Arnold v. Paredes, No. 3:23-CV-00545, __ F. Supp. 3d __, 2024 WL 356751 (M.D. Tenn. Jan. 31, 2024) (Judge Waverly D. Crenshaw, Jr.)

In an effort to prevent benefit plan participants from bringing class actions, or attempting to seek plan-wide relief, as permitted by ERISA under 29 U.S.C. § 1132(a)(2), administrators have increasingly inserted provisions into their plans to thwart them. Often these efforts combine a prohibition on bringing class actions, or a requirement that beneficiaries seek individual relief only, with a provision requiring participants to arbitrate their claims.

The federal courts have increasingly looked askance at these strategies. In the past couple of years, the Third, Seventh, and Tenth Circuit Courts of Appeal have all ruled that benefit plans cannot compel a participant to arbitrate if the arbitration provision prohibits the participant from seeking collective relief on behalf of the plan. These courts ruled that such provisions violate the “effective vindication” doctrine, which holds that when a contractual provision prevents the effective vindication of federal statutory rights, it cannot be enforced. Because Section 1132(a)(2) expressly allows participants to seek plan-wide relief, plans cannot force them into arbitrations where such relief is not permitted.

This week’s notable decision, a published ruling from the Middle District of Tennessee, takes another look at the effective vindication doctrine. However, this time there was no arbitration provision in the mix. Would the result be the same?

The case is a putative class action by employees of Churchill Holdings, Inc. contending that ERISA violations occurred when the Churchill Employee Stock Ownership Plan purchased stock from Churchill’s president and CEO in 2020. Plaintiffs sued the CEO, other corporate officers, and the trustees of the plan, contending that the plan “grossly overpaid” for the stock and that the company improperly used plan dividends “for corporate purposes and not for the benefit of the Plan.” Defendants responded by filing two motions to dismiss.

Defendants first argued that two of the three named plaintiffs signed severance agreements barring their claims. Relying on a recent Sixth Circuit decision, Hawkins v. Cintas, the court ruled that the plaintiffs’ claims were derivative, i.e., brought on behalf of the plan and seeking relief for the plan. As a result, because the claims at issue belonged to the plan, the plaintiffs “did not have the power to individually waive claims owned by the Plan in their separation agreements.” Defendants argued that Hawkins did not apply because that case concerned an arbitration agreement, not a release of claims, but the court stated that defendants “offer no argument…explaining why Hawkins’ reasoning – that § 502(a)(2) claims belong to the Plan and not individual plaintiffs suing on its behalf – should not equally apply to releases of claims.” In short, because the claims at issue never belonged to the plaintiffs in the first place, they could not waive them in their severance agreements.

Defendants’ second argument, that the plan contained a class action waiver, fared no better. Plaintiffs invoked the effective vindication doctrine in opposing this argument, and also argued that the waiver was an unlawful exculpatory provision barred by ERISA § 410(a) (“any provision…which purports to relieve a fiduciary from responsibility or liability for any responsibility, obligation, or duty under this part shall be void as against public policy”).

The court agreed with both of plaintiffs’ arguments. Defendants contended, as with its severance agreement argument, that the cases cited by plaintiffs did not apply because they involved an arbitration provision. The court admitted that the class action waiver in this case did not appear in an arbitration provision, and in fact, the plan had no arbitration provision at all. The court also conceded that class action waivers, by themselves, are not per se violations of the effective vindication doctrine. However, “What distinguishes the class action waiver here…is the prohibition on seeking plan-wide relief. ERISA explicitly allows plaintiffs to seek plan-wide relief… Because the class action waiver in this case cannot be squared with that statutory remedy, it is barred by the effective vindication doctrine.”

The court further ruled that the waiver was unlawful under ERISA’s exculpatory provision, which prohibits plan provisions that “diminish the statutory obligations of a fiduciary.” The court noted that courts have upheld some provisions banning class actions under Section 410(a), but those decisions did “not prevent individual plaintiffs from pursuing statutory remedies; they simply prevent plaintiffs from aggregating their claims with similarly situated individuals.” In this case, however, plaintiffs were not seeking individual relief. They sought equitable relief, including reformation or rescission of the plan and removal of the plan trustees. Thus, “By forbidding claimants from seeking all but individual relief, the Plan bars several types of relief that ERISA guarantees. While every individual claimant could bring his or her own separate action seeking individual relief, none of these individuals would be able to seek injunctive relief. Therefore, the Court agrees with Plaintiffs that the portion of the class waiver provision that proscribes plan-wide relief violates ERISA § 410(a).”

Having decided these threshold issues, the court turned to defendants’ Rule 12(b)(6) arguments regarding the merits of plaintiffs’ claims. The court ruled that (a) the third-party advisor for the 2020 transaction was a fiduciary trustee of the plan; (b) plaintiffs failed to allege that the trustee defendants engaged in self-dealing, and thus did not properly plead that they breached the duty of loyalty; (c) plaintiffs sufficiently alleged a deficient process in the evaluation of the 2020 transaction; (d) plaintiffs plausibly alleged that the Churchill defendants breached their duty of loyalty by misusing the plan’s annual dividend statements; (e) plaintiffs plausibly alleged that the Churchill defendants failed to monitor the plan trustees; (f) plaintiffs plausibly alleged that the CEO “knowingly participated” in a transaction prohibited by ERISA; and (g) plaintiffs properly pled that they were entitled to equitable relief from the CEO under ERISA in the form of disgorgement.

In short, the court largely rejected defendants’ arguments, including most notably their contentions regarding the effective vindication doctrine, and the case will proceed.

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

Disability Benefit Claims

Sixth Circuit

McEachin v. Reliance Standard Life Ins. Co., No. 2:21-CV-12819-TGB-EAS, 2024 WL 356989 (E.D. Mich. Jan. 26, 2024) (Judge Terrence G. Berg). Plaintiff Annette McEachin seeks benefits under an ERISA-governed long-term disability benefit plan. In March of 2023, the court partly granted McEachin relief, ruling that while she was no longer entitled to benefits for her physical disabilities, she had not exhausted her 24-month limit on benefits for mental conditions. (Your ERISA Watch covered this decision in its March 29, 2023 edition.) The court thus ordered Reliance to pay McEachin benefits until the 24-month period is exhausted, so long as she remains disabled because of mental impairment during that time. In response, Reliance filed a motion to amend the judgment and McEachin filed a motion for attorney’s fees, both of which were decided in this order. In its motion Reliance argued that the court misread the plan when it “delayed application” of the 24-month limit and allowed it to begin after McEachin’s physical disability ended. The court rejected this argument, finding that Reliance’s cases were distinguishable and noting that Reliance itself had determined during McEachin’s claim that her psychiatric symptoms were not disabling while it was paying benefits for her physical disability. Thus, she had not exhausted the 24-month mental illness benefit. As for McEachin’s attorney’s fees motion, the court granted it in its entirety because the parties “agree that the attorney fees and costs as proposed by Plaintiff are reasonable[.]” The court found that McEachin had achieved “some success on the merits” and satisfied the Sixth Circuit’s King factors, and thus an award was appropriate. The court ruled that the requested $275 per hour was reasonable for counsel Donald Busta, for 89.2 hours of work, which resulted in an award of $24,530. (After receiving this order, Reliance filed a notice of appeal, so this case is not over yet. Of course, we will let you know if and when the Sixth Circuit weighs in.)

Eighth Circuit

Pattee v. Hartford Life & Accident Ins. Co., No. 23-CV-2-CJW-KEM, 2024 WL 329528 (N.D. Iowa Jan. 29, 2024) (Judge C.J. Williams). Plaintiff Todd Pattee was a truck driver for Twin City Concrete Materials who was forced to stop working due to heart disease. In 2014 he submitted a benefit claim under Twin City’s employee long-term disability benefit plan, which was insured by defendant Hartford. Hartford initially approved Pattee’s claim, but terminated his benefits in 2019, contending that he no longer met the definition of disability. Pattee sued, and the parties filed cross-motions for judgment. Plaintiff contended that Hartford had a conflict of interest, that its decision denying his appeal was late, and that he was not given the right to review and respond to Hartford’s appeal deliberations as required under ERISA regulations. The court agreed that Hartford had a conflict of interest, but gave it little weight because any bias from that conflict was not evident in the record. The court also agreed that Hartford’s denial was late, but assigned this little weight as well. Hartford’s delay was not “nefarious”; it was only because Pattee’s appeal “simply slipped through the proverbial administrative cracks.” The court considered Pattee’s third argument to be more serious. The court agreed with Pattee that the 2018 version of ERISA’s claim procedure regulations applied, and thus Hartford had an obligation to provide its updated reports to Pattee for review and comment before denying his appeal. Hartford did not do so and thus Pattee did not receive a “full and fair review.” Because Pattee was not able to respond, the court considered the administrative record “incomplete” and thus “the Court cannot make a finding regarding whether defendant’s decision was arbitrary and capricious.” The court did indicate that “it is likely that defendant’s decision to terminate plaintiff’s benefits was not unreasonable,” given the evidence in Hartford’s favor, but because Pattee did not receive a full and fair review, the court chose to remand the case to Hartford for further proceedings. The court held Pattee’s request for attorney’s fees in abeyance because it had “not yet determined the merits of the dispute.”

