Lubin v. Starbucks Corp., No. 21-11215, __ F.4th __, 2024 WL 5113125 (11th Cir. Dec. 16, 2024) (Before Circuit Judges Lagoa, Brasher, and Tjoflat)

Your ERISA Watch is celebrating the holidays, so this week’s edition is limited to the case of the week, which comes out of the Eleventh Circuit. As our loyal readers know, arbitration is a hot topic these days. Most arbitration cases have focused on whether and when a plan participant can be forced into arbitration. But what about plaintiffs who are merely beneficiaries under a plan, not participants? Do the same rules apply to them?

This week the Eleventh Circuit gave some answers to these questions in this case involving plaintiff Raphyr Lubin. Lubin is the husband of a former Starbucks employee and had health insurance coverage under Starbucks’ Welfare Benefits Plan through his wife’s employment. He and Ariel Torres, a former Starbucks employee, brought this putative class action against Starbucks in the Middle District of Florida, alleging that Starbucks sent them deficient health insurance notices under ERISA, as amended by the Consolidated Omnibus Budget Reconciliation Act (COBRA).

Lubin’s wife and Torres had both signed employment agreements that required them to arbitrate certain disputes, and thus Starbucks filed a motion to compel arbitration. Torres agreed to go to arbitration, but Lubin refused. Lubin contended that while his wife may have signed an employment agreement containing an arbitration provision, he did not sign it and thus it was unenforceable against him.

The district court agreed with Lubin and denied Starbucks’ motion. The court held that Lubin was not a party to the employment agreement and was not suing to enforce that agreement. Instead, he was suing to enforce his own statutory rights.

Starbucks was not pleased and appealed. However, the Eleventh Circuit affirmed in this published opinion, holding that “Lubin never signed or otherwise agreed to the arbitration agreement with Starbucks. Because he was not a party to the agreement, the Court cannot compel him to adhere to the terms of the agreement…he seeks to vindicates his rights, not his wife’s.”

Starbucks raised a number of arguments in opposition which the Eleventh Circuit serially dispatched. At the outset, Starbucks contended the federal courts should not even be ruling on the issue because “the arbitration agreement’s delegation clause grants exclusive jurisdiction to an arbitrator to determine whether Lubin must arbitrate.”

However, the Eleventh Circuit ruled that Lubin could not be bound by the delegation clause because he did not sign the agreement containing the clause and thus was not a party to it. Furthermore, the court noted that the agreement contained an exclusion clause, which provided that actions to “enforce” the agreement or “compel arbitration” are excluded from arbitration. This language was at odds with the agreement’s delegation clause, thus creating an ambiguity that had to be resolved in Lubin’s favor.

Starbucks also asserted three arguments under Florida law for why Lubin should be compelled to arbitrate. First, Starbucks argued that under equitable estoppel principles Lubin should not be able to simultaneously claim the benefits of his wife’s employment agreement (i.e., health insurance and COBRA protections), while disclaiming the burdens imposed by that agreement (i.e., arbitration). Lubin responded that this argument was irrelevant because he was not suing Starbucks based on the agreement, and the Eleventh Circuit agreed: “Lubin is not claiming the benefits of the agreement while simultaneously attempting to avoid its burdens… Rather, Lubin sues based on Starbucks’s failure to fulfill its notice duties under COBRA.”

Second, Starbucks asserted the third-party beneficiary doctrine. Starbucks argued that if Lubin, as a third party to the employment agreement, wanted the benefits of that agreement, he must be bound by the provisions in that agreement, including the arbitration provision. However, the Eleventh Circuit explained that the third-party beneficiary doctrine does not generally allow contracting parties to bind a non-contracting party simply by conferring a benefit on that party. In any event, the court noted once again that Lubin was not suing to enforce any contractual duty in the employment agreement and thus the doctrine was inapplicable. Instead, Lubin was suing “under federal law, alleging that Starbucks violated statutory duties that it owed him under COBRA.” Thus, “Lubin’s wife and Starbucks cannot bind Lubin to arbitrate merely by conferring spousal health coverage on him.”

