Utah v. Micone, No. 2:23-CV-016-Z, __ F. Supp. 3d __, 2025 WL 510331 (N.D. Tex. Feb. 14, 2025) (Judge Matthew J. Kacsmaryk)
On Valentine’s Day, Judge Kacsmaryk issued what to many was a surprising decision affirming the validity of the most recent regulation on a fiduciary’s consideration of non-pecuniary factors in making investment option decisions for a defined contribution pension plan. In so doing, he held that the regulation – which he described as “then-President Biden’s neutralization of a Trump-era rule that forbade ERISA fiduciaries from considering nonpecuniary factors when making investment decisions” – “is not contrary to ERISA under a post-Chevron analysis.” Even more surprisingly, he criticized the challengers of the rule as embodying “wooden textualism” and “capriciousness” in “demand[ing] arbitrary randomness” in choosing between equally advantageous investment options.
A little background is in order. In 2020, the Department of Labor (“DOL”) under the first Trump Administration issued a regulation that reiterated, consistent with DOL’s previous guidance, that plan fiduciaries could only consider nonpecuniary factors when evaluating plan investment options. It explained that plan fiduciaries, consistent with their duties of loyalty, could not subordinate financial benefit considerations to other considerations, although the 2020 Rule also “did not bar the consideration of nonpecuniary factors to break the tie between two ‘economically indistinguishable’ investment alternatives.” Nevertheless, the 2020 Rule “imposed documentation requirements” when such nonpecuniary consideration occurred and seemed to eliminate the possibility that nonpecuniary factors could be considered as part of a financial benefit analysis. In the words of Judge Kacsmaryk, “confusion ensued.”
Two years later, the Biden Administration issued the 2022 Rule which clarified that “nonpecuniary factors could be considered for pecuniary reasons” when evaluating investment options, and that “risk and return factors ‘may include’ environmental and social governance (‘ESG’) and related nonpecuniary factors depending on individual facts and circumstances.” Additionally, the 2022 Rule “eliminated the 2020 Rule’s documentation requirements surrounding the tiebreaker provision.”
Plaintiffs, including the state of Utah (somehow), challenged this Rule. On cross-motions for summary judgment, Judge Kacsmaryk found in favor of defendants, concluding that the 2022 Rule was valid. (This decision was Your ERISA Watch’s case of the week in our October 4, 2023 edition.)
Plaintiffs appealed. The Fifth Circuit vacated and remanded “for the limited purpose of reconsidering Plaintiffs’ challenge” under the Supreme Court’s recent decision in Loper Bright Enterprises v. Raimondo, 144 S. Ct. 2244 (2024), because Judge Kacsmaryk had previously relied on Chevron, U.S.A., Inc. v. Nat. Res. Def Council, Inc., 467 U.S. 837 (1984), which Loper Bright overruled, in finding the 2022 Rule valid. (Your ERISA Watch reported on this decision in our July 24, 2024 edition.)
On remand, even without application of Chevron deference, the district court concluded that “[t]he 2022 Rule’s tiebreaking provision does not violate ERISA’s text because it never permits fiduciaries to deviate from exclusively achieving financial benefits for the beneficiaries alone.” In so holding, the court disagreed with plaintiffs that ERISA’s loyalty provision – which requires fiduciaries to act “solely in the interest” of plan participants and beneficiaries and for the “exclusive purpose” of providing them benefits – means that “a fiduciary can consider nothing but financial factors on the beneficiaries’ behalf.”
The court reasoned that “[j]ust as a driver, duty-bound to choose the fastest route to his destination, may choose the most scenic of two routes that each bring him to his destination at the same time, so too can a fiduciary choose a preferable investment option between two that will equally satisfy his duty of loyalty.” And while the court agreed with plaintiffs “that ERISA’s text does not allow outright social investing,” the court also agreed with defendants that it does permit “a fiduciary to look to collateral factors to break a tie when investment options would equally serve the plan.”
The court ended by counseling that “[f]iduciaries should strenuously guard against letting impermissible considerations taint their decisions,” and suggesting that the 2020 Rule might best “aid this prevention.” But because the “2022 Rule does not permit a fiduciary to act for other interests than the beneficiaries’ or for other purposes than the beneficiaries’ financial benefit,” the court concluded that it was not “contrary to law,” and therefore satisfied the Loper Bright standard.
Below is a summary of this past week’s notable ERISA decisions by subject matter and jurisdiction.
