Curtis v. Aetna Life Ins. Co., No. 3:19-cv-01579-MPS, 2023 WL 34662 (D. Conn. Jan. 4, 2023) (Judge Michael P. Shea)

In this week’s notable decision, Judge Michael P. Shea applied a “somewhat-novel doctrine of ‘class standing’” to significantly limit claims in an ERISA healthcare coverage class action against Aetna Life Insurance Company. This application of class standing as a hurdle separate and above Article III standing and outside the bounds of Federal Rule of Civil Procedure 23 analysis strikes us as a topic worthy of our readers’ attention.

Plaintiff Dennis E. Curtis, a beneficiary of a Yale University ERISA group medical benefits plan, brought suit on behalf of himself and a class of similarly situated participants and beneficiaries of ERISA healthcare plans administered by Aetna challenging Aetna’s use of medical necessity criteria for physical and rehabilitative therapies not set forth in the plans or their provisions. According to the complaint, these internal “Clinical Policy Bulletins” relied upon by Aetna “modify and limit, to the plan members’ detriment, the plans’ definition of ‘medically necessary.’” Thus, Mr. Curtis alleges that Aetna has violated ERISA by failing to administer the claims for medical benefits in accordance with the language of the plans.

Before Mr. Curtis obtained discovery and moved for class certification under Rule 23, Aetna filed a motion for partial dismissal. Aetna argued that Mr. Curtis, who was denied coverage for physical therapy services, never submitted claims for coverage for additional types of rehabilitation services benefits and therefore lacked class standing to bring these claims. Aetna, however, took a clear position that it was not challenging Mr. Curtis’s Article III standing.

The court found that, despite having Article III standing, Mr. Curtis’s challenges to physical therapy denials were too dissimilar to denials received by other potential class members for the five other therapies – speech, pulmonary rehabilitation, cognitive rehabilitation, occupational, and voice – for Mr. Curtis to have class standing to litigate claims related to these services on behalf of the class. The court reasoned that the evidence Mr. Curtis will need to prove his individual claims for physical therapy benefits will be different from the proof needed to prove the other class members’ claims pertaining to the other challenged therapies. This was so, the court concluded, because the Clinical Policy Bulletins contain unique definitions of medical necessity for these six sub-categories of therapies and it could only decide whether Aetna’s actions violated ERISA by individually analyzing the relevant Clinical Policy Bulletin for each therapy.

Despite Mr. Curtis’ allegation that Aetna’s practice of limiting the definition of medically necessary beyond those of the plans was general to all class members, the court found that under Second Circuit precedent Mr. Curtis did not have a “sufficiently personal and concrete stake in proving [the] other, related claims against” Aetna. Thus, the court focused on the differences between the putative class members rather than Aetna’s challenged common practices.

Finally, the court disagreed with Mr. Curtis’s position that Aetna’s challenge to his class standing should be decided on a Rule 23 motion for class certification and not on a motion to dismiss. The court acknowledged that courts within the Second Circuit are not consistent about when they choose to analyze class standing. However, as the court saw it, Mr. Curtis’s individual claims for physical therapy gave him no incentive to develop medical evidence necessary to prove entitlement to different therapies for which he was never denied coverage. The court concluded that this justified analyzing class standing at the motion to dismiss stage, without the benefit of discovery, or the protections and protocols of Rule 23. For these reasons, the court granted Aetna’s motion, “leaving only (Mr. Curtis’) claims on behalf of a class related to… physical therapy benefits for which he sought coverage.”

In reaching this determination, the district court relied on Second Circuit precedent, including the decision in NECA-IBEW Health & Welfare Fund v. Goldman Sachs & Company, 693 F.3d 145 (2d Cir. 2012). However, in NECA-IBEW, the Second Circuit seemed to use class standing to expand Article III standing, not as a limitation, acknowledging that NECA did not have Article III standing to challenge the misrepresentations made with respect to securities it did not invest in, but that it could nevertheless assert those claims on behalf of the class if the challenged conduct implicated “the same set of concerns” as the misrepresentations that NECA did have Article III standing to challenge. Whether the district court’s decision in this case can be squared with that view of class standing is as “murky” as the “line between traditional Article III standing and so-called ‘class standing.’” Ret. Bd. of the Policemen’s Annuity & Benefit Fund of the City of Chicago v. Bank of N.Y. Mellon, 775 F.3d 154 (2d Cir. 2014). 

In any event, this tension between traditional Article III standing, class standing, and class certification under Rule 23 is a compelling topic and perhaps a noteworthy new trend, made particularly interesting in this decision by Aetna’s clear position that it was not challenging the named plaintiff’s Article III standing.

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

Breach of Fiduciary Duty

Ninth Circuit

Lehr v. Perri Elec., No. 19-17199, __ F. App’x __, 2023 WL 21466 (9th Cir. Jan. 3, 2023) (Before Circuit Judges Thomas, Bennett, and Sung). A former employer, trustee, and plan participant, Colleen Lehr, was criminally prosecuted for embezzling funds from the Perri Electric Inc. Profit Sharing Plan and Profit Sharing Trust Fund. The judgment in the criminal case and bankruptcy proceedings ordered restitution payments in the amounts Ms. Lehr embezzled from the plan. In this ERISA breach of fiduciary duty action against the Perri Electric Inc. company and the plan, Ms. Lehr and her husband Paul argued that the restitution payment she paid to Perri Electric should have been put back into the plan, rather than used by the company to cover business expenses. The district court granted summary judgment in favor of defendants, determining that the Lehrs lacked standing. Plaintiffs appealed. On appeal, the Ninth Circuit affirmed, holding “the district court correctly concluded that Ms. Lehr lacked standing to assert an ERISA breach of fiduciary duty claim” under Parker v. Bain, 68 F.3d 1131 (9th Cir. 1995), which held that “a plaintiff lacks standing under ERISA where they breach their fiduciary duty to the plan by embezzling funds in excess of their claimed account balance.” Although the particulars of this action were mostly not addressed in the Ninth Circuit’s decision, it did state that here “the money allegedly owed to the Plan by Ms. Lehr far exceeds her claimed account balance.” Additionally, the appellate court stated that the judgment in the criminal case against Ms. Lehr ordered payment to the Perri Electric company, not the plan, and a debtor in bankruptcy “cannot designate to which liability its payments will be allocated.” Accordingly, the Ninth Circuit found no error in the lower court’s finding that no mandate in the criminal case or the bankruptcy proceedings required the payment to the company be remitted to the plan. However, this view was not shared among all three judges on the panel. Judge Bennett dissented, finding the Lehrs “established a genuine dispute of material fact as to whether Ms. Lehr’s restitution payment constituted a Plan asset.” Judge Bennett argued that a factfinder could interpret the restitution payment as being intended to compensate the plan rather than the company. The majority’s view was flawed, in Judge Bennett’s opinion, because “by finding that the Lehrs lack statutory standing because the restitution payment was unambiguously not a Plan asset, the majority effectively precludes other Plan participants from challenging defendants’ use of the restitution payment under ERISA.” Judge Bennett reasoned that the criminal and bankruptcy judgments “could have been ordered to Perri Electric in its capacity as a fiduciary of the Plan.” This was supported, Judge Bennett concluded, by the fact that Ms. Lehr’s embezzlement was from the plan and not directly from the company, and the ordered restitution was the “exact amount” stolen by Ms. Lehr from the plan. Thus, looking at the facts favorably to the Lehrs, the dissenting opinion concluded that the purpose of the restitution payment was to remediate the plan for its losses, and therefore the Lehrs in their action are “simply seeking to enforce the bankruptcy judgment and not usurp Perri Electric’s supposed sole and unfettered discretion.” Although Ms. Lehr may not be an innocent party, participants who are, Judge Bennett stated, “are left with no recourse against defendants under the statute,” because the majority’s conclusion essentially finds that defendants didn’t violate any fiduciary duty in using the payment to cover business expenses rather than reimburse the plans.

Raya v. Barka, No. 19-cv-2295-WQH-AHG, 2023 WL 27358 (S.D. Cal. Jan. 3, 2023) (Judge William Q. Hayes). On March 19, 2019, the Department of Labor informed the Calbiotech, Inc. 401(k) Profit Sharing Plan that it was opening an investigation into its operations. The Department’s letter informed the plan that it had found that Calbiotech and the other plan fiduciaries failed to timely remit employee contributions and loan payments and failed to make mandatory safe harbor employer contributions into the accounts of the eligible participants in violation of ERISA. Despite this conclusion, the Department of Labor informed the plan that it had decided not to take legal action. Nevertheless, the plan and its fiduciaries did face legal action, when on December 2, 2019, pro se plaintiff Robert Raya filed this ERISA lawsuit challenging defendants’ conduct in administering the plan. In addition to a claim for benefits and claims for breaches of fiduciary duties, Mr. Raya also included a retaliation claim, arguing that defendants unlawfully terminated him in retaliation for requesting plan documents. The court previously granted summary judgment to defendants on plaintiffs’ claim for benefits, leaving Mr. Raya’s claims for equitable relief pertaining to defendants’ breaches of fiduciary duties pursuant to Sections 502(a)(2) and (a)(3), along with his Section 510 retaliation claim. Defendants moved for summary judgment. The court addressed the breach of fiduciary duty claims first. To begin, the court agreed with defendants that the plan’s phrase about matching contributions describing “‘an amount…as determined by the Board,’ expressly gives the Board of Calbiotech discretion to set the amount of matching contribution and does not preclude the Board from setting the amount to zero.” Accordingly, the plan documents allowed the board not to allocate matching contributions, and thus the court found no breach of fiduciary duty on this basis. Thus, defendants were granted summary judgment on the breach of fiduciary duty claims to the extent they were based on defendants’ failure to make matching contributions to the plan. Next, the court found that uncontroverted evidence established that defendants remitted Mr. Raya’s loan payments to his account in their entirety. Although the Department of Labor had found wrongdoing by defendants for failing to remit loan payments to other participants, the remittance schedule the Department provided demonstrated that Mr. Raya’s account was unaffected because the first unremitted payment occurred after Mr. Raya’s loan was fully repaid. Accordingly, defendants were granted summary judgment on the loan payment remittances claims as well. However, the court determined that the final basis for Mr. Raya’s breach of fiduciary duty claims – that defendants failed to make safe harbor matching contributions to the plan – raised a genuine dispute of material fact precluding an award of summary judgment. Additionally, the court found Mr. Raya had standing to assert this claim as a plan participant. Nevertheless, the court permitted Mr. Raya to proceed only with his breach of fiduciary duty claim asserted under Section 502(a)(2), concluding that his Section 502(a)(3) claim was duplicative and without a distinct remedy. Finally, the court denied defendants’ summary judgment motion on Mr. Raya’s retaliation claim. The court concluded that this claim may be timely, as Mr. Raya provided evidence which could indicate fraudulent concealment justifying tolling the statute of limitations. For these reasons, defendants achieved mixed success and their summary judgment motion was granted in part and denied in part as described above.

Disability Benefit Claims

Eighth Circuit

Diaz v. Metropolitan Life Ins. Co., No. 21-cv-679 (MJD/JFD), 2023 WL 112586 (D. Minn. Jan. 5, 2023) (Judge Michael J. Davis). Plaintiff Raul Diaz worked as a flight attendant for American Airlines for over 30 years until he experienced a tragic accident falling off a roof in 2017, which left him injured and disabled. The fall resulted in a calcaneal fracture of his right foot and the injury required four surgeries. Eventually, Mr. Diaz was diagnosed with avascular necrosis, or the death of bone tissue due to lack of blood supply. Mr. Diaz was never physically the same afterwards and was left with debilitating symptoms, including an inability to walk or stand for extended periods of time. In this action he sought a court order overturning defendant Metropolitan Life Insurance Company’s decision to terminate his long-term disability benefits after 24 months, the plan’s limitation for certain musculoskeletal disorders. The parties cross-moved for summary judgment. In this order the court concluded that MetLife abused its discretion and granted summary judgment in favor of Mr. Diaz. In particular, the court concluded the medical record supported Mr. Diaz’s avascular necrosis diagnosis, and MetLife therefore acted arbitrarily and capriciously in finding Mr. Diaz not disabled due to any nonlimited condition. The court found MetLife’s reviewing doctor’s conclusion that “there remains no evidence of imaging to support” the diagnosis of avascular necrosis problematic, especially since the doctor failed to request any additional imaging or medical records and did not attempt to speak to or consult Mr. Diaz’s treating physicians for further clarification. Had MetLife’s reviewers sought evidence of imaging to support the diagnosis rather than simply stating their conclusion to the contrary they would have found it. The court wrote, “the record is filled with evidence of medical imaging to support the claim of Diaz and his treating physicians that Diaz suffers from avascular necrosis. This includes a March 2019 CT Scan, a June 2019 MRI, a November 2019 CT Scan, a bone density test, and x-rays.” Confronted with this objective medical evidence that MetLife failed to address, the court found that MetLife had not satisfied its duties under ERISA as the plan’s administrator. In sum, the court felt that MetLife’s review of Mr. Diaz’s claim was not a quality review, and “MetLife cannot rewrite the administrative record now.”