Discovery

Ninth Circuit

Rampton v. Anthem Blue Cross Life & Health Ins. Co., No. 23-CV-03499-RFL-RMI, 2024 WL 332889 (N.D. Cal. Jan. 29, 2024) (Magistrate Judge Robert M. Illman). This is an action for ERISA-governed life insurance benefits by plaintiff Cheryl Rampton after the death of her husband, Audie Roldan. Defendant Anthem paid $25,000 in basic benefits, but denied Rampton’s claim for $300,000 in voluntary benefits, contending that Roldan did not provide the “evidence of insurability” which was required in order to obtain voluntary coverage. Rampton filed suit. During litigation, Anthem produced an administrative record which included redactions based on Anthem’s invocation of the attorney work product doctrine. Rampton contended that these redactions were improper under ERISA’s “fiduciary exception” and filed a discovery motion. In response, Anthem contended that the fiduciary exception only applied to attorney-client privileged documents, not attorney work product documents. The magistrate judge found this argument “disagreeable,” ruling that there was “no legitimate reason to cabin the fiduciary exception in the manner urged by Defendant.” Anthem also argued that it was not a fiduciary because it was not named as such in the plan and had “no control, direction, authority, obligations or any responsibility whatsoever over management or administration” of the plan. The court rejected this argument as well, noting that Anthem had the final authority to approve or deny claims under the plan: “It is difficult to understand how Defendant can simultaneously claim to merely be a detached outside service provider with no discretion or responsibility over plan management…while also conceding that it was interpreting and applying ‘the rules determining [Mr. Roldan’s] eligibility for benefits[.]’” However, although the court ruled in Rampton’s favor on these issues, this did not mean that she had an “all-access pass” to Anthem’s documents. The court stated that it could not conclude based on Anthem’s privilege log whether the redacted documents related to benefit eligibility, in which case they would be discoverable under the fiduciary exception, or whether they related to potential civil or criminal consequences of Anthem’s actions, in which case they would remain protected. The court thus granted Rampton’s motion to the extent the documents related to benefit eligibility. If Anthem contended otherwise, it was ordered to revise its privilege log with more detail so that its claims could be better assessed by Rampton and potentially the court.

ERISA Preemption

First Circuit

Prime Healthcare Servs. – Landmark, LLC v. Cigna Health & Life Ins. Co., No. 1:23-CV-00131-MSM-PAS, 2024 WL 361368 (D.R.I. Jan. 31, 2024) (Judge Mary S. McElroy). Plaintiff Landmark is a hospital in Woonsocket, Rhode Island that operates an emergency department. It contends in this action that it “provided emergency medical care to thousands of patients insured by Cigna healthcare plans, to the cost of millions of dollars,” that it did not have a provider agreement with Cigna setting specific rates, and that Cigna was required to reimburse it but “did not adequately reimburse Landmark at the level of its billed charges or any reasonable rate.” Landmark filed its complaint in state court, expressly disclaiming any potential claims covered by self-funded ERISA plans for which Cigna paid no benefits. Cigna removed to federal court based on ERISA preemption and diversity jurisdiction, and then filed a motion to dismiss, which was decided in this order. In response to the ERISA argument, Landmark argued that “it seeks a remedy for the amount of payment, not the right of payment,” and thus ERISA does not apply. Cigna responded that this distinction was irrelevant, but the court disagreed. The court ruled that “the question really is whether the rate of payment versus right of payment distinction survives the defensive preemption test” under ERISA’s “conflict preemption” analysis, not under the jurisdictional “complete preemption” analysis. Under this test, because Landmark had carved out ERISA claims, its “state-law claims, as pled, do not have an impermissible connection with an ERISA plan and therefore they are not preempted on that basis[.]” The court further ruled that Landmark’s claims did not “refer to” an ERISA plan because “the remedy that Landmark seeks is the reasonable rate, or fair market value, of the services it rendered. This calculation would require reference to no specific plan, ERISA or otherwise.” The court went on to address Landmark’s state law claims, which it found sufficient for pleading purposes. As a result, it denied Cigna’s motion in its entirety.

Third Circuit

Princeton Neurological Surgery, P.C. v. Aetna, Inc., No. CV-22-01414-GC-DEA, 2024 WL 328711 (D.N.J. Jan. 29, 2024) (Judge Georgette Castner). Plaintiff, a medical provider which performed surgery on a patient, brought this action alleging that defendant Aetna underpaid the insurance benefit claims arising from that surgery. Plaintiff’s complaint consisted of several common law causes of action against Aetna under New Jersey law. Aetna filed a motion to dismiss, contending that plaintiff’s claims were preempted by ERISA, which the court granted without prejudice on February 28, 2023. Plaintiff filed an amended complaint, but again alleged only state law claims. Aetna moved to dismiss, again arguing that plaintiff’s claims were preempted. The court granted Aetna’s motion in this order, ruling that plaintiff “has not materially altered the factual allegations” and “the amendments do not cure the defects or change the conclusion that the common law claims are expressly preempted.” The court stated that Aetna did not make any promise to pay separate from the plan terms, and that any obligation by Aetna was based on the plan. Thus, plaintiff’s claims were preempted. The court further ruled that even if plaintiff’s claims were not preempted, it would still dismiss because the alleged telephone calls between plaintiff and Aetna did not constitute a promise by Aetna to pay any particular amount. The court thus granted Aetna’s motion, this time with prejudice.

Ninth Circuit

California Spine & Neurosurgery Inst. v. Anthem Blue Cross Life & Health Ins. Co., No. 2:23-CV-00894-FLA-JCx, 2024 WL 382180 (C.D. Cal. Jan. 31, 2024) (Judge Fernando L. Aenlle-Rocha). Plaintiff, a medical provider, filed this action in California state court, bringing solely state law causes of cation, in which it alleged that defendant Anthem “failed to make proper payments and/or underpayments to [Plaintiff]…for surgical care, treatment and procedures provided to [its] Patient[s.]” Anthem removed the case to federal court on ERISA preemption grounds, after which it filed a motion for judgment on the pleadings. Plaintiff filed a motion to remand. The court agreed with Anthem’s preemption argument because plaintiff “seeks reimbursement of benefits that exist ‘only because of [Anthem’s] administration of ERISA-regulated benefits plans.’” The court thus denied plaintiff’s motion to remand. However, the court denied Anthem’s motion for judgment on the pleadings as moot because it granted plaintiff’s request for leave to amend its complaint to assert claims for relief under ERISA.

Life Insurance & AD&D Benefit Claims

Sixth Circuit

Transamerica Life Ins. Co. v. Douglas, No. 3:21-CV-00194, 2024 WL 390605 (M.D. Tenn. Feb. 1, 2024) (Magistrate Judge Barbara D. Holmes). This is an interpleader action in which the court was tasked with deciding who is entitled to ERISA-governed pension, 401(k), and life insurance benefits after the death of Jerry Douglas. The potential beneficiaries are his widow, Jingbin Douglas, his brother, Daniel Douglas, and his two adult children, Jed and Penny Douglas. The court likened the dispute to the fictional Jarndyce v. Jarndyce probate case in Charles Dickens’ Bleak House given the intensity of the litigation. After multiple procedural rulings, Penny settled with Jingbin and Jingbin filed a motion for summary judgment, which was decided in this order. Despite their prior activity in the case, Jed and Daniel did not file a proper response to the motion. Thus, the court deemed Jingbin’s facts as undisputed. The court stated that because Jingbin submitted evidence that she was married to Jerry, as supported by a ruling from Tennessee probate court, she was entitled to the pension benefits at issue. As for the 401(k) benefits, Jerry had designated Jingbin as a 25% beneficiary, but the plan provided that “a legally married spouse must be the sole beneficiary of any death benefits unless that spouse consents to the participant’s choice of a different beneficiary.” There was no evidence of any consent and thus Jingbin was entitled to the full benefit. Finally, the court ruled that Jerry’s beneficiary designation under his life insurance plan should be upheld, which resulted in Jingbin receiving the majority of the proceeds. The magistrate judge rejected Jed’s cross-claims for abuse of power and intentional infliction of emotional distress, ruling that Jed failed to advance these arguments on summary judgment. The court also rejected Jed’s cross-claim for partition, ruling that this issue had already been decided by the probate court and that he had failed to prosecute his claim. The court thus recommended that Jingbin’s motion for summary judgment be granted.

Ninth Circuit

Reliastar Life Ins. Co. v. Hill, No. CV 22-2476-KK-RAO, 2024 WL 400180 (C.D. Cal. Feb. 2, 2024) (Judge Kenly Kiya Kato). Plaintiff Reliastar filed this interpleader action, seeking declaratory relief regarding the rights of potential beneficiaries Michael Stills on one hand, and Janice and Kenneth Hill on the other, to $450,000 in ERISA-governed life insurance benefits. The case was tried to the court, which issued this order. The decedent, Amy Stills, was the daughter of the Hills and married to Stills when she was diagnosed with cancer. Before dying, she filed for a domestic violence restraining order against Stills, signed a change of beneficiary form from Stills to the Hills, and filed for divorce from Stills. The court heard testimony from four witnesses, and found that there was no evidence of mental incompetency, duress, or undue influence upon the decedent. As a result, the court ruled that Amy’s beneficiary change from Stills to the Hills was valid and enforceable. Stills contended that he was still entitled to half of the benefits under California’s community property laws. However, the court stated that “payment of benefits is ‘a central matter of plan administration’” under ERISA “and thus, any state law that conflicts or relates to the administration of benefits is preempted.” Judgment was thus entered in favor of the Hills.

