denied Mr. Bessinger’s motion.

ERISA Preemption

Third Circuit

Essex Surgical, LLC v. Aetna Life Ins. Co., No. 23-03286-WJM-AME, 2024 WL 5264892 (D.N.J. Dec. 31, 2024) (Magistrate Judge André M. Espinosa). Four healthcare providers who are out-of-network with Aetna Life Insurance Company, Aetna Health Insurance Company, and Aetna Health Inc. sued the three Aetna entities in New Jersey state court seeking to hold them to their alleged oral promises of usual and customary rate reimbursement for healthcare services provided to insured patients. Plaintiffs asserted claims for breach of implied contract, breach of the covenant of good faith and fair dealing, quantum meruit, promissory estoppel, negligent misrepresentation, negligence, and tortious interference with economic advantage. The Aetna defendants responded to the lawsuit by removing it to federal court pursuant to ERISA preemption. In addition, the removing defendants further argued that diversity jurisdiction exists because of the fraudulent joinder of non-diverse defendants, namely the parent company Aetna Health Inc. The providers disagreed with these positions, and moved to remand their action back to state court. In this decision the court sided with the plaintiffs and granted their motion to remand. It found that defendants could not demonstrate the state law claims are completely preempted by ERISA, as neither prong of the two-part Davila test were met. One basic problem the court identified was the plans’ unambiguous anti-assignment provisions. Given these clauses, the court concluded it would be impossible for the healthcare providers to bring claims under ERISA Section 502(a). Furthermore, the court stated that the complaint was not seeking a right to recover payments pursuant to the terms of the plan. Rather, the court agreed with the providers that they assert claims based only on alleged oral pre-authorization agreements with the defendants into which they entered as out-of-network third-party providers. “Therefore, Plaintiffs’ claims cannot be construed as colorable claims for benefits under ERISA” and any legal duties that the Aetna defendants might owe to them relate to the alleged oral pre-authorization contracts and are therefore independent. The court thus agreed with plaintiffs that their claims could arise regardless of the existence of any of the ERISA plans, and that the state court will not need to consider any ERISA plan to interpret the alleged agreements between the parties. Finally, the court disagreed with defendants regarding diversity jurisdiction and fraudulent joinder for the purposes of establishing federal jurisdiction. Accordingly, the court granted plaintiffs’ motion to remand, and the case will proceed in state court. 

Sixth Circuit

Ennis-White v. Nationwide Mut. Ins. Co., No. 2:24-cv-1236, 2024 WL 5244464 (S.D. Ohio Dec. 30, 2024) (Judge Sarah D. Morrison). Plaintiff Rusty Ennis-White and his husband Jonathon Ennis-White, proceeding pro se, filed this lawsuit in Nevada state court alleging state law causes of action against Rusty’s former employer, Nationwide Mutual Insurance Company. Because much of the complaint pertained to Rusty’s participation in Nationwide’s ERISA-governed disability plan, his claim for disability benefits under the plan, Nationwide’s handling of his claim, and the plan’s eventual denial of benefits, Nationwide removed the action to the federal court system believing many of the state law causes of action were preempted by ERISA. The district court in Nevada agreed that the claims were preempted because they related to the ERISA-governed plan, and then transferred the case to the Southern District of Ohio pursuant to the policy’s forum selection clause. This district court however remained uncertain. Given its uncertainty, the court ordered the parties to submit supplemental briefing on the issue of ERISA preemption. It expressed concerns that the Nevada federal court improperly conflated express and complete preemption by adopting Nationwide’s position that the claims were preempted because they “relate to” Rusty’s benefits under the plan. However, in this decision the court quieted its doubts and concluded that removal to the federal court system was proper because five of the plaintiffs’ eight causes of action were indeed completely preempted by the federal statute. Specifically, the court found that the claims of intentional and negligent infliction of emotional distress, negligent supervision, disability discrimination, and retaliation were based either entirely or in part on allegations that depend on the plan, and that these claims can only be asserted as causes of action under ERISA, as either claims for benefits, retaliation and discrimination under Section 510, or for violations of ERISA’s claims handling procedures resulting in a denial of a full and fair review. Finally secure of its jurisdiction over the matter, the court also took this opportunity to exercise supplemental jurisdiction over the non-preempted state law claims. As for the causes of action it found to be preempted, the court directed plaintiffs to file an amended complaint reasserting these claims as causes of action under ERISA.