Ninth Circuit

Veronica L. v. Metropolitan Life Ins. Co., No. 3:21-cv-01260-HZ, 2022 WL 18062830 (D. Or. Dec. 28, 2022) (Judge Marco A. Hernandez). Plaintiff Veronica L. worked for Google for twelve years as a Senior UX Writer until she became disabled in the summer of 2017. At that time, Veronica became unable to carry on working, describing how she “used to be able to push myself through at will and got to a point that I couldn’t push through anymore. I didn’t have the capability anymore.” From 2017 onward, Veronica explained that her mental and physical health problems led her to lead “an entirely different life.” Defendant Metropolitan Life Insurance Company (“MetLife”) approved Veronica’s long-term disability benefit claim but did so for her psychiatric and mental health symptoms, limiting her eligibility for benefits to the plan’s 36-month limitation period. 36 months later, MetLife informed Veronica that it would be terminating her benefits. Following an unsuccessful administrative appeal, Veronica commenced this ERISA suit seeking reinstatement of benefits. She argued that her severe chronic fatigue syndrome, a non-limited condition under her plan, has left her unable to work and that she is therefore entitled to benefits beyond the limitation period. As support, Veronica included medical records from her treating physicians, and all of these health care professionals opined that Veronica’s reports of her symptoms were entirely credible and the level of fatigue she was experiencing could not be attributed to her mental health conditions. MetLife’s reviewing doctor of osteopathy agreed that Veronica suffered from chronic fatigue syndrome but found that no objective evidence supported a finding that the disease was severe enough to be disabling on its own. On de novo review of the administrative record under Federal Rule of Civil Procedure 52, the court ultimately faulted MetLife for conducting a paper-only review of a condition which can only be diagnosed upon subjective symptoms and a physician’s in-person credibility assessment of those self-reported symptoms. Additionally, the court stated that MetLife’s blanket statement of a “lack of objective evidence” was inappropriate because “[f]atigue, like pain, is an inherently subjective condition.” To the court, MetLife’s failure to conduct an independent medical evaluation failed to develop the record such that “the Court cannot definitively determine whether Plaintiff is disabled due to a non-limited condition under the Plan.” To rectify this inadequate review, the court concluded that remand to the plan administrator to further develop the incomplete record was the proper recourse in this instance and declined to award judgment to either party at this time.

Exhaustion of Administrative Remedies

Ninth Circuit

Schmidt v. Employee Deferred Comp. Agreement, No. CV-22-01464-PHX-ROS, 2023 WL 35027 (D. Ariz. Jan. 3, 2023) (Judge Roslyn O. Silver). Widow Patricia Schmidt sued her late husband’s employer, the Temprite Company, its deferred compensation top hat plan, and the plans’ fiduciaries, seeking a lifetime monthly benefit of $4,583.33, to which she believes she is entitled under the terms of the plan. Following her husband’s death, the company took actions to frustrate Ms. Schmidt’s claim, at first outright denying the existence of the plan before Ms. Schmidt was able to locate plan documents among her husband’s possessions. Once she had done so, Ms. Schmidt attempted to apply for the benefits. At that point, the company changed gears, stating that Ms. Schmidt was not entitled to both shares of Temprite stock and plan benefits. Unable to exhaust the administrative appeals process, Ms. Schmidt pursued legal action. Defendants moved to dismiss and alternatively moved to transfer. To begin, the named plan administrator, defendant Bob Brown, moved to dismiss for lack of personal jurisdiction. Mr. Brown argued that, contrary to plan documents produced by Ms. Schmidt naming him as the plan administrator, he could not be deemed the plan administrator because “he never performed the work of plan administrator.” The court disagreed, holding Mr. Brown’s argument “does not prove what Brown thinks it does. Construed in the light most favorable to Patricia, Brown’s statement that he has not acted as the plan administrator is evidence he has not performed tasks he should have performed.” Thus, at least at this stage of litigation, the court was satisfied that Mr. Brown is the plan’s administrator and thus subject to “ERISA’s nationwide service of process statute.” Next, the court addressed defendants’ position that Ms. Schmidt failed to exhaust administrative remedies. The court construed defendants’ position as paradoxical because they were simultaneously claiming the top hat plan did not exist while also arguing Ms. Schmidt was required to comply with its claim procedures. Given the allegations in Ms. Schmidt’s complaint, the court found that there was no reasonable procedure to exhaust, stressing that, while top hat plans are excepted from some ERISA requirements, they are not exempt from the requirement that they follow a reasonable procedure for handling benefit claims. “In simple terms, it would not have been reasonable to require Patricia send an administrative claim to Brown, an individual who disavows any role in the administration of the top hat plan.” Furthermore, there was evidence Ms. Schmidt made a reasonable attempt to comply with the claims procedure. For these reasons, the motions to dismiss were denied. Finally, the court also denied defendants’ undeveloped motion to transfer.

Pension Benefit Claims

Second Circuit

Maddaloni v. Pension Tr. Fund, No. 19-cv-3146 (RPK) (ST), 2023 WL 22633 (E.D.N.Y. Jan. 3, 2023) (Judge Rachel P. Kovner). Plaintiff Mark Maddaloni sued the Pension Trust Fund of the Pension, Hospitalization and Benefit Plan of the Electrical Industry and its board under Section 502(a)(1)(B), arguing defendants’ denial of his application for disability pension was an abuse of discretion. Mr. Maddaloni claimed defendants’ reliance in their denial on a plan term that required participants receiving workers’ compensation or disability benefits to apply for disability pension within two years of the date of disability onset was arbitrary and capricious because he was not receiving either. Thus, Mr. Maddaloni argued that under the terms of the plan his application was timely. Defendants responded that the plan was silent on the issue of whether participants who were not receiving workers’ compensation or disability benefits had to apply for disability pension benefits, and they were therefore able to rely on the summary plan description and their own “broad discretion” to impose this limitation. The court rejected defendants’ argument, concluding it “misunderstands the power of ERISA trustees.” Instead, only three requirements were necessary, the court held, for Mr. Maddaloni to be eligible for disability pension: (1) being permanently disabled; (2) having at least 10 pension credits; (3) and being employed by contributing employers for 10 years immediately prior to disability onset. The court concluded defendants failed to meet their burden of establishing that Mr. Maddaloni, who was receiving Social Security disability benefits, did not satisfy these requirements. Furthermore, the court held that Mr. Maddaloni complied with the application requirements in place at the time when he submitted his application. Accordingly, the court granted summary judgment in favor of Mr. Maddaloni, and denied in part defendants’ motion for summary judgment, granting summary judgment in favor of defendants only on Mr. Maddaloni’s alternative claim asserted under Section 502(a)(3), which Mr. Maddaloni did not object to. However, because the court felt it could not “conclude that plaintiff is entitled to benefits,” it opted to remand to the board for further proceedings consistent with its ruling here.

Pleading Issues & Procedure

Fourth Circuit

Int’l Painters & Allied Trades Indus. Pension Fund v. I. Losch, Inc., No. Civ. BPG-19-3492, 2023 WL 24247 (D. Md. Jan. 3, 2023) (Magistrate Judge Beth P. Gesner). A multi-employer pension fund and its trustees filed an ERISA lawsuit to collect withdrawal liability payments after a contributing employer ceased payments into the fund. Last September, the court granted plaintiffs’ motion for summary judgment and awarded withdrawal liability, interest, and liquidated damages. Defendants moved pursuant to Federal Rule of Civil Procedure 59(e) to alter or amend that judgment. In this order the court denied their motion. At bottom, the court held that defendants’ arguments amounted “to nothing more than a disagreement with the court’s conclusion,” and a rehashing of rejected arguments. Specifically, the court expressed that it considered and addressed defendants’ position that defendant Harry Yohn satisfied the requirements of the spousal attribution exception, reiterating how it had “discussed defendants’ argument at some length in its memorandum opinion.” As there was no intervening change in controlling law nor any new evidence not previously available, the court concluded that defendants needed to demonstrate the court’s ruling was a clear error of law. To the court, defendants here did not do so, and in fact did not even engage with the court’s conclusions regarding the spousal attribution exception. Mere disagreement, the court held did not suffice to clear the high bar necessary to overturn or revise the court’s judgment. Accordingly, all remains as before.

Provider Claims

Third Circuit

University Spine Ctr. v. Edward Don & Co., No. 22-3389, 2023 WL 22424 (D.N.J. Jan. 3, 2023) (Judge John Michael Vazquez). A healthcare provider given an assignment of benefits by its patient sued a healthcare plan, the Edward Don & Company, LLC plan, and its claims administrator, Cigna Health and Life Insurance, under ERISA Section 502(a)(1)(B) after the plan paid only $6,184.46 of a medically necessary spinal surgery for which they billed $340,316. Defendants moved to dismiss pursuant to Federal Rule 12(b)(6), arguing the provider failed to state a claim by failing to allege how the payment of $6,18.46 violates the plan. The provider had included in its complaint language from the plan that explains that the plan will pay for the lesser of either the provider’s normal charge, the Medicare allowable fee for the same service, or the 80th percentile of charges made by providers for the same service in the same geographic location. Although plaintiff’s complaint seemed to draw the conclusion that a payment of about $6,000 for spinal surgery must be in violation of the policy language, the complaint failed to explain what calculation defendants used to determine their rate of reimbursement, and precisely what about that calculation was incorrect. Because of this, the court agreed with defendants that Plaintiff failed to state a claim by “merely referenc[ing] the relevant provision without articulating how and why it entitles Plaintiff to additional compensation.” Dismissal, however, was without prejudice, and the provider may replead to address this stated deficiency.

Statute of Limitations

Second Circuit

Spillane v. N.Y.C. Dist. Council of Carpenters & Joiners of Am., No. 21 Civ. 8016 (AT), 2023 WL 22611 (S.D.N.Y. Jan. 3, 2023) (Judge Analisa Torres). Patrick and Deborah Spillane, a retired member of the New York City District Council of Carpenters and Joiners of America union and his spouse, brought an ERISA, LMRDA, and state law claims against the union, its pension and welfare funds, union leadership, and the funds fiduciaries after a union trial found that Mr. Spillane performed employment for a non-union contractor, and the trial “verdict” was subsequently used as grounds to terminate the Spillanes’ pension and healthcare benefits. Plaintiffs asserted ERISA claims under Sections 502(a)(1)(B) and (a)(3), for benefits and breaches of fiduciary duties respectively. Defendants moved to dismiss for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6). The court began its analysis by addressing the pension plan’s one-year statute of limitations. Plaintiffs argued that a 365-day window within which to commence legal action was unreasonably short. The court disagreed and referred to decisions by other courts in the Southern District of New York which have upheld “limitations provisions that afforded participants less than a year to file suit following a denial of benefits.” Accordingly, the court granted defendants’ motion to dismiss the Section 502(a)(1)(B) claim for pension benefits as untimely. Next, the court analyzed the claim for healthcare benefits. The relevant plan documents for the welfare plan conferred discretionary authority upon the fund’s trustees. Thus, the court held that the arbitrary and capricious standard of review applied. Plaintiffs’ assertion that the union trial verdict was flawed was found by the court not to “establish that the Fund Defendants’ actions were arbitrary and capricious. The Fund Defendants’ interpretation that…Spillane worked in disqualifying employment [and] was no longer eligible for benefits under the Welfare Plan, is supported by the plain language of the 2003 Welfare Plan SPD and the SMMs defining ‘disqualifying employment.’” Thus, the court held that plaintiffs failed to state a claim for benefits. Next, the court dismissed plaintiffs’ breach of fiduciary duty claim under ERISA as “conclusory.” Plaintiffs’ LMRA claims held up no better than their ERISA claims and were also dismissed under Rule 12(b)(6). The court also declined to exercise supplemental jurisdiction over the state law tort claim. Finally, the court denied plaintiffs’ motion for leave to amend their complaint, holding amendment would be futile.

