ForUsAll, Inc. v. United States Dep’t of Labor, No. 22-cv-1551 (CRC), 2023 WL 5559682 (D.D.C. Aug. 29, 2023) (Judge Christopher R. Cooper)

Concerned about the rise in and volatility of cryptocurrency investments, the Department of Labor (“DOL”) issued a Compliance Assistance Release last year entitled “401(k) Plan Investments in ‘Cryptocurrencies’” which cautioned fiduciaries that defined-contribution retirement plan investments in digital assets may constitute breaches of the fiduciary duty of prudence under ERISA.

The Release warned that investments in crypto are concerning given “the many uncertainties associated with valuing these assets, speculative conduct, the amount of fictitious trading reported, [and] widely published incidents of theft and fraud.” It also worried that many market participants were “operating outside of existing regulatory frameworks or not complying with them.”

The DOL’s concerns have largely been vindicated. Since the DOL issued the Release, the Securities and Exchange Commission has filed charges against several large cryptocurrency exchanges alleging that they misled investors and operated as unregulated securities exchanges. The value of many cryptocurrencies has also plummeted from their high in 2021. Additionally, Sam Bankman-Fried, the founder of the collapsed crypto exchange FTX, is facing criminal charges for securities and commodities fraud and money laundering.

Nevertheless, despite the current turmoil and instability in the world of cryptocurrencies, they remain popular with the public and investors alike. Companies like the administrative service provider ForUsAll, Inc., the plaintiff in this matter, have every intention of providing access to cryptocurrency investment options to those who are interested. Which is why ForUsAll was none too happy when it learned of the DOL’s Release questioning whether cryptocurrencies are sound and prudent 401(k) investments.

As a result, ForUsAll commenced this action against the DOL under the Administrative Procedure Act (“APA”), seeking a declaration that the Department’s Release was unlawful and an order vacating it and preventing its application in any manner. The complaint asserts that the Department violated the APA by issuing the Release without first going through the notice and comment process. ForUsAll further alleges that the DOL acted in an arbitrary and capricious manner by jettisoning ERISA’s duty of prudence “in favor of a special ‘extreme care’ standard” unique to cryptocurrency investments.

In response, the DOL moved to dismiss this action pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). Its motion was granted in this decision.

First, the court agreed with the DOL that ForUsAll’s alleged injury – that retirement plans were backing out of discussions to invest with the company in cryptocurrency options – would not be addressed by the requested relief. The court was skeptical that an order barring the application of the Release would suddenly prompt ERISA-plan fiduciaries “to renew their discussions or enter into the contemplated partnerships.” As a result, the court found that ForUsAll did not have standing and granted the DOL’s motion to dismiss pursuant to Rule 12(b)(1) for lack of subject matter jurisdiction.

Even more to the point, the court held that the Release is not a final agency action under 5 U.S.C. § 704 subject to judicial review. It stated that the Release “neither marks the consummation of the Department’s decisionmaking nor determines any entities’ legal rights or obligations,” thereby failing to meet the two conditions necessary for an agency action to be final. In the words of the court, the Release “was only the opening act, not the grand finale, of the Department’s process of regulating the burgeoning cryptocurrency market.” Simply put, the court found that nothing in the Release binds regulated entities and no “legal consequences flow from the Release.” Instead, the Release functions as a warning, one that companies can chose to heed or not. Thus, regardless of ForUsAll’s failure to demonstrate standing, the court found that it had not stated a cognizable claim and therefore dismissed the suit.

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

Disability Benefit Claims

Second Circuit

Flowers v. Hartford Life & Accident Ins. Co., No. 1:21-cv-05388-MKV, 2023 WL 5628763 (S.D.N.Y. Aug. 31, 2023) (Judge Mary Kay Vyskocil). In this decision ruling on parties’ cross-motions for summary judgment, the court entered judgment in favor of defendant Hartford Life and Accident Insurance Company and denied plaintiff Kerri Flowers’ motion for judgment. It concluded that substantial evidence supported Hartford’s decision to terminate Ms. Flowers’ long-term disability benefits and that the insurance company’s decision was therefore rational, not arbitrary and capricious. In doing so, the court relied on an independent medical examination report, statements from Ms. Flowers’ treating physicians attesting to improvements in her conditions, the opinions of Harford’s reviewing doctors, and the result of the vocational assessment Hartford ordered. Taken together, the court agreed with Hartford that these pieces of evidence clearly amounted to “more than a scintilla” of evidence in support of Harford’s denial of continued benefits. The court also concluded that no evidence in the administrative record unequivocally cut against Harford’s findings to “alter the conclusion that Hartford’s claim determination was not arbitrary and capricious.” To the extent that evidence could be viewed favorably to Ms. Flowers because her treating physicians disagreed with the opinions of Harford’s reviewers, the court stated that Hartford did not abuse its discretion by resolving this conflict against a finding of disability and crediting certain pieces of evidence over others. Finally, the court was unpersuaded that Hartford abused its discretion by terminating Ms. Flowers’ benefits after over a decade of paying her claim. It pointed to evidence of meaningful improvement in Ms. Flowers’ conditions, and also stressed that “the insured always has the burden to demonstrate an entitlement to benefits.” Based on the foregoing, the court granted Hartford’s motion for summary judgment and denied Ms. Flowers’ cross-motion for summary judgment.

Seventh Circuit

Scanlon v. Life Ins. Co. of N. Am., No. 22-1121, __ F. 4th __, 2023 WL 5617127 (7th Cir. Aug. 31, 2023) (Before Circuit Judges Rovner, Jackson-Akiwumi, and Lee). In his appeal to the Seventh Circuit, plaintiff-appellant Scott Scanlon argued that the district court erred in finding him not entitled to long-term disability benefits under de novo review. In its decision, the appellate court agreed and therefore vacated and remanded. It held that the district court failed to appropriately consider how Mr. Scanlon’s symptoms from his sleep disorders and chronic pain affect his ability to perform the material duties of his work as a systems analyst. First, the court of appeals stated that the lower court had failed to consider Mr. Scanlon’s inability to sit for extended periods of time, which is a requirement of his occupation. “The district court found Scanlon could earn 80% or more of his normal earnings even with his diminished capacity for sedentary work. We are puzzled by this conclusion; Scanlon’s ability to sit does not appear to come close to 80% of his full workday.” On remand, the Seventh Circuit required the district court to provide such an explanation and analyze Mr. Scanlon’s inability to sit for prolonged periods when considering the physical demands of his job. Further, the appeals court held that the district court failed to support its findings that Mr. Scanlon’s reports of pain were not reliable. The appellate court therefore also directed the district court to “consider the degree to which the opinions of Scanlon’s medical providers are consistent with the results of the functional capacity evaluation.” Regarding the cognitive requirements of Mr. Scanlon’s profession, the court of appeals wrote that the lower court “described the evidence” of the impact of sleep and pain disorders on Mr. Scanlon’s cognition, but “did not consider the effect [the symptoms] had on his ability to perform the requirements of a Systems Analyst job.” The court of appeals found that this was a clear error, especially as Mr. Scanlon’s job requires critical and analytical thinking, as well as technical computer skills and high-level verbal and written communication abilities. It held that “there is record evidence that Scanlon suffers cognitive and communicative impairments due to chronic sleep disorders that affect his ability to perform these duties during regular work hours.” The district court was therefore directed to specifically address the cognitive aspects of Mr. Scanlon’s work and the limitations he has as a result of his medical conditions. In sum, the Seventh Circuit agreed with Mr. Scanlon that his illnesses are affecting his daily life and that the district court committed clear error by failing to fully consider these physical and cognitive effects. Thus, the Seventh Circuit vacated the district court’s ruling and remanded the case for further proceedings consistent with its opinion. 

Medical Benefit Claims

Third Circuit

McDonough v. UFCW Nat’l Health & Welfare Fund, No. 3:22-CV-01209, 2023 WL 5596254 (M.D. Pa. Aug. 29, 2023) (Magistrate Judge Karoline Mehalchick). Plaintiff Matthew W. McDonough filed this action against the UFCW National Health and Welfare Fund to recover benefits under the plan. Mr. McDonough sustained injuries, including broken bones, bleeding, and bruising, after accidentally falling twelve feet from the back of a neighbor’s porch while at a party. At the time of the accident, Mr. McDonough was drinking and taking prescription medications, including prescription marijuana. He was hospitalized, received successful surgical procedures, and was then discharged. Mr. McDonough’s claim for reimbursement of his medical benefits under the plan was denied by the Fund pursuant to its intoxication exclusion. Believing that this denial was not arbitrary and capricious, defendant moved for summary judgment. The court granted its motion. It agreed that substantial evidence supported defendant’s conclusion that Mr. McDonough’s alcohol level was a contributing cause of his accident and resulting injuries. Given the unambiguous plan language which excludes recovery from injuries sustained while voluntarily intoxicated, the court upheld the denial. It disagreed with Mr. McDonough that he needed to intend to injure or harm himself pursuant to the terms of the exclusion, holding “the alcohol exclusion at issue in this case is included in a separate sentence from the suicide provision, [and the] exclusion plainly provides that no benefit will be paid under the Plan for any voluntary act of alcoholic intoxication.” Furthermore, the court stressed that injuries do not “have to result solely from intoxication but only that the injuries be a result of intoxication.” The court also found Mr. McDonough’s argument that the average plan participant could not reasonably be expected read or understand the terms of the exclusion to be “unavailing.” Accordingly, the court found that the Fund correctly applied the intoxication exclusion to deny Mr. McDonough benefits and therefore held that it was entitled to judgment in its favor.

Ninth Circuit

K.G. v. Univ. of S.F. Welfare Benefit Plan, No. 23-cv-00299-JSC, 2023 WL 5599009 (N.D. Cal. Aug. 28, 2023) (Judge Jacqueline Scott Corley). Plaintiff J.G., father of son K.G., sued his ERISA-governed healthcare plan, defendant University of San Francisco Welfare Benefit Plan, for denial of healthcare benefits and for equitable relief for violating the Mental Health Parity and Addiction Equity Act. Defendant moved to dismiss or alternatively for judgment on the pleadings. As an initial matter, the parties agreed to substitute K.G. as the plaintiff. As a result, defendant’s motion to dismiss for lack of Article III standing was a moot issue. Thus, the court spent the decision discussing whether plaintiff stated a Mental Health Parity Act claim for equitable relief under ERISA Section 502(a)(3). K.G. maintained that the plan violates the Parity Act by imposing an accreditation requirement for mental health residential treatment centers which it does not require for skilled medical nursing facilities. Specifically, the plan requires that residential treatment centers be fully accredited by either The Joint Commission, the Commission on Accreditation of Rehabilitation Facilities, the National Integrated Accreditation for Healthcare Organizations, or the Council on Accreditation. Meanwhile, the plan requires nursing facilities to have “recognition under Medicare.” As alleged, the court found that plaintiff plausibly stated a claim that these two requirements are not equal, and the plan is discriminatorily imposing a more restrictive limitation for mental healthcare benefits than it is applying to physical health benefits. Defendant’s argument that the accreditation requirement for residential treatment centers is not more onerous than the Medicare recognition requirement for skilled nursing centers was viewed by the court as question that cannot be answered at the pleading stage and “is instead a factual question requiring discovery.” Accordingly, the court denied defendant’s motion for judgment on the pleadings of the Section 502(a)(3) claim. Finally, the decision ended with the court declining to resolve the appropriate review standard for some of the benefit denials at issue. It held that further briefing on the issue was necessary. Plaintiff K.G. is represented in this matter by Kantor & Kantor attorney Elizabeth Green.

Tenth Circuit

J.S. v. United Healthcare Ins. Co., No. 2:21-cv-00483, 2023 WL 5532237 (D. Utah Aug. 28, 2023) (Magistrate Judge Daphne A. Oberg). Father and daughter J.S. and S.S. initiated this lawsuit against defendants United Healthcare Insurance Company and United Behavioral Health to dispute denials of medical benefits for the care S.S. received at a residential treatment center and seeking a court order requiring the United defendants to pay more than $100,000 in medical expenses the family incurred. In this memorandum decision and order Magistrate Judge Daphne A. Oberg granted plaintiffs’ motion for summary judgment and denied defendants’ motion for summary judgment. The court held that under de novo review a preponderance of the evidence showed that S.S.’s treatment was medically necessary as defined by the plan from the date when the claims were first denied on August 10, 2018 “at least through May 31, 2019.” As for the claims for benefits after that date, the court remanded to United for further consideration. In particular, the court agreed with plaintiffs that the care was medically necessary under the Optum Guidelines because S.S. was “an extreme danger to herself and danger to others,” as there were at least 48 incidents during the relevant time period where S.S.’s “mental health disorders manifested in alarming ways that would likely have compromised her safety had [the residential treatment center] staff not caught and addressed them.” United’s assertion that S.S. had improved when it denied her benefits was therefore belied by the medical record. The court accordingly concluded that S.S.’s continued care was medically necessary under the plan “based on her continued dysregulation risking harm to herself or others, the turbulent nature of her family relationships, her participation [and struggles] in therapy, and the opinion of her treating therapist.” The decision ended with the court declining to consider an award of prejudgment interest or attorneys’ fees at this time.