Third, and finally, Starbucks contended that Lubin should be compelled to arbitrate because his claim was “derivative” of his wife’s rights. The Eleventh Circuit quickly dispensed with this argument: “Lubin’s claim is not derivative of his wife’s claim. Lubin’s claim is premised on an independent statutory right…the mere fact that Lubin was a beneficiary of his wife’s health plan does not mean that he sues to enforce his wife’s rights under her employment agreement[.]”

In short, the Eleventh Circuit concluded that because Lubin was not a party to his wife’s employment agreement, and because he had his own independent rights conferred on him by another source, i.e. federal law in the form of ERISA and COBRA, the agreement’s arbitration clause was unenforceable against him. As a result, his claims will proceed in federal court, even though his co-plaintiff’s identical claims ended up in arbitration.

The ruling was not unanimous, however. Judge Tjoflat penned a concurrence in which he agreed that Lubin’s claim “is not the product of any bargained-for exchange with Starbucks” and thus “Starbucks cannot compel him to arbitrate under an agreement that is not his own.”

However, Judge Tjofat “would not speculate on how the law would apply under different circumstances.” As a result, he did not join the majority’s discussion of the delegation clause or the third-party beneficiary doctrine. According to Judge Tjoflat, much of this discussion was “unnecessary to the resolution of this dispute.” Instead, “it suffices to hold that Lubin cannot be bound by an arbitration agreement he did not sign, particularly when he sues to enforce a statutory right rather than a benefit of the contract. I would leave other questions for a later, more appropriate dispute.”

And thus ends another year of ERISA jurisprudence. All of us at Your ERISA Watch hope you have a happy holiday season and a rewarding 2025.

Singh v. Deloitte LLP, No. 23-1108, __ F.4th __, 2024 WL 5049345 (2d Cir. Dec. 10, 2024) (Before Circuit Judges Livingston, Nardini, and Robinson)

One of the mainstays of ERISA litigation in recent years has been class actions against employers for allegedly breaching their fiduciary duties in the management of employee retirement plans. Large companies are frequently a target of such actions because of the massive size of their plans; any misstep by a plan fiduciary can lead to millions of dollars in losses by plan participants. As a result, the federal courts have increasingly been called on to set the ground rules for how such claims should be pleaded.

This week’s notable decision is yet another example. The plaintiffs were all participants in Deloitte LLP’s 401(k) retirement plan, which as of 2020 had tens of thousands of participants with more than $7 billion in assets. The plaintiffs sued Deloitte, its board of directors, and its retirement plan committee, alleging that they violated their duty of prudence under ERISA by failing to manage the plan’s recordkeeping and administrative fees.

According to plaintiffs, for a “jumbo plan” like Deloitte’s, “[n]early all recordkeepers in the marketplace offer the same range of services and can provide the services at very little cost.” Such recordkeepers provide services “for one price (typically at a per capita price), regardless of the services chosen or utilized by the plan.” As a result, recordkeeping fees for large plans should be largely the same.

However, plaintiffs contended that Deloitte’s fees were higher than those for comparable plans. They alleged that “the Plan’s recordkeeping cost per participant ranged from $59.58 to $70.31, as compared to six other plans with at least 30,000 participants, for which the cost per participant in 2019 ranged from $21 to $34.” Plaintiffs alleged that the plan’s fiduciaries should have negotiated more favorable rates or conducted a request for proposal in order to correct this discrepancy. Plaintiffs suggested that the fiduciaries did not do so because they had inappropriately relied on the plan’s recordkeeper, Vanguard, who had performed that role for the plan since 2004.

Plaintiffs did not get far, however. The district court granted defendants’ motion to dismiss, ruling that plaintiffs failed to plausibly allege that the plan’s fees “were excessive relative to the services rendered.” The district court stated that plaintiffs did not allege specifically what services Vanguard provided, or what services the comparator plans provided, and thus “plaintiffs’ comparison does not compare apples to apples.” The district court also criticized plaintiffs for comparing the plan’s combined direct and indirect costs for recordkeeping with only the direct costs of the comparator plans. (Your ERISA Watch covered this decision in our January 25, 2023 edition.)