Medical Benefit Claims

Tenth Circuit

Robert D. v. Blue Cross of Cal., No. 2:20-CV-138-HCN-DAO, __ F. Supp. 3d __, 2024 WL 340828 (D. Utah Jan. 30, 2024) (Judge Howard C. Nielson, Jr.). Plaintiffs Robert D. and his daughter, K.D., filed this action seeking payment of benefits under an ERISA-governed medical benefit plan insured by defendant Anthem Blue Cross. Plaintiffs’ claims arose from treatment received by K.D. at Fulshear Treatment to Transition, a treatment facility for mental health disorders and substance abuse. Anthem denied plaintiffs’ claims on the ground that K.D.’s treatment was not medically necessary. Plaintiffs brought this action, and the parties filed cross-motions for summary judgment. Plaintiffs first contended that Anthem’s denial “was procedurally flawed because Anthem improperly ‘disregarded’ the ‘opinions’ of K.D.’s treating providers by failing to ‘meaningfully’ engage with those opinions during the appeal.” The court rejected this argument, noting that Anthem’s doctors discussed K.D.’s case with her doctors and reviewed 940 pages of medical records. Plaintiffs contended that the court should not review the internal notes of Anthem’s doctors, and that its review should be limited to the denial letters themselves. However, the court stated that ERISA’s claim procedure regulations allow an administrator to either set forth a rationale for its determination, or provide that rationale upon request. Here, Anthem chose the latter, and provided its file, which included the notes of its reviewers, and thus there was no procedural violation. Having disposed of plaintiffs’ procedural argument, the court next addressed whether, under de novo review, Anthem’s denial should be upheld. The court was “unable to conclude, based on the administrative record, that Anthem’s determination that K.D.’s behaviors did not risk serious harm absent structured 24-hour care was correct.” The record showed that K.D. was having issues with sexual boundaries and Anthem did not explain why her treatment was not necessary to prevent her dangerous behavior. Anthem contended that its internal notes showed that its denial was justified because K.D.’s symptoms were not a deterioration of her usual status. However, the court stated that Anthem did not provide this rationale in its denial letters, and thus the court would not consider it in determining whether benefits should be paid. Despite these rulings, the court did not overturn Anthem’s decision. The court ruled that Anthem may have “failed to make adequate factual findings or failed to adequately explain the grounds for the decision,” but “‘the evidence in the record’ does not ‘clearly show that the claimant is entitled to benefits.’” Thus, “the court concludes that a remand is appropriate.”

Pension Benefit Claims

Third Circuit

Hamrick v. E.I. Du Pont De Nemours & Co., No. C.A. 23-238-JLH, 2024 WL 359240 (D. Del. Jan. 31, 2024) (Magistrate Judge Laura D. Hatcher). In this case, several participants in a defined benefit pension plan sponsored by E.I. Du Pont de Nemours & Co. (DuPont) brought two putative class actions (referred to as the “Manning Action” and the “Hamrick Action”) challenging the interest rate assumptions used by the plan fiduciaries in calculating certain spousal benefits. The named plaintiffs in the two actions, which were consolidated, asserted claims for both statutory violations and fiduciary breach with respect to these assumptions. DuPont moved to dismiss. In this decision, a Magistrate Judge denied the motion with one exception. With respect to the Manning Action, the court held that: (1) Mr. Manning stated a claim that DuPont violated ERISA’s statutory requirement that if a plan offers two or more spousal annuity options, it must ensure that they are actuarial equivalents; (2) Mr. Manning waived his claim under ERISA’s anti-forfeiture provision and that claim was therefore dismissed; and (3) Mr. Manning stated a claim that the actuarial assumptions used by the fiduciaries were unreasonable and therefore in violation of their fiduciary duties because they were based on outdated mortality tables that did not ensure that the spousal benefits were actuarily equivalent to a single life annuity. With respect to the Manning Action, the court rejected DuPont’s argument that fiduciaries cannot violate their fiduciary duties by simply following the plan terms. The court recognized that ERISA expressly provides that its requirements trump contrary plan terms and therefore fiduciaries do violate their fiduciary duties by following plan terms that violate ERISA’s requirements, such as ERISA’s actuarial equivalence requirement. Finally, the court rejected DuPont’s contention that the claims in both actions should be dismissed as untimely. The court agreed with DuPont that a one-year statute of limitations was applicable under Delaware law to plaintiffs’ statutory claims, but held that DuPont had not met its burden of establishing that plaintiffs’ claims accrued more than a year before they filed suit because it did not show when the plaintiffs had notice that something was amiss with regard to their benefit calculations. For similar reasons, the court held DuPont could not show that plaintiffs had actual knowledge of the facts establishing fiduciary breach more than three years before filing suit. 

D.C. Circuit

Saunders v. Saunders, No. 23-CV-2154 (DLF), 2024 WL 358181 (D.D.C. Jan. 31, 2024) (Judge Dabney L. Friedrich). Plaintiff Deborah A. Saunders brought this pro se action in the Northern District of Georgia against her ex-husband, Malachiah Saunders, and the Pension Benefit Guaranty Corporation. She contends that she is entitled to benefits pursuant to Mr. Saunders’ participation in General Motors’ pension plan (PBGC took over GM’s pension plan in 2009), and a subsequent qualified domestic relations order (QDRO). The Georgia court dismissed Mr. Saunders from the case due to lack of personal jurisdiction, and transferred Ms. Saunders’ remaining PBGC claims to the District of Columbia. PBGC then filed a motion to dismiss, which was granted in this order. The court ruled that Ms. Saunders’ claims did not plausibly allege that she was entitled to benefits because she did not “quote, cite, or summarize” the terms of the GM plan. Furthermore, Ms. Saunders did not adequately plead that she was entitled to benefits pursuant to a QDRO because she alleged no facts regarding any “judgment, decree, or order in her favor.” Ms. Saunders contended that a federal court should have signed her QDRO, but the court noted that QDROs are state law creations and cannot be issued by federal courts. As a result, the court granted PBGC’s motion to dismiss, but gave Ms. Saunders 30 days to amend her complaint to fix the identified deficiencies.

Pleading Issues & Procedure

Ninth Circuit

Mattson v. Milliman, Inc., No. C22-0037 TSZ, 2024 WL 340589 (W.D. Wash. Jan. 30, 2024) (Judge Thomas S. Zilly). This is a fiduciary breach class action pertaining to the management of The Milliman Profit Sharing and Retirement Plan. Defendants filed motions to exclude the opinions and testimony of two of plaintiffs’ expert witnesses, Horacio A. Valeiras and Arthur B. Laffer (presumably the same Laffer who created the famous Laffer Curve). Valeiras was designated to testify as to damages calculations. Defendants contended that Valeiras’ model was tailored to the wrong components of damages, and that he included too many investors in his calculations. The court rejected these arguments, determining that Valeiras’ opinions were not unreliable simply due to the scope of his analysis, and that defendants could challenge them at trial. As for Laffer, defendants argued that he should not be able to testify regarding whether the funds at issue should have been removed from the plan prior to 2016 because their performance history was too short and ERISA’s six-year statute of repose barred such opinions. The court ruled that the first argument went to the weight of Laffer’s testimony, not its admissibility, and that decisions prior to 2016 might be relevant in deciding whether the plan acted prudently in subsequently retaining the funds. Defendants further argued that some of Laffer’s testimony was contrary to law or not supported by surveys, studies, or research. The court again concluded that these objections went to the weight of Laffer’s testimony, and that given “his extensive experience in the investment industry and as a fiduciary advisor, the Court concludes that these opinions cannot be excluded prior to trial.” The court thus denied defendants’ two motions in their entirety.

Provider Claims

Third Circuit

BrainBuilders, LLC v. Aetna Life Ins. Co., No. 17-03626 (GC) (DEA), 2024 WL 358152 (D.N.J. Jan. 31, 2024) (Judge Georgette Castner). Plaintiff BrainBuilders provides autism therapy services. In a 156-page amended complaint it and other related plaintiffs have asserted fifteen claims for relief under state law as well as ERISA against defendant Aetna, contending that Aetna either failed to pay or underpaid for treatment by BrainBuilders from 2014 through 2022 in the amount of $50 million. Plaintiffs contends that Aetna used to reimburse claims at about 90% of BrainBuilders’ billed rate, but in 2014, without explanation, Aetna began reimbursing at “much lower … and inconsistent rates that do not adhere with any coverage or reimbursement provisions under the [plans].” The case was stayed while the Third Circuit decided Am. Orthopedic & Sports Med. v. Indep. Blue Cross Blue Shield, 890 F.3d 445 (3d Cir. 2018), in which the appellate court held that “anti-assignment clauses in ERISA-governed health insurance plans as a general matter are enforceable.” Plaintiffs amended their complaint, after which Aetna filed a motion to dismiss, which was decided in this order. The court ruled that: (a) the non-BrainBuilders individual plaintiffs had Article III standing to bring the action because of the ongoing threat of a collectable debt; (b) under Third Circuit law BrainBuilders was “foreclosed from pursuing ERISA claims via derivative standing where the plans contain valid anti-assignment provisions,” and that Aetna had not waived that defense; (c) plaintiffs’ claims for payment of plan benefits did not adequately identify plan provisions requiring payment; (d) there is no independent cause of action under ERISA for denial of a full and fair review; (e) plaintiffs’ claim for failure to provide plan documents lacked sufficient detail regarding their requests; (f) BrainBuilders’ state law claims were preempted by ERISA because they arose “not from a freestanding agreement reached with Aetna, but from the ERISA plans’ coverage for out-of-network services”; and (g) plaintiffs’ state law claims, even if not preempted, were inadequately pled under New Jersey law. As a result, the court granted Aetna’s motion to dismiss, and gave plaintiffs 45 days to file a further amended complaint.