Pension Benefit Claims

Sixth Circuit

McGlynn v. Ford-UAW Ret. Plan, No. 22-12462, 2023 WL 5511194 (E.D. Mich. Aug. 25, 2023) (Judge Linda V. Parker). Plaintiff Louis Edward McGlynn, an employee of the Ford Motor Company, has sued his employer, its ERISA-governed retirement plan, and the plan’s retirement board under ERISA Sections 502(a)(1)(B), 502(a)(3), and 503 on the belief that his pension benefits have been miscalculated under the terms of the plan which govern service credit. Specifically, Mr. McGlynn brings a claim for benefits, violations of fiduciary duties, a claim for violation of ERISA’s claim procedure requirements, and a claim for violation of ERISA’s requirements to disclose plan documents upon request. Defendants moved pursuant to Federal Rule of Civil Procedure 12(b)(6) for dismissal of Mr. McGlynn’s claims alleging fiduciary breach and violation of ERISA’s claims procedure requirements. The court granted in part and denied this motion. To begin, the court denied the motion to dismiss the fiduciary breach claims. It concluded that these claims, alleging systematic improper handling of claims and failure to disclose material terms of the plan and/or misrepresentation the terms of the plan, were not simply “repackaged” versions of Mr. McGlynn’s Section 502(a)(1)(B) claim. The court found that Mr. McGlynn’s injuries were separate and distinct from one another in his Section 502(a)(1)(B) and his Section 502(a)(3) claims, and that his fiduciary breach claims were therefore not precluded by the denial of benefits. Moreover, the court agreed with Mr. McGlynn that in light of the Supreme Court’s ruling in Amara, he is not required to demonstrate or plead detrimental reliance on the plan misrepresentations under ERISA. “As the Supreme Court noted in Amara, ‘it is not difficult to image how the failure to provide proper summary information, in violation of the statute, injured employees [because] plan changes would likely prove harmful…Congress would [not] have wanted to bar those employees from relief.’” However, the court granted the motion to dismiss Mr. McGlynn’s claim for violation of ERISA’s claims procedure requirements. The court agreed with defendants that these regulations do not provide an independent cause of action under these circumstances, especially as the court felt the claim was duplicative of the benefits claim and was seeking to redress the same injury. Because this claim was found to be “subsumed within” Mr. McGlynn’s denial of benefits claim the court found that it is properly pursued as part of the Section 502(a)(1)(B) claim and therefore dismissed the claims procedure count as an independent cause of action.

Pleading Issues & Procedure

Seventh Circuit

Bryant v. Walgreen Co., No. 23 CV 1294, 2023 WL 5580415 (N.D. Ill. Aug. 29, 2023) (Judge Manish S. Shah). Four former employees of defendant Walgreen Co. have sued the company in connection with two COBRA notices it sent to them after termination from their employment, which they believe were deficient under 29 U.S.C. § 1166. They claim that Walgreens failed to meet regulatory requirements by sending two notices, rather than a single notice, and because neither notice complied with the regulation. In particular they maintain that Walgreens failed to provide the address to which payments should be sent, failed to identify the plan administrator, failed to explain how to enroll in COBRA coverage, failed to include a physical election form, failed to provide the correct election date, and failed to provide notice in manner which could be understood by the average plan participant. Without this information, plaintiffs aver that they could not make informed decisions about health insurance coverage and therefore suffered injuries in the form of lost health insurance coverage and prescription benefits, and by incurring out-of-pocket medical expenses. In their complaint, the former employees assert two causes of action, a claim for statutory penalties under Section 1166 and a claim in the alternative for recovery of benefits and a declaration of rights clarifying benefits under Section 502(a)(1)(B). Walgreens moved to dismiss. The decision began by addressing plaintiffs’ standing. It concluded that plaintiffs had sufficiently alleged concrete injuries-in-fact traceable to the deficient COBRA notices and therefore met the low bar of showing a “causal connection between the injury and the conduct complained of.” Next, the court declined to dismiss either of plaintiffs’ causes of actions as untimely. Regarding the Section 1166 claim, the court agreed with Walgreens that Illinois’ two-year statute of limitations for actions against insurance providers concerning renewal of insurance was applicable to this action. However, the court expressed that it could not determine at present when the clock on that two-year limitation period began to run because COBRA notice claims accrue “when the plaintiff either knows or should have known the facts necessary to bring an improper-notice claim: specifically, that his former employer has failed to provide him with the required notice of his continuation right.” The court found that it could not determine when plaintiffs reasonably knew their notification rights were violated and thus stated that their § 1166 claim could not be dismissed as time-barred at this stage in litigation. Regarding the benefits claim, the court held that plaintiffs were well within the analogous ten-year state statute of limitation, and that this claim was thus timely. After these initial holdings, the court moved on to evaluating the motion to dismiss for failure to state a claim. It started with plaintiffs’ Section 1166 claim, which the court mostly dismissed. The court determined that (1) Walgreens named the plan administrator in its notices; (2) physical election forms are not required and that directions to call a phone number for an explanation of the plan’s procedures for electing coverage is compliant with the regulation; (3) the notices were written in a manner that participants could understand; and (4) the regulation does not require a single notification or expressly prohibit multiple notices. The only piece of plaintiffs’ Section 1166 claim which remained was their allegation that Walgreens sent inaccurate enrollment deadlines during the pandemic when the government had extended COBRA enrollment deadlines. The court then examined plaintiffs’ Section 502(a)(1)(B) claim. It found this claim conclusory and vague because “plaintiffs have not alleged any details regarding the Walgreens Health Plan nor how the allegedly deficient notices relate to benefits under the terms of the plan. Further, plaintiffs make no allegations regarding what benefits are due to them or what rights they are entitled to enforce under the plan.” As a result, the court also dismissed the Section 502(a)(1)(B) cause of action. However, dismissal was without prejudice, and plaintiffs may amend their complaint to attempt to cure the above identified deficiencies. 

Retaliation Claims

Third Circuit

Ensor v. Clearfield Prof’l Grp., No. 3:22-cv-00216, 2023 WL 5515976 (W.D. Pa. Aug. 25, 2023) (Judge Stephanie L. Haines). Plaintiff Jonelle Ensor sued her former employer, Clearfield Professional Group, Ltd., asserting claims for breach of contract, interference with benefits under ERISA, and violation of state wage laws. Clearfield moved to dismiss all of Ms. Ensor’s breach of contract claims as well as her ERISA Section 510 claim pursuant to Rule 12(b)(6). Clearfield’s motion was granted in part and denied in part in this decision. The court granted the employer’s motion to dismiss some, but not all, of the breach of contract claims. The breach of contract claims that were dismissed were determined by the court to be lacking in detail necessary to state the claims. Dismissal of these claims was without prejudice. With regard to the ERISA retaliation claim, the court held it was clear from the face of the complaint that Clearfield did not fire Ms. Ensor for the purpose of interfering with her medical and retirement benefits. To the contrary, Clearfield wanted Ms. Ensor to sign a new employment contract “thereby indicating it wanted Ensor to continue with employment at Clearfield.” Ms. Ensor declined to sign the contract, because its terms were less favorable than her governing contract, and she was then terminated. Accordingly, the court concluded that the facts of Ms. Ensor’s situation “are not congruent with her assertions claiming Clearfield desired to stymie [her] pension eligibility when they discharged her from her duties. There is no plausible claim that Clearfield intentionally interfered with Ensor’s benefits and the ERISA claim will be dismissed with prejudice.”

Standard of Review

Ninth Circuit

White v. Guardian Life Ins. Co., No. 22-cv-1788-L-KSC, 2023 WL 5519315 (S.D. Cal. Aug. 25, 2023) (Judge M. James Lorenz). Plaintiff William White moved to establish de novo review as the applicable review standard in his action challenging Guardian Life Insurance Company’s denial of his claim for accidental death and dismemberment benefits. Guardian opposed Mr. White’s motion and argued that abuse of discretion review applies. As an initial matter, the parties agreed that the plan grants discretionary authority to Guardian to determine benefit eligibility and construe plan terms. However, Mr. White argued that this discretionary clause does not trigger abuse of discretion review as California law prohibits insurance policies from assigning discretion to insurers and administrators. In opposition, Guardian responded that the policy designates Florida law as the state law governing the policy, and in Florida no such statute bans discretionary clauses. The court stated that its role in resolving the dispute was determining whether the choice of law provision in the plan was fair. It concluded that application of Florida law to the policy was not fundamentally unfair nor unreasonable. “Indeed, Plaintiff’s employer…is a corporation headquartered in Florida, and a majority of its employees are located in Florida.” Moreover, the court noted that the California insurance law had not gone into effect at the time when the policy was issued, meaning that the plan had not chosen “Florida law to avoid banning discretionary clauses.” Finally, the court held that Mr. White failed to make any compelling argument to meaningfully establish that application of Florida rather than California law would be unreasonable or unfair. Accordingly, the court concluded that the policy’s choice of Florida law applied, and the applicable review standard was abuse of discretion. Mr. White’s motion for de novo review was thus denied.

Wit v. United Behav. Health, No. 20-17363, 2023 WL 5356640 (9th Cir. Aug. 22, 2023) (Before Circuit Judges Christen and Forrest, and District Judge Michael M. Anello)

As the title indicates, this is the third time the Ninth Circuit has wrestled with this long-running class action alleging that insurance giant United Behavioral Health (“UBH”) improperly denied benefit claims and breached its fiduciary duties under ERISA by using mental health guidelines that are unreasonable and inconsistent with generally accepted standards of medical care (“GASC”).

In its initial decision, which Your ERISA Watch discussed in its March 30, 2022 edition, the Ninth Circuit dealt a blow to the plaintiffs’ case in an eight-page unpublished memorandum decision. That decision overturned a judgment in plaintiffs’ favor and an accompanying $20 million award of attorneys’ fees that were awarded after a ten-day bench trial.

In that ruling, the Ninth Circuit agreed that the plaintiffs had standing to bring their claims, and that they could bring them on a class-wide basis. It also agreed that they could seek reprocessing of claims as a class-wide remedy, and that this approach “avoided the individualized nature” of ERISA’s benefits remedy.

However, none of that mattered because the court also ruled that the district court misapplied the abuse of discretion standard of review “by substituting its interpretation of the Plans for UBH’s.” The court held that UBH’s interpretation of the benefit plans was reasonable, and that the benefit plans at issue “do not require consistency with the GASC.” Specifically, the court stated, “The Plans exclude coverage for treatment inconsistent with the GASC; Plaintiffs did not show that the Plans mandate coverage for all treatment that is consistent with the GASC.”

The plaintiffs requested rehearing, and the Ninth Circuit responded by issuing a new published opinion on January 26, 2023. (Your ERISA Watch analyzed this second decision in its February 1, 2023 edition.)

In its new ruling, the court again agreed that the plaintiffs had standing. However, it walked back its conclusion regarding the reprocessing of claims. This time, the court ruled that plaintiffs’ request for reprocessing violated the Rules Enabling Act, which provides that procedural rules “shall not abridge, enlarge or modify any substantive right.”

The court ruled that reprocessing was not a proper remedy under ERISA, but was instead only “a means to the ultimate remedy,” i.e., the payment of benefits. As a result, the district court had erred by certifying a class around the concept of seeking reprocessing. The court further ruled that reprocessing was not an available remedy under ERISA’s equitable relief provision either.

The Ninth Circuit went on to reiterate that UBH’s interpretation of the plans was reasonable, and also added that the district court had not properly enforced ERISA’s requirement that claimants exhaust their internal appeals. Specifically, the court agreed with UBH that the district court improperly allowed an exception to that requirement and violated the Rules Enabling Act in doing so by abridging UBH’s affirmative defenses and expanding absent class members’ rights.

Dismayed that this second decision turned out even worse than the first one, plaintiffs once again petitioned for rehearing, and this week’s notable decision is the result.

The court began by agreeing, for the third time, that the plaintiffs had standing. The court then turned to the class claims seeking reprocessing. Implicitly acknowledging that its prior decision had created some confusion by suggesting that reprocessing could never be an appropriate remedy under ERISA, the court clarified that reprocessing “may be an appropriate remedy in some cases where an administrator has applied an incorrect standard.”

However, the Ninth Circuit ruled that the district court’s class certification order in this case could not be upheld because it was based on a “determination that the class members were entitled to have their claims reprocessed regardless of the individual circumstances at issue in their claims.”

The court found that the plaintiffs were required to show that all of the members of the class were prejudiced by UBH’s use of its guidelines in their particular circumstances, but had not met that burden. As a result, the court ruled that the district court had applied class certification rules “in a way that enlarged or modified Plaintiffs’ substantive rights in violation of the Rules Enabling Act.” The Ninth Circuit therefore reversed the court’s certification order.

Most of the rest of the decision was similar to the court’s second effort. The court again ruled that the plaintiffs could not seek reprocessing as a form of equitable relief pursuant to § 1132(a)(3), and also ruled once again that the district court erred in finding that the plans “require[d] coverage for all care consistent with GASC.”

As for exhaustion, the Ninth Circuit took a more measured approach. The court noted that because it was reversing and remanding as to the plaintiffs’ claim for benefits, the only remaining class claim was a statutory one for breach of fiduciary duty. The court admitted that exhaustion is not typically required for such claims, but might be required if the claim “is a disguised claim for benefits.” The court remanded for the district court to determine in the first instance if the exhaustion requirement applied, and if so, “whether that requirement was satisfied by the unnamed class members or should otherwise be excused in light of our decision.”