Attorneys’ Fees
Sixth Circuit
Hawkins v. Cintas Corp., No. 1:19-cv-1062, 2025 WL 523909 (S.D. Ohio Feb. 18, 2025) (Judge Jeffrey P. Hopkins). A class of former employees of the Cintas Corporation brought this suit to challenge the company’s actions managing its employee retirement plan. “Specifically, they argued that Cintas failed to adequately review the Plan’s investments to make sure each was cost-effective, and also that it failed to control the Plan’s recordkeeping costs.” In response to plaintiffs’ litigation, Cintas tried to force them to arbitrate because of arbitration clauses in their employment contracts. The court rejected this effort, and the Sixth Circuit affirmed, sending the case back to the district court. Following further developments, the parties agreed to settlement in late 2023. Under the terms of the settlement, Cintas agreed to a total payment of $4,000,000 in exchange for release and dismissal by the plaintiffs. The court approved the settlement, finding it fair and reasonable. Plaintiffs subsequently moved for a one-third attorneys’ fee award totaling $1,333,200, reimbursement of $24,964.50 in expenses, and $3,500 in case contribution awards to each of the twelve named plaintiffs. In this decision the court granted plaintiffs’ motion completely unaltered. The court noted “that the requested award of one-third of the common fund is consistent with fees awarded in similar actions in this circuit and across the country.” It found such an award fair given that the attorneys took the case on a contingency basis, the recovery was a significant benefit representing roughly a third of the settlement class’s estimated maximum potential damages, and the litigation was complex and served a significant public interest in protecting retirement funds. The court also tipped its hat to “the professional skill and standing of counsel, Capozzi Adler.” According to the court, the fee award was further supported by the lodestar cross check. It accepted counsel’s hourly rates (ranging from $250 for junior support staff to $990 per hour for partners) as reasonable in the context of the nationwide ERISA market, and further approved of the total of 812 hours spent on the case. The court was then left with a lodestar figure of $541,373, or a lodestar multiple of 2.46, which it stated confirmed the reasonableness of the fee request because district courts typically award multiples between approximately 2.0 and 5.0. In addition to awarding the full requested costs, the court also reimbursed plaintiffs for the entirety of their litigation expenses which were composed of mediation costs, travel expenses, Westlaw research, and other similar items, all of which the court agreed were recoverable and customary. Finally, the court compensated the twelve named plaintiffs for their efforts representing the class. Although it questioned the need for a dozen named plaintiffs, it nevertheless approved the request to compensate them each only $3,500 because it added up to a total of just $42,000, which is similar to total incentive payments awarded in other similar ERISA class actions in the Circuit. For these reasons, the court granted plaintiffs’ motion for attorneys’ fees, expenses, and contribution awards and awarded plaintiffs the amounts they requested to be paid from the gross settlement amount.
Breach of Fiduciary Duty
Third Circuit
Schultz v. Aerotech, Inc., No. 24-618, 2025 WL 563585 (W.D. Pa. Feb. 20, 2025) (Judge W. Scott Hardy). Since 1977, the Aerotech, Inc. company has sponsored an employee stock ownership plan (“ESOP”). That plan has two types of assets: Aerotech stock and a General Investments Account (“GIA”). 80% of plan assets are held in Aerotech stock and the GIA represents the remaining 20%. Since 2009, the fiduciaries of the plan have kept the GIA invested exclusively in money market funds and short-term certificates of deposit with a term of less than one year. Plaintiffs in this action, participants in the plan, allege that by applying unsound investment strategies concerned with short-term market volatility at the expense of long-term capital growth defendants have breached their duties of prudence and monitoring. They claim that “[n]otwithstanding participants’ long-term investment horizon Defendants keep the GIA invested exclusively in cash equivalents,” and that this “mismatch between Defendants’ short-term investment strategy and participants’ goal of long-term capital appreciation” violates their fiduciary duties to act in the best interests of the plan participants. As evidence that other ESOP fiduciaries acting under similar circumstances do not invest exclusively in cash equivalents plaintiffs offered five comparator plans. Plaintiffs allege that the “conduct of other fiduciaries demonstrates that prudent ESOP fiduciaries do not hold ESOP assets in cash to satisfy the company’s repurchase obligation. Most ESOPs do not hold more than a de minimis amount of cash equivalents. Among all ESOPs with more than 100 participants at year-end 2022, the median cash holding was less than 0.10% of total plan assets. In contrast, the Aerotech ESOP held over 20% of its assets in cash or cash equivalents as of the end of each plan year between 2018 and 2023.” In addition to their fiduciary breach allegations, plaintiffs further assert a claim that defendants engaged in a prohibited transaction by pursuing this “principal preservation” cash-only strategy over many years. Defendants moved to dismiss the complaint. In this decision the court denied the motion to dismiss the fiduciary breach allegations but granted the motion to dismiss the Section 1106(a) prohibited transaction claim. To begin, the court declined to seriously consider defendants’ attached exhibits, stating that even considering the documents, “Defendants failed to articulate a natural, obvious or patently more reasonable explanation for their investment approach sufficient to grant their motion to dismiss.” In its discussion of the fiduciary breach claims the court stated much the same, that defendants’ basic position that their investment strategy was prudent was inappropriate for resolution at the pleadings as plaintiffs offered a plausible counter-narrative in their complaint, supported by “apples to apples” comparisons. Therefore, the court denied the motion to dismiss the imprudence claim, or the derivative failure to monitor claim. However, the court found the prohibited transaction claim a different matter. The court broadly rejected plaintiffs’ contention that a prolonged investment strategy could constitute a “transaction” prohibited under Section 1106(a). Understanding there to be “no actionable ‘transaction’ under the facts pleaded in the Amended Complaint,” the court granted the motion to dismiss the prohibited transaction claim. Accordingly, defendants’ motion to dismiss was granted as to this claim only and otherwise denied.