Statute of Limitations

Tenth Circuit

B.M. v. Anthem Blue Cross & Blue Shield, No. 1:22-CV-00098-JNP-JCB, 2024 WL 360830 (D. Utah Jan. 31, 2024) (Judge Jill N. Parrish). Plaintiffs brought this action contending that defendant Anthem Blue Cross wrongfully denied their claims for benefits arising from medical care at a residential treatment facility. Anthem responded by filing a motion to dismiss, arguing that plaintiffs’ claims were time-barred by the benefit plan’s one-year limitation period. Plaintiffs argued that an alternative provision in the plan provided a three-year limitation period, the plan was ambiguous as to which provision governed, and thus the plan should be construed in their favor. Indeed, one plan provision stated, “You have the right to bring a civil action in federal court under ERISA Section 502(a)(1)(B) within one year of the appeal decision,” while another, under the heading “Legal Action,” stated that participants “may not take legal action against us to receive benefits…[l]ater than three years after the date the claim is required to be furnished to us.” The court ruled that the plan was not ambiguous and should be understood to mean that claims for benefits brought under ERISA Section 502(a)(1)(B) must be brought within one year, while other claims could be brought within three years. (The court did not explain how a “legal action against us to receive benefits” under the three-year provision could be brought in a way that did not invoke Section 502(a)(1)(B) under the one-year provision.) Under this interpretation, because plaintiffs’ claims were brought under Section 501(a)(1)(B), the one-year limitation applied, and thus, the court granted Anthem’s motion and dismissed the case.

Statutory Penalties

Ninth Circuit

Zavislak v. Netflix, Inc., No. 5:21-CV-01811-EJD, 2024 WL 382448 (N.D. Cal. Jan. 31, 2024) (Judge Edward J. Davila). Plaintiff Mark Zavislak is a beneficiary of defendant Netflix’s health benefit plan for its employees. He made several requests to Netflix for plan documents and documents related to plan administration, and received unsatisfactory responses. He then initiated this action alleging various statutory violations of ERISA, including a Section 104 violation (failure to produce plan documents) and a claim that Netflix did not operate the plan in accordance with written documents. The case proceeded to trial and the court issued this surprisingly lengthy order deciding the matter. After dispensing with various evidentiary motions, which included rejecting Zavislak’s motion to exclude Netflix’s expert witness, the court tackled the merits. Zavislak contended that under Section 104 Netflix was obligated to produce not only the plan documents, but also administration agreements and various internal documents used by third parties to adjudicate claims. The court, noting that the Ninth Circuit had “narrowly interpreted” Section 104, ruled that ERISA did not require Netflix to produce any of the claims administration agreements or internal documents at issue because they did not “govern the relationship between the plan provider and the plan participants,” and instead “relate only to the manner in which the plan is operated.” As for the plan documents themselves, the court ruled that Netflix had produced the most recent version, as requested, but agreed that it had not produced the documents in a timely fashion. The court noted mitigating factors, however, including that Netflix had not acted in bad faith and that Zavislak’s first request had occurred during the COVID pandemic during which the Department of Labor had suspended deadlines. Also, Netflix had acted promptly upon receiving Zavislak’s second request. As a result, the court exercised its discretion to award a reduced statutory penalty of $15 per day, which totaled $6,465. As for Zavislak’s claim that Netflix did not operate its plan according to a written instrument, the court ruled in favor of Netflix. The court stated that the erroneous provisions in the plan identified by Zavislak were in fact scrivener’s errors, and found that Netflix amended its plan in accordance with valid procedures set forth in the plan. As a result, Zavislak was only victorious on one of his claims, and received a significantly reduced award on it.

It appears that the winter holidays are truly over now, as the pace has picked up and the federal courts have issued more ERISA-related decisions. No one case in particular stood out this week, but there were plenty of entertaining facts and issues. Read on to learn about (a) potential transgender discrimination in medical benefits, (b) a $2.6 million settlement of a proton beam therapy class action, (c) a suit demanding that medical insurers in New Mexico pay for cannabis treatment, (d) whether the widow of a supermarket chain’s CFO can recover accidental death benefits arising from the CFO’s plane crash, and, perhaps most interesting for plaintiff’s attorneys such as yours truly, (e) whether an employee benefit plan can recover an overpayment from a claimant’s counsel (spoiler: maybe, but not this time!).

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

Breach of Fiduciary Duty

Seventh Circuit

Abel v. CMFG Life Ins. Co., No. 22-CV-449-WMC, 2024 WL 307489 (W.D. Wis. Jan. 26, 2024) (Judge William M. Conley). Three employees of CMFG Insurance Company brought this putative class action alleging that defendants, who were responsible for investing assets in CMFG’s 401(k) plan, “imprudently retained investments in ‘BlackRock LifePath Index Funds’ despite their poor performance and the availability of other, better-performing, target date funds.” Defendants moved to dismiss. The court largely skipped over defendants’ standing argument, finding that at a minimum plaintiffs had standing to bring their breach of fiduciary duty claim. The court focused instead on the merits, and ruled that plaintiffs’ allegations that CMFG’s funds compared poorly to other identified funds were insufficient. “In short, plaintiffs ask this court to infer with the benefit of hindsight unavailable to the Committee that defendants committed a breach of their fiduciary duty simply because the BlackRock TDFs ultimately underperformed in comparison to the Comparator TDFs.” The court found that plaintiffs’ comparator funds were not “meaningful benchmarks” under Seventh Circuit precedent because some of those funds were actively managed, as opposed to the passively managed CMFG funds, and because they were designed to invest “through retirement” rather than “to retirement.” Also, plaintiffs selected an unduly short time frame for comparison, the CMFG funds were not always underperformers during that period, and the CMFG funds offered lower fees. The court thus granted defendants’ motion to dismiss, but gave plaintiffs leave to amend to address the identified deficiencies.

Ninth Circuit

Chea v. Lite Star ESOP Committee, No. 1:23-CV-00647-JLT-SAB, 2024 WL 280771 (E.D. Cal. Jan. 25, 2024) (Magistrate Judge Stanley A. Boone). Plaintiff Linna Chea, a former employee of B-K Lighting, Inc., brought this action under ERISA on behalf of the Lite Star Employee Stock Ownership Plan (ESOP) against several defendants, contending that they “violated ERISA through the ESOP’s purchase of stock” in December of 2017 and through “the failure of the Plan’s fiduciaries to remedy fiduciary violations in the ESOP Transaction, and the resulting loss of millions of dollars by the ESOP and its participants.” The defendants brought three separate motions to dismiss, raising numerous arguments, all decided in this order. In a lengthy decision, the magistrate judge ruled that (1) plaintiff had standing to bring her claims because she “adequately pleads that her (and the ESOP’s) economic injury is the direct result of the Defendants’ failure to properly evaluate and take into account problems with the Company’s operations, management, and financial reporting,” (2) plaintiff was allowed to sue one of the individual defendants as a “legal successor” of a deceased company officer, (3) plaintiff’s allegations were sufficient to establish that defendants were fiduciaries under ERISA, and (4) plaintiff adequately pled claims under ERISA for prohibited transactions, breach of fiduciary duty, failure to monitor, and co-fiduciary liability. However, the court did find that plaintiff’s claim for breach of fiduciary duty relating to indemnification provisions between the ESOP and its fiduciaries was time-barred because the provisions were adopted more than six years ago, in 2016. Apart from this one issue, however, the magistrate judge recommended denying all three motions to dismiss in all respects.

Tenth Circuit

Schissler v. Janus Henderson US (Holdings) Inc., No. 22-CV-02326-RM-SBP, 2024 WL 233141 (D. Colo. Jan. 22, 2024) (Judge Raymond P. Moore). This is a putative class action by participants in the Janus Henderson defined contribution employee 401(k) benefit plan alleging that defendants “breached their fiduciary duty of prudence by offering inappropriate investment options and their fiduciary duty of loyalty by benefiting from the Plan at Plaintiffs’ expense.” Defendants filed a motion to dismiss, which was referred to a magistrate judge. The magistrate judge ruled that (a) plaintiffs had standing to bring their claims, (b) writing and amending the plan were settlor functions, and thus plaintiffs could not bring a fiduciary breach claim against defendants based on those actions, (c) plaintiffs adequately pled a fiduciary breach claim for “failing to remove underperforming funds or to employ a reasonable selection process for investment options,” and (d) the plan’s advisory committee was a proper defendant because it was a fiduciary with respect to the offering of the funds at issue. Both sides filed objections to the magistrate judge’s decision, which were addressed by the district court judge in this ruling. Plaintiffs were largely satisfied with the magistrate judge’s decision, but objected “to the extent it suggests that the acts of selecting and monitoring the investments in a 401(k) plan are not subject to ERISA’s fiduciary standards.” The district court clarified that the ruling “does not state or suggest that selecting and monitoring the Plan’s investment options are not fiduciary functions,” only that the ruling drew a distinction between settlor functions in establishing the plan and administrative functions pertaining to how the plan was managed. The former could not be challenged while the latter could be, which is what the magistrate’s decision allowed. As for defendants, they raised numerous objections, all of which were overruled by the district court. The district court upheld the magistrate judge’s rulings that (a) the committee was a fiduciary with respect to the funds at issue, (b) the plan’s mandate regarding certain funds did not override ERISA’s duties of prudence and loyalty, (c) the company acted as both a settlor and a fiduciary at different times, exposing it to liability for breach of fiduciary duty, (d) plaintiffs provided meaningful benchmark funds for comparison, and (e) plaintiffs had standing to pursue their claims because under ERISA they were “entitled to represent the interests of other injured participants in a derivative capacity.” Thus, the district court upheld the magistrate judge’s recommendation in its entirety and largely denied defendants’ motion to dismiss.