Thus ended the Ninth Circuit’s third effort at deciding this appeal. However, the most ominous part of the court’s ruling came in the order accompanying the opinion, in which the court expressly stated, “Subsequent petitions for rehearing or rehearing en banc, if any, are permissible.” In other words, this appeal is likely not over yet. Stay tuned to Your ERISA Watch to see if we are graced with Wit IV (or V or VI…)

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

Arbitration

Sixth Circuit

Parker v. Tenneco Inc., No. 23-10816, 2023 WL 5350565 (E.D. Mich. Aug. 21, 2023) (Judge George Caram Steeh). Defendants moved to compel plaintiffs Tanika Parker and Andrew Farrier to submit their dispute to arbitration in this matter alleging fiduciary breaches regarding two ERISA-governed retirement plans, the DRiV 401(k) Retirement Saving Plan and the Tenneco 401(k) Investment Plan. In line with several similar decisions Your ERISA Watch has reported on recently (see Henry v. Wilmington Trust NA, No. 21-2801, __ F.4th __, 2023 WL 4281813 (3d Cir. June 30, 2023), Smith v. Board of Directors of Triad Mfg., Inc., 13 F.4th 613 (7th Cir. 2021), and Harrison v. Envision Mgmt. Holding, Inc., 59 F.4th 1090 (10th Cir. 2023)), the court here denied the motion to compel arbitration. It concluded that the “Group, Class, or Representative Action” waiver in the arbitration procedure is invalid and in direct conflict with statutorily authorized remedies under ERISA. The court stated clearly that arbitration agreements such as this one are not enforceable when they have “the effect of altering, limiting, or precluding a party from pursuing her substantive rights or remedies under a federal statue.” Such was the case here, as the waiver at issue prohibits participants from bringing suit in a representative capacity on behalf of the plan and limits their relief to individual account losses as opposed to plan-wide remedies. The court held that “[t]hese rights and remedies provided to plans under ERISA may not be taken away by agreement.” Moreover, it agreed with plaintiffs that because the waiver could not be severed from the arbitration provision as a whole, the arbitration provision itself was rendered null and void. Thus, the court determined that the arbitration procedure does not apply to the pending action, and plaintiffs cannot be compelled to arbitrate. 

Attorneys’ Fees

Sixth Circuit

Messing v. Provident Life & Accident Ins. Co., No. 1:20-cv-351, 2023 WL 5497946 (W.D. Mich. Aug. 25, 2023) (Judge Hala Y. Jarbou). Plaintiff Mark M. Messing succeeded in his long-term disability benefit action against Provident Life and Accident Insurance Company. In this order the court ruled on Mr. Messing’s motion for an award of attorneys’ fees, costs, interest, a sum certain money judgment, and an order requiring Provident to satisfy the judgment and continue to pay benefits owed. The decision began with Mr. Messing’s requests for costs. Plaintiff sought costs of $8,875.93 which included expert fees, filing fees, mediation fees, deposition transcript fees, travel expenses, copying and postage costs, and research and technology expenditures. The court awarded $3,533.34 in costs which were made up of filing fees, mediation fees, and deposition costs. The court declined to award the remaining requested costs, concluding they were not recoverable and beyond what is allowed under 29 U.S.C. § 1920. Next, the court assessed Mr. Messing’s requested attorneys’ fees under Section 502(g)(1). As an initial matter, the court was satisfied that Mr. Messing’s results in this action constituted success on the merits making him eligible for a fee award. Nevertheless, the court declined to grant Mr. Messing fees after employing the Sixth Circuit’s five-factor test. It determined that Provident did not act in bad faith, that its conduct was not highly culpable or in need of deterring, that no significant legal question was resolved, and that recovery of fees would only benefit Mr. Messing. Significantly, the court concluded that although Mr. Messing proved by a preponderance of the evidence that he is disabled and qualifies for benefits under his plan, it also found Provident’s position to not be entirely meritless and therefore did not weigh the fifth factor – the relative merits of the parties’ positions – in favor of granting fees. In fact, the only factor the court felt weighed at all in favor of a fee award was Provident’s ability to satisfy such an award. The court pointed out that this factor is relevant “more for exclusionary than for inclusionary purposes.” For these reasons, the court did not award attorneys’ fees. Such a decision is very unusual for plaintiff-side victories in ERISA benefit actions, particularly one where, as here, the plaintiff was awarded benefits outright rather than having their claim remanded to the defendant for reconsideration. The court then addressed Mr. Messing’s request for make-whole relief in the form of a payment for tax neutralization. Absent direction from the Sixth Circuit on the issue, the court followed the path of its sister district courts within the Circuit and declined to award this requested gross-up award. Moving on to an award of pre-judgment interest, the court agreed with Mr. Messing that district courts have discretion to grant prejudgment interest on unpaid benefits recovered under ERISA. Here, the court exercised that discretion and awarded the requested 3.5% interest rate on the unpaid benefits. Additionally, the court agreed with Mr. Messing that he “is entitled to [any outstanding] benefits as well as interest on the amount of benefits that has accrued as owing between January 26, 2023, and the date of judgment.” Finally, the court granted Mr. Messing’s motion for an order requiring Provident to pay the amounts owed to him at present and to continue to pay him benefits under the plan so long as he remains disabled under the policy terms and the facts.

Breach of Fiduciary Duty

Second Circuit

Carfora v. Teachers Ins. Annuity Ass’n of Am., No. 21 Civ. 8384 (KPF), 2023 WL 5352402 (S.D.N.Y. Aug. 21, 2023) (Judge Katherine Polk Failla). Last year, the court dismissed this fiduciary breach action asserted against the Teachers Insurance Annuity Association of America (“TIAA”). Broadly, the court decided therein that TIAA was not acting as a fiduciary in using participant data or soliciting participants to roll over their plan assets into its own proprietary portfolio advisory program, behavior referred to as cross-selling. As a result, it found that TIAA’s actions did not render it a functional fiduciary and that plaintiffs therefore could not state their fiduciary breach claims against TIAA. Plaintiffs, the court found, “failed to allege that TIAA owed any fiduciary duties to them.” That decision was Your ERISA Watch’s case of the week on October 5, 2022. After concluding that amendment would be futile, the court not only granted the motion to dismiss the complaint, but also closed the case. Now, nearly a year later, the case has been resurrected, thanks to this decision granting in part plaintiffs’ motions under Federal Rules of Civil Procedure 59(e) and 15. The decision began by acknowledging the “numerous hurdles” plaintiffs faced in submitting their proposed amended complaint (“PAC”). “First, this case has been closed. In consequence, Plaintiffs must argue that judgment should be vacated to allow them to file the PAC. Second, Plaintiffs face a potential untimeliness and delay argument, inasmuch as the December 14, 2021 scheduling order required any amended pleadings to be filed within 21 days of the motion to dismiss. Third, and perhaps most significantly, Plaintiffs must demonstrate that the PAC would not be futile, meaning that the claims in it would survive a motion to dismiss.” In part, at least, plaintiffs were able to overcome these hurdles. Importantly, the court did not change its mind regarding the fiduciary status of TIAA. The court felt that plaintiffs were simply relitigating their arguments that participant-level advice is plan-level advice, and that TIAA provided this advice on a regular basis. Both of these arguments were already considered and rejected by the court in its original order. In addition, the court rejected plaintiffs’ allegations about post-rollover interactions, finding that the actions taken following the rollovers were outside the scope of fiduciary analysis. Although plaintiffs disagreed with the court’s reading of the Supreme Court’s decision in LaRue v. DeWolff, the court said that such a disagreement was not grounds to grant their reconsideration motion. Accordingly, it found no reason to disturb its prior conclusions regarding TIAA’s status as a non-fiduciary, and therefore held that “claims seeking relief on that basis would be futile.” Nevertheless, the court decided to vacate judgment to allow plaintiffs to replead a violation of Section 502(a)(3), “which extends liability for ERISA violations to certain non-fiduciaries.” In their proposed amended complaint, plaintiffs make clear that they believe their plan sponsors breached their fiduciary duties under ERISA and that TIAA knowingly participated in those breaches. Therefore, even though the court has found that TIAA is not a fiduciary, it “remains subject to [the equitable remedies of] restitution, disgorgement, or a constructive trust.” Although plaintiffs maintained originally that their complaint sought liability premised on TIAA’s fiduciary status, the court felt it was in the interest of justice to allow plaintiffs to bring this new theory not originally pleaded because their amended complaint includes “sufficient factual content with respect to a non-fiduciary theory.” And although these new theories about TIAA’s actions cross-selling revenues and self-serving use of plan data may not ultimately be successful, the court found that defendants’ attack of them at the pleadings stage “misse[d] the mark.” Thus, the court was satisfied that plaintiffs made an adequate showing that this portion of their complaint is not futile, and therefore allowed them to carry this case, still in its infancy, forward. As such, this action has remarkably been revived and TIAA may ultimately be held responsible for its actions, regardless of whether it was donning its fiduciary hat at the time.

Third Circuit

Nunez v. B. Braun Med., No. 20-4195, 2023 WL 5339620 (E.D. Pa. Aug. 18, 2023) (Judge Edward G. Smith). In this order, the court entered its final judgment following a three-day bench trial in this class action involving allegations of imprudence regarding the fiduciary handling of the B. Braun Medical Inc. defined contribution plan’s investments and expenses. The plaintiff participants argued that the retirement committee had breached its duty of prudence by failing to investigate and select well-performing low-cost investment options for the plan and by failing to monitor and control the plan’s direct and indirect recordkeeping expenses. The court found the testimony of the committee’s expert “highly credible” and persuasive. Plaintiffs’ story, their version of events, and the views of their experts were not present in this decision and therefore did not sit as any sort of counter-narrative to the defendant’s telling, making for slightly strange reading. At bottom, the court agreed with the committee and its expert that it had acted prudently in arriving at its choice of investment options and in selecting its recordkeepers. Moreover, the court agreed with defendant that the investment options and fees were themselves prudent and reasonable. Specifically, the court highlighted how the committee met regularly, solicited the advice of third-party consultants, utilized watchlists to scrutinize the performance of the investment lineup, and approached its investment decision-making with nuance and care. With regard to the performance of the challenged funds, the court determined they were objectively prudent because Morningstar had identified the funds as “especially strong performers,” and because the plan’s offerings as a whole performed in the top half of all comparable funds more than half of the time. As for the plan’s recordkeeping costs, the court wrote that the committee had a “pattern of lower[ing] recordkeeping fees,” by routinely conducting benchmarking studies and responding to the information gleaned through those results. This cycle of evaluating fees and renegotiating them was seen by the court as a fiduciary best practice and thus not a breach of any fiduciary duty. Additionally, the court noted that the committee was an early adopter of “fee-leveling” – the industry’s term for a fixed per-participant fee – switching to this option within a year of it first becoming available. Finally, the court agreed with defendant that the plan’s “recordkeeping fees were routinely below average,” and that it had not violated any duty by engaging in revenue sharing practices. Based on these above findings, the court concluded that the committee had not violated its duty of prudence during the class period, and therefore granted judgment in its favor and against plaintiffs.

Seventh Circuit

Riskus v. United Emp. Benefit Fund, No. 1:23-cv-60, 2023 WL 5348766 (N.D. Ill. Aug. 21, 2023) (Judge Elaine E. Bucklo). Plaintiff George Riskus brings this action against the United Employee Benefit Fund and several individual plan fiduciaries/parties-in-interest for breaches of fiduciary duties, failure to comply with reporting and disclosure obligations, and engaging in self-dealing and prohibited transactions. Mr. Riskus’s lawsuit stems from the termination of his death benefit and defendants’ failure to inform him of the opportunity to maintain the benefit by purchasing the life insurance policy that funded the benefit. In his suit, Mr. Riskus seeks equitable relief in the form of restoration of the death benefit, accounting, and the replacement of the Fund’s trustees. The Fund moved to dismiss all claims against it. Its motion was granted by the court in this order. To begin, the court addressed the plan’s jurisdictional challenge that Mr. Riskus lacked standing to sue because his benefits were not vested. In response, the court wrote, “As I understand Riskus’s theory, he does not claim that his death benefit was ‘vested’ in the sense that [the Fund] could not terminate the benefit if Riskus or his employer ceased being a Plan participant; his theory is instead that the terms of Section 7G of the Summary Plan Description created a vested right by promising participants like Riskus the ability to purchase the insurance policies that funded their benefits. [The Fund] breached that duty, Riskus claims, by terminating his death benefit without giving him that opportunity. This claim is not frivolous, so my jurisdiction is secure.” Having addressed standing, the court then moved on to the Fund’s arguments for dismissal under Rule 12(b)(6). Here, the court agreed with the plan that Mr. Riskus had not stated viable claims for relief. First, the court agreed with defendant that 29 U.S.C. § 1023(e) does not create a private right of action for individuals to sue to enforce violations of ERISA’s reporting and disclosure requirements. Second, the court held that the Fund could not be a fiduciary because it does not control, administer, or render advice concerning the plan; it “is the Plan, and ‘plans cannot be fiduciaries of themselves.’”  Accordingly, the court found that Mr. Riskus could not bring fiduciary breach claims against the plan. Furthermore, the court held that Mr. Riskus failed to plausibly allege that the loss of his death benefit was caused by defendants’ failure to inform him that his eligibility for benefits would terminate when his employment ended. Finally, the court held that Mr. Riskus’s prohibited transaction and self-dealing claims were conclusory and lacking in meaningful factual allegations. These claims, then, the court determined did not rise “above the speculative level.” Accordingly, the court granted the Fund’s motion and dismissed the claims against it.