Ninth Circuit
Furst v. Mayne, No. CV-20-01651-PHX-DLR, 2025 WL 552997 (D. Ariz. Feb. 19, 2025) (Judge Douglas L. Rayes). Plaintiff Robert Furst sued his sister and co-fiduciary of the DHF Corporation Profit Sharing Plan, defendant Linda Mayne, individually and as co-trustee of the plan, for breaches of the fiduciary duties of prudence and loyalty. The complaint seeks to prohibit Ms. Mayne from interfering with plan distribution, identifying plan trustees and administrators, to remove her from any fiduciary role in the plan, and to appoint a qualified replacement for her. Ms. Mayne and the other defendant, Stephen S. Mayne, previously moved to partially dismiss the complaint. The court responded by granting the motion to dismiss in part. It dismissed the claims belonging to a former plaintiff who was subsequently placed under conservatorship, as well as the claims that Mr. Furst purported to bring on behalf of the plan, finding that the prerequisites of these claims had not been satisfied. However, the court found that there were genuine disputes of material fact about plan losses precluding summary judgment on the fiduciary breach claims Mr. Furst asserted in his capacity as co-trustee of the plan. (Your ERISA Watch reported on this decision in our September 25, 2024 edition.) Defendants moved for reconsideration. In this short order the court denied the motion. It concluded defendants could not prove that its previous order denying summary judgment on Mr. Furst’s breach of fiduciary duty claim was manifestly erroneous. The court did not permit defendants from advancing arguments not previously raised. And while the court acknowledged that there were a few minor mistakes in its previous decision, it nevertheless held that they did not amount to manifest error because its basic holding that genuine issues of material fact exist was correct. The court rejected defendants’ argument that Mr. Furst’s affidavit was insufficient to create a genuine issue of material fact wholesale, stating, “Robert’s affidavit stated more than mere conclusions; it asserted facts that appear to be within Robert’s personal knowledge which he is competent to testify. Under such circumstances, it is inappropriate to disregard his affidavit for purposes of summary judgment.” Thus, unconvinced that defendants demonstrated it manifestly erred in finding that Mr. Furst sufficiently established evidence to create triable issues of fact regarding plan losses, the court denied defendants’ motion for reconsideration.
Disability Benefit Claims
Second Circuit
Johnson v. Hartford Life & Accident Ins. Co., No. 23-1140, __ F. App’x __, 2025 WL 573687 (2d Cir. Feb. 21, 2025) (Before Circuit Judges Park, Perez, and Nathan). Plaintiff-appellant Melinda Johnson sued the Hartford Life & Accident Insurance Company after it terminated the long-term disability benefits she had been receiving for ten years. Ruling on the parties cross-motions for summary judgment, the district court concluded that the termination decision was supported by substantial evidence and neither arbitrary nor capricious. (Your ERISA Watch reported on this decision in our March 20, 2024 edition.) On appeal, the Second Circuit agreed and affirmed the district court’s summary judgment order in favor of Hartford. The appeals court underscored that “the question before us is not whether Hartford made the ‘correct’ decision, but whether it had a ‘reasonable basis for the decision that it made.’” The Second Circuit found that it did. Although there was evidence provided by Ms. Johnson that cut the other way and supported continuation of her disability benefits, the court stated that administrators are not required to accord the opinions of treating physicians any special weight and are fully permitted to disagree with those opinions as long as they explain why. According to the court of appeals, Ms. Johnson’s arguments did nothing more than demonstrate the mere existence of conflicting evidence, which alone is insufficient to render Hartford’s conclusion arbitrary and capricious. Finding Ms. Johnson’s arguments without merit, the Second Circuit breezily passed them by and concluded, as the district court had, that Hartford acted within its discretion in determining that Ms. Johnson could perform sedentary work and was no longer eligible for benefits under the policy. Accordingly, the Second Circuit deferred to Hartford’s decision and affirmed the order of the district court upholding it.