Seventh Circuit

Harris-Morrison v. Sabert Corp., No. 1:23-CV-16120, 2024 WL 5264702 (N.D. Ill. Dec. 31, 2024) (Judge Edmond E. Chang). Plaintiff Tamiko Harris-Morrison filed this putative class action complaint in Illinois state court alleging that her former employer, Sabert Corporation, violated Illinois’s Genetic Information Privacy Act by requiring its employees to submit to physical examinations in which they were forced to disclose private genetic information and family medical histories as a condition of employment. Sabert removed the action to federal court based on federal-question jurisdiction, arguing that Ms. Harrison-Morrison’s claims are preempted by ERISA. Ms. Harris-Morrison conceded that removal was proper, but only because the court has diversity jurisdiction under the Class Action Fairness Act as the class has more than 100 class members, the parties are diverse, and there is possibly $15 million in damages. Sabert, insisting on ERISA preemption, moved to dismiss the complaint under Rule 12(b)(6), or alternatively, moved for a more definite statement under Rule 12(e). The court began its order by first agreeing with Ms. Harris-Morrison that it has diversity jurisdiction over the matter, and that removal was therefore proper. It then turned to its discussion of Sabert’s motions. First, the court held that ERISA preemption is not grounds for dismissal. The court focused on the notable lack of mention of any ERISA plan in the complaint, and while it acknowledged that a plaintiff cannot avoid preemption by simply omitting critical details, it nevertheless found that the connection to any ERISA welfare plan is currently unclear and far too tenuous to permit an inference that ERISA completely preempts the claims asserted under the state genetic privacy law. The court disagreed with Sabert that the physical examination “necessarily relates to an employee benefit plan.” The court was especially hesitant to adopt Sabert’s arguments regarding complete preemption under ERISA. And while it found conflict preemption less of a stretch, it nevertheless concluded that Sabert’s conflict preemption arguments also fail at this stage for basically the same reason: “it is not obvious from the Complaint that an ERISA plan is involved. The Complaint never mentions an ERISA plan, let alone its terms or administration. Without further discovery, the Court can neither ‘interpret or apply the terms’ of any ERISA plan, nor analyze the connection between the alleged GIPA violation and ERISA plan administration.” However, the court was careful to state that should discovery reveal that an ERISA plan is involved, Sabert will have the opportunity to reassert a renewed preemption argument later in the proceedings, and thus denied the motion to dismiss without prejudice to a potential summary judgment motion based on ERISA preemption. The court further permitted the parties to conduct limited discovery on whether an ERISA plan was the basis for the collection of genetic information and on what role the employer had in collecting the genetic information of Ms. Harris-Morrison. Finally, the court flatly rejected Sabert’s motion for a more definite statement. “Sabert’s argument, in essence, is that the Complaint lacks the factual detail for it to make an ERISA preemption argument.” This use of Rule 12(e), the court stated, is inappropriate, as Rule 12(e) is only intended to strike unintelligible pleadings and clear up confusion, “not to replace traditional discovery.”

Pleading Issues & Procedure

Tenth Circuit

M.Z. v. Blue Cross Blue Shield of Ill., No. 1:20-cv-00184-RJS, 2025 WL 18700 (D. Utah Jan. 2, 2025) (Judge Robert J. Shelby). In December of 2020, mother and son plaintiffs M.Z. and N.H. filed this action against Blue Cross Blue Shield of Illinois challenging its denial of benefit claims for mental health treatment N.H. received at two residential treatment centers. In April of 2023, the court entered judgment finding in favor of each party in part, and remanding the claims relating to one of the two residential treatment facilities back to Blue Cross for reconsideration. On remand, the claims administrator upheld the denial of benefits for N.H.’s care at the facility. In response, the family moved to reopen their case to challenge the denial. Plaintiffs further sought leave to file an amended complaint. In this very succinct order the court granted plaintiffs’ motions, finding it appropriate to reopen the case to evaluate the most recent denial and necessary for plaintiffs to amend their complaint “as the facts of the case have changed significantly following the court-ordered remand.”