Eighth Circuit

Fritton v. Taylor Corp., No. 22-cv-00415 (ECT/TNL), 2023 WL 5348834 (D. Minn. Aug. 21, 2023) (Judge Eric C. Tostrud). Former employees of Taylor Corporation bring this action against the fiduciaries of the company’s 401(k) and profit-sharing plan for breaches of their duties of prudence, loyalty, and monitoring. Plaintiffs allege that the fiduciaries mismanaged the plan by (1) authorizing it to pay unreasonably high recordkeeping fees, (2) including investment options with excessive management fees, (3) investing in costly share classes when cheaper options of identical funds were available, and (4) by allowing the plan to retain an underperforming fund. Defendants moved to dismiss the complaint for failure to state a claim. Their motion was granted in part and denied in part by the court. Mostly, the court agreed with defendants that plaintiffs lacked sound comparators and meaningful benchmarks with which to compare the challenged fees and investments. The one exception to this general finding was plaintiffs’ claims of imprudence and monitoring based on the costly share class. Because the share classes are identical to one another in all ways other than cost, the court agreed with plaintiffs that one was a sound comparator for the other, and that plaintiffs therefore stated  plausible claims based on their expensive share class theory. In all other respects, however, the court saw plaintiffs’ complaint as containing bare allegations of costs being too high, returns being too low. Such “labels and conclusions” about fees and performance do not colorable claims make, the court held. “Plaintiffs cite no authority relaxing the pleading standard for ERISA breach-of-fiduciary-duty claims or permitting a sue-now-discover-later approach.” As a result, the court held that plaintiffs failed to plausibly allege facts to back up these allegations of imprudence and disloyalty regarding excessive fees, unnecessary expenses, and underperformance. Therefore, the majority of plaintiffs’ complaint was dismissed. To the extent the court granted the motion to dismiss, dismissal was without prejudice.

Class Actions

Ninth Circuit

Schuman v. Microchip Tech., No. 16-cv-05544-HSG, 2023 WL 5498065 (N.D. Cal. Aug. 23, 2023) (Judge Haywood S. Gilliam, Jr.). Plaintiffs are a certified class of 220 former employees of defendant Atmel Corporation who were terminated without cause following a merger that took place in the spring of 2016 between Atmel and defendant Microchip Technology, Inc. Plaintiffs contend that they are entitled to benefits under the Atmel Corporation U.S. Severance Guarantee Benefit Program, which was created in the event of just such a merger or acquisition. The plan was designed to ease employee concerns over job security which might arise from a potential change of control at the company. However, plaintiffs were not awarded benefits under the plan. Defendants decided that the plan had expired before the merger took place. As a result, they did not honor its terms, and denied the submitted claims for benefits. The new CEO of the company in fact told employees that they “would have to fight him in court if they wanted to challenge him on their entitlement to benefits under the Plan.” But to help ensure that employees could not actually challenge them in court, defendants had terminated employees sign releases in exchange for a much smaller portion of severance benefits than what was provided for by the plan. 215 of the 220 class members signed these waivers. In their operative complaint, plaintiffs bring claims for benefits and breach of fiduciary duty, and also seek injunctive relief preventing defendants from enforcing the releases they obtained or from soliciting new releases. Defendants moved for summary judgment. They contend that the releases signed by almost all of the plaintiffs are valid as plaintiffs knowingly and voluntarily signed away their rights in exchange for the reduced severance payments. Defendants also argued that plaintiffs do not state valid claims for breach of fiduciary duty and their requests for equitable relief fail. In response, plaintiffs claimed that defendants waived their ability to rely on the release as a defense to bar their right to pursue their benefit claims because the plan administrator did not base the denials on the existence of the releases, but rather on a statement that the plan had expired. Starting off, the court stated that it was “not persuaded” by plaintiffs’ waiver argument. In this case, the releases were not part of the merits of plaintiffs’ claims for benefits, the court said, instead they are an affirmative defense that needs to be addressed to determine whether they can pursue ERISA benefit claims at all. Therefore, the court concluded that defendants had not waived their right to rely on the releases, and thus turned to whether the releases, which preclude ERISA actions in federal court, are enforceable. In the end, the court determined they were. The court was convinced that, at least as to the two named plaintiffs, the overwhelming evidence plainly establishes that their decisions to sign the releases were knowing and voluntary. The court therefore granted defendants’ summary judgment motion as to the two named plaintiffs. However, the court denied the summary judgment motion as to the rest of the class members. Instead, it ordered briefing to show cause why the class should or should not be decertified “based on the individualized inquiry necessary to assess the validity of the releases signed by the majority of the class members.” Also, the court denied defendants’ motion to dismiss on their second basis – that plaintiffs failed to state fiduciary breach and equitable relief claims. To the contrary, the court agreed with plaintiffs that they raised at least one fact of material dispute regarding whether defendants knew or should have known that the plan had not in fact expired.

Disability Benefit Claims

Fifth Circuit

Lewis v. Unum Life Ins. Co. of Am., No. 3:22-cv-00067, 2023 WL 5401873 (S.D. Tex. Aug. 22, 2023) (Magistrate Judge Andrew M. Edison). Plaintiff Roy Lewis brought suit against Unum Life Insurance Company to challenge its denial of his claim for long-term disability benefits. Mr. Lewis applied for disability benefits more than two years after a motorcycle accident which left him with physical and neurocognitive impairments, including a traumatic brain injury. Prior to his accident, Mr. Lewis worked as a senior accountant for an energy company. His position, while physically sedentary, required him to perform complex analysis of financial data “working to precise, accurate standards.” His claim for benefits was denied after Unum’s reviewing physicians determined that “the available medical records do not appear to support that Lewis lacked the functional capacity to perform the physical and/or cognitive demands of his occupations.” The parties cross-moved for judgment. They agreed that the appropriate review standard was de novo. The court therefore independently weighed the administrative record. In the end, the court determined that Mr. Lewis did not meet his burden of proving by a preponderance of the evidence that he met his policy’s definition of disabled. In particular, the court highlighted the fact that Mr. Lewis “was able to work for two and a half years after his motorcycle accident,” which it viewed as “persuasive evidence that the motorcycle accident did not cause him to suffer from a debilitating neurocognitive condition that precluded him from working.” The court did not find the stated opinion from Mr. Lewis’s treating physician that he was cognitively impaired from performing the essential duties of his occupation to be credible. “Although Dr. Haider takes the position that Lewis suffered from a debilitating neurological disorder as a result of the 2018 motorcycle accident, I am not convinced. The overwhelming medical evidence supports the view that Lewis is able to work.” The court therefore did not accord special weight to Mr. Lewis’s treating medical professionals. Instead, the court decided the administrative record demonstrated that Mr. Lewis had at the least the ability to perform part-time work in his regular occupation, and that Unum’s decision to deny benefits was therefore correct. Thus, the court granted judgment in favor of Unum and against Mr. Lewis.

ERISA Preemption

Eleventh Circuit

Surgery Ctr. of Viera v. Cigna Health & Life Ins. Co., No. 6:22-cv-393-JA-LHP, 2023 WL 5353461 (M.D. Fla. Aug. 21, 2023) (Judge John Antoon II). Plaintiff Surgery Center of Viera, LLC sued Cigna Health and Life Insurance Company for breach of contract, unjust enrichment, and quantum meruit challenging a significantly unpaid claim for medical services it provided to a patient insured under an ERISA-governed health plan administered by Cigna. The court previously granted a motion to dismiss by Cigna, but without prejudice. In response, the surgery center amended its complaint. Once again, Cigna sought dismissal of the action pursuant to ERISA preemption. For the second time, the court granted the motion to dismiss, agreeing with Cigna that the state law claims are inextricably intertwined with the ERISA plan. “As with the original complaint, the Court agrees with Cigna that there is no way to determine what [plaintiff] is owed under the contract without examining the patient’s ‘co-pay, deductible, co-insurance, and non-covered amounts’ under the ERISA plan.” The court thus found that it was clear from the face of the complaint that all three state law causes of action relate to the ERISA plan in the same way and are therefore defensively preempted. Accordingly, the court granted the motion to dismiss, and because plaintiff repeatedly failed to cure its deficiencies through two previous amendments the court dismissed the action with prejudice.

Life Insurance & AD&D Benefit Claims

Ninth Circuit

Hartford Life & Accident Ins. Co. v. Kowalski, No. 21-cv-06469-RS, 2023 WL 5418749 (N.D. Cal. Aug. 22, 2023) (Judge Richard Seeborg). In this decision the court ruled on cross-claimants’ cross-motions for summary judgment in this interpleader action brought to determine the proper beneficiary of the proceeds of a life insurance policy belonging to decedent Marc Kowalski. Defendant Marilyn Valois moved for summary judgment arguing that she was entitled to the benefits as the policy’s named beneficiary. However, defendant Haili Kowalski, in her cross-motion for summary judgment, argued that her minor son had superior rights to the funds under the terms of a Qualified Domestic Relations Order (“QDRO”). The court agreed with Ms. Kowalski’s position and entered judgment in her favor. It expressed that the Legal Separation Agreement between Mr. and Ms. Kowalski met ERISA’s requirements to qualify as a QDRO, especially given “the congressional purposes underpinning the QDRO provisions” to provide security to former spouses and dependent children. To find otherwise “would require elevating form over substance,” the court held. Under the QDRO’s clear and unambiguous terms Mr. Kowalski was required to “maintain a life insurance policy of $800,000 and to name [their son] as the sole beneficiary and to not borrow, assign, or otherwise encumber said policy.” Thus, the court agreed that the minor son had the right to the life insurance proceeds, and so granted Ms. Kowalski’s motion for summary judgment and denied Ms. Valois’.

Medical Benefit Claims

Tenth Circuit

Doe v. Intermountain Healthcare, Inc., No. 2:18-cv-807-RJS-JCB, 2023 WL 5395526 (D. Utah Aug. 21, 2023) (Judge Robert J. Shelby). Plaintiff Jane Doe is a physician. As a child, Ms. Doe experienced sexual abuse by a family member. This trauma has caused her problems that have followed her into adulthood. In late 2016, during a stressful period in her life and career, Ms. Doe’s mental health issues began to escalate rapidly. Following several hospitalizations for attempted suicide, Ms. Doe was admitted to a residential treatment facility in Massachusetts called Austen Riggs Center. There, she was diagnosed with major depressive disorder, post-traumatic stress disorder, schizoid personality disorder, and an unspecified feeding and eating disorder. Ms. Doe stayed at Austen Riggs twice, first in 2017 and again in 2018 after another involuntary psychiatric hospitalization. Her ERISA healthcare plan’s failure to pay for her treatment at Austen Riggs is at the center of this action, wherein Ms. Doe, individually and on behalf of a class, has sued Intermountain Health, Inc. and SelectHealth, Inc. for violations of ERISA. Ms. Doe asserts seven causes of action; (1) a claim for individual recovery of benefits under Section 502(a)(1)(B); (2) an individual claim for injunctive relief under Section 502(a)(3)(A) for violations of the Mental Health Parity and Addiction Equity Act; (3) an individual claim for equitable relief under Section 502(a)(3)(B) for Parity Act violations; (4) an individual claim for statutory penalties under 502(c); (5) a class claim for recovery of benefits and to clarify future benefits under 502(a)(1)(B); (6) a class Parity Act claim for injunctive relief under Section 502(a)(3); and (7) a class claim for equitable relief under Section 502(a)(3), also related to the Parity Act. Before the court here was Ms. Doe’s motion for summary judgment on counts 1-4 (the individual claims). Before evaluating the Parity Act claims and the request for statutory penalties, the court started its analysis with Ms. Doe’s denial of benefits. Her claims for her two stays at Austen Riggs were denied because the services allegedly did not meet the plan’s medical InterQual criteria, which focuses on managing care at lower levels and requires a patient to present certain acute symptoms at all times during their treatment. Additionally, Ms. Doe’s plan requires participants to be treated at residential treatment centers “provided in reasonable proximity to a member’s community or resident.” Austen Riggs, located in Massachusetts, was not in close proximity to Ms. Doe in Utah. As a result, this plan criterion was also cited as an additional reason for denial. The court evaluated the denials under de novo review, despite the fact that SelectHealth had discretionary authority to interpret plan terms and determine benefit eligibility. The court agreed with Ms. Doe that defendants fell “short in communicating the basis for denial in a reasonably clear manner as required.” In addition, the court considered defendants’ reliance on a single medical reviewer at each stage of the claims process to be “a serious procedural irregularity,” which denied Ms. Doe the opportunity to “receive an unbiased, impartial review by an unrelated and qualified medical professional,” that deprived her of full and fair review. For these reasons, the court concluded that Ms. Doe was entitled to de novo review of her denial of benefits. However, even without deferential review, the court denied Ms. Doe’s motion for judgment on her benefits claim. It found that issues of fact precluded Ms. Doe “from establishing by a preponderance of the evidence that [her] claim for benefits is covered under the Plan.” These unresolved issues included whether her treatment as Austen Riggs was “in reasonable proximity” to her and her community, whether facilities recommended by defendants in Utah could have provided the care necessary to treat Ms. Doe, and whether Austen Riggs was medically necessary under the InterQual criteria. Because the court could not answer these questions at this time, it denied Ms. Doe’s summary judgment motion. It then turned to her Parity Act claims. With regard to these claims, the court analyzed whether the plan violates the Parity Act by imposing a geographic limitation for mental health services that it does not apply to medical or surgical services, and whether the plan fails to ensure an adequate network of residential treatment centers. The court opined that Ms. Doe failed to identify medical/surgical analogs necessary to show parity violations. “By failing to identify and compare the analogous care limitations, the court is unable to determine as a matter of law whether the criteria” were applied more stringently for mental healthcare coverage for similar medical or surgical healthcare benefits. Thus, Ms. Doe was also denied summary judgment on her two individual Parity Act claims under Section 502(a)(3). Finally, the court denied Ms. Doe’s motion for summary judgment on her statutory penalties claim. It held that there was a genuine issue of material fact as to whether the documents Ms. Doe requested that were not produced by defendants were documents which Ms. Doe was entitled to under ERISA. In sum, the court denied Ms. Doe’s summary judgment motion for all four of her individual claims, and the action will therefore continue.