Seventh Circuit
Slaughter v. Hartford Life & Accident Ins. Co., No. 24-2163, __ F. App’x __, 2025 WL 546909 (7th Cir. Feb. 19, 2025) (Before Circuit Judges Brennan, Scudder, and St. Eve). A systems engineer at Boeing, plaintiff-appellant Kenneth Slaughter, stopped working and applied for long-term disability benefits after he was hospitalized for heart failure in the summer of 2020. His claim for benefits under Boeing’s group insurance policy was denied by Hartford Life and Accident Insurance Company, prompting this litigation. The district court upheld the decision that Mr. Slaughter was not disabled within the meaning of the policy under a de novo review of the medical evidence and record under Federal Rule of Civil Procedure 52(a).). (Your ERISA Watch reported on this ruling in our July 10, 2024 edition.) In this Seventh Circuit decision the court of appeals affirmed the reasoning and its conclusion that Mr. Slaughter failed to prove his cardiac condition left him unable to perform the essential duties of his profession. The appeals court further commended the district court’s “diligent and careful handling of the case.” The district court and the court of appeals both stressed that Mr. Slaughter’s treating cardiologist did not support a finding of disability in his attending physician statement, stating instead that in his opinion Mr. Slaughter had stabilized and his heart function had greatly improved. Before the district court, and again on appeal, Mr. Slaughter drew attention to the report of his retained vocational expert which supported his contention that he could not work due to continuing physical and cognitive limitations. However, neither court felt that the vocational expert’s opinion outweighed that of his treating cardiologist. The Seventh Circuit accordingly concluded that its own look at the record revealed no clear error, legal or factual, in the district court’s handling and resolution of the case. The court of appeals therefore affirmed.
ERISA Preemption
Eleventh Circuit
Gogan v. Napier, No. 2:24-cv-876-SPC-NPM, 2025 WL 562599 (M.D. Fla. Feb. 20, 2025) (Judge Sheri Polster Chappell). Death brings with it many conflicts, and so it was with the death of Debra Napier. After she passed away, the home she owned in Naples and the proceeds of her employer-sponsored life insurance policy went to her surviving husband. Her three children believe that these assets passed to their mother’s spouse against her documented wishes, and that it was always her intent to leave her home and the life insurance money to them. Upon this belief, siblings Andrew, Jack, and Jessica Gogan sued in state court bringing claims of fraud against the husband, and negligence claims against their mother’s employer, Vineyards Country Club Inc. and Pro Tree Farms Inc., and the insurance company, defendant Guardian Life Insurance Company. Arguing that ERISA completely preempts plaintiffs’ state law causes of action relating to the life insurance policy, the insurer and employer removed the action to federal court. Guardian then moved to dismiss the action, while the siblings moved to remand their litigation. The issue of the court’s jurisdiction and resolution of the motions thus boiled down to a question of ERISA preemption. The court sided with Guardian. First, the court made quick work of establishing that the life insurance policy at issue is an ERISA-governed welfare plan, and that the safe harbor regulation does not prevent the plan from being an employee welfare benefit plan as the employer performed functions beyond just publicizing the program and collecting/remitting the premiums. The court was also comfortable concluding that plaintiffs have standing as they assert that their late mother designated them as her beneficiaries under the policy. Moreover, the court held that in their action the children of the deceased are essentially asserting claims as beneficiaries to recover benefits due to them under the terms of plan, which can only be asserted under ERISA. Indeed, the court could not see any independent legal duty in this action involving a dispute over a change of beneficiary form which could defeat ERISA preemption. Instead, plaintiffs’ claim easily fall within the scope of ERISA, and they have standing to bring their claims under Section 502(a). Thus, the court agreed with defendants that ERISA preempts completely plaintiffs’ state law claims and supports removal of their action from state court. And because the claims are completely preempted, the court concluded they are conflict preempted as well. It therefore granted the motion to dismiss the state law claims. However, the court also granted plaintiffs’ request for leave to amend to replead their action under ERISA. As for the claims of fraud against the husband, the court expressed that they are seemingly unrelated to ERISA, having to do with the house deed instead. The court therefore stated that it would likely sever and remand this aspect of the case, but ordered supplemental briefing on the topic first. Accordingly, the court granted Guardian’s motion to dismiss, without prejudice, and denied plaintiffs’ motion to remand. The court further ordered Guardian, as the party invoking the court’s jurisdiction, to show cause why it should not sever and remand the claims asserted against Mr. Napier.