Plaintiffs amended their complaint, adding comparisons of the direct costs of the relevant plans, and including an expert declaration explaining how the plan’s recordkeeping and administrative fees were excessive. Plaintiffs also noted that the defendants had “sole possession of relevant Plan disclosures,” which limited their ability to allege malfeasance.

This was insufficient for the district court, however. The district court acknowledged the more specific pleading regarding direct costs, but stated that “plaintiffs’ allegations highlight that a plan’s indirect costs may range widely from year-to-year.” Furthermore, according to the district court, the complaint “still lacked sufficient factual allegations regarding the type and quality of recordkeeping services provided by the Plan and its allegedly less-expensive comparators.” Plaintiffs’ general allegations regarding the fungible nature of recordkeeping services for jumbo plans such as Deloitte’s were not enough. (Your ERISA Watch covered this ruling in our July 12, 2023 edition.)

Plaintiffs appealed, and in this ruling the Second Circuit affirmed. “[W]e agree with the district court that the [first amended complaint] fails to do more than allege conclusorily that the Plan’s recordkeeping fees exceeded those of a select handful among the many other plans available on the market.”

The court explained that in order to survive a motion to dismiss, a plaintiff must specifically allege how the fees at issue are excessive in relation to the services rendered. After all, a higher-than-average fee might still be prudent if the plan receives additional services that warrant a higher fee. As a result, a plaintiff cannot simply compare price; an examination of the services being purchased for that price must also be conducted.

The court ruled that plaintiffs “allege next to nothing about the recordkeeping services provided by the Plan or by the six other large plans that the [first amended complaint] cites as allegedly lower-priced comparators. Nor do they provide allegations as to ‘other factors…relevant to determining whether a fee is excessive under the circumstances.’” Specifically, the complaint was “silent on the number of services actually provided by either the Plan or its alleged comparators.”

The court did not accept plaintiffs’ arguments regarding the fungibility of large plan services. The court acknowledged that plaintiffs had alleged that “[n]umerous recordkeepers in the marketplace are capable of providing a high level of service,” but plaintiffs did “not allege what level of service the Plan provided,” nor “whether less expensive comparator plans provided a similar quality of service.”

The court was also skeptical that the services provided to large plans were truly the same: “[T]he [first amended complaint’s] own allegations, however sparse, show a range of recordkeeping fees even among the six large comparator plans, belying the implication that the allegation of a cost disparity alone, without some consideration of the surrounding context, categorically suggests imprudence.”

The court also rejected the specific comparisons alleged by plaintiffs. The Second Circuit acknowledged plaintiffs’ allegations regarding direct costs, but agreed with the district court that plaintiffs omitted indirect costs from their amended complaint, thereby failing to compare total costs. The court further noted that plaintiffs cited only costs from 2019 when the time period at issue in their complaint ranged from 2015 to 2019. Also, plaintiffs’ allegations regarding the fees charged in other situations by other companies, and the results of a market survey, were unhelpful because once again they did not provide sufficient information regarding the services provided.

Plaintiffs attempted to equate their complaint with those upheld by other Circuit Courts of Appeal, but the Second Circuit distinguished them. The court held that those cases contained far more specific and robust allegations, while plaintiffs’ allegations were “sparse” and “simply not comparable.” In short, “Absent greater specificity as to the type and quality of services provided by the Plan and its comparators – or absent other allegations providing the context that might move this recordkeeping claim “from possible to plausible[]”– Plaintiffs fail to state a claim for breach of the duty of prudence.”

As a result, the Second Circuit affirmed the district court’s dismissal of all of plaintiffs’ claims, including their derivative claim against Deloitte and its board of trustees for failing to monitor the plan’s fiduciaries.

The decision was not unanimous, however. Judge Beth Robinson penned a concurrence in which she agreed with the majority that market comparisons of plans must be “apples to apples,” and that plaintiffs had not satisfied their burden because they inappropriately compared only direct costs without considering indirect costs.