Pension Benefit Claims

Ninth Circuit

Erickson v. Hillsboro Med. Ctr., No. 3:22-cv-01208-HZ, 2023 WL 5382856 (D. Or. Aug. 22, 2023) (Judge Marco A. Hernandez). Upon retiring from her career as a registered nurse with defendant Hillsboro Medical Center, plaintiff Maritta Erickson wrote to her former employer and defendant Transamerica Retirement Advisors asserting that her monthly retirement benefits had been miscalculated when the old defined-benefit plan froze and transitioned to a cash balance plan. Specifically, Ms. Erickson alleged that defendants failed to properly credit her with four years of benefit service during the late 1990s and early 2000s. Defendants looked into the matter. Ultimately, they agreed with Ms. Erickson that they had indeed miscalculated her benefits, but not that she was receiving too little in monthly pension benefits. Instead, defendants insisted that she was being overpaid. Defendants stated that the four years in question did not count for years of benefit service because Ms. Erickson did not meet the threshold requirement of 1,000+ hours of service in those years. However, they maintained that an internal audit revealed that a systems error had resulted in a “portion of your Normal Retirement Benefit derived from your employment through December 31, 1987, was incorrectly applied as an annual value instead of a monthly value, causing your overall benefit to be overstated.” Consequently, defendants began reducing Ms. Erickson’s future monthly benefit payment to the “corrected amount.” Having exhausted her administrative appeals procedures, Ms. Erickson brought this action against Hillsboro Medical and Transamerica Retirement Advisors asserting claims under ERISA Sections 502(a)(1)(B) and (a)(3) for payment of benefits, enforcement of the terms of the retirement plan, and clarification of future benefit rights. The parties filed competing motions for judgment under abuse of discretion review. In this decision the court granted in part and denied in part Hillsboro’s motion for entry of judgment, granted in part and denied in part Ms. Erickson’s motion for entry of judgment, and granted Transamerica Retirement Advisors’ motion for entry of judgment. To begin, the court addressed Hillsboro’s dual responsibilities deciding and paying claims, and the conflict of interest this created. Because Hillsboro “consistently provided the same reasons for denial…obtained and reviewed the evidence necessary to evaluate Plaintiff’s claims, and considered Plaintiff’s evidence including employer contributions to her 403(b) plan and pay stubs,” and as there was no “evidence in the record the [it] repeatedly denied benefits to plan participants or acted with malice,” the court decided to give little weight to Hillsboro’s structural conflict of interest upon its review of the adverse benefit decision. As a result, the court stated that it would uphold Hillsboro’s decisions so long as they were reasonable. Before assessing the reasonableness of the benefit calculations though, the court turned to defendant Transamerica Retirement Advisors. The court granted judgment in its favor after the court concluded that Transamerica was not a proper defendant in this ERISA matter. The court found that Transamerica was merely a non-fiduciary recordkeeper that was not responsible for denying the claim for benefits. Ms. Erickson’s motion for summary judgment was therefore denied as to the issue of Transamerica’s liability and Transamerica was granted judgment in its favor. The court then focused on Hillsboro. Having reviewed the documents, the court concluded that Hillsboro’s decision regarding Ms. Erickson’s hours of service “was not illogical, implausible, or without support in the record. In fact, [Hillsboro’s] decision is supported by the terms of the Frozen Plan, the SPD, Plaintiff’s time records, and Plaintiff’s statements that she frequently volunteered to take low census hours so that other nurses would not have to take mandatory low census hours.” Accordingly, the court granted judgment in favor of Hillsboro on the issue of Ms. Erickson’s years of benefit service calculation, agreeing that she did not have 1,000 hours of service for the four years in question. However, on the issues of Hillsboro’s computation of Ms. Erickson’s average monthly compensation using her highest average annual earnings and its calculation of her pre-1988 monthly accrued benefit, the court sided with Ms. Erickson. It agreed that the employer had ignored the language of the frozen plan and that these calculations were not supported by the evidence in the record. Therefore, the court held that Hillsboro had abused its discretion in this regard and granted judgment in favor of Ms. Erickson on these two matters.

Pleading Issues & Procedure

Third Circuit

Emami v. Aetna Life Ins. Co., No. 22-cv-6115 (KSH) (LDW), 2023 WL 5370999 (D.N.J. Aug. 22, 2023) (Judge Katharine S. Hayden). Dr. Arash Emami brought this ERISA action against defendants Aetna Life Insurance Company and Symrise, Inc. as attorney-in-fact for his patient to recover unpaid medical benefits from defendants. Defendants moved to dismiss the complaint for failure to state a claim. Their motion was granted by the court. The court agreed with defendants that Dr. Emami “has not pled or otherwise provided the Court with evidence that [the patient’s] power of attorney is sufficient to confer standing under New Jersey law,” as the power of attorney lacked a notarized signature of an attesting witness, which is required by the state. Although the dismissal of the complaint was without prejudice, the court did note that plaintiff had already filed three complaints seeking reimbursement of the surgery costs and “has yet to successfully meet pleading requirements.” Nevertheless, Dr. Emami may try, try, again.

Retaliation Claims

Seventh Circuit

Chung v. Arthur J. Gallagher & Co., No. 21-cv-01650, 2023 WL 5486954 (N.D. Ill. Aug. 24, 2023) (Judge Martha M. Pacold). Plaintiff Norbert Chung commenced this action against his former employer, Arthur J. Gallagher & Co., and the company’s compensation committee alleging that his termination from Gallagher & Co. in 2020 was done as part of an effort to cut costs of employees under the age of 62 who had large account balances in its Deferred Equity Participation Plan before their benefits vested. Mr. Chung, who was a high-level executive, had accrued more than $5 million in his plan account. In addition to alleging a claim of interference under ERISA Section 510, Mr. Chung also alleges that the plan itself did not meet ERISA’s top-hat plan requirements. He claims that the primary purpose of the plan is not to provide deferred compensation for the company’s top-level employees but that it was instead created to encourage the retention of key employees and align their financial interests with those of the stockholders. Accordingly, Mr. Chung maintains that “he is entitled to equitable relief under ERISA because the Plan was required to conform with the various ERISA requirements for ordinary plans that this Plan does not have.” Defendants moved to dismiss Mr. Chung’s complaint. The court denied their motions, holding that Mr. Chung met the low notice pleading threshold established under Rule 8. First, the court found that Mr. Chung’s allegations of interference with his ERISA rights “raise a plausible inference that Gallagher fired [him] to save the more than $5 million it would have owed him had it kept him employed until he turned 62,” and taking these allegations are true, Mr. Chung plausibly alleged that his termination was designed to interfere with his rights under ERISA. Second, the court concluded that Mr. Chung was not required to exhaust a claim that a plan violates ERISA’s top-hat plan requirements. Requiring exhaustion, the court said, was not appropriate here because Mr. Chung is challenging the legality of the plan and not a benefits decision. Finally, the court determined that Mr. Chung plausibly alleged that the plan does not qualify as a top-hat plan. The court wrote that the “plain text of the Plan document confirms Chung’s allegations.” The court emphasized how the plan document contains no statement attesting that its purpose is to provide deferred compensation for key employees. For the forgoing reasons, the court allowed Mr. Chung’s claims to proceed and entirely denied defendants’ motions to dismiss.

Pharm. Care Mgmt. Ass’n v. Mulready, No. 22-6074, __ F. 4th __, 2023 WL 5218138 (10th Cir. Aug. 15, 2023) (Before Circuit Judges Phillips, Murphy, and Rossman)

Ah preemption, the thorniest of ERISA’s thorny issues. Like many courts before it, the Tenth Circuit last week addressed the effect of ERISA’s notoriously broad and amorphous preemption provision, concluding that ERISA preempts Oklahoma’s attempt to regulate pharmacy benefit managers (PBMs).

In 2019, Oklahoma enacted the Patient’s Right to Pharmacy Choice Act to regulate some of the practices of pharmacy benefit managers (PBMs), organizations that act as middle-men between pharmaceutical retailers and healthcare plans, both those governed by ERISA and those that are not. They do so in several ways: by contracting with manufacturers for drug rebates, by generally managing the prescription drug benefits offered by healthcare plans, by contracting with pharmacies to be in the PBMs’ networks, and by designing the structure of drug benefits and pharmacy networks for plans.

The Pharmaceutical Care Management Association (PCMA), a trade association for PBMs, brought suit challenging thirteen of the Oklahoma law’s provisions as preempted by ERISA and by Medicare Part B. The district court ruled against PCMA on all thirteen ERISA challenges but ruled in favor of the organization on its Medicare Part D challenges with respect to six of the thirteen provisions.

By the time the case reached the Tenth Circuit, only four provisions were at issue. Three of these provisions are aimed at the PBMs’ networks. The first requires that PBMs design their networks so that a fixed percentage of covered individuals in Oklahoma live close to a brick-and -mortar pharmacy. The second prohibits PBMs from refusing to contract with pharmacies that are on probation but who have not had their licenses revoked. The third of these provisions required PBMs to admit any pharmacy willing to agree to their terms into the network (a so-called “any willing provider” provision). The fourth provision under challenge prohibits the use of cost-savings and discounts aimed at incentivizing covered individuals to use only certain pharmacies.      

The Tenth Circuit decision starts from the premise that PBMs provide a valuable service because, in the court’s view, it would be “prohibitively expensive” for healthcare plans to simply allow plan participants and beneficiaries to obtain the drugs their doctors prescribe at any pharmacy. The Court touts  the “economic efficiencies and administrative savvy” of PBMs, apparently agreeing with PCMA’s assertion that PBMs provide cost savings for plans. Whether this is true or not, there is no disagreeing with that fact that PBMs now manage prescription drug benefits for most people, an estimated 270 million, “nearly everyone with a prescription drug benefit.” It would seem logical that, if you think you are paying too much, not too little, for prescription drugs, PBMs may bear some responsibility. In fact, according to Kaiser Family Foundation, Americans pay more for prescription drugs than citizens of any other peer nation.

But back to preemption. The court began this analysis with the familiar formulation of the scope of Section 514, 29 U.S.C. § 1114, noting that ERISA preempts state laws that have a ”connection with” or “reference to” ERISA plans. PCMA only challenged the provisions under the “connection with” prong. In deciding whether a state law is preempted under this prong, the Tenth Circuit naturally turned to the Supreme Court’s most recent preemption decision, Rutledge v. PCMA, 114 S. Ct. 474 (2020), which, not coincidentally, also involved a state law regulating PBMs and a challenge to that law brought by PCMA. In that case, however, the Supreme Court concluded that ERISA did not preempt an Arkansas PBM law.

The Tenth Circuit noted that Rutledge identified two categories of laws that are preempted as having a “connection with” ERISA plans: those that directly require plans to structure their benefits in a particular manner, and those that do so indirectly through acute economic effects. Distilled down, the court saw the issue as whether the challenged state law governs a central matter of plan administration or interferes with nationally uniform plan administration.

Having described the state of ERISA preemption, the court then dealt with what it saw as a threshold issue. Was the Oklahoma law even within ERISA’s purview given that, in its aim and effect, it only directly governs PBMs, not plans? The court had no trouble answering in the affirmative, referencing many cases in which the Supreme Court and other courts found that ERISA preempted state laws that regulate third parties in their dealing with ERISA plans.

Turning to the geographic access provision, the discount prohibition and the any willing provider provision, the court concluded that all three were preempted because they govern a central matter of plan administration by requiring that prescription drug benefits be structured in a particular way. “Together, these three provisions effectively abolish the two-tiered network structure, eliminate any reason for plans to employ mail-order or specialty pharmacies, and oblige PBMs to embrace every pharmacy into the fold.”

This conclusion, the court reasoned, “adheres to Rutledge,” because Rutledge concerned reimbursement-rate provisions of a state law that had a purely economic impact on plans, whereas the Oklahoma law regulates the network-structure through which plan beneficiaries obtain their prescriptions.

Thus, the court rejected all of Oklahoma’s arguments to the contrary and concluded that ERISA preempts all three of these network provisions. It probably did not help Oklahoma that the Department of Labor agreed with PCMA that these provisions had a “connection with” ERISA plans. Although the Department argued that the provisions were nevertheless “saved” from preemption as insurance regulations, the Tenth Circuit declined to address the insurance savings clause argument because it concluded that the state had not pressed this argument sufficiently either in the district court or on appeal.

The court then turned to the probation provision. The court reasoned that this provision, like the other three, dictated the composition of permissible networks and was likewise preempted. The Department of Labor supported Oklahoma’s position that this provision was not preempted because its effect on plan design was de minimis. But the Tenth Circuit rejected the application of what it saw as a “novel” de mimimis test, and also was unconvinced with the Department contention that the impact was slight. The Tenth Circuit did recognize that the Eighth Circuit had concluded that a similar North Dakota law was not preempted. PCMA v. Wehbi, 18 F.4th 956 (8th Cir. 2021). But the Tenth Circuit found that Wehbi “unhelpful” because its  reasoning “formulaic” and “limited.” 