Medical Benefit Claims
Seventh Circuit
C.B. v. Bluecross Blueshield of Ill., No. 23-cv-01206, 2025 WL 524153 (N.D. Ill. Feb. 18, 2025) (Judge Mary M. Rowland). Plaintiff C.B. is the parent of a minor child with a history of severe psychiatric conditions. C.B. filed this ERISA action individually and on behalf of the child against defendants Blue Cross Blue Shield of Illinois and Mondelez Global LLC Group Benefits Plan, alleging that they wrongly denied $165,000 worth of coverage for residential mental health treatment in violation of the Mental Health Parity and Addiction Equity Act. At issue in this litigation were the terms of the plan which require that residential treatment centers be staffed with 24-hour onsite medical and nursing services. The facility at which C.B.’s child was treated did not have a 24-hour onsite nursing presence, and thus defendants denied the claim (after initially communicating to the family that the care would be covered.) Given this plan language, defendants moved to dismiss the complaint – both its claim based on a Parity Act violation and its claim for benefits under the plan. Despite voicing frustration with the limitations of the Parity Act, the court granted defendants’ motion in this order. Ultimately, the fact the plan imposed the same 24-hour medical staffing requirement on both skilled nursing facilities and residential treatment centers doomed C.B.’s Parity Act allegations. The court stressed that the Parity Act requires some disparity between the treatment limitations imposed on mental health or substance use disorder benefits as compared to the limitations applied to analogous medical and surgical benefits and here there simply was no daylight between the two. The family maintained that in the context of a skilled nursing setting 24-hour nursing care is medically necessary and appropriate for licensing requirements, while the same was not true for residential treatment centers. On this basis, they argued that the plan imposed treatment limitations on mental healthcare that were not in line with the generally accepted standards of care, while it did not do so on the medical side. The court responded by saying that the family “may well be right that, for example, the 24-hour nursing requirement is medically necessary for [skilled nursing facilities] but not for [residential treatment centers], or that the requirement goes beyond [the generally accepted standards of care for residential treatment centers], but the fact that the Plan applies the treatment limitation to both analogues equally precludes Plaintiffs from stating a Parity Act violation.” The court therefore agreed with defendants that C.B.’s allegations were insufficient to state either cause of action, and concluded that it was therefore required to grant the motion to dismiss. Nevertheless, the court expressed that it viewed this outcome as “very troubling,” and noted that the Parity Act is not satisfying its goal of requiring insurance companies to cover medically necessary care for mental health needs, leaving plaintiffs, like the family here, unable to state a claim for reimbursement of care that was needed to treat mental health disorders.
Pension Benefit Claims
Second Circuit
Mauer v. Pension Comm. of the NBA Referees’ Pension Plan, No. 24-1405-cv, __ F. App’x __, 2025 WL 559107 (2d Cir. Feb. 20, 2025) (Before Circuit Judges Kearse, Sack, and Lee). In January 2023, plaintiff-appellee Kenneth Mauer applied for pension benefits after he was terminated from the National Basketball Association (“NBA”) for violating its COVID-19 vaccination policy. The Committee of the NBA Referees’ Pension Plan denied his claim, determining that it wasn’t “sufficiently clear” that he had attained a distribution event under the plan, i.e. “termination of employment.” Ultimately, the district court entered judgment in favor of Mr. Mauer on his claim for lump sum payment of his benefits under Section 502(a)(1)(B), concluding that in the context of the plan, the plain and unambiguous meaning of “termination of employment” means “the complete severance of an employer-employee relationship,” and that Mr. Mauer thus qualified for his pension payment. (Your ERISA Watch reported on this decision in our March 20, 2024 edition.) The Committee appealed. Its first argument on appeal was that Mr. Mauer failed to assert that “termination of employment” unambiguously refers to severance of the employer-employee relationship, regardless of any potential for future reinstatement during the internal review process, and as a result Mr. Mauer skirted ERISA’s exhaustion requirement. In response, Mr. Mauer replied that the Committee waived any exhaustion defense. The Second Circuit agreed with Mr. Mauer that the Committee’s argument had been forfeited because it failed to present it to the district court. The court of appeals then turned to the Committee’s principal merits argument that the district court erred by finding the term “termination of employment” to be unambiguous. Again, the Committee failed to persuade the appeals court. The Second Circuit echoed the position of the district court and concluded that the ordinary meaning of “termination of employment” is the severance of the employer-employee relationship. It added, “[t]he Committee’s attempt to introduce an additional condition – that there be ‘no reasonable possibility that the participant would return to work’…strains the phrase’s ordinary meaning.” The court of appeals therefore affirmed the district court’s position that the term “termination of employment” is unambiguous, and by extension its holding that the Committee must honor its plain meaning. “Here, because Mauer suffered a severance in the employer-employee relationship in September 2022, Mauer had attained a ‘distribution event’ as defined by the Plan and is entitled to his pension benefits.” Based on the foregoing, the Second Circuit affirmed the judgment of the district court.