Cockerill v. Corteva, Inc., No. CV 21-3966, 2024 WL 5159892 (E.D. Pa. Dec. 18, 2024) (Judge Michael M. Baylson)

We at Your ERISA Watch had intended to take last week and this week off for the holidays, but good news is always worth sharing, especially for the New Year. In that spirit, we are reporting this week on one case for our first issue of 2025: a win for two classes of DuPont workers and retirees represented by Kantor & Kantor attorneys Susan L. Meter and myself, Elizabeth Hopkins, along with attorneys at Edward Stone Law and Feinberg, Jackson, Worthman & Wasow LLP.

This action was filed in 2021 following the merger of two chemical behemoths, E.I. DuPont de Nemours & Company (“Historical DuPont”) and Dow Chemical Company. In 2019, these two companies split into three: DuPont de Nemours Inc., Dow Inc., and Corteva.

When the dust settled, the workers who remained at the company that continued to operate under the DuPont name lost their ability to obtain early and optional retirement benefits even though they continued to work in their same jobs at the same workplaces. This was because Historical DuPont, the company they formerly worked for, had been placed, along with the pension plan, as a subsidiary of Corteva. However, the workers were not told this and thus they did not understand how these complex corporate transactions affected their pension benefits.

The plaintiffs asserted multiple claims under ERISA. In Counts I and II, they sought clarification under ERISA Section 502(a)(1)(B) of their rights to early and optional retirement benefits under the terms of the plan. In Count IV, they alleged that defendants breached their fiduciary duties in failing to fully and clearly communicate the effect of the spin-off on their benefits. In Count V, they alleged that by “splitting employees from Historical DuPont,” defendants acted to prevent them from attaining benefits in violation of ERISA Section 510. And in Count VI, plaintiffs alleged that defendants “retroactively applied an amendment to the Optional Retirement Benefits” in violation of ERISA’s anti-cutback provision, Section 205.

The district court previously denied motions to dismiss and certified two classes encompassing workers both over and under the age of 50 who had at least fifteen years of employment at the time of the 2019 spin-off.

In this order, the court issued a lengthy liability decision following a six-day bench trial in the summer and fall of 2024. Although we started off saying this was a win for the plaintiffs, the decision began in defendants’ favor as the court ruled for them on Count I. The court concluded that, although the plan language was ambiguous as to whether employees who were under the age of 50 when they lost their jobs at Historical DuPont due to the spin-off remained eligible for early retirement benefits once they reached the age of 50, defendants’ interpretation that the under-50 workers were not eligible was reasonable.

Plaintiffs fared better on Count II, their claim for optional retirement benefits for the over-50 class. Here the court found the plan language unambiguous in providing benefits for workers in the optional retirement class who lost their employment with Historical DuPont for reasons other than cause. Likewise, the court found that the defendants’ contrary interpretation of the plan language as inapplicable in the case of a corporate spin-off controverted the plain plan language and was therefore arbitrary and capricious. Indeed, the court stated that even if the language of the optional retirement provision were ambiguous, the court would find defendants’ interpretation arbitrary and capricious given their financial conflicts of interest coupled with numerous procedural irregularities in interpreting the plan to preclude benefits for the optional retirement class.  

The court also ruled in plaintiffs’ favor on Count IV, their breach of fiduciary duty claim, finding that “Defendants did not inform Class Members how the spin-off would affect their benefits in a manner that a reasonable employee could understand,” and therefore defendants breached their fiduciary duties under ERISA” to both classes. The court ticked through the pre-spin-off communications on early retirement benefits and found that a “reasonable Plan participant would not understand the significance or implications of the Early Retirement communications or SPD on their Plan benefits.”

The court found only “one clear communication on Early Retirement – the PowerPoint Presentations” contained as links in an email sent to all employees. The court reasoned, however, that “a reasonable employee could not have been expected to review the PowerPoint” because “in the context of the SPD and other communications before the spin-off, Defendants’ March 2019 email, which contained links to the PowerPoint Presentations, was woefully insufficient to notify a reasonable Plan participant of the spin-off’s effect on Early Retirement Benefits.” Indeed, in the court’s view, “[f]ar from a disclosure that hundreds of employees were losing eligibility to receive Early Retirement Benefits, the March 2019 email that linked the PowerPoints reads as an anodyne notice advertising a perk for the employees who could begin their Early Retirement Benefit at the spin-off.” Moreover, the email directed “employees with pension questions to either the PowerPoint Presentations or the SPD,” but the SPD itself “did not explain the effect of the spinoff on Early Retirement.”