Thus, the court concluded that ERISA preempts all four challenged provisions in their application to ERISA plans. The Tenth Circuit likewise concluded that the Medicare Part D preempts the any willing provider provision as applied to Medicare Part D plans.  

Another day, another circuit split. So stay tuned for further developments as states continue to attempt to regulate PBMs and PCMA, we predict, will continue to challenge those law. And speaking of ERISA developments, the Ninth Circuit panel in Wit v. United Behavioral Health, just issued yet another decision, which came out too late for this edition.  We’ll analyze it next week.       

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

Breach of Fiduciary Duty

Ninth Circuit

Bracalente v. CISCO Sys., No. 5:22-cv-04417-EJD, 2023 WL 5184138 (N.D. Cal. Aug. 11, 2023) (Judge Edward J. Davila). Two participants of the Cisco Systems, Inc.’s 401(k) Plan brought this putative class action against the plan’s fiduciaries to challenge their behavior administering the plan. Specifically, plaintiffs allege that Cisco and the retirement committee imprudently maintained a suite of BlackRock LifePath target date Index Funds as the plan’s default investment options, despite the funds long-term and significant underperformance of similar target date fund investment options which were available. Defendants moved to dismiss the complaint for failure to state a claim. Their motion was supported by two amicus curiae briefs, one from the American Benefits Council, American Retirement Association Committee on Investment of Employee Benefit Assets, Inc., and the ERISA Industry Committee, and the other from the U.S. Chamber of Commerce. Defendants and amici maintained that case law makes clear that underperformance alone cannot sustain a plausible claim for breach of fiduciary duty under ERISA. The court agreed. It found the complaint focused too heavily on underperformance while ignoring other factors about the BlackRock funds like their investment strategy, cost, and risk. The court expressed that it therefore could not infer that just because the target date fund suite was underperforming, even for an extended period of time, that Cisco’s decision to continue offering these investment options fell outside the range of reasonable fiduciary judgments, especially given the difficult tradeoffs fiduciaries must make when designing investment portfolios. Therefore, the court granted the motion to dismiss the complaint. However, dismissal was without prejudice, and plaintiffs were granted leave to amend to cure the court’s identified deficiencies. The court cautioned though that further evidence of underperformance would not in and of itself cure the problems, regardless of the comparators that plaintiffs selected.

Class Actions

Third Circuit

Wolff v. Aetna Life Ins. Co., No. 22-8056, __ F. 4th __, 2023 WL 5082238 (3d Cir. Aug. 9, 2023) (Before Circuit Judges Jordan, Shwartz, and Smith). Plaintiff Joanne Wolff commenced this action on behalf of a nationwide class to challenge defendant Aetna Life Insurance Company’s allegedly coercive practices of recouping a portion of disability payments from disabled plan participants who received third-party personal injury recoveries for their disabling injury causing event, despite the plans’ language which do not contemplate any such reimbursement. Ms. Wolff moved for class certification under Rule 23(b)(3). On May 25, 2022, the court granted her motion and certified a class. Eighty-four days later, on August 17, 2022, Aetna filed a motion to reconsider the class certification order. Its arguments were two-fold. First, and primarily, it argued that a Third Circuit decision which had recently been issued updated the precedent on how district courts need to analyze the requirements of Rule 23 class certification. Second, Aetna argued that the class definition created an impermissible “fail-safe” class, the membership of which hinged on answers to merits issues. On November 22, 2022, the district court granted in part and denied in part Aetna’s motion for reconsideration. Specifically, the district court rejected Aetna’s assertions that new authority from the Third Circuit required it to alter its precertification order. Instead, the court reaffirmed its prior analysis regarding the differences among the class members and their plans. The district court did, however, revise its class definition to address the potential fail-safe issues, and reworded its definition slightly, creating a simpler class definition wherein membership could be determined without resolving any merits of the case. Following the district court’s decision, Aetna filed a 23(f) petition with the Third Circuit seeking interlocutory review of the district court’s class certification order from November 22. Ms. Wolff opposed the petition, as “patently untimely,” arguing that the November 22 order did not materially change the status quo and that Aetna was therefore required to file a Rule 23(f) petition within fourteen days of the original May 25, 2022, class certification order, which it failed to do. In this decision, the Third Circuit agreed with Ms. Wolff. The appeals court stated that Rule 23(f)’s time limit “is strict and mandatory…[and] purposefully unforgiving.” This petition, the court of appeals found was untimely and could not be considered. It agreed with Ms. Wolff that nothing in the November 22 order had any practical effect on the class or materially changed the class definition. Instead, the district court was “merely reaffirm[ing] its prior ruling,” through clarifying changes. As a result, the Third Circuit stated that it could not view the November 22 decision as an order granting or denying class-action certification, and therefore agreed with Ms. Wolff that, under Rule 23(f)’s time limitation, Aetna had been required to file an interlocutory appeal within 14 days of the original order. As that deadline came and went without Aetna filing a 23(f) petition, the court held that this petition was untimely and therefore denied it without considering its merits. 

Disability Benefit Claims

First Circuit

Hughes v. The Lincoln Nat’l Life Ins. Co., No. 2:22-cv-00098-NT, 2023 WL 5310611 (D. Me. Aug. 17, 2023) (Judge Nancy Torresen). Before the onset of symptoms from a mysterious gastrointestinal illness, plaintiff Benjamin Hughes worked as a systems engineer for the Lincoln National Life Insurance Company. In 2021, Mr. Hughes stopped working after abdominal pain, nausea, vomiting, and diarrhea became debilitating. Originally, Lincoln approved and paid for Mr. Hughes’ disability benefits. However, by a letter dated August 31, 2021, Mr. Hughes was informed that his long-term disability benefits were being terminated, as Lincoln determined that he no longer met his policy’s definition of disability for his own occupation. Following an unsuccessful administrative appeal, Mr. Hughes commenced this ERISA lawsuit under Section 502(a)(1)(B), seeking to recover his disability benefits. The parties filed cross-motions for judgment on the administrative record. The court in this order granted defendant’s motion for judgment. The court disagreed with Mr. Hughes that he was denied a full and fair review of his benefits claims thanks to Lincoln’s failure to provide him with a copy of its vocational expert’s analysis with which to respond to. To the contrary, the court held that this failure to turn over relevant records did not constitute a denial of a full and fair review because the procedural irregularity here did not prejudice Mr. Hughes in the end. This was so, the court stated, because Mr. Hughes could not identify “any evidence that he contends he would have provided to Lincoln to further develop the administrative record if given the opportunity to respond to [the] analysis.” The failure to provide this type of evidence, the court wrote, “seriously undercuts his argument that the procedural irregularity was prejudicial.” Nor did the court identify any problem with Lincoln’s timeliness in issuing its denials under ERISA’s claims procedural regulations. The court agreed with Lincoln that there were special circumstances present which justified its extension of the usual 45-day window. Accordingly, the court moved on to evaluating the merits of the adverse benefit decision. Under abuse of discretion review, the court upheld the denial. It found that there was substantial evidence to support Lincoln’s reasonable conclusion that Mr. Hughes’ gastrointestinal problems did not render him unable to perform the material and substantial duties of his occupation. For these reasons, the court granted judgment in favor of Lincoln and denied Mr. Hughes’ claim for judgment.

Fourth Circuit

Pifer v. Lincoln Life Assurance Co. of Bos., No. 1:22-cv-186, 2023 WL 5208111 (M.D.N.C. Aug. 14, 2023) (Judge William Lindsay Osteen Jr.). Back in 2011, plaintiff Rebecca Pifer was diagnosed with an inherited disorder called, Ehlers Danlos Syndrome, a disease which affects and weakens a person’s connective tissues. The disease has left her with osteoarthritis and pain in her cervical spine, shoulders, hands, and feet. Shortly after her diagnosis, Ms. Pifer stopped working and applied for disability benefits. She received long-term disability benefits from 2011 until 2021, at which time her monthly benefits were terminated. The claims administrator and payor of the policy, defendant Lincoln Life Assurance Company of Boston, terminated Ms. Pifer’s benefits determining that she could perform a sedentary occupation. Following an unsuccessful administrative appeal, Ms. Pifer brought this ERISA benefits action to challenge that decision. The parties cross-moved for judgment in their favor. In this order the court entered judgment in favor of Ms. Pifer under arbitrary and capricious review standard and remanded to Lincoln for further decision-making. The court identified several major flaws with Lincoln’s decision. These shortcomings included Lincoln’s failure to provide its reviewing doctors with all of the relevant medical records, its decision to ignore evidence within the record favorable to Ms. Pifer, its shaky grounds for terminating benefits that it had been paying for years without any significant change or improvement in the medical records, and its failure to consider Ms. Pifer’s subjective accounts of her pain and the severity of her symptoms. These failures, the court wrote, were “not harmless,” and therefore it found the decision to terminate the long-term disability benefits not supported by adequate evidence, and not the result of a reasoned and principled decision-making process. Accordingly, concluding the adverse benefit determination was an abuse of Lincoln’s discretion, the court granted summary judgment in favor of Ms. Pifer. Nevertheless, the court declined to award benefits outright. Instead, it chose to remand to Lincoln. According to the court remand was the proper course of action here, as the Fourth Circuit directs district courts to “reverse and remand” an unreasonable ERISA benefit decision to allow the administrator to correct its findings and reconsider after reviewing all available evidence “that has been developed since the original denial…and to make a new determination.”

Sixth Circuit

Jordan v. Reliance Standard Life Ins. Co., No. 22-5234, __ F. App’x __, 2023 WL 5322417 (6th Cir. Aug. 18, 2023) (Before Circuit Judges Cole, Clay, and Kethledge). Plaintiff/appellant Beth Nichole Jordan appealed a district court order upholding defendant Reliance Standard Life Insurance Company’s denial of her long-term disability benefits. In this Sixth Circuit decision, the court of appeals reversed the district court’s judgment, and awarded benefits to Ms. Jordan. The court of appeals found Ms. Jordan’s medical records compelling evidence that the symptoms of Lyme disease and a history of breast cancer left her unable to continue working as a nurse anesthetist. Reliance Standard’s findings to the contrary were determined by the court of appeals to be “conclusory…[and] not sufficiently supported by credible medical evidence.” The appeals court stated that Reliance Standard’s denial letters failed to adequately explain their reasoning and inappropriately selected from the medical records. Moreover, it found “the medical opinions utilized by Reliance Standard [to be] riddled with errors.” Accordingly, the Sixth Circuit determined that Reliance Standard acted arbitrarily and capriciously and so overturned the denial of benefits.

Ninth Circuit

Sund v. Hartford Life & Accident Ins. Co., No. 21-cv-05218-JST, 2023 WL 5181624 (N.D. Cal. Aug. 11, 2023) (Judge Jon S. Tigar). Plaintiff David F. Sund was employed with Amazon working as a global commodity manager, a position which required extensive travel both domestically and internationally, including to Asia and Europe. While away on one such business trip to China, Mr. Sund unfortunately severely injured his spine after slipping on wet marble, falling backwards. He immediately received treatment in hospitals in China and was diagnosed with a significant traumatic compression fracture of his lumbar. The doctors in Hong Kong and Kaiser recommended that Mr. Sund wait to undergo vertebrae plasty surgery. However, by the time Mr. Sund returned to the U.S. and saw doctors here, he was informed that it was too late to have the procedure done and was instead provided with other treatments for his chronic pain and back injury. Mr. Sund attempted to return to his position at Amazon, but was unable to work his scheduled hours, or to perform even modified duties to continue with his occupation. Accordingly, Amazon formally terminated him, after which Mr. Sund applied for disability benefits under Amazon’s ERISA-governed disability policy insured by defendant Hartford Life & Accident Insurance Company. Ultimately, Mr. Sund’s claim for long-term disability benefits was denied by Hartford, which concluded that his occupation was sedentary in nature and that he could perform sedentary-level work with his back conditions. Mr. Sund appealed the denial, and after the denial was upheld, commenced this action under Section 502(a)(1)(B) of ERISA to challenge de novo the adverse benefit decision. The parties cross-moved for judgment under Federal Rule of Civil Procedure 52.  Giving no deference to Hartford’s denial, the court reviewed the medical records and concluded that the insurer incorrectly denied benefits. As a result, the court concluded that Mr. Sund was entitled to the full 24 months of benefits payable under the plan to participants, like him, who have reached the age of 65. The court stated that whether it viewed Mr. Sund’s occupation as “sedentary” or “light,” Mr. Sund would still qualify for benefits, as his condition has left him unable to sit for more than one-third of the workday, and because he cannot stand, walk, or travel for any extended period of time, nor can he lift, push, or pull objects weighing more than 5lbs. Moreover, the court reasoned that Mr. Sund’s attempt to return to work for four months after the accident, and Amazon’s inability to accommodate him even with modifications, supported a finding that Mr. Sund was disabled. Finally, the court decided to give greater weight to Mr. Sund’s treating physicians, rather than to Hartford’s reviewing doctor who never personally examined Mr. Sund. Based on the foregoing, the court concluded that Mr. Sund proved by a preponderance of the evidence that he was disabled under the policy terms and therefore entitled to benefits. Thus, the court entered judgment in favor of Mr. Sund and denied Hartford’s cross-motion for judgment.