Withdrawal Liability & Unpaid Contributions

Seventh Circuit

Trs. of the Chi. Reg’l Council of Carpenters Pension Fund v. Drive Constr., No. 19 C 2965, 2023 WL 22141 (N.D. Ill. Jan. 3, 2023) (Judge Virginia M. Kendall). Trustees of multi-employer ERISA pension funds sued an employer for unpaid contributions under collective bargaining agreements between the employer and the Chicago Regional Council of Carpenters union. In this order the court granted plaintiffs’ motion for leave to file a second amended complaint to add an additional defendant, a company they believe is under common control with the first employer, which they allege was created to avoid paying millions of dollars to the funds in contributions. Plaintiffs expressed in their motion that they discovered the existence of the alter ego of the first company thanks to an investigation by the Illinois Attorney General, and that defendant “deliberately concealed” this corporate relationship “throughout the litigation.” Furthermore, the trustees, relying on subpoena responses during the attorney general’s investigation, offered evidence that the employers failed to submit over $9 million to the pension funds and thus moved to file the second amended complaint to allege their original contribution claims against both companies as either alter egos or as a single employer. The court disagreed with the employer that permitting the amendment would be unduly prejudicial, holding that this “appears to be a bona fide change in circumstances,” as the relationship between the employers “was not available until (the) response to the AG’s subpoena in the separate investigation.” Finally, the court held “[i]f Plaintiff’s allegations prove to be true…denying the filing of the SAC would serve to shield Defendants from liability due to their own actions of concealing the ownership of the company,” and that the interest of justice would therefore be promoted by granting plaintiffs’ motion.

Happy New Year ERISA Watchers. For our first issue of 2023, we thought we’d take a moment to look back on the highs and lows of 2022 in the world of ERISA. In that spirit, we have compiled a somewhat subjective list of the best and worst decisions of the past year. We included only ERISA cases and not decisions that are sure to affect ERISA plans, such as the Supreme Court’s decision in Dobbs v. Jackson Women’s Health Organization, which certainly tops our list of worst decisions of 2022.

Here is our list of the Best ERISA Decisions of 2022:

  1. Hughes v. Northwestern University, No. 19-1401, 142 S. Ct. 737, 2022 WL 199351 (U.S. Jan. 24, 2022). This unanimous decision from the Supreme Court, authored by Justice Sotomayor, reversed the Seventh Circuit’s adoption of a categorical rule that imprudent options in a 403(b) plan’s investment line-up are “neutralized by prudent, lower-cost options.” The Court wisely recognized that “even in a defined-contribution plan where participants choose their investments, plan fiduciaries are required to conduct their own independent evaluation to determine which investments may be prudently included in the plan’s menu of options.”
  2.  Collier v. Lincoln Life Assurance Co. of Bos., No. 21-55465, 53 F.4th 1180, 2022 WL 17087828 (9th Cir. Nov. 21, 2022) (Before Circuit Judges Paez and Watford, and District Judge Richard D. Bennett). The Ninth Circuit has repeatedly recognized that a plan administrator may not present “a new rationale to the district court that was not presented to the claimant as a specific reason for denying benefits during the administrative process.” In this decision, the court expanded on this precedent to hold that the “district court clearly errs by adopting a newly presented rationale when applying de novo review.” This Kantor & Kantor victory is sure to have a significant impact in ERISA benefit litigation in the coming year and beyond.
  3. Gragg v. UPS Pension Plan, No. 22-3379, __ F.4th __, 2022 WL 17729625 (6th Cir. Dec. 16, 2022) (Before Circuit Judges Batchelder, Griffin, and Kethledge). In this decision, the Sixth Circuit held that “[t]he limitations period for an ERISA claim ‘to recover benefits due’ under a plan does not expire before the alleged underpayment on which the claim is based.” Emphasizing that an ERISA benefit claim accrues “when the plaintiff discovers, or with due diligence should have discovered, the injury that is the basis of the action,” the court reasoned that, in an underpayment case, this injury does not occur until the plaintiff receives the first underpayment, and not when he is told that he will receive that amount.
  4. Boley v. Universal Health Servs., No. 21-2014, 36 F.4th 124, 2022 WL 1768984 (3d Cir. Jun. 1, 2022) (Before Circuit Judges Greenaway, Jr., Scirica, and Cowen). In this decision, the Third Circuit recognized sensible limits to the Supreme Court’s Article III standing decision, Thole v. U.S. Bank N.A., 140 S. Ct. 1615 (2020), in a case challenging excessive fees associated with some of the investment options in a defined contribution plan. The court concluded that Article III did not prevent plaintiffs from representing class members who were allegedly harmed by investments in other funds that were imprudent for the same reason as the funds in which the named plaintiffs were invested.
  5. Cloud v. The Bert Bell/Pete Rozelle NFL Player Ret. Plan, No. 3:20-CV-1277-S, 2022 WL 2237451 (N.D. Tex. Jun. 21, 2022) (Judge Karen Gren Scholer). The final case on the Best Decisions list is a district court decision that we believe (or at least hope) represents a change in direction for courts reviewing benefit denials under the National Football League’s disability plan. The court allowed the plaintiff, through discovery, to pull back the curtain “on the inner workings of Defendant The Bert Bell/Pete Rozelle NFL Player Retirement Plan.” This peek revealed alarming claim-handling practices, including the fact that the board in charge of deciding Cloud’s appeal made its decision at a ten-minute-long “pre-meeting” during which it (purportedly) reviewed 100 other appeals, with each appeal involving a file of “hundreds or thousands of pages of documents.” To the court, “[t]he Board’s review process, its interpretation and application of the Plan language, and overall factual context all suggest an intent to deny Plaintiff’s reclassification appeal regardless of the evidence,” leading the court to conclude that the board did not give Cloud a full and fair review of his claim for the highest level of disability benefits under the plan. Based on its own review of the evidence, the court concluded that he was entitled to those benefits.

Here is our list of the Worst ERISA Decisions of 2022:

  1. Wit v. United Behavioral Health, No. 20-17363, __ F. App’x __, 2022 WL 850647 (9th Cir. Mar. 22, 2022) (Before Circuit Judges Christen and Forrest, and District Judge Michael M. Anello). In this eight-page unpublished memorandum decision, the Ninth Circuit swept away countless extensive rulings over seven years from the magistrate judge presiding over this case, including the judge’s lengthy decision finding that United Behavioral Health (UBH) engaged in “pervasive and long-standing violations of ERISA” by adopting and applying mental health and substance use disorder guidelines that were unreasonable and inconsistent with generally accepted standards of medical care. Applying an abuse of discretion standard, the Ninth Circuit concluded that UBH reasonably interpreted the plans as not requiring that benefits be paid for generally accepted standards of medical care. Whether the panel or the en banc court reconsiders this ruling remains to be seen.
  2. Klaas v. Allstate Ins. Co., No. 20-14104, 21 F.4th 759, 2021 WL 6124337 (11th Cir. Dec. 28, 2021) (Before Circuit Judges Pryor, Luck, and Brasher). In this decision from the Eleventh Circuit (which is technically a 2021 case, but we reported on it in 2022), the court, based on reservation of rights clauses in summary plan descriptions, held that plan participants had no right to life insurance benefits they were repeatedly promised by their employer, Allstate. The court also held that plaintiffs’ claims based on misrepresentations were untimely because the last misleading statements were made more than six years before they filed suit. The court’s reliance on summary plan descriptions, along with its failure to allow the introduction of extrinsic evidence on the meaning of the reservation of rights clauses, earn this decision a place on the Worst list. This placement is cemented by the fact that the court looked to the last date defendants made promises of lifetime benefits, rather than the date on which those promises were rescinded, in determining that plaintiffs’ fiduciary breach claim was untimely.
  3. Turner v. Allstate Ins. Co., No. 2:13-cv-685-RAH-KFP [WO], 2022 WL 17640165 (M.D. Ala. Dec. 13, 2022) (Judge R. Austin Huffaker, Jr.). On remand, the Allstate class action litigation again lands on the Worst list, this time based on the district court’s disregard of clear recusal rules. The plaintiffs argued that the district court judge who had ruled against them on summary judgment should have recused herself because she owned shares in the Allstate Corporation at the time she ruled in the company’s favor. A different district court judge ruled that there was no risk of injustice from the judge’s failure to recuse herself given the affirmance by the Eleventh Circuit, and further ruled that the failure to recuse “would not undermine the public’s confidence in the judicial process.” If this is correct, it is hard to understand the point of the court’s own mandatory recusal rules.
  4. Carfora v. Teachers Ins. Annuity Ass’n of Am., No. 21 CIVIL 8384 (KPF), 2022 WL 4538213 (S.D.N.Y. Sep. 28, 2022) (Judge Katherine Polk Failla). In this case, a district court in New York decided that the Teachers Insurance Annuity Association of America (TIAA), which administered a defined contribution pension plan in which the plaintiffs participated, was not acting as a fiduciary in soliciting plaintiffs to roll over their plan assets into TIAA’s proprietary “Portfolio Advisor Program.” This holding effectively allowed TIAA to escape liability for problematic sales tactics that allegedly included lying to plan participants to get them to invest in subpar investments.   

Whether you agree with which list these decisions belong on, we hope you all agree that these were some of the most important ERISA decisions from the past year. Read on for summaries of last week’s ERISA-related rulings.

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

Breach of Fiduciary Duty

First Circuit

Sellers v. Trustees of Boston College, No. CV 22-10912-WGY, __ F. Supp. 3rd __, 2022 WL 17968685 (D. Mass. Dec. 27, 2022) (Judge William G. Young). This is yet another in a long line of cases involving institutions of higher education and financial services advisors TIAA and Fidelity. Two former employees of Boston College (BC), Connie Sellers and Sean Cooper, brought this putative class action against the trustees of BC and its plan investment committee, alleging that they breached their fiduciary duties under ERISA in administering and monitoring BC’s two defined contribution 401(k) retirement plans, which were administered by TIAA and Fidelity. Defendants filed a motion to dismiss. Plaintiffs first argued that BC caused them to “incur unreasonable fees during the class period in the form of high recordkeeping expenses and excessive investment management fees.” Defendants argued that these claims were not supported by facts and were purely speculative, but the court noted the information asymmetry between the parties, and cited specific allegations by plaintiffs comparing BC’s plans to other plans, as well as BC’s failure to issue requests for proposals in order to reduce fees. Plaintiff further argued that defendants should have ceased investing with TIAA because of negative court decisions and regulatory investigations of TIAA, and because those funds underperformed a market index. The court found that plaintiffs’ evidence on these arguments was “certainly not overwhelming” and seemed swayed by defendants’ argument that plaintiffs needed more than a “single metric” to assess performance. Ultimately, however, the court ruled that “disputes over the appropriateness…of benchmarks…are inappropriate at the motion to dismiss stage,” and that plaintiff’s allegations were sufficient. For similar reasons, the court ruled that plaintiffs’ allegations against Fidelity, while “relatively thin,” passed muster. In doing so, the court noted that TIAA and Fidelity “make up a large percentage of the investment offerings in the two plans,” which “also weighs in favor of Plan Participants establishing a plausible breach of the duty of prudence.” As a result, although it was a close call, the court denied defendants’ motion in its entirety: “While each of Plan Participants’ allegations taken individually are likely insufficient to survive a motion to dismiss, the totality of the pleaded facts raise a plausible – not merely conceivable – inference that Boston College breached their fiduciary duties under ERISA.”