With respect to optional retirement benefits, the court noted that “Defendants never even informed Plan participants in any communications before spin-off that the Optional Retirement Benefit would no longer be available due to the spin-off.” The court thus concluded that “[t]he complete omission of any explanation of how the spin-off affected the Optional Retirement Benefit, coupled with repeated reassurances to employees that their employment and benefits were not changing, also constituted a breach of fiduciary duty owed to the Optional Retirement Class.”

Nor was the court persuaded by defendants’ claim that plaintiffs themselves were to blame for failing to make further inquiries about their benefits, an argument that the court rejected as an impermissible “attempt to shift the burden of disclosure to Plaintiffs.” Finally, the court noted that “Defendants’ attempt to terminate employment for one benefit but not another is not only inequitable, but leaves this Court with the firm impression that, between November 8, 2018, through the spin-off, Defendants shirked their ERISA fiduciary duties to Plaintiffs.” For all of these reasons, the court found in favor of plaintiffs on Count IV.

The court found in defendants’ favor on Count V, plaintiffs’ Section 510 claim, which posited that the placement of the plan with Corteva was intended to prevent plaintiffs’ attainment of early and optional retirement benefits. Although the court held that “Plaintiffs presented sufficient evidence of a prima facie ERISA § 510 violation,” the court ultimately “was persuaded that Defendants chose Corteva as the Plan sponsor for legitimate business reasons, and that splitting the Plan was not feasible or necessary.”

Rounding out the decision, the court found in plaintiffs’ favor on their anti-cutback claim. This claim turned on plaintiffs’ assertion that “Defendants amended the Plan through interpretation of the spin-off to cut back Plaintiffs’ Optional Retirement Benefits in violation of ERISA § 204(g).” Relying on Third Circuit case law that broadly reads the term “amend” in Section 204(g), the court concluded that “Administrative Committee’s interpretation of the spin-off vis-à-vis the Optional Retirement Benefit – which was arbitrary and capricious – had the effect of amending the Plan and cutting back Optional Retirement Class Members’ benefits.”

The court left the determination of remedies for the final stage of the bifurcated proceedings. In a subsequent order, the court appointed Pennsylvania attorney Richard L. Bazelon to serve as a special master for these purposes and asked Mr. Bazelon to report back to the court with a recommendation by March 28, 2025. The court also stated its intention to issue its final decision by April 15, 2025.

Happy New Year everyone. I am certainly celebrating.

Lubin v. Starbucks Corp., No. 21-11215, __ F.4th __, 2024 WL 5113125 (11th Cir. Dec. 16, 2024) (Before Circuit Judges Lagoa, Brasher, and Tjoflat)

Your ERISA Watch is celebrating the holidays, so this week’s edition is limited to the case of the week, which comes out of the Eleventh Circuit. As our loyal readers know, arbitration is a hot topic these days. Most arbitration cases have focused on whether and when a plan participant can be forced into arbitration. But what about plaintiffs who are merely beneficiaries under a plan, not participants? Do the same rules apply to them?

This week the Eleventh Circuit gave some answers to these questions in this case involving plaintiff Raphyr Lubin. Lubin is the husband of a former Starbucks employee and had health insurance coverage under Starbucks’ Welfare Benefits Plan through his wife’s employment. He and Ariel Torres, a former Starbucks employee, brought this putative class action against Starbucks in the Middle District of Florida, alleging that Starbucks sent them deficient health insurance notices under ERISA, as amended by the Consolidated Omnibus Budget Reconciliation Act (COBRA).

Lubin’s wife and Torres had both signed employment agreements that required them to arbitrate certain disputes, and thus Starbucks filed a motion to compel arbitration. Torres agreed to go to arbitration, but Lubin refused. Lubin contended that while his wife may have signed an employment agreement containing an arbitration provision, he did not sign it and thus it was unenforceable against him.