Class Actions

Third Circuit

Molloy v. Aetna Life Ins. Co., No. CV 19-3902, 2024 WL 290283 (E.D. Pa. Jan. 25, 2024) (Judge Cynthia M. Rufe). This is a class action alleging that Aetna breached its fiduciary duty under ERISA by improperly denying requests for proton beam therapy (PBT) under health insurance plans it administered. On July 12, 2023, the court certified a settlement class, preliminarily approved a settlement, and scheduled a hearing regarding final approval of the settlement. The court held a fairness hearing on December 19, 2023, and issued this order approving the final settlement. The court ruled that all class action requirements were met because there were numerous plaintiffs (139), there were common issues of law and fact because all plaintiffs suffered from head, neck, or brain cancer and had their claims for PBT denied by Aetna on the ground that the treatment was experimental or investigational, and the named plaintiffs’ interests were in alignment with the class. Notice had been duly given to all class members. The court ruled that the settlement was fair, reasonable, and adequate because the parties had vigorously litigated the case, including through two motions to dismiss, the parties had conducted extensive discovery and reviewed significant claims data, plaintiffs had consulted with experts, and settlement negotiations took over two years. Furthermore, over half of the class had submitted valid claim forms, there were no objections, and only one person opted out. The parties had also addressed the court’s previous concern over a proposed cy pres award, which the court had indicated was too large, by reducing it and increasing the amount paid to class members. As a result, the court approved the settlement in the amount of $2,588,329.62, $1,750,224.96 of which will be paid directly to class members. Each class member will receive a payment between $20,000 and $40,000. The cy pres award to NRG Oncology, Inc. totaled $828,104.66. The court also approved plaintiffs’ request for $1,407,099.25 in attorneys’ fees, which will be paid separately.

Sixth Circuit

Davis v. Magna Int’l of Am., Inc., No. 20-11060, 2024 WL 280645 (E.D. Mich. Jan. 25, 2024) (Judge Nancy G. Edmunds). In March of 2023, the court denied the plaintiffs’ motion for class certification in this action alleging breach of fiduciary duty in the management and administration of the Magna Group Companies Retirement Savings 401(k) Plan. The court ruled that the two named plaintiffs were not adequate class representatives, and gave counsel time to find better ones. Counsel did so, filed an amended complaint, and conducted expedited discovery and briefing related to the new plaintiffs. They then filed a new motion for class certification, which was granted by the court in this order. Because the court had already considered the issues of class numerosity, commonality, and typicality in its previous order, and ruled in plaintiffs’ favor on those issues, it limited its analysis to the adequacy of the new representatives. The court found that the new plaintiffs had invested time and effort in the litigation, maintained contact with counsel, indicated that they understood their role in representing the class, and, most importantly, did not have criminal records like the prior representatives. The court also rejected defendants’ argument that the new plaintiffs had conflicts with the rest of the class: “All claims relate to mismanagement across all Plan investments, and all relief is tied to Plan losses, not to the loss of any individual fund. Neither the claims nor the relief sought pit investors against one another.” As a result, the court granted plaintiffs’ motion and certified the class.

Disability Benefit Claims

Fifth Circuit

Domino v. Guardian Life Ins. Co. of Am., No. CV 22-1760, 2024 WL 278984 (E.D. La. Jan. 25, 2024) (Judge Ivan L.R. Lemelle). Douglas Domino, Sr., who was employed by Gulf Coast Express Carriers, Corp. as a commercial truck driver, brought this action seeking benefits against Guardian, the insurer of Gulf Coast’s disability benefit plan. Guardian approved Domino’s short-term disability claim, but denied his claim for long-term disability benefits. The parties filed cross-motions for summary judgment which were decided in this order. In its motion, Guardian contended that benefits were not payable because Domino did not have coverage. Specifically, the case turned on whether Domino was “considered to be in ‘active full-time service’ within the meaning of the policy while on sick leave after exhausting his paid time off.” The court agreed with Guardian that any covered disability did not arise until after Domino had exhausted his PTO, at which time his coverage had terminated because he was no longer “actively at work” as defined by the policy. As a result, the court granted Guardian’s summary judgment motion, and denied Domino’s.

Seventh Circuit

Treslley v. The Guardian Life Ins. Co. of Am., No. 22-CV-494-WMC, 2024 WL 262812 (W.D. Wis. Jan. 24, 2024) (Judge William M. Conley). Plaintiff Jo Treslley was a director of financial operations for a non-profit organization who suffered from numerous medical issues, including diabetes, stress, cognitive issues, kidney disease, eye floaters, and orthopedic problems with her back, shoulder, and hand. Based on these issues, she stopped working and submitted a claim for long-term disability benefits to Guardian, the insurer of her employer’s benefit plan. Guardian denied Treslley’s claim on the ground that she did not “provide objective evidence that preclude[d] [her] ability to work in [her] own occupation throughout the elimination period and beyond.” Treslley appealed, but Guardian upheld its decision, so she brought this action. In this order the court resolved the parties’ cross-motions for summary judgment. The court ruled that (1) any error by Guardian in its vocational analysis of Treslley’s job was inconsequential, (2) the evidence regarding Treslley’s cognitive issues was mixed, which meant that the court was required to defer to Guardian under the arbitrary and capricious standard of review, and (3) Treslley’s other medical conditions, either individually or collectively, did not prevent her from returning to her own occupation because they were either stable or improving. Treslley argued that Guardian misrepresented facts about her condition, but the court ruled that “any inaccuracies are insufficient to undermine the conclusion that defendant’s determination was supported by the record.” The court also found that any procedural errors in the handling of Treslley’s claim were not prejudicial. Ultimately, “although a different decision on plaintiff’s claim could have been justified on this record, this court’s inquiry is more limited as a matter of law…[T]he inquiry is whether defendant’s decision was arbitrary and capricious, and the undisputed evidence shows that it was not.” The court thus granted Guardian’s summary judgment motion and denied Treslley’s.

Ninth Circuit

Gray v. United of Omaha Life Ins. Co., No. 2:23-CV-00630-MCS-PLA, 2024 WL 324899 (C.D. Cal. Jan. 29, 2024) (Judge Mark C. Scarsi). Plaintiff Kandice Gray brought this action seeking benefits under her employer’s ERISA-governed group disability benefit plan. Gray was a supervisor and mental health therapist for a community services organization who suffered from back pain as well as pain in her arms and hands. United of Omaha approved short-term disability benefits for a period, but terminated them and denied Gray’s claim for long-term benefits as well, contending that she did not meet the plan definition of disability. Gray sued, and the action proceeded to trial under de novo review. The court upheld United of Omaha’s decision, noting that Gray’s treatment history was “sparse,” her doctors did not have a specialty relevant to her orthopedic claims, the detail in her treatment notes was “thin,” her doctors did not “connect their findings to their opinions on Plaintiff’s functional limitations,” and “virtually all” of the supportive evidence in the record “rests on subjective reports by Plaintiff.” The court found United of Omaha’s medical reviews more persuasive because they were by relevant specialists and identified objective measures that could have been performed to corroborate Gray’s complaints but were not provided. The court further found that Gray’s receipt of state disability benefits, while supportive, was insufficient because she only submitted evidence of payment; she “neither cites nor offers documentation confirming a finding of disability or stating the grounds upon which that finding rests.” As a result, the court ruled that Gray had not met her burden of proving disability and entered judgment in United of Omaha’s favor.

Discovery

Seventh Circuit

Van Bergen v. Fastmore Logistics, LLC, No. 21 C 5796, 2024 WL 230950 (N.D. Ill. Jan. 22, 2024) (Magistrate Judge Jeffrey T. Gilbert). Plaintiff Paul Van Bergen is a former employee of Fastmore Logistics who seeks in this lawsuit to recover unit appreciation rights (UAR) benefits under Fastmore’s Equity Appreciation Plan. Van Bergen has also asserted a claim for interference with his benefits in violation of ERISA. Van Bergen contends that when he attempted to redeem his UAR benefits upon his resignation, Fastmore’s owner “advised Van Bergen that his UARs had not appreciated in value since the date they were issued, and therefore, he was not entitled to any payment for them.” Van Bergen alleges that defendants “arbitrarily manipulated” the value of his UARs, and filed a motion to compel seeking discovery from defendants regarding how the UARs were, and should be, calculated. The court concluded that the circumstances in this case “give rise to a conflict of interest” because the Fastmore owner, who denied Van Bergen’s claim, was the sole member/shareholder of Fastmore, the sole manager of the plan, and “benefited financially from denying Van Bergen any redemption value for his vested UARs.” Therefore, the court ruled that Van Bergen was entitled to conduct discovery. However, the court also noted that the Seventh Circuit “disfavors extensive discovery in ERISA cases.” Thus, while the court allowed Van Bergen to take the two depositions he sought, including of the owner, it limited the scope of the depositions such that Van Bergen could not ask questions about the valuation or sale of Fastmore one year before his redemption request. The court also did not agree with Van Bergen that he was entitled to greater leeway in discovery because of his interference claim. The court ruled that this claim “relies on the same conduct and seeks the same relief as his Section 502(a)(1)(B)” claim and thus additional discovery was unnecessary. The court further denied Van Bergen’s request for attorney’s fees in connection with his motion because the motion was only “partially successful,” and because defendants’ opposition “was substantially justified given the developing law in this area.”