Fifth Circuit

Roton v. Peveto Fin. Grp., LLC, No. 3:20-CV-3569-X, 2022 WL 17994020 (N.D. Tex. Dec. 29, 2022) (Judge Brantley Starr). Plaintiffs Robert Roton and Jacqueline Juarez were employees of Legacy Counseling Center, which offered an ERISA-governed 403(b) savings plan to its employees. Plaintiffs alleged that they “were never provided with any meaningful opportunity to participate” in the plan, which was only offered to high-level company officers. Plaintiffs brought two claims under ERISA, for plan benefits under 29 U.S.C. § 1132(a)(1)(B), and breach of fiduciary duty under 29 U.S.C. § 1132(a)(2), against Legacy and its financial advisor Peveto Financial Group. Before the court were several motions. First, the court denied Peveto’s motion for judgment on the pleadings regarding standing, because plaintiffs had standing to sue for breach of fiduciary duty under the Supreme Court’s decision in LaRue v. DeWolff, Boberg & Associates, Inc. However, it granted Peveto’s motion regarding plaintiffs’ request for “lost opportunity costs” in the form of “missed market gains,” finding that these constituted impermissible extracontractual damages under ERISA. Peveto also filed a motion for summary judgment, contending that it was not a fiduciary under ERISA and that even if it was, it did not breach any fiduciary duty. The court denied this motion, finding there were genuine disputes of material fact as to both claims. In so ruling, the court noted that Legacy and Peveto presented different evidence, and “it is difficult to know which party was initiating, administering, authorizing, and managing Legacy’s 403(b) accounts, and which party is now trying to shirk responsibility.” As for Legacy, it filed a motion for summary judgment, arguing that its plan was exempt from ERISA under Department of Labor “safe harbor” rules. The court agreed, deciding in Legacy’s favor on the central element of whether the employer offered a “reasonable choice” to its employees. Plaintiff argued that only one advisor (Peveto) and one product (American Funds) was offered, but the court found that multiple investment options were available from American Funds, and thus the safe harbor provision was satisfied. Thus, the court granted Legacy’s summary judgment motion. Finally, the court addressed Peveto’s motion to strike plaintiffs’ jury demand, and Peveto’s motions regarding expert testimony. The court agreed that plaintiffs were not entitled to a jury under ERISA because of the equitable nature of their claims, and excluded testimony from one of plaintiff’s experts, concluding that her report “impermissibly offers conclusions of law and opinions on ultimate legal issues, and that the rest of her report’s conclusions are factual, and thus are improper for an expert witness.” The court did, however, agree to consider the expert’s report “in the nature of an amicus brief and give her conclusions the weight they are due.”

Disability Benefit Claims

Ninth Circuit

Abrams v. Unum Life Ins. Co. of America, No. C21-0980 TSZ, 2022 WL 17960616 (W.D. Wash. Dec. 27, 2022) (Judge Thomas S. Zilly). At the beginning of 2020, plaintiff William Abrams, an attorney with a long career as a partner at several large law firms, was earning a base salary of $525,000 and was planning on running in three major international marathons that year. However, in April, he began suffering from frequent fevers, severe fatigue, and mental fogginess, resulting in “a sharp decline in Plaintiff’s legal abilities.” In July, he stopped working and submitted a claim for long-term disability benefits to defendant Unum Life Insurance Company of America, the insurer of his firm’s ERISA-governed LTD employee benefit plan. Unum denied Mr. Abrams’ claim, and then, despite a 900-page submission involving the support of seven different doctors, Unum denied his appeal as well. Mr. Abrams filed suit, and the parties filed cross-motions for judgment, which were decided in this order. The court noted that the trial work performed by Mr. Abrams, with which the court was “intimately familiar,” requires “a high-level of cognitive work” and is “mentally and physically grueling.” The court concluded under de novo review that Mr. Abrams could no longer do that work, noting the “significant shift in his demeanor and abilities,” the fact that “Plaintiff’s doctors agree that he is sick” with either chronic fatigue syndrome (CFS) or long COVID, and “Neuropsychological testing revealed that Plaintiff was not malingering.” The court further observed that “Plaintiff has exhausted his savings account, sold his house, and drawn on retirement savings to afford daily life,” which he would not have done if he were able to work. Unum countered that Mr. Abrams’ doctors could not agree on a diagnosis and he did not satisfy the criteria for CFS, but the court noted that “[t]he accuracy of Plaintiff’s diagnoses is not, however, the question before the Court.” The only question was whether Mr. Abrams could return to work with his symptoms, which the court answered in the negative. As a result, the court granted Mr. Abrams’ motion for judgment regarding his claim for benefits. However, it denied Mr. Abrams’ motion regarding Unum’s bad faith, noting that “the evidence of disability is not overwhelming,” and finding that “multiple relevant pieces of evidence in this case support Defendant’s denial.”

Discovery

Tenth Circuit

Kilbourne v. Guardian Life Ins. Co., No. 2:22-CV-036-DBB-DBP, 2022 WL 17960482 (D. Utah Dec. 27, 2022) (Magistrate Judge Dustin B. Pead). Plaintiff Kameron Kilbourne filed this action against defendant Guardian Life Insurance Company, the insurer of his employer’s ERISA-governed employee long-term disability benefit plan. Mr. Kilbourne contended that he was disabled and entitled to benefits after suffering from three pulmonary embolisms and declining health while receiving multiple diagnoses. Guardian disagreed, denying his claim for LTD benefits at the outset, based largely on the report of its reviewing physician, Dr. Benjamin Kretzmann. Mr. Kilbourne sued, and then filed a motion for discovery, seeking depositions of Guardian’s medical consultants and employees. Mr. Kilbourne argued that (1) “several diagnoses listed by the physician reviewer are unsupported by the same medical records that Defendant ultimately relied upon in denying benefits,” (2) Dr. Kretzmann erroneously dated his report, (3) his second pulmonary embolism “was not listed in the physician’s report,” and (4) “the record indicates that Plaintiff received short-term disability benefits, yet then was denied LTD benefits under very similar standards.” Under these circumstances, the court agreed that “the totality of the unique circumstances leads the court to find that additional discovery is warranted.” Thus, the court granted Mr. Kilbourne’s motion in part, allowing him to take the deposition of Dr. Kretzmann, as well as a Rule 30(b)(6) deposition of a “witness for Defendant that can speak to the possible irregularities in the record and other relevant inquiries.”

Provider Claims

Sixth Circuit

Henry Ford Hosp. v. Oakland Truck & Equip. Sales, Inc., No. 21-12352, 2022 WL 18028252 (E.D. Mich. Dec. 30, 2022) (Judge David M. Lawson). Plaintiff Henry Ford Hospital provided medical care to Monica Chaney on two occasions, once in 2017 and again in 2019. Ms. Chaney was insured through an ERISA-governed employee health care plan sponsored by defendant Oakland Truck & Equipment Sales. The hospital contended it was underpaid for its services and brought this action against Ms. Chaney, Oakland Truck, and the third-party claim administrator of the health plan, ClaimChoice LLC. Defendants, who were jointly represented, filed a motion for summary judgment, which was decided in this order. Defendants first contended that the hospital’s claims relating to the 2017 treatment were time-barred either under ERISA’s three-year statute of limitations found in 29 U.S.C. § 1113(2), or under the plan’s contractual one-year limitation period. The court rejected both arguments. First, the court noted that § 1113(2) does not apply because that limitation only applies to breach of fiduciary duty claims, which were not present here. Second, the one-year contractual period also did not apply because under the plan that period only begins running after a claim is denied, and in this case the hospital was repeatedly told the claim was “approved,” “processed,” and “awaiting release of funds.” Thus, the hospital’s claim was timely under ERISA’s six-year statute of limitations on claims for plan benefits (as borrowed from Michigan law). The court also rejected defendants’ argument that it was entitled to summary judgment on the issue of whether the hospital obtained preauthorization for the 2017 treatment because the hospital presented documentation suggesting that it had received such authorization from a case manager. As for the 2019 claims, the hospital admitted that its only recourse was against Ms. Chaney because she refused to sign an assignment of rights. Under Michigan breach of contract law, the court ruled that the hospital had a colorable claim against Ms. Chaney and thus denied her motion for summary judgment. (However, the court did find it “curious” that she had refused to assign her rights regarding the 2019 treatment and wondered if there was a conflict of interest regarding defendants’ joint representation, because Ms. Chaney arguably had a claim against the other defendants for that treatment.)

Venue

Fourth Circuit

Trauernicht v. Genworth Financial Inc., No. 3:22-CV-532, 2022 WL 18027618 (E.D. Va. Dec. 30, 2022) (Judge Robert E. Payne). Plaintiffs Peter Trauernicht and Zachary Wright brought this putative class action against Genworth Financial, contending that Genworth breached its fiduciary duty under ERISA by “selecting, retaining, and otherwise ratifying poorly-performing investments for participants of the Genworth Financial Inc. Retirement and Savings Plan.” At the pretrial conference, the court noted that another judge in the Eastern District of Virginia (albeit in the Alexandria division, not the Richmond division where this case is pending) was already presiding over two cases involving related issues. The court requested position papers regarding venue transfer from the parties. Plaintiffs argued in favor of transfer, while defendants argued against, relying on a forum selection clause in the plan which provided that “[a]ny action in connection with the Plan…may only be brought in Federal District Court for the Eastern District of Virginia, located in Richmond, Virginia.” The court found that there was “nothing to suggest that the forum-selection clause is invalid or unreasonable,” and thus the Court “will abide by the clear language of the clause and, therefore, declines to transfer the case to the Alexandria Division.”

Withdrawal Liability & Unpaid Contributions

Fourth Circuit

United Food & Commercial Workers Unions & Participating Employers Pension Fund v. Supervalu Inc., No. CV DKC 22-0295, 2022 WL 17978273 (D. Md. Dec. 28, 2022) (Judge Deborah K. Chasanow). This case involves a dispute between a union multiemployer pension benefit plan and one of its contributing employers, Supervalu. The fund was certified to be in “critical status” in 2010. Since then, the fund has periodically reevaluated its financial projections and created updated rehabilitation plans, which have involved higher contribution rates from employers like Supervalu. In 2020, one day before the 2017 collective bargaining agreements were set to expire, Supervalu and the union signed an extension. In 2022, the plan sued Supervalu, contending that it was not contributing at the correct rate. Shortly after filing suit, the parties completed negotiation of new CBAs which included retroactive changes to the 2017 CBAs and new provisions that were not included in the 2017 CBAs. The parties filed cross-motions for summary judgment, raising the threshold issue of “whether—and when—the 2017 CBAs ‘expired.’” The fund argued that the 2017 CBAs expired in 2020, and thus Supervalu should have paid higher rates based on the schedule the fund was allowed to unilaterally choose after that date. Supervalu contended that the 2017 CBAs never actually expired and thus its obligation to adopt the fund’s updated contribution schedules “has not yet been triggered.” The court agreed with the fund, noting that the 2017 CBA contained a 2020 expiration date, and that the 2022 negotiations included backdating of the new CBAs to match the expiration of the old CBAs in 2020. “Thus, because the bargaining agreements signed earlier this year retroactively became ‘the governing CBA[s]’ in July 2020, the 2017 CBAs have ‘long since expired.’” Supervalu argued that the new CBAs were not really new, but simply agreements to continue the 2017 CBAs past their original expiration date. The court rejected this argument, however, finding that the language in the agreements and the conduct of the parties demonstrated that the 2022 CBAs “were new bargaining agreements, not extensions of the old CBAs.” As a result, the court granted the fund’s summary judgment motion, and denied Supervalu’s.

