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
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.)
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.”
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.
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.
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.
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
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.
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
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
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.
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
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.
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
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.
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.