ERISA Preemption

Tenth Circuit

New Mex. Top Organics-Ultra Health, Inc. v. Blue Cross & Blue Shield of New Mex., No. 1:22-CV-00546-MV-LF, 2024 WL 260935 (D.N.M. Jan. 24, 2024) (Magistrate Judge Laura Fashing). Plaintiffs brought this action in New Mexico state court against Blue Cross & Blue Shield of New Mexico and other insurer defendants seeking damages and declaratory relief that “would compel health plans and health insurance issuers in New Mexico to pay for the cost of cannabis distributed under [New Mexico’s] Lynn and Erin Compassionate Use Act.” Defendants removed the case to federal court, contending that the court had original jurisdiction under the federal Class Action Fairness Act, and that the claims of at least two plaintiffs were preempted by ERISA. Plaintiffs filed a motion to remand, which was decided in this order. The magistrate judge agreed that defendants met their burden to establish that the court had original jurisdiction over the case under CAFA. As for ERISA, the magistrate judge found that the two plaintiffs at issue were covered under ERISA-governed benefit plans, and were seeking benefits in the action under those plans. In order to adjudicate these claims, the court ruled that it needed to interpret the benefit plans at issue “to determine what benefits the plans afford for medical cannabis, what cost sharing the plans impose on medical cannabis, and whether Cigna and True Health have failed to provide the benefits afforded by the plans.” As a result, their claims “related to” ERISA and were preempted by it. Plaintiffs contended that they had “carved out” any ERISA claims in their first amended complaint, which they filed after removal, but the court ruled that the amended complaint was irrelevant: “the Court can only consider the complaint at the time of removal in deciding whether removal was proper and whether the case should be remanded.” In short, the plaintiffs could not “amend away federal jurisdiction.” As a result, the magistrate judge recommended that the court deny plaintiffs’ motion to remand.

Eleventh Circuit

Silverman v. Sun Life & Health Ins. Co., No. 1:22-CV-22339, 2024 WL 262531 (S.D. Fla. Jan. 24, 2024) (Judge Darrin P. Gayles). Plaintiff Cheryl Silverman, who already had individual disability insurance with MetLife, bought a group disability policy from a predecessor insurer of defendant Sun Life. Silverman alleges that she was seeking supplemental coverage, and consistent with that desire she was informed that the two policies did not offset each other. However, Silverman’s original policy was replaced with a new policy that did contain an offset provision. When she became disabled, Sun Life, invoking the offset provision, only paid her the minimum benefit. Silverman filed suit in Florida state court for fraudulent inducement, negligent misrepresentation, and violations of the Illinois Consumer Protection Act and Connecticut Unfair Trade Practices Act. Sun Life removed the case to federal court, contending that Silverman’s claims were preempted by ERISA, and filed a motion to dismiss. In this order the court ruled that Silverman’s claims were not preempted because she was not challenging the terms of the benefit plan or seeking an interpretation of the plan. Instead, she was challenging the insurer’s representations made before the formation of the plan. The insurer was not acting “in its capacity as an ERISA entity. Rather, it was acting as the seller of an insurance product.” As a result, “at this stage of the litigation, the Court finds that Plaintiff’s claims do not ‘relate to’ an ERISA plan and, therefore, are not defensively preempted.” The court thus denied Sun Life’s motion.

Life Insurance & AD&D Benefit Claims

Second Circuit

Sarno v. Sun Life & Health Ins. Co., No. 2:22-CV-00968-JMA-LGD, 2024 WL 291624 (E.D.N.Y. Jan. 25, 2024) (Magistrate Judge Lee G. Dunst). Nicholas Sarno was an employee of Nikon, Inc. for nearly 35 years and a participant in Nikon’s employee group life insurance benefit plan, which was insured by defendant Sun Life. The policy had an accelerated death benefit for those suffering from terminal illnesses, and gave participants the right to convert their group coverage to individual coverage. Unfortunately, Mr. Sarno was diagnosed with stage IV pancreatic cancer and began a disability leave of absence. During this time Mr. Sarno had several conversations with Nikon, who allegedly never informed him of the accelerated benefit. He also had several conversations with Sun Life about converting his coverage, but Sun Life allegedly gave him misinformation about how to do so, and therefore he missed the deadline. After Mr. Sarno died, plaintiff Cathleen Sarno filed a claim for benefits, which Sun Life denied. She then filed this action against Nikon and Sun Life, alleging three claims: (1) breach of fiduciary duty for failure to adequately inform of the accelerated benefit; (2) breach of fiduciary duty for failure to adequately inform of conversion rights; and (3) a claim for benefits. The Nikon defendants filed a motion to dismiss, which was decided in this order. The magistrate judge recommended “granting the Nikon Defendants’ Motion to dismiss Count 3 for lack of standing under Article III of the U.S. Constitution and to dismiss Counts 1 and 2 as duplicative of Count 3.” Specifically, the court ruled that plaintiff could not pursue a claim for benefits because she “fails to plead an adequate line of causation between her alleged injury and the Nikon Defendants’ actions… Plaintiff does not and cannot allege that the Nikon Defendants had any role in the conversion process nor any role in determining the eligibility of the Accelerated Benefit. It is undisputed that Sun Life was responsible for that.” The court noted that plaintiff had not alleged that Nikon ever spoke to Mr. Sarno about the accelerated benefit or any conversion deadlines, and thus “no causal connection exists between the Nikon Defendants’ conduct and Plaintiff’s injury.” As for the breach of fiduciary duty claims, because plaintiff sought to recover the accelerated death benefit under those claims, and relied on the same facts to support her claims, the court ruled that those claims were “duplicative…repackaged claims for the same benefits” and recommended that they be dismissed as well.

Ninth Circuit

Mueller v. Lincoln Nat’l Life Ins. Co., No. 2:23-CV-00919-WBS-JDP, 2024 WL 307789 (E.D. Cal. Jan. 26, 2024) (Judge William B. Shubb). Kenneth Mueller was the CFO of the supermarket chain Raley’s. On September 4, 2022, he was flying in a private twin-engine aircraft with Raley’s chief pilot. The purpose of the flight was for Mr. Mueller to learn how to operate the plane, as he was not yet qualified to fly it by himself. The plane crashed, killing both men. Mr. Mueller’s wife, plaintiff Brigitte Mueller, submitted a claim for accidental death benefits to defendant Lincoln, the insurer of Raley’s group life insurance employee benefit plan. Lincoln denied the claim, contending that Mr. Mueller’s death fell under the plan’s aircraft exclusion. Ms. Mueller sued, and the case was tried under de novo review. Ms. Mueller argued that Lincoln should pay benefits because Mr. Mueller’s death satisfied an exception to the aircraft exclusion, which allows coverage if the insured is “traveling as a passenger in any aircraft that is owned or leased by or on behalf of the Sponsor.” Lincoln responded that Mr. Mueller was not a “passenger” under this exception because he was a student pilot. The court reviewed case law regarding the difference between passengers and pilots, ultimately concluding that after “examining the policy as a whole and construing the exception to the aircraft exclusion broadly…a student pilot such as decedent qualifies as a ‘passenger.’” At a minimum, the undefined term “passenger” was ambiguous, which “would require the court to adopt the interpretation favoring coverage, leading to the same result.” However, the court sided with Lincoln on the issue of whether the aircraft was “owned or leased by or on behalf of” Raley’s. The parties agreed that Raley’s did not own the plane, and there was no evidence in the record of who did, or that Raley’s had leased it in the traditional sense. As a result, Ms. Mueller failed to meet her burden of proving that the exception to the exclusion applied. The court entered judgment for Lincoln.

Medical Benefit Claims

Third Circuit

Doe v. Independence Blue Cross, No. CV 23-1530, 2024 WL 233216 (E.D. Pa. Jan. 22, 2024) (Judge Timothy J. Savage). Plaintiff Jane Doe is a transgender woman who sued her health insurance provider, defendant Independence Blue Cross (IBX), under several state and federal laws after IBX denied her coverage for facial feminization surgeries as treatment for gender dysphoria. On November 21, 2023, the court granted defendant Independence Blue Cross’ motion to dismiss several of plaintiff’s claims, leaving her only two: one for medical benefits under ERISA, and the other for violation of the Affordable Care Act (“ACA”) and Title IX for impermissible gender stereotyping. IBX subsequently filed a motion for summary judgment, which was decided in this order. The court identified the primary issue in the ACA and Title IX claims as “whether IBX intentionally discriminated against Doe on the basis of her nonconformity to a gender stereotype.” The court ruled that a jury could reasonably find discrimination because “IBX representatives repeatedly cited the gender stereotyping language throughout Doe’s appeal.” As for plaintiff’s ERISA claim, the court found there was “an issue of fact as to whether IBX’s interpretation was ‘reasonably consistent’ with the text of the cosmetic procedure exclusion” in the benefit plan. The conflicting interpretations of IBX’s own reviewers showed that the exclusion was ambiguous and thus “a reasonable fact finder could find that IBX applied a physical defect requirement and ignored Doe’s impaired social and occupational functioning in a way that is not ‘reasonably consistent’ with the plan’s text.” The court did, however, rule that plaintiff was not entitled to punitive or emotional distress damages as a matter of law under any of her claims. Other than this ruling on remedies, the court denied IBX’s summary judgment motion in its entirety.

Tenth Circuit

S.T. v. United Healthcare Ins., No. 4:21-CV-00021-DN-PK, 2024 WL 233328 (D. Utah Jan. 22, 2024) (Judge David Nuffer). This is yet another Utah case challenging a denial of medical benefits for residential mental health treatment. The plaintiffs, S.T. and his son J.T., seek benefits for J.T.’s treatment at Ashcreek Ranch Academy. United Healthcare, the insurer of the employee medical benefit plan under which J.T. had coverage, denied plaintiffs’ claims on the ground that his treatment was not “medically necessary,” as that term is defined by the plan. Plaintiffs filed suit, alleging one claim for plan benefits and one claim alleging that United’s plan violated the Parity Act. The parties filed cross-motions for summary judgment, which were decided in this order under de novo review. The court began by admitting into evidence Ashcreek’s billing records and claim submissions, ruling that these documents were relevant to determining whether the treatment at issue was medically necessary. The court then reviewed the time period at issue and ruled that United’s denial was incorrect for a 25-day period from December 30, 2017 to January 23, 2018. During this period J.T. “reported two attempts to commit suicide to a therapist during the week of January 3, 2018” and “it was reported that J.T. was hallucinating on January 2, 2018, and January 12, 2018.” As a result, J.T. met the requirements for medical necessity at that time. However, for the remaining dates at issue – December 13-29, 2017 and January 24, 2018 to March 31, 2019 – the court ruled in United’s favor. During these times the court found that plaintiffs failed to cite to pertinent treatment notes or support in the administrative record, or the documents in the record did not show that J.T.’s condition was serious enough to warrant residential treatment. As for plaintiffs’ Parity Act claim, the court ruled that plaintiffs had standing to pursue it, but rejected it on the merits because plaintiffs did not establish that United’s criteria for mental health treatment were more restrictive than its criteria for other health conditions.