Seventh Circuit

Central States, Se. & Sw. Areas Pension Fund v. Transervice Logistics, Inc., No. 20-3437, __ F.4th __, 2022 WL 17843034 (7th Cir. Dec. 22, 2022) (Before Circuit Judges Sykes, Hamilton, and Brennan). This published opinion involves collective bargaining agreements between a union and two employers involving contributions to the union’s ERISA-governed multiemployer pension benefit plan. The CBAs were both set to expire on January 31, 2019, and both contained “so-called ‘evergreen clauses’ that extended them a year at a time until either party provided timely written notice expressing an ‘intention to terminate’ the agreements.” In November of 2018, the union sent letters to the employers noting that the CBAs would expire soon and expressing a desire to negotiate new agreements. The parties eventually completed those negotiations, which required payment to a new fund beginning on February 1, 2019. On January 30, 2019, the employers informed the union that they would stop providing pension contributions to the old fund, after which plaintiff brought this action. Plaintiff contended that the evergreen clauses extended the CBAs for an additional year, requiring the employers to maintain contributions to the old fund through January 31, 2020. The district court rejected this argument and ruled for the employers, finding that the November 2018 negotiation letters “constituted an unequivocal expression of the intent to terminate the current contract.” The Seventh Circuit disagreed and reversed. Citing its own precedent and cases from other circuits, it stated that evergreen clauses must be “strictly interpreted” according to their terms. Here, the evergreen clauses in the CBAs provided that the CBAs would continue in force until one party provided the other with “timely ‘written notice’ expressing an ‘intention to terminate.’” The “obvious import” of the November 2018 letters was that “the union hoped to negotiate new agreements with the employers.” However, “the letters said nothing about terminating the existing agreements regardless of whether or not new agreements were reached.” The employers cited statements by the union regarding negotiation of a “new” contract, and the “termination date” of the CBAs, as evidence that the CBAs were no longer valid. However, the Seventh Circuit ruled that these comments did not satisfy its strict interpretive standard. The court also stated that at the time of the letters, there was no guarantee that new CBAs could be successfully negotiated, and thus it fulfilled the purpose of ERISA to leave the CBAs in place, protecting beneficiaries, until there was an “express intent” to terminate, which never occurred. The court admitted that its decision might seem inequitable, as it required the employers to contribute to two different funds for the same hours worked by the same employees. However, the court observed that equitable defenses are not permitted under Section 515 of ERISA, and “for good reasons,” because “enforcing these contracts as written both complies with the terms of the statute and protects third-party beneficiary plans and workers.”

Tekmen v. Reliance Standard Life Ins. Co., No. 20-1510, __ F.4th __, 2022 WL 17725720 (4th Cir. Dec. 16, 2022) (Before Circuit Judges Wynn, Harris, and Keenan)

ERISA is famously vague on a great number of issues, and one of those is how benefit disputes should be resolved. Fortunately, the Department of Labor has issued regulations that explain in detail how claims and appeals must be handled by plan administrators, but when that process is over, and the claimant remains unhappy, the only recourse is litigation. ERISA tells us that plan participants have a right to sue under ERISA, but doesn’t tell us anything about how those cases should be handled by the courts. One recurring issue, which was addressed by the Fourth Circuit Court of Appeals in this week’s notable decision, is whether such cases should be decided by summary judgment under Federal Rule of Civil Procedure 56, or by trial under Federal Rule of Civil Procedure 52.

The plaintiff in this case, represented by Kantor & Kantor on appeal, was Anita Tekmen. Ms. Tekmen was working as a financial analyst when she was involved in a car accident in October of 2013. After the accident, she suffered from significant symptoms such as dizziness, sensitivity to light and noise, difficulty concentrating, and vestibular issues such as unsteadiness and difficulty with balance.

Ms. Tekmen’s symptoms gradually improved in 2014, and she was able to return to work. However, in 2015, her condition dramatically worsened. Ms. Tekmen’s doctor noted that she had “an episode involving slurred speech, unstable gait, and problems with motor function, among other symptoms.” Ms. Tekmen stopped working and filed a claim for disability benefits with Reliance Standard Life Insurance Company, the insurer of her employer’s disability benefit plan. Reliance paid short-term disability benefits, but denied Ms. Tekmen’s claim for long-term benefits, contending that she did not have an impairment that prevented her from continuing work in her regular occupation.

Ms. Tekmen filed suit in the Eastern District of Virginia and the parties filed cross-motions for summary judgment. The district court denied both motions and instead awarded judgment to Ms. Tekmen on the merits after conducting a bench trial pursuant to Federal Rule of Civil Procedure 52. Reliance appealed to the Fourth Circuit.

The Fourth Circuit first addressed “two interrelated questions: the method a district court uses to resolve an ERISA denial-of-benefits case, like this one, and the standard of review we employ on appeal.” In its appeal, Reliance contended that district courts are required to resolve ERISA benefit disputes via summary judgment, and that any findings made by the district court are subject to de novo review on appeal.

The Fourth Circuit rejected both of these arguments. It first conducted a survey of case law from other circuits, noting that “some have concluded that, although summary judgment may be appropriate when there is no genuine issue as to any material fact, a bench trial is appropriate when fact-finding is required,” “one has concluded that neither summary judgment nor a bench trial is appropriate in ERISA denial-of-benefits cases and that an alternative form of review unique to ERISA cases is appropriate,” and “still others provide that a modified, quasi-summary-judgment procedure is appropriate.”

The Fourth Circuit concluded that summary judgment procedures are typically improper in ERISA benefit cases because summary judgment can only be granted in the absence of disputed issues of material fact. The court observed that this is rarely the case; for example, Ms. Tekmen’s doctors strongly disagreed with the conclusions of Reliance’s doctors. In such cases, “we see no alternative to the district court making findings of fact. And where such findings implicate material issues, summary judgment simply is not appropriate.”

The Fourth Circuit further noted that “if the district court were to resolve a denial-of-benefits case involving disputed facts at summary judgment but without the attendant summary-judgment presumptions, it would effectively be engaging in factfinding that is subject to a de novo standard of appellate review.” The court stated that this would be unproductive, as “district courts are institutionally assigned the role of finder of fact.” District courts would have “little reason to invest the time in factfinding” if they knew those findings would be entitled to no deference on appeal. Trial court litigation would merely be a “tryout on the road” and the district court’s findings would be “essentially superfluous.”

Reliance argued that this conclusion was foreclosed by Fourth Circuit precedent, which Reliance contended mandated de novo review on appeal in ERISA benefit cases. However, the Fourth Circuit distinguished Reliance’s authorities, explaining that its prior decisions only indicated that it reviewed legal conclusions de novo, not factual findings. “If we can review factual findings for clear error – which, as noted, is the typical rule for our review of a Rule 52 judgment – then there is no contradiction between our prior case law and the clear-error standard of review we apply to factual findings made in bench trials.”

The court also rejected two other arguments made by Reliance about the standard of review. First, Reliance contended that because the district court, when presented with competing summary judgment motions, did not decide the case pursuant to summary judgment procedures, the district court violated the “party presentation principle.” However, the Fourth Circuit found no party presentation violation because the district court “did not reshape the legal question presented by the parties; it simply adjusted the procedural mechanism it would use to address the correctness of Reliance’s decision.”

Second, Reliance argued that the district court “ignored” deemed admissions by Ms. Tekmen during summary judgment briefing. However, the Fourth Circuit found no error because the case was not decided on summary judgment, and in any event the local rule allegedly violated by Ms. Tekmen was “plainly permissive, not mandatory.”

Having resolved the preliminary issue of how ERISA benefit cases should be decided, the court then turned to the merits of Ms. Tekmen’s claim, stating, “we will review the court’s factual findings for clear error…and review de novo its legal conclusion that Tekmen was entitled to benefits.”

As the court noted, “the district court’s most consequential factual determination was its decision to give more weight to the reports of the two physicians who repeatedly treated Tekmen…than to the physicians hired by Reliance who merely reviewed Tekmen’s file.” Reliance argued that the district court improperly favored Ms. Tekmen’s doctors because the Supreme Court’s decision in Black & Decker Disability Plan v. Nord, 538 U.S. 822 (2003), allegedly “prohibits [courts] from giving more weight to the opinions of treating physicians than those of non-treating physicians.”

However, as the Fourth Circuit explained, Nord “did not create such a rule.” Nord only held that administrators and courts are not required to give more weight to treating physicians. Giving greater weight is still permissible if “the accounts of treating physicians are more persuasive than those of physicians who only examined a paper record.”

Under this rule, the Fourth Circuit found no clear error in the district court’s findings of fact. The court found it compelling that “most physicians who treated Tekmen believed her to have legitimate impairment in functioning, even in the face of normal test results,” and “the two physicians who consistently examined and treated Tekmen,” including a neurologist, “believed that her symptoms were legitimate and disabling.”

The court discounted Reliance’s argument that Ms. Tekmen was able to work for a time after her accident, noting that the record showed that her symptoms “significantly worsened” in 2015, and that claimants should not be punished for “heroic efforts to work” in the face of such symptoms.

The Fourth Circuit also found no error in the district court’s legal conclusion that Ms. Tekmen was entitled to plan benefits, stating, “Tekmen submitted ample evidence demonstrating that she was totally impaired under the terms of the plan.” Reliance challenged two of the district court’s rulings in this regard, arguing that Ms. Tekmen did not submit objective evidence, and that the district court misinterpreted the plan definition of “regular occupation.”

The Fourth Circuit quickly dismissed these arguments. The court, distinguishing its prior ruling in Gallagher v. Reliance Standard, 305 F.3d 264 (4th Cir. 2002), explained that the plan did not include an objective evidence requirement, and thus Ms. Tekmen could not be faulted for not submitting such evidence. The Fourth Circuit further ruled that the district court properly interpreted the “regular occupation” definition, because there was no evidence that Ms. Tekmen’s disability was “limited to a specific ‘locale,’” as argued by Reliance.

As a result, because (1) the district court properly decided the case under Federal Rule of Civil Procedure 52, (2) the district court’s factual findings were not clearly erroneous, and (3) the district court properly concluded that Ms. Tekmen was entitled to benefits, the Fourth Circuit affirmed the decision awarding benefits to Ms. Tekmen in its entirety.

Ms. Tekmen was represented by Richard D. Carter and Kantor & Kantor attorneys Glenn R. Kantor and Sally Mermelstein.

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

Arbitration

Sixth Circuit

Howmet Aerospace Inc. v. Corrigan, No. 1:22-cv-713, 2022 WL 17592322 (W.D. Mich. Dec. 13, 2022) (Judge Hala Y. Jarbou). On July 28, 2020, plaintiff Howmet Aerospace, Inc., the successor to another company, the Pechiney Corporation, elected to terminate the Pechiney top hat plan. Plaintiff paid the participants of the plan, former Pechiney executives, the balances of the deferred compensation they were each entitled to. However, these executives claim that they were entitled not only to their deferred compensation amounts, “but that their beneficiaries were also entitled to a gratuity upon their death.” Based on this conviction, two actions occurred. First, Howmet Aerospace filed this action seeking a declaration that it properly discharged its termination obligations and appropriately paid the participants. Second, the executives served Aerospace notice of intent to arbitrate in New York, based on the arbitration provision of the plan. In response, Howmet Aerospace filed a motion to stay arbitration, and defendants, three of the participants of the plan, filed a motion to compel arbitration and either stay or dismiss the case under the Federal Arbitration Act (“FAA”). As a preliminary matter, the court stated that in this instance the motion to compel arbitration strictly presented questions of law rather than any factual dispute, and as such the court held that resolution on the motion without a hearing was appropriate. After examining the arbitration provision within the plan, the court concluded that the action was not arbitrable. In particular, the court highlighted the fact that the contract expired, and the plan did not contain a survival clause. Without such a clause, the presumption of arbitrability exists only when one of three conditions are met: (1) the events at issue occurred mostly before expiration, (2) the action infringes upon rights that accrued or vested under the agreement, or (3) under principles of contract law the disputed right survives expiration of the rest of the agreement. Howmet Aerospace was able to show the court that none of these were conditions were met. First, most of the material events transpired after the termination of the plan, including defendants cashing their distribution checks. Second, the court stated that no express language vested the payment-upon-death benefit, and in fact this benefit “could only vest if certain contingencies arose,” including the condition of a participant’s death. The court thus stated that as “none of Defendants died while the plan was operative…the death benefit did not vest.” Finally, the court ruled that the contract indicates by its language that “the parties did not intend for the payment upon death benefit to survive termination of the plan.” Therefore, the court found the presumption of arbitrability inapplicable, denied defendants’ motion to compel arbitration, and granted Howmet Aerospace’s motion to stay arbitration.