However, she parted ways with the majority regarding “the scope and quality of services provided to the respective comparator plans.” Judge Robinson pointed to plaintiffs’ expert declaration, which listed the specific services provided to large nationwide plans like Deloitte’s, which “include the same suite of essential services.” Because “they’ve told us what those services are,” and “have alleged that the actual price these large recordkeepers charge a Plan does not depend on the specific services elected,” plaintiffs had plausibly alleged that “significant pricing differences in recordkeeping fees in plans at this level cannot be attributed to variations in the bundles of services accepted by a given plan[.]”.

As a result, Judge Robinson concluded that plaintiffs’ allegations were “far from the kind of ‘labels and conclusions’ or ‘naked assertions’ that we can properly disregard in assessing the sufficiency of a complaint.” She emphasized that “there is not a heightened pleading standard for these kinds of ERISA claims,” and reminded the court that it was evaluating the case at the pleading stage, where all reasonable inferences should be drawn in the plaintiffs’ favor.

Judge Robinson also noted that ERISA is a remedial statute and that its terms should be construed liberally. As a result, she was concerned that the majority was “impos[ing] an unwarranted burden at the pleadings stage on plaintiffs seeking to protect their rights under ERISA[.]” Thus, while Judge Robinson concurred in the judgment, she was clearly concerned that the majority had raised the bar too high for future litigants alleging similar claims.

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

Attorneys’ Fees

Second Circuit

Purcell v. Scient Fed. Credit Union, No. 3:22-CV-961 (VDO), __ F. Supp. 3d __, 2024 WL 5102829 (D. Conn. Dec. 13, 2024) (Judge Vernon D. Oliver). Plaintiff David Purcell was successful in his ERISA disability pension benefit action. In June of 2024 the court granted summary judgment in his favor on his claim brought under Section 502(a)(1)(B). Before the court here was Mr. Purcell’s motion for attorney’s fees and costs. Mr. Purcell sought $51,810 in attorney’s fees, as well as recovery of $429.60 in costs. Referring to Congress’s intended purpose with respect to ERISA’s fee provision to encourage beneficiaries to enforce their statutory rights, the court granted Mr. Purcell’s motion with one slightly nitpicky modification, denying his request for $29.60 in costs for postage. The court batted away defendants’ attempts to argue that Mr. Purcell acted in bad faith, and that he was therefore ineligible for fees. To the contrary, the court stated, “the record reveals that Plaintiff worked diligently to simplify this action by moving to dismiss the counterclaims and opposing Defendants’ motion to expand discovery beyond the underlying administrative record. In contrast, Defendants defended themselves through ignoring deadlines…and attempted to expand this litigation with improper counterclaims and discovery.” There was, to the court, simply no justification for denying the motion wholesale. Taking a closer look at the specific requested amount, the court found the lodestar comprising 94.2 hours of work at a $550 hourly rate “to be reasonable, in light of attorney David S. Rintoul’s more than thirty years of experience in employee benefits and ERISA matters,” the declarations of fellow attorneys in the field, and Mr. Rintoul’s billing records. However, when it came to the matter of costs, the court only awarded plaintiff $400 in court filing fees, taking off the less than $30 in postage which Mr. Rintoul did not provide receipts for. Nevertheless, following this decision Mr. Purcell has not only achieved success on the merits of his ERISA claim, but also compensation for his legal counsel who facilitated that success. Thus, Section 502(g)(1) functioned here just as Congress intended.