Pleading Issues & Procedure
Second Circuit
Sacerdote v. Cammack Larhette Advisors, LLC, No. 17 Civ. 8834 (AT), 2025 WL 524115 (S.D.N.Y. Feb. 18, 2025) (Judge Analisa Torres). A group of New York University (“NYU”) professors and employees who participate in its retirement plans brought this long-running ERISA fiduciary breach action alleging that defendants, including Cammack Larhette Advisors, LLC, violated their duties by recommending the plans include costly and poorly performing investment options “tainted by the financial interest” of TIAA-CREF and Vanguard, the plans’ two recordkeepers. Cammack previously moved for judgment on the pleadings on the claims asserted against it, and in November 2024, the court granted the motion in part and denied it in part. (Your ERISA Watch reported on this ruling in our December 4, 2024 edition.) Cammack now moves for reconsideration of one aspect of that decision: the court’s decision not to dismiss the claim that it breached its co-fiduciary duties when it offered advice that caused NYU to allow TIAA-CREF to cross-sell its own products and services to plan participates using their data. Cammack says that the co-fiduciary duty cross-selling claim is a derivative claim which cannot survive absent the existence of a viable underlying claim for fiduciary breach. The court agreed with this, but disagreed with the proposition that there was no viable underlying fiduciary breach claim related to the cross-selling allegations. In fact, the court said a viable claim is one that has not already been foreclosed on the merits, and here “all the claims against the NYU-affiliated entities, including a cross-selling claim, were dismissed as duplicative, in other words, on a procedural basis, (meaning) the underlying cross-selling claim remains viable.” Accordingly, the court denied Cammack’s motion for reconsideration, leaving in place the co-fiduciary breach claim pertaining to the cross-selling allegations asserted against it.
Third Circuit
Barker v. United Airlines, Inc., No. 23-3065 (SDW) (LDW), 2025 WL 572756 (D.N.J. Feb. 21, 2025) (Judge Susan D. Wigenton). This action, filed in 2023, stems from plaintiff Yulex Barker’s termination from employment at United Airlines, Inc. The case was originally brought in state court and asserted claims for disability discrimination under New Jersey law, breach of contract, and implied covenant of good faith and fair dealing. After several amendments, the court dismissed the complaint with prejudice on November 6, 2024. Ms. Barker responded by filing a motion to alter judgment pursuant to Federal Rule of Civil Procedure 59(e). Convinced that her motion was frivolous and filed for an improper purpose, United Airlines filed its own motion for sanctions pursuant to Rule 11. In this decision the court took the side of United, denying Ms. Barker’s motion to alter judgment and granting defendant’s motion for sanctions under Rule 11. Ms. Barker claimed in her motion that the judgment had to be altered because United intentionally and wrongly terminated her in order to prevent her from obtaining her pension benefits. She requested that the court allow her to state claims under ERISA, presumably Section 510. The court retorted that Ms. Barker failed to present any argument why the ERISA claim could not have been included earlier as she “clearly knew at least enough about the claim without any discovery to include it in this motion.” Further demonstrating Ms. Barker knew about the ERISA claim earlier, the court said, was the fact that she explicitly referenced the collective bargaining agreement relating to the plan and even attached it to prior pleadings. The court also complained that Ms. Barker’s motion continued to argue that her contract claims were properly pled, while failing to address the legal basis on which the court dismissed them – preemption under the Railway Labor Act. Therefore, the court denied plaintiff’s motion to alter judgment. Then it went one step further, and agreed with United that sanctions against Ms. Barker were warranted under the circumstances. However, the amount of the monetary sanction was not settled. The court did state that “a nominal monetary sanction is appropriate.” Nevertheless, the court wanted more information from United about its costs incurred in defending against the motion to alter judgment and held off determining the appropriate amount to impose against plaintiff’s counsel until it has these details.