Breach of Fiduciary Duty

Second Circuit

Browe v. CTC Corp., No. 2:15-cv-267, 2022 WL 17729645 (D. Vt. Dec. 16, 2022) (Judge Christina Reiss). Participants of the CTC Corporation deferred compensation plan brought a breach of fiduciary duty class action challenging gross mismanagement of the plan and seeking plan benefits they were wrongfully denied. In its June 22, 2018 order and findings of fact following a bench trial, the court found defendants and the plan were not in compliance with ERISA. Among other things, the court held that defendants failed to comply with ERISA’s regulations governing benefit denials by not providing written notice identifying specific reasons for the denials or the appeals procedures available to claimants with which to challenge the determinations. The court also stated that the plan never provided participants with information regarding their account balances, nor other plan documents and statements mandated under ERISA. Instead, the managers of CTC were selectively choosing to whom to award benefits and in what amounts. It was further revealed that “CTC’s management was using CTC retirement benefits to pay operating expenses between 2004 and 2008.” CTC appealed the 2018 order to the Second Circuit. The Second Circuit remanded to the district court, instructing it to craft a remedial scheme outlining the vested rights of participants. In addition to requiring the creation of such a scheme, the Second Circuit also directed the lower court to assess whether one of the plaintiffs was liable for her participation in the breaches. This plaintiff had engaged in a side-deal with the plan’s fiduciaries seeking payment of benefits that she knew others were not receiving and only brought her complaint once her original attempts to create a side-deal proved fruitless. The appeals court thus established that this plaintiff should not “escape liability entirely.” (Your ERISA Watch examined the Second Circuit’s ruling in our October 6, 2021 issue.) In this order, the court adopted the instructions of the Second Circuit, drafting the restoration award, outlining how the award was to be paid to each participant, and ordering the plan’s termination following distributions of the payments in full. Additionally, the court entered judgment in favor of the plaintiffs who were not liable for any wrongdoing with respect to their breach of fiduciary duty claim. As for the liability of the plaintiff who had acted in her own self-interest, the court found defendants “entitled to contribution from Plaintiff Launderville for one half of the Restoration Award paid to Plan Participants and are entitled to compel Plaintiff Launderville to join them in paying the Restoration Award.” Finally, the court expressed that any party could request an award of attorneys’ fees, but that it would offer no opinion “at this time as to whether attorneys’ fees are available.”

Eighth Circuit

Fritton v. Taylor Corp., No. 22-cv-00415 (ECT/TNL), 2022 WL 17584416 (D. Minn. Dec. 12, 2022) (Judge Eric C. Tostrud). Participants in the Taylor Corporation 401(k) and Profit Sharing Plan sued the plan’s fiduciaries, the Taylor Corporation, its Board of Directors, the Investment Committee, and the committee’s members, alleging these fiduciaries breached their duties of prudence and monitoring by allowing the plan to pay unreasonable recordkeeping and management fees, failing to remove an underperforming fund, and including expensive individual share classes in its investment portfolio rather than negotiate for cheaper institutional share classes for which the large plan could have qualified. Defendants moved to dismiss the complaint. They argued that plaintiffs lacked standing by failing to plausibly allege an injury in fact resulting from the alleged ERISA violations. Defendants further argued that plaintiffs failed to state claims upon which relief could be granted. The court started its analysis by addressing whether plaintiffs plausibly alleged an Article III injury to confer standing. The court was critical of plaintiffs’ barebones assertion that “each of them participated in the Plan and were injured by Defendants’ unlawful conduct.” Instead, the court pointed out that “[s]eemingly important facts are not alleged…when any Plaintiff began participating in the Plan, whether any Plaintiff continues to invest in the Plan today, whether or when any Plaintiff ceased to invest in the Plan, the specific fund in which any Plaintiff ever invested, and the period during which any Plaintiff invest in any funds or funds.” Accordingly, the court found that, with respect to most of their claims, plaintiffs had not included details from which they could plausibly allege an injury in fact. Only plaintiffs’ recordkeeping expenses claim was found to be “straightforward” enough to infer each of the plan’s participants necessarily experienced and was charged these plan-wide fees. In all other respects, the court dismissed plaintiffs’ allegations for lack of constitutional standing. And, as for the remaining recordkeeping expenses claim, the court concluded that it failed on the merits because “Plaintiffs do not allege facts plausibly showing that the amount of the Plan’s recordkeeping fees are unreasonably high.” Accordingly, the court granted the motion to dismiss in its entirety. However, dismissal was without prejudice, so plaintiffs were given an opportunity to replead should they wish to do so.

Second Circuit

Pessin v. JPMorgan Chase U.S. Benefits Exec., No. 22cv2436 (DLC), 2022 WL 17551993 (S.D.N.Y. Dec. 9, 2022) (Judge Denise Cote). Plaintiff Joseph Pessin, on behalf of himself and a class of similarly situated individuals, brought this action against his former employer, JP Morgan Chase & Company, its board of directors, and the administrator of the Morgan Pension Plan, the JPMorgan Chase U.S. Benefits Executive, for violating ERISA by failing to effectively communicate, disclose, and inform participants of the wear-away phenomenon caused by the plan’s transition in 1998 from a traditional defined benefit plan to a cash balance plan. Mr. Pessin’s complaint asserted four claims under three sections of ERISA. Claims one and two were brought under Section 404(a) for breaches of fiduciary duties. Claim one was brought was against the JPMorgan Chase Benefits Executive for failing to sufficiently disclose the wear-away problem and claim two was brought against the JP Morgan Chase Board for failing to monitor the plan’s administrator. Mr. Pessin’s third cause of action was brought against the Benefits Executive for violation of Section 102, for failure to provide summary plan descriptions written in a manner to be understood by the participants. Finally, Mr. Morgan brought a claim against the plan administrator under Section 105 for failure to provide pension benefit statements listing the participant’s total accrued benefits. Defendants moved to dismiss for failure to state a claim. The court granted their motion. The court concluded that the summary plan descriptions, the plan statements, and other disclosures made by defendants to participants sufficiently explained the mechanisms of how the cash balance plan operated and outlined how participants would receive the greater of either their benefits under the final average pay formula of the old plan or their benefits under the cash balance formula. Thus, the court distinguished the allegations made here from those made in Cigna v. Amara, where defendants had “intentionally withheld details that would provide employees with a direct comparison of their benefits under the two benefits calculations.” As a result, the court found the information provided to be accurate, not deceptive or misleading, and therefore it satisfied the “fiduciary duty (defendants) had to provide complete and accurate information about plaintiff’s pension plan.” Additionally, as the court found no underlying fiduciary breach, it also dismissed the derivative claim for failure to monitor a co-fiduciary. Next, the court dismissed the Section 102 claim for largely the same reason as the Section 404(a) claims – that the summary plan descriptions accurately explained the calculations of benefits without anything “excessively technical or complex such that the Benefit Statement could not be understood by an average plan participant.” Finally, the court dismissed the Section 105 claim, writing, “[t]he fact the statements did not also expressly list the minimum benefit is immaterial.” Counterintuitively, the court reasoned that had JP Morgan included the amount of the minimum benefit on the statements in addition to the cash balance amount, it would have been engaging in inappropriate action because it would have confused “an average plan participant,” and potentially would have “incorrectly suggested that participants would receive both amounts.” For these reasons, the motion to dismiss was granted.

Class Actions

First Circuit

Glynn v. Maine Oxy-Acetylene Supply Co., No. 2:19-cv-00176-NT, 2022 WL 17617138 (D. Me. Dec. 13, 2022) (Judge Nancy Torresen). On September 14, 2022, the court granted a motion for preliminary approval of class action settlement in this litigation between participants of the Main Oxy-Acetylene Supply Company Employee Stock Ownership Plan (“ESOP”), along with Secretary of Labor Walsh, against the plan’s fiduciaries in connection with series of stock transactions involving the ESOP. (A summary of that decision is found in Your ERISA Watch’s September 21, 2022 edition.) Following distribution of settlement notice to participants and a final fairness hearing during which no objections were made, plaintiffs moved for final approval of settlement and for attorneys’ fees, expense reimbursement, and incentive awards for the four class representatives. In this order the court granted the motions. Here, the court reaffirmed its position that the $6,330,000 settlement was adequate, fair, and reasonable, especially as the figure reflected a stock valuation on the high end of the range estimated by plaintiffs’ expert. Once again, the court found the requested attorneys’ fees and costs, 19% of the settlement total or $1,200,000, to be exceedingly fair and in fact a “below-average recovery for counsel in class actions, as contingent fee awards usually are within the range of twenty to thirty percent.” Finally, the court granted the motion for $30,000 in total incentive awards, a distribution of $7,500 to each of the four class representatives, finding it just compensation for their efforts in this action. Thus, with this final stamp of approval from the court, this breach of fiduciary duty ESOP litigation has reached its conclusion.

ERISA Preemption

Third Circuit

Neurosurgical Care of N.J. v. United Healthcare Ins. Co., No. 22-1333, 2022 WL 17585882 (D.N.J. Dec. 12, 2022) (Judge John Michael Vazquez). A neurosurgeon and a healthcare service provider sued United Healthcare Insurance Company in state court challenging its denial of a benefits claim for surgery performed on a patient who was a beneficiary of an employee welfare plan governed by ERISA. United removed the action to the federal district court and subsequently moved to dismiss the complaint arguing the state law causes of action relate to the plan and are therefore preempted by ERISA. As the court understood it, “Plaintiffs’ overarching theory appears to be that they are owed payment under the Plan. Accordingly, Plaintiffs’ claims are predicated on the Plan and its administration.” This was especially true, the court found, because plaintiffs rely on the plan’s definition of medical necessity in their assertions that the denial was improper. Given this, the court felt it could not decide plaintiffs’ claims without relying on or interpreting the plan. Thus, the court agreed with United that plaintiffs’ claims were expressly preempted and so granted the motion to dismiss.

Ninth Circuit

PMH Lab v. Cigna Healthcare of Cal., No. 2:22-cv-06716-SPG (PLAx), 2022 WL 17604437 (C.D. Cal. Dec. 12, 2022) (Judge Sherilyn Peace Garnett). Plaintiff PMH Laboratory, Inc. filed an action in state court against Cigna Healthcare of California and Cigna Health and Life Insurance Company seeking payment of outstanding claims for reimbursement for Covid-19 testing it provided to individuals insured by defendants. In state court PMH Lab asserted claims for violation of California’s Health and Safety code, violation of California Business and Professions code, negligence, unjust enrichment, quantum meruit, and several other state common law causes of action. Defendants removed the action to federal court, claiming the lawsuit naturally implicates ERISA, creating a federal question. PMH Lab subsequently moved to remand the action to state court. The court granted plaintiff’s motion in this order. Applying the two prongs of the Davila test, the court stated that PMH Lab “could not have brought its claims under ERISA § 502(a)(1)(B),” as plaintiff made clear that it does not have any assignments of benefits from any of the patients at issue, and therefore concluded that the first prong of Davila was not met. Accordingly, the court stated it need not analyze whether an independent legal duty was implicated by the allegations and accompanying state law claims. Thus, the court held Cigna failed to meet its burden to prove complete ERISA preemption, and the court concluded the appropriate course of action was therefore to remand the case back to state court.