Pension Benefit Claims

Sixth Circuit

Hill v. Cleveland Bakers & Teamsters Pension Fund, No. 1:22-CV-2073, 2024 WL 262252 (N.D. Ohio Jan. 24, 2024) (Judge J. Philip Calabrese). In 2021, David Hill, Sr., contemplating retirement, applied to his pension fund for benefits and received approval. However, he died only weeks later, before the fund paid any benefits. When his son, plaintiff David Hill, Jr., submitted a posthumous claim for benefits, the fund denied his claim, and he brought this action. The parties filed cross-motions for judgment which were decided in this order. The case turned on the language of the plan, which provided for a two-month waiting period between the date a retiree submits an application for a pension and the date benefits are first paid. The court ruled that because the father had passed away during the waiting period, he never became entitled to a benefit under the terms and conditions of the plan, and thus the fund was not arbitrary and capricious in denying his son’s claim. The son argued that while his father may have passed away before benefits were scheduled to begin, under the plan his eligibility for those benefits occurred earlier, before he died. However, the court rejected this interpretation, ruling that even if the son’s argument was plausible, he could not prevail: “Defendants’ interpretation of the Plan represents a principled reasoning process, does not render the provisions of the Plan meaningless or internally consistent, and is not arbitrary or capricious.” The court thus issued judgment in the fund’s favor.

Subrogation/Reimbursement Claims

First Circuit

Cutway v. Hartford Life & Accident Co., No. 2:22-CV-00113-LEW, 2024 WL 231453 (D. Me. Jan. 22, 2024) (Judge Lance E. Walker). Plaintiff Kevin Cutway began receiving long-term disability benefits in 2016 under an ERISA-governed employee benefit plan insured by defendant Hartford. Several years later, Hartford discovered that it had failed to offset Mr. Cutway’s monthly payments by the correct amount of disability benefits he was receiving from the Social Security Administration. It notified Cutway that it would stop making future payments until it had recouped $52,000 in overpayments. Cutway filed suit under 29 U.S.C. § 1132(a)(3), arguing that Hartford should be equitably estopped from exercising its contractual right to recoupment because the overpayments were the result of its own negligence. At the start of the case, the court granted Cutway’s request for a preliminary injunction ordering Hartford not to reduce his benefit while the litigation proceeded. The parties then filed cross-motions for judgment, which were decided in this order. The court was “not persuaded that the equities support a judicial decree that Hartford forfeited its right under the policy to offset against future payments the ‘overpayments’ associated with Mr. Cutway’s receipt of social security income benefits.” The court ruled that Hartford properly applied the terms of the plan, which were not contested by Cutway, that Cutway “was informed of and understood or should have understood that he was being overpaid LTD benefits due to his ongoing receipt of both unreduced LTD payments and monthly social security benefits,” and Hartford made repeated efforts to obtain accurate information from Cutway about his Social Security benefits. The court agreed that Hartford was “not entirely blameless” in its calculation of and pursuit of the overpayment, but this “relative lack of care in administration did not exceed Mr. Cutway’s own lack of care in the management of his funds.” As a result, the court rejected Cutway’s claim for equitable relief under ERISA, lifted the preliminary injunction, and entered judgment in Hartford’s favor.

Verizon Sickness & Accident Disability Benefit Plan for New Eng. Assoc. v. Rogers, No. 1:21-CV-00110-MSM-PAS, 2024 WL 323057 (D.R.I. Jan. 29, 2024) (Judge Mary S. McElroy). Defendant Jacqueline Rogers, an employee of Verizon, received $44,962.40 in benefits from plaintiff, Verizon’s ERISA-governed disability benefit plan. Her disability was due in part to an automobile accident, which resulted in her receiving a settlement of $100,000, $31,617.60 of which went to her attorney, co-defendant Richard Sands. Verizon sought reimbursement from Rogers pursuant to the terms of the plan, but she “apparently disappeared” and was never served. As a result, Verizon sought to recover from Sands. On summary judgment, the court ruled that Verizon’s lien was potentially enforceable against Sands, but did not grant Verizon’s motion because an issue of fact remained, i.e., whether Sands had dissipated the settlement proceeds so that they could not be traced by Verizon. (Your ERISA Watch covered this ruling in its March 22, 2023 edition.) The action proceeded to trial, where Sands produced an affidavit in which he asserted that the settlement funds were used to pay his operating expenses and thus Verizon could not trace them or equitably recover them. The court first discussed the burden of proof: whose burden was it to prove whether the funds had been dissipated? The court stated, “One would think that this question would be easily answered, but one would be wrong. The Court has not found, and the parties have not cited, any controlling authority clearly stating where the burden of proof lies on the dissipation issue.” The court ultimately concluded that logic, and language from Supreme Court precedent, suggested that the burden should be placed on Verizon. The court ruled that because Verizon was seeking an equitable remedy regarding an existing asset, it should be obligated to prove that the asset still exists. The court further found that Verizon did not meet this burden. The court noted that Verizon had presented no evidence on this issue and had made little effort during litigation to ascertain the contents of Sands’ bank accounts. Thus, because Verizon failed to meet its burden of showing that the funds had not been dissipated, Sands was entitled to judgment in his favor.

Flores v. Life Ins. Co. of N. Am., No. 22-55779, __ F. App’x __, 2024 WL 222265 (9th Cir. Jan. 22, 2024) (Before Circuit Judges Collins, Mendoza, and Desai)

This week’s notable decision addresses a procedural issue in ERISA benefit cases: if a plaintiff brings a lawsuit seeking benefits, and the court rules against her because she hasn’t yet complied with the benefit plan’s claim submission requirements, can she bring a subsequent action for those same benefits after she does comply with the requirements? This question split a panel of Ninth Circuit judges.

The plaintiff is Kayla Flores, who sued defendant Life Insurance Company of North America (LINA) in 2020 for terminating her short-term disability (STD) benefits. In her complaint Flores also included a claim for long-term disability (LTD) benefits, even though she had not yet applied for them. The district court overturned LINA’s denial of her STD claim, but rejected her request for LTD benefits because she had not complied with the LTD insurance policy’s proof of loss requirements. (Your ERISA Watch covered this decision in its August 4, 2021 edition.)

Flores then submitted her LTD claim in accordance with the policy’s requirements. LINA denied this claim as well, so Flores brought another lawsuit in 2022. LINA filed a motion to dismiss based on claim preclusion, which was granted by the district court. The district court ruled that Flores had already pursued her claim for LTD benefits in her first action and thus could not do so a second time. Flores appealed.

In this ruling the Ninth Circuit reversed. In doing so, the court applied a four-factor test to determine if Flores’ claim was precluded, although it focused on the fourth and “most important”: “whether the two suits arise out of the same transactional nucleus of facts.” For the court, this question was equivalent to asking “whether the [second] claim could have been brought in the previous action.”

The court concluded that Flores could not have brought the second claim in the first action. This was because “an ERISA cause of action accrues either at the time benefits are actually denied or when the insured has reason to know that the claim has been denied.” Flores’ claim regarding LTD benefits did not accrue until LINA denied her claim in 2022, and thus the court concluded that it could not have been brought in the prior action: “At bottom, Flores I and Flores II could not have been tried together because the latter suit involves Flores’s eligibility for benefits that she applied for after a judgment had been rendered in the former suit.” As a result, her claim for LTD benefits was not barred by claim preclusion.

The Ninth Circuit’s decision was not unanimous, however. Judge Collins dissented, contending that the district court “squarely held” in the first action that Flores was not entitled to LTD benefits, which barred any subsequent claim for those benefits. Judge Collins stated, “Here, it is clear that the two actions arise from the ‘same transactional nucleus of facts,’ because Flores seeks the same LTD benefits, based on the same underlying condition, under the same policy.” 

The majority responded to the dissent by characterizing it as “overstating” the district court’s original ruling. According to the majority, Flores responded appropriately to the district court’s decision by doing “what any diligent plaintiff would have done; she went back and complied with the precondition that the district court stated she had missed.” As a result, “the district court’s determination that Flores was not entitled to LTD benefits before she had complied with the terms of the LTD policy does not bar her subsequent suit for LTD benefits after she complied with the terms of the LTD policy.”

The court thus reversed, and remanded for further proceedings on the merits.