Discovery

Sixth Circuit

Kramer v. Am. Elec. Power Exec. Severance Plan, No. 2:21-cv-5501, 2023 WL 5177429 (S.D. Ohio Aug. 11, 2023) (Judge Sarah D. Morrison). Plaintiff Derek Kramer served as Chief Digital Officer of American Electric Power Service Corporation for two years from 2018 to 2020. In 2020, American Electric terminated him. Following his termination, Mr. Kramer applied for severance benefits under the company’s EIRSA-governed severance plan. His claim was denied on the grounds that his termination was “for cause.” Mr. Kramer unsuccessfully appealed the denial and later commenced this ERISA action to challenge it. The court allowed Mr. Kramer to conduct discovery into allegations regarding American Electric’s conflict of interest, and the ways in which bias may have adversely affected his benefit decision. In response to this discovery order, American Electric produced certain documents. However, many others were withheld on the basis of attorney-client and work product privileges. These withheld documents were identified in a privilege log American Electric provided to Mr. Kramer. Mr. Kramer subsequently filed a motion to compel production of the documents withheld on the basis of attorney-client privilege. He argued that these documents are discoverable under the fiduciary exception to attorney-client privilege under ERISA. The matter was assigned to a magistrate judge. The Magistrate issued an opinion in April of this year denying Mr. Kramer’s discovery motion, concluding that the plan qualifies as a “top hat” plan and that it is therefore exempted from ERISA’s fiduciary duty provisions. As a result, the Magistrate Judge held that the fiduciary exception to attorney-client privilege did not apply here, and that the documents were thus not discoverable. Mr. Kramer objected to the Magistrate’s rulings. In this order the court overruled his objections. It found no clear error with the Magistrate’s findings that the plan qualifies as a top-hat executive plan. The court agreed that the plan was established primarily for providing deferred compensation because it provides future compensation for past work. Additionally, the court stated that because the plan is a top-hat plan, it was not required to file annual reporting and disclosure documents with the Department of Labor, and the fact that it did not file these documents was further support that it qualified as an exempted top-hat plan. For these reasons, the court affirmed the position of the Magistrate and overruled Mr. Kramer’s objections. And because the court reached this conclusion putting an end to the discovery period, it also ordered Mr. Kramer to respond to American Electric’s pending summary judgment motion within fourteen days of this order.

Eighth Circuit

Wessberg v. Unum Life Ins. Co. of Am., No. 22-0094 (JRT/DLM), 2023 WL 5311509 (D. Minn. Aug. 17, 2023) (Judge John R. Tunheim). Attorney Ann D. Wessberg brings this action to challenge defendant Unum Life Insurance Company of America’s denial of her long-term disability benefit claim. Ms. Wessberg moved to expand the administrative record, compel discovery, and amend the scheduling order. Her motions were assigned to Magistrate Judge Leo I. Brisbois. Judge Brisbois denied the motions, concluding that special circumstances did not warrant expanding the record or opening up discovery. Specifically, Judge Brisbois felt that Ms. Wessberg was “improperly attempting to present ‘better evidence’ than she did during the claim administration.” Ms. Wessberg appealed the Magistrate’s order denying her motions. In this decision the court held that there was no clear error with the Magistrate’s conclusion that Ms. Wessberg could not show good cause to justify expanding the administrative record. The court agreed with Judge Brisbois that the evidence and medical records Ms. Wessberg sought to include in the administrative record were available to her during the administrative claims review process, and that there was no reason why she could not have included them at the time. Accordingly, the court denied Ms. Wessberg’s appeal and affirmed the order of the Magistrate.

ERISA Preemption

Tenth Circuit

Crawford v. The Guard. State Bank & Tr. Co., No. 2:22-CV-02542-JAR-GEB, 2023 WL 5222496 (D. Kan. Aug. 15, 2023) (Judge Julie A. Robinson). Plaintiff David Crawford worked for The Guaranty State Bank & Trust Company for 30 years from 1990 until his resignation with the bank in 2020. His career progressed from agricultural loan officer to senior vice president, with the majority of his work throughout his career dealing with cattle financing. Mr. Crawford though was not a model employee. Over the years, Mr. Crawford was embroiled in several escalating incidents involving personal side deals with borrowers and problematic loans he issued which involved at different points missing, dead, and even non-existent livestock. The search for some of these missing or stollen bovines eventually lead to an investigation headed by the Kansas Bureau of Investigations (“KBI”). That KBI investigation would not wrap-up until over a year after Mr. Crawford had resigned from his position. After receiving and reading the report, the bank determined that Mr. Crawford was ineligible for benefits under an ERISA-governed executive salary continuation plan. It pointed to plan language which provides that executives fired “for cause” shall forfeit all provided benefits. Following the termination of his benefits, Mr. Crawford brought this lawsuit under ERISA to recover them under Section 502(a)(1)(B). The defendants responded by asserting five counterclaims against Mr. Crawford for recoupment for fraudulent misrepresentation and omission, recoupment for conversion, recoupment for breach of fiduciary duty, recoupment for breach of the duty of good faith and fair dealing, and recoupment for negligence. Mr. Crawford moved to dismiss the counterclaims for failure to state a claim or in the alternative to stay consideration of the counterclaims pending resolution of an overlapping state court proceeding. The court addressed the motion to dismiss first. Mr. Crawford asserted that the state law counterclaims are preempted under both complete and conflict preemption. The court disagreed. Regarding complete preemption, it found that defendants’ counterclaims did not constitute an action for equitable relief and that they therefore could not have brought them under ERISA Section 502(a). With regard to conflict preemption, the court found that Kansas’s common law doctrine of recoupment was distinct from ERISA, as it applies to all contract disputes and does not have any impermissible connection with ERISA plans. “[I]n fact, the Court sees no specific connection between the common law doctrine of recoupment and an ERISA plan.” Accordingly, the court concluded that defendants’ counterclaims were not preempted by ERISA, and thus denied the motion to dismiss them. The court then turned to Mr. Crawford’s alternative motion to stay the proceedings of the counterclaims pending resolution of the similar state court civil action. As an initial matter, the court disagreed with Mr. Crawford that the two lawsuits were parallel. While some of the parties are the same, and so are some of the issues, the court pointed out that the overlapping issues have to do with defendants’ counterclaims, not plaintiff’s ERISA claims against defendants. “Therefore, what Plaintiff is requesting amounts to a partial stay; yet Plaintiff has not cited, and the Court has not found, ‘any authority that a federal district court can partially dismiss or stay a case under Colorado River, and it is not clear that Colorado River applies when only part of the case is parallel to a state court action.” For this reason, the court denied the novel request to stay part of the action pending the outcome of the state court case. Consequently, both of Mr. Crawford’s motions were denied.

Life Insurance & AD&D Benefit Claims

Fifth Circuit

Wicks v. Metro. Life Ins. Co., No. 4:21-CV-1275-O, 2023 WL 5216493 (N.D. Tex. Aug. 14, 2023) (Judge Reed O’Connor). Decedent Jackie Wicks underwent surgery on June 24, 2021, to treat morbid obesity. He died the next morning. The circumstances and causes of Mr. Wicks’ death are not entirely clear. However, his death seems to have been caused, at least in part, by a negative reaction to the opioid medications he was given in the hospital post-operation. Fonda Wicks, his widow and the plaintiff in this Accidental Death & Dismemberment (“AD&D”) action, viewed her husband’s death as a tragic accident, and therefore believes she is entitled to benefits under his AD&D plan. The policy does not define the term accident. However, her claim for benefits was denied by defendant Metropolitan Life Insurance Company (“MetLife”) pursuant to both the plan’s sole-cause clause, as well as its illness/treatment exclusion, which excludes coverage for deaths caused or contributed by a pre-existing physical or mental illness. In this decision the court issued its judgement under de novo review of the administrative record and affirmed the denial. The court concluded that Fifth Circuit precedent on the topic makes clear that Mr. Wick’s death “resulted from underlying illness, not accident, because it ‘occurred from the standard complications of standard medical treatment for a disease.’” Specifically, the court found that Mr. Wick died from the combined effects of surgery and post-surgery medication complications to treat morbid obesity. Furthermore, the court agreed with MetLife that Ms. Wicks could not prove that the “accident” – here the adverse reaction to the opioid medications – was the sole cause of her husband’s death. Even if she could though, the court maintained that Mr. Wicks’ medication reaction nevertheless falls under the umbrella of standard and proper medical care and the range of standard complication which can result from that care. Thus, the court found that Mr. Wicks died as a result of his obesity, and that his death therefore was not the result of an “accidental injury, independent other causes.” As a result, MetLife’s denial of benefits was affirmed.

Medical Benefit Claims

First Circuit

Turner v. Liberty Mut. Ret. Benefit Plan, No. 20-11530-FDS, 2023 WL 5179194 (D. Mass. Aug. 11, 2023) (Judge F. Dennis Saylor IV). Plaintiff Thomas Turner sued the Liberty Mutual Retirement Benefit Plan, the Liberty Mutual Medical Plan, the Liberty Mutual Retirement Benefit Plan Retirement Board, Liberty Mutual Group, Inc., and Liberty Mutual Insurance Company under ERISA for benefits, equitable relief, failure to provide a full and fair review, and failure to disclose plan limitations in connection with his cost-share obligations for post-retirement medical benefits, which he believed were incorrectly calculated. Defendants previously moved for summary judgment on the benefits claim under Section 502(a)(1)(B). The court granted that motion. It concluded that the medical benefit was not a vested benefit and agreed with defendants that the unambiguous terms of the governing summary plan description “state that the plan does not provide cost-sharing credit for his years working with Safeco Insurance Company, a company acquired by Liberty Mutual.” Defendants subsequently moved for summary judgment on the remaining claims. In this decision the court granted in part and denied in part their summary judgment motion. In particular, the court found that a genuine issue of material fact exists with regard to whether Liberty Mutual and its representatives repeatedly misled Mr. Turner about whether his plan provided for a cost-sharing credit for his years working at Safeco pre-merger, and whether he reasonably relied on these misrepresentations to his detriment, including by turning down opportunities to work with other employers. The court expressed that the Supreme Court decisions in “Varity and Amara stand for the principle that plan administrators have a fiduciary duty not to mislead beneficiaries about plan benefits, and that at least in some circumstances, such misrepresentation can be remedied by equitable relief under § 502(a)(3), including through reformation and surcharge.” Thus, the court concluded that Mr. Turner may possibly succeed on this claim and that discovery needs to take place as to the specifics of the alleged misrepresentations and their context before the equitable relief claim can be resolved on summary judgment. Moreover, the court found that this claim was not duplicative of Mr. Turner’s claim for denial of benefits and that he was thus not relitigating the same benefits dispute already resolved in defendants’ favor. Accordingly, the court denied defendants’ motion as to the claim under Section 502(a)(3). However, defendants were granted summary judgment on both the full and fair review claim and the failure to disclose plan limitations claim, as the court concluded that these claims were foreclosed by its findings as to the benefit claim. Regarding the Section 503 full and fair review claim, the court held that the appropriate relief should Mr. Turner succeed – remand – is unavailable here. Therefore, even if the court found that procedural requirements were violated, given the unambiguous plan language which cuts against Mr. Turner, the court stressed that remand would be futile and is thus inappropriate given the circumstances. And as for the allegation that the summary plan descriptions failed to adequately disclose how the prior service with Safeco would be used to calculate benefits, the court found that an average plan participant would have been able to understand the SPD’s unambiguous language barring Safeco employees from receiving cost-sharing credit for their years of service prior to the merger. Therefore, the court found that Mr. Turner could not prevail on his failure to disclose limitations claim. For these reasons, defendants were granted in part and denied in part summary judgment as described above.

Fifth Circuit

Specialists Hosp. Shreveport v. Harper, No. 21-1748, 2023 WL 5309906 (W.D. La. Aug. 15, 2023) (Judge Elizabeth Erny Foote). In 2020, Tammy Harper took a leave of absence from her employment. She opted to continue her healthcare coverage during this time. Ms. Harper was informed of the requirements for continued coverage under COBRA. Principally, she needed to make contribution payments by the 15th day of each month in order to maintain coverage. At first, she did so, paying her first two premiums in a timely manner. After that though she stopped making her healthcare payments, and Blue Cross ultimately ended her coverage. On March 4, 2020, Ms. Harper’s husband underwent lumbar surgery that was previously scheduled and pre-approved by Blue Cross. By this time, however, the family’s COBRA coverage had lapsed, and they were ultimately left on the hook for the $140,273.92 in unpaid costs related to the surgery. In this action, the provider has sued Mr. Harper to recoup that payment. In turn, Mr. Harper brought an ERISA claim against Blue Cross alleging that it breached the terms of the plan by refusing to pay the expenses arising from the surgery. Blue Cross moved for summary judgment. It presented two arguments why the court should grant its motion. First, Blue Cross argued that it was not designated authority to determine eligibility or coverage under the plan and that it is therefore an improper party for a benefits claim. The court disagreed. Not only do the plan documents clearly list Blue Cross as the plan administrator, but the court also found that its actions preapproving the surgery, and then issuing the denial letters constituted the fiduciary actions of an entity with decision-making authority. Thus, the court proceeded to assess the merits to Blue Cross’s second argument – that the Harper family’s coverage was properly terminated. This time, the court agreed with Blue Cross. At bottom, the plan’s terms clearly required the Harpers to pay their premiums by the fifteenth day of every month in order to maintain coverage. Because they did not do so, the termination of their coverage was determined by the court not to be an abuse of discretion. Accordingly, the court granted Blue Cross’s motion and dismissed Mr. Harper’s claims against it with prejudice.