Fifth Circuit
The Expo Grp. v. Purdy, No. 3:23-CV-2043-X, 2025 WL 565836 (N.D. Tex. Feb. 20, 2025) (Judge Brantley Starr). This action involves two benefit plans – one governed by ERISA and one which is not. In his action plaintiff Torbejorne Purdy asserts both ERISA and state law claims with regard to the ERISA-governed plan, and asserts exclusively state law causes of action with regard to the non-ERISA plan. The Expo Group, LLC moved to strike Mr. Purdy’s jury demand on his ERISA claims and moved for a separate trial on the state law claims. In response, Mr. Purdy agreed that his Section 502(a)(1)(B) and Section 502(a)(3) ERISA claims do not give rise to a jury trial. As a result, the court denied as moot defendant’s request to strike the jury demand as to these claims. Mr. Purdy also asserts an ERISA Section 510 claim against the Expo Group. The court granted the Expo Group’s motion to dismiss the jury demand for this cause of action. As for the breach of contract and negligent misrepresentation claims relating to the ERISA-governed plan, the court ordered Expo Group to file supplemental briefing on whether or not these two causes of action are preempted by ERISA, to which Mr. Purdy may respond. The court thus deferred resolution of this issue until after it has this further briefing. Finally, the court granted the motion to pursue a separate jury trial on the state law claims relating to the non-ERISA plan and a bench trial on ERISA issues. Should either of the state law claims relating to the ERISA-governed plan not be found to be preempted by ERISA, the court stipulated that these claims will be tried before the jury alongside the other state law causes of action.
Sixth Circuit
Cazalas v. International Paper Co., No. 2:24-cv-02130-SHM-tmp, 2025 WL 539957 (W.D. Tenn. Feb. 18, 2025) (Judge Samuel H. Mays, Jr.). Plaintiff David Cazalas seeks severance benefits in this ERISA action brought against his former employer International Paper Company (“IP”). Mr. Cazalas asserts three causes of action in his complaint: (1) a claim for benefits under the plan under Section 502(a)(1)(B); (2) a claim for breach of fiduciary duty under Section 502(a)(3); and (3) a claim for interference under Section 510. Defendants IP and the International Paper Company Salaried Savings Plan moved to dismiss the complaint pursuant to Rule 12(b)(6) and moved to strike Mr. Cazalas’s jury trial demand under Rule 39(a)(2). Mr. Cazalas opposed dismissal of his causes of action, but voluntarily agreed to dismiss his jury trial demand. In this decision the court granted in part and denied in part the motion to dismiss, and denied as moot the motion to strike the jury trial demand. As an initial matter, the court disagreed with defendants that the complaint failed to satisfy notice pleading and that it was an example of impermissible “shotgun pleading.” To the contrary, the court found the complaint met the notice pleading requirements of Rule 8(a)(2) and 10(b), and emphasized that defendants’ position was undercut by the fact they understood the complaint clearly enough to craft a motion to dismiss specifically addressing the three claims at issue and mounting defenses to them. The court then took up defendants’ argument that neither IP nor the IP Savings Plan were proper defendants. Here, the court agreed that the Savings Plan was not a proper defendant, as it is not the severance plan at issue but an unrelated 401(k) plan, named by mistake. Rather than permit Mr. Cazalas to name the appropriate plan as a defendant, the court dismissed the Savings Plan. It chose this course of action because Mr. Cazalas failed to file a motion for leave to amend or to obtain defendants’ consent to amend the complaint to name the appropriate plan. However, the court disagreed with IP that it was not a proper defendant. Rather, the court agreed with Mr. Cazalas that the allegations in his complaint demonstrate that IP exercised control over the severance benefits decision. Moving on, the court analyzed Mr. Cazalas’s three claims. First, the court accepted Mr. Cazalas’s account of the events that took place, and said that when it did so it could infer that he was entitled to severance benefits under the plan. As there remains a factual dispute that cannot be resolved at the motion to dismiss stage, the court denied IP’s motion to dismiss the benefits claim and allowed the claim to proceed to discovery. Second, the court concluded that the complaint states a claim for breach of loyalty against IP, as it alleges that IP functioned as a fiduciary when it made material misrepresentations that Mr. Cazalas relied upon to his detriment. IP’s motion to dismiss the fiduciary breach claim was therefore denied. That being said, IP’s motion to dismiss the Section 510 claim was successful. There the court concluded that the claim was not raised properly because it was not mentioned in the original complaint, but instead, raised for the first time in Mr. Cazalas’s response to defendants’ motion to dismiss. Accordingly, the motion to dismiss was granted in part as described above and Mr. Cazalas was left with his claims for benefits and fiduciary breach as asserted against IP.