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

Disability Benefit Claims

Seventh Circuit

Kamholtz v. Madison Nat’l Life Ins. Co., Inc., No. 22-CV-617-JDP, 2024 WL 230283 (W.D. Wis. Jan. 22, 2024) (Judge James D. Peterson). Plaintiff Jeanie Kamholtz was a receptionist for Madison Teachers, Inc. who stopped working in January 2021 when pain and spasming in her eyes made it difficult for her to keep them open for extended periods. She applied for long-term disability benefits with her employer’s insurer, defendant Madison National, but Madison National denied her claim. Kamholtz then brought this action under ERISA against Madison National. The parties filed cross-motions for summary judgment, which were decided in this order. The court first determined that because the insurance policy at issue gave Madison National discretionary authority to determine benefit eligibility, it would review the denial under an “arbitrary and capricious” standard of review. Kamholtz argued that the denial should be overturned because Madison National (1) “unreasonably disregarded objective evidence of her pain and instead relied on irrelevant ophthalmologic testing results,” (2) “failed to consider the totality of her mental and physical limitations,” and (3) “failed to give her claim a full and fair review because it didn’t provide her with the independent physician reports for her second appeal in advance of its decision denying her appeal.” The court rejected all three arguments. First, the court found there was “rational support in the record for Madison National’s conclusion that the objective medical evidence did not support Kamholtz’s claim,” because her symptoms were subjective, her eye examinations were normal, and she did not adequately explain how her medical diagnoses were connected to her allegedly disabling symptoms. Second, the court found that Madison National fully considered Kamholtz’s mental health symptoms, and that it was reasonable for Madison National to conclude that these were insufficient to support disability. Third, the court agreed that Kamholtz was not provided with Madison National’s independent physician reports relating to her second-level appeal. However, the court ruled that she was not prejudiced by this error because the reports were similar to previous reports, and Kamholtz did not identify what evidence she would submit to counteract the reports. As a result, remand was not required for this procedural violation. The court thus granted Madison National’s summary judgment motion and denied Kamholtz’s.

ERISA Preemption

Third Circuit

Invictus Special Situations Master I v. Invictus Global Management, LLC, No. CV 24-16-RGA, 2024 WL 175736 (D. Del. Jan. 12, 2024) (Judge Richard G. Andrews). This action is a dispute between a privately held investment fund and its estranged general partner and investment manager, originally filed in Delaware state court. Defendants served interrogatories on plaintiffs, whose responses referred to ERISA. Defendants believed that this triggered ERISA preemption and thus removed the case to federal court. Plaintiffs promptly filed a motion to remand, which the court granted in this order. First, the court determined that defendants’ removal was untimely because it did so more than 30 days after receiving plaintiffs’ interrogatory responses. Second, the court ruled that even if the removal was timely, plaintiffs’ claims were not preempted under the Supreme Court’s Davila test because their “allegations relate to different duties than ERISA.” Specifically, plaintiffs’ complaint alleged that defendants breached various agreements and sought to reform a partnership agreement, and thus defendants’ potential liability does not “exist[] only because of their administration of ERISA-regulated plans.” Defendants’ notice of removal was also “vague as to which counts they believe are preempted.” Thus, the court ruled that removal was improper and remanded the case back to Delaware court.

Exhaustion of Administrative Remedies

Second Circuit

Fitzsimons v. New York City Dist. Council of Carpenters, No. 23-815, __ F. App’x __, 2024 WL 221550 (2d Cir. Jan. 22, 2024) (Before Circuit Judges Park, Lee, and Merriam). This is the first of two decisions issued this week by the same panel of Second Circuit judges involving the same defendant, New York City District Council of Carpenters and Joiners of America, the same attorneys on both sides, and similar issues. The plaintiff in this case is Peter Fitzsimons, who, with his family members who were also plan beneficiaries, alleged that the union’s pension and welfare funds improperly terminated their benefits after the union determined that Mr. Fitzsimons was working as a carpenter for a non-union company. The district court upheld the union’s decision in April of 2023. (Your ERISA Watch covered this ruling in its May 3, 2023 edition.) Plaintiffs appealed, and the Second Circuit affirmed in this ruling. The court rejected plaintiffs’ claim under the Labor-Management Reporting and Disclosure Act, finding that (a) Mr. Fitzsimons had received a full and fair disciplinary hearing from the union, (b) his claims of bias were unsupported, and (c) the LMRA did not allow the court to “interfere at will in the internal affairs of unions.” As for plaintiffs’ ERISA claims, the Second Circuit upheld the district court’s ruling that they had failed to exhaust their administrative remedies: “Fitzsimons failed to take any appropriate administrative action after receiving the Funds’ benefit-determination letters.” The court rejected plaintiffs’ arguments that any appeal would have been futile on the ground that they were “speculative and insufficient.”

Pleading Issues & Procedure

Tenth Circuit

Graham O. v. United Behavioral Health, No. 1:18-CV-31-TS, 2024 WL 170739 (D. Utah Jan. 16, 2024) (Judge Ted Stewart). The three plaintiffs, two parents and their child, J.O., brought this action against United alleging that it improperly denied their claims for medical benefits for treatment received by J.O. The district court agreed, concluding that United had acted arbitrarily and capriciously, and remanded the case to United “to more adequately explain its decision.” On remand, United again denied plaintiffs’ claims, and plaintiffs filed this motion to reopen the case. United opposed the motion, contending that its denials “were supported by substantial evidence.” The district court granted plaintiffs’ motion, concluding that it was “ill-suited to resolve” the arguments on the merits asserted by United. The court thus directed the parties to file cross-motions for summary judgment to address the issue of whether United’s new denial should be upheld.

Provider Claims

Second Circuit

The Medical Soc’y of the State of New York v. UnitedHealth Grp. Inc., No. 22-2702-CV, __ F. App’x __, 2024 WL 177448 (2d Cir. Jan. 17, 2024) (Before Circuit Judges Calabresi and Nathan, and District Judge Paul A. Engelmayer). This is a class action by several medical providers against health insurer United asserting that United violated ERISA when it refused to pay benefits for outpatient surgery performed at office-based surgery venues (“OBS”). United denied the claims at issue on the ground that the benefit plans “only cover fees for procedures performed at facilities ‘licensed’ in New York, and OBSs are not licensed facilities.” After a five-day bench trial, the district court ruled in United’s favor (a decision covered by Your ERISA Watch in its September 21, 2022 edition), and plaintiffs appealed. Plaintiffs raised two arguments on appeal: “(1) the district court erred by relying on evidence outside the administrative record; and (2) the district court erred by failing to interpret the plain meaning of the plan terms.” In this ruling, the Second Circuit rejected both arguments. The court acknowledged that ERISA benefit denials are typically adjudicated solely on the administrative record, but noted that district courts may exercise their discretion to admit extrinsic evidence for good cause. Good cause existed in this case because plaintiffs’ challenge was to United’s claims-adjudication process, and the extrinsic evidence admitted by the district court, which consisted of “medical coding evidence, industry standards such as Medicare practices, other payors’ OBS facility fee policies, and United’s correspondence with regulators,” related to that process. The Second Circuit also concluded that the district court’s findings of fact – that the OBSs were not “licensed facilities” for the purpose of New York’s Public Health Law – was not arbitrary and capricious, and therefore affirmed the judgment in United’s favor.

Statute of Limitations

Second Circuit

Spillane v. New York City Dist. Council of Carpenters & Joiners of Am., No. 23-247, __ F. App’x __, 2024 WL 221816 (2d Cir. Jan. 22, 2024) (Before Circuit Judges Park, Lee and Merriam). In this second case this week involving the same defendant, attorneys, and the same panel of Second Circuit judges, plaintiff Patrick Spillane, a retired member of the New York City District Council of Carpenters and Joiners of America union, and his wife, Deborah, brought this action against the union for terminating their pension and medical benefits. The union’s decision was based on a finding that Mr. Spillane had performed employment for a non-union contractor, and thus was ineligible for continued union benefits. Plaintiffs filed an action alleging several claims, including under ERISA, but the union’s decision was upheld in its entirety by the district court. (Your ERISA Watch covered this decision in its January 11, 2023 edition.) The Second Circuit’s ruling in this case was the same as in the first: affirmed. The court agreed that plaintiffs had failed to exhaust their claims under the Labor-Management Reporting and Disclosure Act. As for plaintiffs’ ERISA benefit claim, the Second Circuit upheld the district court’s decision that it was time-barred because plaintiffs did not bring suit within 365 days of the denial, as required by the plan, and furthermore the decision to terminate their benefits was not arbitrary and capricious because the union reasonably found that Mr. Spillane was engaged in disqualifying employment. The Second Circuit also rejected plaintiffs’ breach of fiduciary duty claim, ruling that it consisted of “speculation and unsubstantiated name-calling,” and in any event was duplicative of their claim for benefits.

Subrogation/Reimbursement Claims

Ninth Circuit

Protingent Inc. v. Gustafson-Feis, No. C20-1551-KKE, 2024 WL 197368 (W.D. Wash. Jan. 18, 2024) (Judge Kymberly K. Evanson). Defendant Lisa Gustafson-Feis was injured in a motor vehicle accident in 2016. At the time, she was insured under an ERISA-governed medical benefit plan established by plaintiff Protingent, Inc. Protingent placed a lien on the lawsuit arising from Gustafson-Feis’ accident, which eventually settled for $150,000. Gustafson-Feis refused to reimburse Protingent, whose lien totaled $73,326.54, and thus Protingent filed this action under ERISA against her. In this order the court granted Protingent’s motion for summary judgment. The court rejected Gustafson-Feis’ reliance on the make-whole doctrine (under which an insured party injured in an accident must be “made whole” before her insurer can recover compensation) because the plan specifically disclaimed the doctrine: “the Plan ‘is entitled to full reimbursement on a first-dollar basis from any payments, even if such payment to the plan will result in a recovery which is insufficient to make you whole or to compensate you in part or in whole for the damages sustained.’” The court also rejected other various arguments made by Gustafson-Feis, such as (1) Protingent engaged in procedural irregularities, (2) her husband’s claim affected Protingent’s right to reimbursement, (3) the summary plan description prevented Protingent from enforcing the plan terms, (4) Protingent was not diligent in pursuing its lien, and (5) the lien increased over time, suggesting impropriety. Notably, and unusually, the court also ruled that Protingent was “entitled to an award of reasonable attorney fees,” as well as interest, which will be determined pursuant to a subsequent motion.