The district court agreed with Lubin and denied Starbucks’ motion. The court held that Lubin was not a party to the employment agreement and was not suing to enforce that agreement. Instead, he was suing to enforce his own statutory rights.

Starbucks was not pleased and appealed. However, the Eleventh Circuit affirmed in this published opinion, holding that “Lubin never signed or otherwise agreed to the arbitration agreement with Starbucks. Because he was not a party to the agreement, the Court cannot compel him to adhere to the terms of the agreement…he seeks to vindicates his rights, not his wife’s.”

Starbucks raised a number of arguments in opposition which the Eleventh Circuit serially dispatched. At the outset, Starbucks contended the federal courts should not even be ruling on the issue because “the arbitration agreement’s delegation clause grants exclusive jurisdiction to an arbitrator to determine whether Lubin must arbitrate.”

However, the Eleventh Circuit ruled that Lubin could not be bound by the delegation clause because he did not sign the agreement containing the clause and thus was not a party to it. Furthermore, the court noted that the agreement contained an exclusion clause, which provided that actions to “enforce” the agreement or “compel arbitration” are excluded from arbitration. This language was at odds with the agreement’s delegation clause, thus creating an ambiguity that had to be resolved in Lubin’s favor.

Starbucks also asserted three arguments under Florida law for why Lubin should be compelled to arbitrate. First, Starbucks argued that under equitable estoppel principles Lubin should not be able to simultaneously claim the benefits of his wife’s employment agreement (i.e., health insurance and COBRA protections), while disclaiming the burdens imposed by that agreement (i.e., arbitration). Lubin responded that this argument was irrelevant because he was not suing Starbucks based on the agreement, and the Eleventh Circuit agreed: “Lubin is not claiming the benefits of the agreement while simultaneously attempting to avoid its burdens… Rather, Lubin sues based on Starbucks’s failure to fulfill its notice duties under COBRA.”

Second, Starbucks asserted the third-party beneficiary doctrine. Starbucks argued that if Lubin, as a third party to the employment agreement, wanted the benefits of that agreement, he must be bound by the provisions in that agreement, including the arbitration provision. However, the Eleventh Circuit explained that the third-party beneficiary doctrine does not generally allow contracting parties to bind a non-contracting party simply by conferring a benefit on that party. In any event, the court noted once again that Lubin was not suing to enforce any contractual duty in the employment agreement and thus the doctrine was inapplicable. Instead, Lubin was suing “under federal law, alleging that Starbucks violated statutory duties that it owed him under COBRA.” Thus, “Lubin’s wife and Starbucks cannot bind Lubin to arbitrate merely by conferring spousal health coverage on him.”

Third, and finally, Starbucks contended that Lubin should be compelled to arbitrate because his claim was “derivative” of his wife’s rights. The Eleventh Circuit quickly dispensed with this argument: “Lubin’s claim is not derivative of his wife’s claim. Lubin’s claim is premised on an independent statutory right…the mere fact that Lubin was a beneficiary of his wife’s health plan does not mean that he sues to enforce his wife’s rights under her employment agreement[.]”

In short, the Eleventh Circuit concluded that because Lubin was not a party to his wife’s employment agreement, and because he had his own independent rights conferred on him by another source, i.e. federal law in the form of ERISA and COBRA, the agreement’s arbitration clause was unenforceable against him. As a result, his claims will proceed in federal court, even though his co-plaintiff’s identical claims ended up in arbitration.

The ruling was not unanimous, however. Judge Tjoflat penned a concurrence in which he agreed that Lubin’s claim “is not the product of any bargained-for exchange with Starbucks” and thus “Starbucks cannot compel him to arbitrate under an agreement that is not his own.”

However, Judge Tjofat “would not speculate on how the law would apply under different circumstances.” As a result, he did not join the majority’s discussion of the delegation clause or the third-party beneficiary doctrine. According to Judge Tjoflat, much of this discussion was “unnecessary to the resolution of this dispute.” Instead, “it suffices to hold that Lubin cannot be bound by an arbitration agreement he did not sign, particularly when he sues to enforce a statutory right rather than a benefit of the contract. I would leave other questions for a later, more appropriate dispute.”

And thus ends another year of ERISA jurisprudence. All of us at Your ERISA Watch hope you have a happy holiday season and a rewarding 2025.