Life Insurance & AD&D Benefit Claims

Third Circuit

Rizzo v. First Reliance Standard Life Ins. Co., No. 20-1144, __ F. App’x __, 2022 WL 17729430 (3d Cir. Dec. 16, 2022) (Before Circuit Judges Jordan, Hardiman, and Smith). In late 2012, decedent Angelo Rizzo stopped working and filed a claim for disability benefits with his insurer, First Reliance Standard Life Insurance Company. Then, in early 2013, Mr. Rizzo filed an application for a waiver of premium (“WOP”) under his life insurance policy, also insured by First Reliance. It would be 203 days later, on October 9, 2013, that First Reliance would finally send a curt denial letter, rejecting Mr. Rizzo’s application for waiver of premium and finding him “capable of sedentary work exertion.” As the Third Circuit put it, “the decision, though already late, was inexplicably rushed out the door, with no indication that it relied on anything but a stale medical opinion from a nurse or a non-response from a non-treating cardiologist.” The denial did inform Mr. Rizzo of his ability to request a review and of the possibility to convert his group life insurance policy to an individual policy. These actions would not happen because shortly after receiving the denial, Mr. Rizzo, who was just 42 years old, died. His widow, plaintiff Jody Rizzo, subsequently sued First Reliance, seeking benefits under ERISA Section 502(a)(1)(B). In ruling on cross-motions for summary judgment, the court concluded that Mrs. Rizzo should be deemed to have met the exhaustion requirement because First Reliance’s denial was at least 98 days late according to the relevant ERISA regulation. The court further ruled that Frist Reliance’s denial was arbitrary and capricious, and not the result of principled or reasoned decision-making process. Thus, the district court granted summary judgment in favor of Mrs. Rizzo and concluded that she was entitled to the $188,000 provided by Mr. Rizzo’s life insurance policy, and pre- and post-judgment interest. First Reliance appealed. The Third Circuit affirmed. First, the appeals court strongly agreed with the lower court that 29 C.F.R. § 2560.503-1 unambiguously “instructs that, when a claimant files suit to challenge an untimely benefits denial pursuant to 29 U.S.C. § 1132(a), the court is not free to use the prudential exhaustion doctrine to usher the claimant out the door.” Furthermore, the Third Circuit stressed that the denial here was “not just mildly noncompliant; it was grossly so,” and the Department of Labor’s regulation was expressly intended to protect claimants in situations just like this one. Next, the Third Circuit turned to the denial of the waiver of premium benefit, and again affirmed the conclusions drawn by the lower court. In total, the court of appeals found the process by which First Reliance made its decision to be flawed: “the denial letter was the product of an arbitrary process.” For these reasons, the Third Circuit affirmed, ruling the district court “appropriately awarded Mrs. Rizzo $188,000 under Mr. Rizzo’s life insurance policy.”

Eleventh Circuit

Turner v. Allstate Ins. Co., No. 2:13-cv-685-RAH-KFP [WO], 2022 WL 17640165 (M.D. Ala. Dec. 13, 2022) (Judge R. Austin Huffaker, Jr.). Retirees of the Allstate Insurance Company initiated a class action after the company decided it would stop paying insurance premiums on life insurance policies for its former employees who retired after 1990. This action was in direct conflict with oral and written promises Allstate made to its employees and retirees informing them that their life insurance benefits were paid up for life. Nevertheless, these promises were undermined by the summary plan descriptions which consistently included a “no vesting rights” provision and reserved for Allstate the right to terminate benefit plans or modify terms. Originally, this case was before Judge W. Keith Watkins. However, a few years into litigation, and while Allstate’s motion for summary judgment and plaintiffs’ motion for class certification were fully briefed and set for hearing, the case was reassigned to newly sworn-in Judge Emily C. Marks. About a month later, on September 30, 2020, Judge Marks issued an opinion granting summary judgment in favor of Allstate on all claims, concluding that Allstate had the unambiguous power to cease paying premiums on the life insurance policies, and that plaintiffs’ breach of fiduciary duty claims were time-barred by ERISA’s six-year statute of limitations. Plaintiff then filed an appeal to the Eleventh Circuit. Just weeks before the Eleventh Circuit was scheduled to hold oral argument, plaintiffs were informed by the Clerk of Court for the Middle District of Alabama that while Judge Marks was presiding over their case, she owned shares in the Allstate Corporation in a managed account. Under the code of conduct for federal judges, this stock ownership required recusal. Plaintiffs were understandably alarmed by this information and moved to stay argument before the Eleventh Circuit and remand the case to the district court to allow them to move under Federal Rule of Civil Procedure 60 to vacate Judge Marks’ order. The Eleventh Circuit denied plaintiffs’ motion and subsequently issued its own decision unanimously affirming Judge Marks’s summary judgment order. Your ERISA Watch’s summary of that decision was one of two notable decisions in our January 5, 2022 edition. Following the Eleventh Circuit’s ruling, plaintiffs filed for a writ of certiorari with the Supreme Court, which was ultimately denied. Pending before the court here was plaintiffs’ motion pursuant to Federal Rule of Civil Procedure 62.1 for an order vacating Judge Marks’ summary judgment decision and an additional motion for leave to conduct discovery on Judge Marks’ stock ownership in Allstate. Plaintiffs’ motions were firmly denied by the court, which held at bottom that “Judge Marks’s failure to recuse was harmless.” The court disregarded what it characterized as plaintiffs’ theory that “Judge Marks could only be wrong because she had a financial interest in Allstate,” concluding such a theory fell flat because the neutral three-judge panel on the Eleventh Circuit unanimously affirmed the decision on de novo review. Accordingly, the court held that there was “no risk of injustice to the Plaintiffs from Judge Marks’ failure to recuse, especially when the Plaintiffs can point to no other action by Judge Marks that impacted the summary judgment record that both she and the Eleventh Circuit reviewed.” Finally, it was the view of the court that denying plaintiffs’ requested relief would not “undermine the public’s confidence in the judicial process.” However, when one takes a moment to look at a broader context, for instance the revelations revealed in the Wall Street Journal’s large-scale investigative piece entitled “131 Federal Judges Broke the Law by Hearing Cases Where They Had a Financial Interest,” or when one considers the series of extremely political decisions issued last term by the Supreme Court, most notably in Dobbs v. Jackson Women’s Health Organization, this court’s dismissive comments regarding the public’s confidence in the judicial process seem questionable.

Medical Benefit Claims

First Circuit

K.D. v. Harvard Pilgrim Health Care, Inc., No. 20-11964-DPW, 2022 WL 17586091 (D. Mass. Dec. 12, 2022) (Judge Douglas P. Woodlock). A beneficiary of a self-insured ERISA healthcare plan, the Harvard Pilgrim – Lahey Health Select HMO, brought this lawsuit challenging the denial of her claims for out-of-network mental health benefits, asserting the denials were a violation of ERISA and the Mental Health Parity and Addiction Equity Act. Plaintiff K.D. sued the plan’s sponsor, Lahey Clinic Foundation, Inc., along with its third-party administrator, Harvard Pilgrim Health Care, Inc. (“HPHC”) after the plan refused to pay for her stay at an inpatient treatment center, Sierra Tucson, and for her time at a partial hospitalization program, the Cambridge Eating Disorder Center. HPHC contracted Optum United Behavioral Health to handle its mental health and substance abuse benefit claims under the Plan. Under the terms of the Plan, participants and beneficiaries can only receive care from out-of-network providers after establishing that the professional services required could not be provided by any in-network professional. K.D. and her father contended that none of the facilities included as in-network providers were appropriate because they did not specialize in depression and eating disorders but were instead substance abuse programs. Thus, the central dispute between the parties during the court’s analysis of their cross-motions for summary judgment was whether the in-network provider identified by defendants in their denials, Walden Behavioral Care, had the expertise and ability to provide the particularized mental health care treatment that K.D. needed and received from Sierra Tucson and the Cambridge Eating Disorder Center. To begin, as the plan grants HPHC discretionary authority, the court stated that deferential review was applicable. However, the court stressed that deferential review was not “without some bite” and stated that the First Circuit makes clear “there is a sharp distinction between deferential review and no review at all.” Because defendants focused on a single in-network provider that it believed could have provided the care for K.D., the court stated that it would also focus its analysis on this provider and that it would not allow defendants to “expand the playing field by the move of demanding an analysis of all providers, in contrast to their own reviews, denials, and arguments that focused on Walden.” On review, the court held that “Walden’s psychiatric treatment facilities were inappropriate for the level of care that K.D. needed.” The court found that the denials were not supported by substantial evidence. Furthermore, the denials themselves were found by the court to be lacking adequate analysis to fully provide K.D. with a fair review sufficient “to meet ERISA’s requirement that specific and understandable reasons for denial be communicated to the claimant.” However, the court decided remand to the plan administrator for further proceedings was the appropriate remedy for defendants’ inadequate review, as the court found that “the record does not compel the finding that K.D. is entitled to benefits.” Nevertheless, the court expressed that remand to the claims administrator makes K.D. eligible for an award of attorneys’ fees, and upon review of the Cottrill factors the court determined that K.D. is entitled to a fee award pursuant to Section 502(g)(1). Finally, regarding K.D.’s Mental Health Parity violation claim, the court held that K.D. did not provide requisite facts for comparison to demonstrate that the Plan’s network of residential mental health treatment centers was inadequate. Accordingly, defendants were granted summary judgment on that count.

Pension Benefit Claims

Fourth Circuit

Mahoney v. iProcess Online, Inc., No. JKB-22-0127, 2022 WL 17585160 (D. Md. Dec. 12, 2022) (Judge James K. Bredar). Plaintiffs Brian Mahoney, Meghan DeMeio, and Christina Reed were employed by defendant iProcess Online Inc. Throughout their employment with iProcess, the company was required to transfer earned wages and matching contributions into plaintiffs’ 401(k) accounts. However, plaintiffs claim that iProcess and its chief operating officer, defendant Michelle LeachBard, failed to do so. In their complaint, plaintiffs asserted ERISA violations and state law claims of fraud, breach of contract, conversion, and negligent misrepresentation. Defendants have been served but have never appeared in the action. Accordingly, plaintiffs moved for entry of default, which was granted. Subsequently, plaintiffs filed a motion for default judgment. The court granted in part and denied in part plaintiffs’ motion. Specifically, the court denied the motion with respect to the ERISA and conversion claims and directed plaintiffs to perform an accounting of their compensatory damages and provide further briefing on the total amount of damages they are seeking. Regarding ERISA, the court expressed confusion regarding which subsection of ERISA supported plaintiffs’ claims, and therefore also whether they adequately stated claims upon which relief could be granted. Furthermore, to the extent plaintiffs were asserting a claim for breach of fiduciary duty under ERISA, the court stated that “Plaintiffs do not sufficiently allege that Defendants are fiduciaries.” The court also identified shortcomings with plaintiffs’ state law conversion claim, stating plaintiffs failed to distinguish whether they were seeking the return of “the actual, identical money,” rather than “a specific amount of money.” Nevertheless, the court refused to grant the motion to dismiss with respect to plaintiffs’ remaining state law claims. However, as the court felt it could not determine the proper award of judgment on the information currently before it, it directed plaintiffs to provide detailed accounting of the damages and information on any additional relief they seek.

Pleading Issues & Procedure

Third Circuit

Miller v. Campbell Soup Co. Ret. & Pension Plan Admin. Comm., No. 19-11397 (RBK/EAP), 2022 WL 17555302 (D.N.J. Dec. 9, 2022) (Magistrate Judge Elizabeth A. Pascal). Pro se plaintiff Sherry Miller brought an ERISA action against the administrative committee of the Campbell Soup Company Retirement & Pension Plan for breaches of fiduciary duties and equitable estoppel based on misrepresentations the committee made about the methodology the plan used to calculate accrued pension benefits. In her action, Ms. Miller seeks the difference between the benefits she received and the benefits to which she believed she was entitled based on the alleged promises made by defendant. This summer, Ms. Miller served her first set of requests for production of documents on defendant, seeking, among other things, the documents and communications relating to her hire and her rehire with the company. While responding to Ms. Miller’s production request, the committee claims it obtained Ms. Miller’s personnel file, which included a copy of an executed Voluntary Separation Agreement and General Release. This form included terms stating that the release waived the signatory’s rights to bring claims under ERISA, although it also expressly carved out claims for vested benefits under the pension plan. During a 10-day period last August, defendant discovered this agreement, sent it to Ms. Miller, consulted their counsel and confirmed that they had not asserted the affirmative defense of release, sought Ms. Miller’s consent to their filing an amended answer, and then when Ms. Miller declined to consent, moved for leave to file an amended answer to include the release as an affirmative defense. Taking the liberal approach adopted by the Third Circuit, the court granted defendant’s motion, finding the committee satisfied Federal Rule of Civil Procedure 16’s good cause standard, and that under Rule 15, granting the motion to allow for the proposed amendment would not be futile or prejudice Ms. Miller. In particular, the court was satisfied that defendant acted speedily, without undue delay, and that defendant had a good explanation of why it was unaware of the agreement prior to its discovery production. As to whether the release bans Ms. Miller’s action, the court stated that it would not decide this merits issue during its analysis of whether to grant a motion for leave to amend answer. Finally, in addition to granting defendant’s motion, the court granted Ms. Miller one week to request discovery from defendant regarding the release.