Ninth Circuit
Metaxas v. Gateway Bank F.S.B., No. 20-cv-01184-EMC, 2025 WL 550749 (N.D. Cal. Feb. 19, 2025) (Judge Edward M. Chen). This action was originally filed in February 2020 and involved benefits denied under a supplemental executive retirement top-hat plan. Plaintiff Poppi Metaxas was ultimately successful in her claim for termination benefits, but not for disability benefits or in her claim for equitable relief. Regarding the termination benefits, the court remanded to the plan administrator to reconsider the claim. The administrative committee reconsidered and found that Ms. Metaxas was entitled to $9,252.95 per month since the date of her retirement. Ms. Metaxas responded by filing a post-remand supplemental complaint challenging the correct amount of past and future benefits due, her entitlement to interest, and claiming defendants failed to produce documents she requested relevant to her claim. Her supplemental complaint asserted claims against defendants for failure to pay all benefits due in violation of Section 502(a)(1)(B), equitable relief under Section 502(a)(3), and failure to produce documents under Section 502(a)(1)(A). Defendants moved to dismiss the supplemental complaint for failure to state a claim. In July 2024, the court granted in part and denied in part the motion to dismiss with leave to amend. Specifically, the court found that Ms. Metaxas sufficiently pled a claim for termination benefits under Section 502(a)(1)(B), but granted dismissal of the 502(a)(1)(B) claim as to interest and tax withholding. The court father dismissed the equitable relief claim, finding that the claim failed because it was not seeking appropriate equitable relief against a non-fiduciary and was seeking additional monetary relief beyond plan benefits. The statutory penalties claim fared no better. The court dismissed this claim because Ms. Metaxas failed to name the plan administrator as the defendant, and failed to sufficiently allege that she requested specific documents defendants were required to disclose under ERISA. (Your ERISA Watch reported on this decision in our July 31, 2024 edition.) Ms. Metaxas subsequently filed her first amended supplemental complaint realleging the same claims. Defendants again moved to dismiss. This decision spent a lot of energy treading water, ultimately ending up in the same spot as before. Like the July 2024 order, Ms. Metaxas was left with her sole remaining claim for termination benefits under Section 502(a)(1)(B), as the court granted the motion to dismiss. It concluded that its previously identified deficiencies were not cured through amendment. With regard to the claim for benefits seeking interest and tax withholding, the court stated that the latter is a matter of the discretion of the court, not entitlement, while the former was in conflict with the terms of the plan. Regarding the equitable relief claim, the court once again concluded that the request for equitable relief amounted to “an equitable surcharge against Defendants to compensate her for the financial losses over and above her PLAN benefit as the consequence of Defendants’ breach,” and such a claim “lies only against a fiduciary.” The court further stressed that “[e]quitable remedies are not available where the claim ‘would result in a payment of benefits that would be inconsistent with the written plan.’” Finally, the court found that Ms. Metaxas failed to state a claim for penalties against the plan administrator because “none of the statutes on which Plaintiff relies provide a basis to seek document disclosure and penalties for the failure to do so.” Namely, the court stated that Sections 102 and 104(b) do not bind top-hat plans like the one at issue, and that neither 29 C.F.R. § 2560.503(b)(2) nor 29 C.F.R. § 2560.503(b)(2) create a document disclosure requirement. The court’s dismissal of these causes of action was with prejudice this time around. In all other respects, this decision left things just as they were after the court’s order from July.
Provider Claims
Third Circuit
Essex Surgical, LLC v. Aetna Life Ins. Co., No. Civ. 2:23-cv-03286 (WJM), 2025 WL 572606 (D.N.J. Feb. 21, 2025) (Judge William J. Martini). A group of healthcare providers in New Jersey who are out-of-network with defendant Aetna Life Insurance Company sued the insurer in state court alleging that it violated state contract laws by reimbursing them at rates lower than the usual, customary, and reasonable rates relayed during pre-authorization calls. Aetna removed the action to federal court, arguing that the claims were preempted by ERISA. Magistrate Judge Andre Espinosa recommended the court remand the case for lack of subject-matter jurisdiction, unpersuaded that ERISA completely preempted the state law causes of action or that there was complete diversity of citizenship under the fraudulent joinder doctrine. Aetna objected. In this straightforward decision, the court overruled Aetna’s objections, adopted the Magistrate’s report and recommendation, and remanded the litigation back to state court. Like the Magistrate, the court emphasized that the providers could not bring their lawsuit under ERISA Section 502(a) because the plans at issue contain valid provisions precluding participants and beneficiaries from assigning a claim for benefits to out-of-network providers. Additionally, the court emphasized that the out-of-network providers’ action is fundamentally outside of ERISA because they assert their right to reimbursement for preauthorized medical services based on promises not dependent on the terms of the plans. The decision then discussed its reasons for disagreeing with Aetna that there was no agency relationship between the insurer and the non-diverse “Payor Defendants.” Accordingly, the court overruled Aetna’s objections to the Magistrate’s conclusion that joinder of the non-diverse parties was not fraudulent and destroys diversity jurisdiction. Thus, the court found that it lacks jurisdiction over this matter and therefore adopted the recommendation of the Magistrate to remand the case to state court.