Tenth Circuit

David P. v. United Healthcare Ins. Co., No. 21-4129, __ F. 4th __, 2023 WL 5209748 (10th Cir. Aug. 15, 2023) (Before Circuit Judges Carson, Baldock, and Ebel). A father and daughter, plaintiffs David P. and L.P., commenced this ERISA medical benefits action seeking reimbursement of costs incurred during L.P.’s year-long mental health and substance abuse treatment, which she received at two residential treatment centers. Plaintiffs sued the plan’s administrator, defendant Morgan Stanley, and its claims administrator, defendants United Healthcare Insurance Company and United Behavioral Health, under ERISA Section 502(a)(1)(B). Plaintiffs challenged both the substance and the sufficiency of the denials they received for L.P.’s treatment. And in the district court they found success. The court awarded plaintiffs summary judgment, benefits, and attorneys’ fees. It concluded that defendants’ claims processing fell short of ERISA’s “meaningful dialogue” mandate. As a result, the district court held that defendants had not provided plaintiffs will a full and fair review of their claims and that defendants therefore abused their discretion. Defendants challenged the district court’s decisions in this appeal to the Tenth Circuit. The appeals court affirmed the lower court’s ruling that defendants violated ERISA by circumventing the dialogue required between plan participants and the administrators processing their claims for benefits. The Tenth Circuit concurred that United Behavioral Health provided shifting and inconsistent bases for its denial rationales, and that these  rationales were also often inaccurate and easily refuted by the medical records. Moreover, the denial letters had statements that both the district court and the Tenth Circuit found “were conclusory and failed to refer to any of L.P.’s treatment records.” Three specific concerns both courts had with the denials were (1) their failure to address whether L.P.’s treatment for substance abuse provided an independent ground for coverage; (2) their failure to engage with the opinions of the treating providers who believed L.P. required care in a residential treatment center; and (3) the letters’ failure to fully explain why L.P.’s care was not medically necessary. The court of appeals stated plainly that defendants could not deprive claimants of a meaningful dialogue simply by having secret back-up reasons and internal notes as extra-justifications at the ready in case of litigation. “If [United Behavioral Health] thought Summit did not qualify as a [residential treatment center] it could have explained that to Plaintiffs. If [it] disagreed with the treatment recommendations made by L.P.’s treating health care providers, it could have said so and explained why. [United Behavioral Health] instead, abused its discretion by denying Plaintiffs the meaningful dialogue ERISA mandates.” The appellate court also specified that although an external reviewer also came to the same conclusion that the residential care was not medically necessary here, that external review could not cure the insufficiencies of the deficient claims handling, and that the external review therefore did not preclude reversing the denial of benefits. At this point in the decision, the Tenth Circuit and the district court’s paths diverged. Despite agreeing that reversing the denials was appropriate, the court of appeals determined that the district court had erred by awarding benefits outright. United Behavioral Health’s failure to adequately explain the grounds for its denials and its failure to make adequate factual findings were circumstances the Tenth Circuit held warranted remand rather than an award of benefits. The court went on to say that remand was appropriate because the record did not clearly show that father and daughter are entitled to their claimed benefits. Nevertheless, the court of appeals strongly warned defendants that “remand, however, does not ‘provide the plan administrator the opportunity to reevaluate a claim based on a rationale not raised in the administrative record,’…and not previously conveyed to Plaintiffs.” Finally, the Tenth Circuit reversed the district court’s award of attorneys’ fees in light of its ruling that defendants should have the claim remained to them for further consideration. The fee issue was thus remanded to the district court for reconsideration after defendants finished their fresh consideration of the benefits claim. At that time, the Tenth Circuit stated that the district court may redecide whether and in what amount to award plaintiffs’ counsel fees and costs. Overall, this decision from the Tenth Circuit has affirmed its conviction of late that one-sided conversations and soliloquies do not a dialogue make.

Pension Benefit Claims

Third Circuit

Miller v. Campbell Soup Co. Ret. & Pension Plan Admin. Comm., No. 1:19-cv-11397 (RBK/EAP), 2023 WL 5287816 (D.N.J. Aug. 17, 2023) (Judge Robert B. Kugler). During her tenure working at Campbell Soup Company, plaintiff Sherry L. Miller saw her retirement plan transform from a traditional defined-benefit plan into a cash balance plan. Ms. Miller’s employment with Campbell initially ended in the year 2000. This constituted her “first termination” for the purposes of benefits calculations under the retirement plan. “At that point in time, Plaintiff’s retirement benefits had been calculated under the traditional pension formula, and her retirement benefits under that formula froze at 15.333 years, which included her employment through August 12, 2000, as well as her severance period through February 16, 2001.” Shortly after leaving the company, Ms. Miller returned. In June of 2001, she was rehired by Campbell. This is where the dispute between the parties begins. At the time of the rehire, Campbell maintains that it had a policy in effect to bridge prior service for rehired employees for the purposes of calculating their retirement benefits. Under this policy, Ms. Miller’s retirement benefits continued to accrue from the date of her rehire under the new cash balance formula, rather than under the traditional pension formula it had previously been calculated under. Ms. Miller did not believe that this was correct. She felt that under the bridging policy she was entitled to 28.6 years of benefit service pursuant to the traditional pension formula. The question when Ms. Miller first brought this lawsuit in 2022 was whether Campbell used the correct formula to calculate Ms. Miller’s benefits by the time she retired anew in the fall of 2015 under Campbell’s Voluntary Separation Incentive Program. The answer, according to the court, was yes, and it dismissed Ms. Miller’s Section 502(a)(1)(B) claim on April 12, 2022, finding that she was not entitled to further benefits under the express terms of the plans. Nevertheless, Ms. Miller continued her ERISA action under claims of breach of fiduciary duty and equitable estoppel. Parties since filed cross-motions for summary judgment on those remaining claims. Here, the court granted defendant’s motion and denied Ms. Miller’s. It concluded that the release Ms. Miller signed as part of the voluntary separation program barred her remaining claims. “Plaintiff’s claims are premised on her detrimental reliance on Campbell’s misrepresentations of her pension plan benefits. Because the terms of the Release unambiguously waive misrepresentation, estoppel, and ERISA claims, Plaintiff’s claims are ‘foreclosed by the plain language of the contract,’ and Defendant is entitled to judgment as a matter of law.” Accordingly, Ms. Miller’s lawsuit anticlimactically resolved in favor of Campbell.

Provider Claims

Third Circuit

Metro. Neurosurgery on Assignment of Naazish S. v. Aetna Ins. Co., No. 22-0083 (JXN)(MAH), 2023 WL 5274611 (D.N.J. Aug. 16, 2023) (Judge Julien Xavier Neals). On December 4, 2019, patient Naazish S. was admitted to an emergency room and subsequently underwent emergency spinal surgeries, which were performed by plaintiff Metropolitan Neurosurgery Associates. At the time, Naazish was a participant in an ERISA-governed healthcare plan funded by his employer, defendant Deloitte LLP, and administered by defendant Aetna Life Insurance Company. Plaintiff was an out-of-network healthcare provider. It submitted a claim for reimbursement of the care. Eventually, the plan paid for the emergency surgical procedures, but only in the amount of $4,068.70, which represented a tiny fraction of the $138,192.00 billed by the provider. Metro. Neurosurgery filed this ERISA benefit action in response, to challenge that payment amount. Defendants moved to dismiss the complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). Their motion was granted by the court in this decision. It found that plaintiff failed to tie its claim to a plan provision showing it is entitled to the amount it seeks in this action. The court wrote that the complaint lacked details necessary to set forth an ERISA claim as it “does not point to any Plan provision from which the Court can infer that Plaintiff was entitled to the amount of reimbursement demanded for the out-of-network emergency medical services provided to the Patient.” Moreover, the court stated that the complaint failed to adequately allege that the billed amount constituted a “reasonable charge” as that term is defined by the plan. Accordingly, the court dismissed the benefit claim. Dismissal was without prejudice. Finally, because the court dismissed the complaint for failure to state a claim, it declined to address the merits of defendants’ exhaustion arguments. However, the court informed the parties that should plaintiff file an amended complaint, defendants would be free to raise the issue of administrative exhaustion anew.

Severance Benefit Claims

Fifth Circuit

Lu v. Anadarko Petroleum Corp. Welfare Benefits Admin. Comm., No. H-22-709, 2023 WL 5254682 (S.D. Tex. Aug. 15, 2023) (Judge Lee H. Rosenthal). Data scientist, plaintiff Ping Lu started working at Anadarko Petroleum Corporation in 2017. Two years later, another company, Occidental Petroleum Corporation acquired Anadarko. Should such an acquisition occur, Anadarko had put in place a Change of Control Severance Plan, which would allow employees to resign for “good reason” and receive severance benefits. On November 1, 2019, Mr. Lu did just that, and completed his form claiming good reason on the basis of a material and adverse diminishment in his duties following the acquisition. His claim for benefits was denied, which ultimately led to this ERISA lawsuit. Parties have now filed competing motions for judgment in their favor. In this order the court granted judgment in favor of defendants. To begin, the court concluded that summary judgment under Rule 56, rather than judgment under Rule 52, is the more appropriate mechanism to apply to its review here to resolve the dispute. It reached this decision because “the plan itself extends broad discretion to the Committee and limits the court’s review,” and Rule 52 requires the court to issues its own findings of fact which would be different from those already issued by the committee. Therefore, the court concluded that its limited review would be more appropriately handled under Rule 56 summary judgment. The court then segued to its analysis of the denial under abuse of discretion review. Mr. Lu argued that the committed did not give the plan uniform construction as every other data scientist was approved severance benefits, while his claim was denied. In response, defendants maintained that these individuals had different circumstances, and their roles did experience diminished responsibilities entitling them to benefits, unlike Mr. Lu. “The Committee’s factual findings are entitled to deference, and nothing in the administrative record indicates that the Committee abused its discretion in finding that Berestovsky, Bayeh, and Cao’s circumstances different than Lu’s circumstances.” Therefore, the court did not find Mr. Lu’s uniform construction argument grounds for reversal. His procedural fairness argument fared no better. There, the court held that the committee gave Mr. Lu a full and fair hearing, thoroughly considered his claim, and complied with ERISA’s procedural requirements. Finally, the court upheld the merits decision itself. The court found that “the record shows that Lu simply disliked that his work environment had changed, not that he was negatively impacted.” In fact, the court was persuaded by defendants that there was ample work for Mr. Lu following the acquisition and that his responsibilities, if anything, were set to increase beyond those under Anadarko. Based on the forgoing, defendants’ decision was upheld, and judgment was entered in their favor.

Withdrawal Liability & Unpaid Contributions

Ninth Circuit

Unite Here Ret. Fund v. City of San Jose, No. 5:20-cv-06069-EJD, 2023 WL 5181633 (N.D. Cal. Aug. 11, 2023) (Judge Edward J. Davila). From 2003 to 2019, the City of San Jose owned a hotel and conference center known as the Hayes Mansion. To manage and operate the mansion, the City contracted with a company called Dolce International. The scope of Dolce’s role and the duties it was required to carry out on the City’s behalf were outlined in a Managed Agreement that was signed and executed in 2003. Pertinent here, the agreement discussed Dolce International’s role with regards to labor unions and their ERISA-governed plans, including by requiring the company pay pension contributions, negotiate for the best interest of the City with labor unions, and comply with all provisions and obligations under collective bargaining agreements. Throughout this period when Dolce International managed the facility, many of the employees working at the mansion were unionized and were subject to collective bargaining agreements between their local union and Dolce. Things came to a head in 2019 when the City decided to sell Hayes Mansion. The obligation to contribute to the multiemployer pension plan was terminated, and a withdrawal liability was triggered. A question then arose– who is the employer bound under the collective bargaining agreement and therefore responsible for paying the liability – the City, Dolce International, or both? The Fund commenced this withdrawal liability MPPAA action to get the court’s answer, and its liability payment. Each party filed its own separate cross-motion for summary judgment. The City moved for summary judgement that Dolce International is the employer responsible for paying the withdrawal liability. Dolce International moved for summary judgment that it is not responsible for paying. The Fund moved for judgment that Dolce International is responsible, or, in the alternative, that the City is responsible. To resolve the dispute, the court took a deep dive into the agency relationship between the City and Dolce. To begin, the court found that an agent can obligate its principal to a collective bargaining agreement under ERISA, such that the principal is responsible for any withdrawal liability. Having concluded that the City could be bound by an agent, the court looked to whether Dolce International in fact qualified as the City’s agent. In the end the court was satisfied that the managed agreement between the parties created an agency agreement, as it expressly outlined how Dolce International was to act on behalf of the City of San Jose. Furthermore, the scope of the agreement was such that the court was convinced signing the agreement on behalf of the City was within the authority granted to Dolce. Accordingly, the court found there was no genuine dispute that the City is an employer responsible for the withdrawal liability in this case. Nevertheless, the court stated that it could not resolve on summary judgment the issue of whether Dolce International was also an employer, at least not with the factual record currently developed. Whether Dolce International is jointly responsible for the liability “turns on the issue of disclose,” and it remains unclear whether Dolce ever informed the union that the City was the principal with regard to the collective bargaining agreements. Thus, the court did not grant summary judgment either for or against Dolce International, and the action will proceed to resolve this open issue. However, the court did grant summary judgment to the Fund on its claim against the City. The City’s motion for summary judgment for denied.