Atlantic Neurosurgical Specialists P.A. v. United Healthcare Grp., No. Civ. 20-13834 (KM) (JBC), 2022 WL 17582546 (D.N.J. Dec. 12, 2022) (Judge Kevin McNulty). Two medical providers and three individual physicians brought this ERISA action on behalf of patients with healthcare plans insured by United Healthcare Insurance Company and its related entities after the patients received emergency medical treatment by the providers and United rendered adverse benefit determinations on the submitted claims for reimbursement. Both Atlantic Neurosurgical Specialists and American Surgical attempted to pursue administrative appeals contesting the amounts paid by United. However, United refused to process the appeals, rejecting plaintiffs’ designation of authorized representative forms. Thus, in plaintiffs’ complaint, the medical professionals allege that “United consistently and systematically refuses to recognize a duly-executed (designation of authorized representative form) submitted by its beneficiaries, particularly when those DAR Forms are executed in favor of the beneficiary’s health care provider.” This practice, including United’s use of a form claim denial letter, plaintiffs claim, violates ERISA’s minimum requirements for claims and appeals procedures under ERISA’s claims procedure regulation, 29 C.F.R. § 2560.503-1. In a prior order, the court dismissed plaintiffs’ initial complaint for failing to establish standing under Article III. The court stated that although plaintiffs alleged the procedures were inadequate, they failed to allege that the denial of benefits was improper under the terms of the plans “and that a proper review process would therefore have resulted in the payment of further benefits.” Since that decision, plaintiffs have moved for leave to amend their complaint. Their motion was accompanied by their proposed second amended complaint, which they averred includes the information the court previously concluded was required to allege an injury in fact to confer them with standing, i.e., specific references to the portions of the plans that entitle the patients to the benefits they are asserting they are entitled to. In this order, the court found the proposed amendments did indeed cure the deficiencies it previously identified. Additionally, the court was satisfied that the claims as to the reasonableness of the procedures were “sufficient to survive a motion to dismiss.” The court also declined to dismiss the complaint for failure to exhaust, as exhaustion is an affirmative defense and plaintiffs presented arguments that they should be deemed to have exhausted their remedies given United’s failure to follow the claims procedures, and that exhausting their remedies would have been futile. Finally, the court allowed plaintiffs to assert claims under both Sections 502(a)(1)(B) and 502(a)(3)(A), permitting them to plead their claims in the alternative as alternate routes to relief. For these reasons, the court granted plaintiffs’ motion.

Fourth Circuit

Koman v. Reliance Standard Life Ins. Co., No. 1:22CV595, 2022 WL 17607056 (M.D.N.C. Dec. 13, 2022) (Judge Loretta C. Biggs). Plaintiff Kristen Mann Koman sued her long-term disability plan, Unifi, Inc. Employee Welfare Benefit Plan, and its claims administrator, Reliance Standard Insurance Company, alleging that Reliance reversed its decision to approve her claim for benefits despite any change in Ms. Koman’s conditions or her ability to perform work. In her action, Ms. Koman asserted three ERISA claims: (1) a claim for benefits under Section 502(a)(1)(B); (2) a claim for breach of fiduciary duty; and (3) a claim for failure to comply with ERISA’s claims procedures regulations. Defendants moved to dismiss Ms. Koman’s second and third claims under Federal Rule of Civil Procedure 12(b)(6). Defendants argued that Ms. Koman could not pursue her two claims seeking equitable remedies because they were duplicative of an adequate remedy available to Ms. Koman that she is pursing in her claim for recovery of benefits. Thus, “Defendants argue that Counts II and III should therefore be dismissed pursuant to Varity Corp v. Howe, 516 U.S. 489 (1996), and Korotynska v. Metropolitan Life Insurance Co., 474 F.3d 101 (4th Cir. 2006).” The court agreed with defendants, determining that “all three counts allege only a single injury: that Plaintiff was wrongfully denied benefits.” Thus, in accordance with the interpretation of Varity adopted by many other courts, the court concluded that a claimant with a valid cause of action under Section 502(a)(1)(B) may not also proceed with a claim under Section 502(a)(3). For this reason, the court granted defendants’ motion and dismissed Ms. Koman’s equitable relief claims, leaving her with only her claim for benefits.

Fifth Circuit

Ledet v. Bd. of Trs., No. 22-3697, 2022 WL 17581716 (E.D. La. Dec. 12, 2022) (Judge Susie Morgan). Plaintiff Mary Ledet sued the Board of Trustees of Transit Management of Southeast Louisiana, Inc. Retirement Plan in Louisiana state court asserting six state law claims, and two ERISA claims under Sections 502(a)(1)(B) and (a)(3). A couple of months after Ms. Ledet served the Board of Trustees, it filed a notice of removal. Subsequently, Ms. Ledet filed a motion to remand on the basis that the Board’s notice of removal was untimely. Although the court agreed that the Board’s removal was untimely, it ultimately found the issue of timeliness irrelevant because the federal district court has exclusive jurisdiction over Ms. Ledet’s claim for equitable relief under ERISA Section 502(a)(3), and remanding to state court would therefore “be fruitless.” In addition to its exclusive jurisdiction over Ms. Ledet’s ERISA breach of fiduciary duty claim, the court also found that it had concurrent jurisdiction on Ms. Ledet’s claim for unpaid benefits under ERISA Section 502(a)(1)(B), and that the interest of judicial economy would be served by it exercising its supplemental jurisdiction over the state law claims that pertain to the same case or controversy as the ERISA claims. Accordingly, the court denied Ms. Ledet’s motion to remand.

Retaliation Claims

Third Circuit

Hager v. Harland Clarke Corp., No. 2:21-cv-1358, 2022 WL 17724430 (W.D. Pa. Dec. 15, 2022) (Judge Cathy Bissoon). Plaintiff Mark Hager was an employee of defendant Harland Clark Corporation. Mr. Hager asserts in his complaint that Harland Clark Corp. terminated his employment to interfere with his receipt of health insurance benefits under the company’s group health insurance plan in violation of ERISA Sections 502 and 510. Defendant moved to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). It argued that Mr. Hager did not plausibly allege facts suggesting that the company had the specific intent to interfere with his attainment of employee benefits and that his claims therefore fail. The court agreed. “[T]he Amended Complaint is devoid of factual allegations – such as unusual timing, misrepresentation of benefits or costly medical condition or diagnosis – specific to Plaintiff that differentiate him from other Plan participants or otherwise suggest specific intent. Indeed, the only assertions the Amended Complaint adds are generalized suspicious about Defendant’s motivations based on a theory that older employees generally incur higher health benefit expenses.” Finding Mr. Hager had failed to meet pleading requirements, the court granted the motion and dismissed the complaint without prejudice.

Statute of Limitations

Sixth Circuit

Gragg v. UPS Pension Plan, No. 22-3379, __ F. 4th __, 2022 WL 17729625 (6th Cir. Dec. 16, 2022) (Before Circuit Judges Batchelder, Griffin, and Kethledge). “The limitations period for an ERISA claim ‘to recover benefits due’ under a plan does not expire before the alleged underpayment on which the claim is based.” So began the Sixth Circuit’s reversal of a district court decision dismissing a retiree’s suit seeking pension payments under the UPS Pension Plan. The district court had concluded that plaintiff Ralph Gragg’s action was untimely because he brought it eight years after he received a letter from his pension plan, the particulars of which contradicted the plan’s descriptions of Social Security offsets, and the monthly payments retirees would receive after turning 65. This letter was certainly a “dispute” among the parties, but the Sixth Circuit would conclude it was not the “injury.” The court of appeals emphasized, under common law, that an ERISA benefit claim accrues, and its six-year statute of limitations begins to run, “when the plaintiff discovers, or with due diligence should have discovered, the injury that is the basis of the action.” The Sixth Circuit disagreed with the lower court’s interpretation of when Mr. Gragg’s injury occurred, stating, “the letters did not cause the injury upon which Gragg sued; the underpayments did. And before that injury his claim had not accrued.” Applying this understanding, the court of appeals concluded that Mr. Gragg “had no injury to discover until August 1, 2018 – when the Plan first paid him $1,754 less than the monthly amount to which he says he was entitled. That claimed underpayment is what first injured him; before then, the Plan paid him every penny he was owed.” Furthermore, it was the view of the court that Mr. Gragg could not have commenced legal action after receiving the letter. At that time, he did not have a ripe controversy “justiciable under Article III.” Accordingly, the Sixth Circuit found the claim timely, and reversed the lower court’s holding concluding otherwise.

Venue

Tenth Circuit

R.J. v. Optima Health, No. 1:21-00172-DBP, 2022 WL 17690147 (D. Utah Dec. 15, 2022) (Magistrate Judge Dustin B. Pead). Plaintiffs are a family who have sued Optima Health seeking judicial review of the insurer’s failure to pay for residential mental health and substance use treatment, claiming the denial violates ERISA and the Mental Health Parity and Addiction Equity Act. Optima moved to dismiss or to transfer venue. The court denied the motion to dismiss, concluding venue was proper in Utah, but granted the motion to transfer. As the plaintiffs are residents of Virginia and Optima is headquartered in Virginia, the court concluded that the Eastern District of Virginia was a more convenient forum. This was especially true, the court stated, because the only connection to Utah was the location of the treatment facility. As a final note, the court compared the dockets of District of Utah to the Eastern District of Virginia, and found the latter district less congested, which favored transfer. For these reasons, the case will be moved.

Withdrawal Liability & Unpaid Contributions

Seventh Circuit

Plumbers’ Pension Fund Local v. Only Plumbing 2 Inc., No. 21-cv-1342, 2022 WL 17668607 (N.D. Ill. Dec. 14, 2022) (Judge Steven C. Seeger). Multi-employer pension funds sued two plumbing companies, Only Plumbing and G&N Plumbing, and their owners, husband and wife Joe and Gina Geraghty, for failure to pay contributions to the plans. These two plumbing companies shared “family ties,” funds, and the same workforce. The only thing they didn’t share was an obligation to union workers under a collective bargaining agreement. As the court noted, “[t]his case is the third lawsuit alleging that (Joe Geraghty) formed a new company to avoid paying union contributions.” Given Mr. Geraghty’s familiarity with ERISA civil actions, he and his two companies “capitulated,” acknowledging that the court should pierce the corporate veil between them and admitting that the purpose of the second company was to avoid paying fund contributions the first was obligated to pay. However, Gina Geraghty did not join the other defendants in this concession. Thus, the issue before the court was to decide whether to pierce the corporate veil between Gina Geraghty and the companies. Viewing the record, the court stated that there was a unity of interest and ownership between Gina Geraghty and the plumbing companies. The court further stated that “fairness requires holding Gina Geraghty accountable for the company’s liabilities.” If the corporate veil were not pierced, the court concluded the funds and their participants would be the ones to suffer, by losing out to contributions they were entitled to and rely on. “Without piercing the corporate veil, Gina Geraghty would reap the benefits of a scheme to scam the unions.” Accordingly, the court granted summary judgment in favor of plaintiffs and found Mrs. Geraghty has an obligation to pay the contributions alongside her husband and their businesses.