Class Actions

Seventh Circuit

Holloway v. Kohler Co., No. 23-CV-1242-JPS, 2024 WL 5088316 (E.D. Wis. Dec. 12, 2024) (Judge J.P. Stadtmueller). Four retirees who opted for joint and survivor annuity pension benefits sued the Kohler Company and its pension plan on behalf of a putative class alleging that the plan was in violation of ERISA’s actuarial equivalence requirements. The parties reached a settlement in April of 2024, and on July 24, 2024, the court issued an order preliminarily approving the class and the proposed $2.45 million settlement fund. (You can find our summary of that decision in Your ERISA Watch’s July 31, 2024 edition.) In the intervening months, notice was sent to the 500 class members, the objection deadline passed without the court receiving any objections, a fairness hearing was held, and plaintiffs moved for final approval of class settlement, for an award of attorneys’ fees and costs, and for service awards to the four named plaintiffs. In this decision granting plaintiffs’ motions the court ticked through the requirements of Class Action Fairness Act and found that final approval of the class certification and class settlement were appropriate. The court affirmed that its earlier conclusions from its preliminary approval decision stand and therefore declined to disturb or elaborate on them, stating simply “that the negotiated outcome in this case is favorable to the class.” Taking a look at the requested $735,000 in attorneys’ fees for class counsel, the court ruled that the amount was reasonable in light of the achieved results “in this complex and cutting-edge case.” Moreover, the fee award, which represented a contingent fee of 30% of the common fund and a lodestar multiplier of 2.23, was found by the court to be well within the acceptable range in ERISA cases within the Seventh Circuit. The court therefore approved plaintiffs’ counsel’s proposed fee award. Furthermore, the court saw “no barrier” to approving the requested reimbursement of $18,015.24 in costs and the requested $2,500 each in service awards to the four named plaintiffs, and accordingly approved these amounts too. As a result, plaintiffs’ motions were granted unaltered, distribution procedures were set in motion, plaintiffs released their claims, and this class action is quickly approaching its final days, as the year also draws to a close.

ERISA Preemption

Ninth Circuit

R & R Surgical Inst. v. Luminare Health Benefits, Inc., No. CV 24-08310-MWF (AGRx), 2024 WL 5077751 (C.D. Cal. Dec. 10, 2024) (Judge Michael W. Fitzgerald). Cases involving fully self-insured employer-sponsored healthcare plans have been trending recently. These types of welfare plans depend on third-party claims administrators and processors to administer the benefits. In this action, a healthcare provider, plaintiff R&R Surgical Institute, claims that it rendered services to a patient who is a member of one such fully-insured employer-sponsored plan for which defendant Luminare Health Benefits Inc. serves as the claims processor. After the provider submitted its claim for reimbursement, Luminare issued an Evidence of Payment (“EOP”) agreeing to pay $235,306.22 with a prepaid credit card subject to a 5% merchant processing fee. To avoid paying that 5% processing fee, plaintiff requested that Luminare issue the payment in the form of a paper check. Luminare agreed to do so, but then reduced the payment amount to $4,100.70 and issued a new EOP. It claims that the original EOP was an error. R&R Surgical seeks recovery of the remaining $231,205.52 from the original EOP plus interest. It filed an action in state court in California asserting claims for account stated, violation of California’s unfair competition law, and violation of California penal code sections for larceny, grand theft, and receiving stolen property. Luminare removed the action on the basis of diversity jurisdiction. The provider responded by moving to remand its action back to state court, and also to add the employer as a defendant. Luminare opposed remand, and moved to dismiss the case entirely, basing its motion to dismiss on arguments of ERISA preemption. The court sided with the provider in this decision, and granted its motions. Defendant’s motion to dismiss was accordingly denied as moot. With regard to ERISA preemption, the court found the Ninth Circuit’s decision in Marin Gen. Hosp. v. Modesto & Empire Traction Co., 581 F.3d 941 (9th Cir. 2009), instructive to its analysis of both prongs of the Davila preemption test. As in Marin, the court found that plaintiff’s claims here failed both prongs of the preemption test as its causes of action do not seek additional payment under the patient’s ERISA plan, but are based on duties and obligations that arise beyond ERISA. The court noted that complaint expressly states that the provider is seeking the amount “due from Defendant by virtue of the Defendant’s EOP,” which is not dependent on the terms of the healthcare plan. Moreover, the court concluded that plaintiff’s state law claims arise from defendant’s alleged failure to timely and fully pay it pursuant to the written EOP which implicates independent legal duties imposed by state law, not by ERISA. Accordingly, the court found that neither prong of the Davila test supports preemption, and that it does not have federal question jurisdiction over plaintiff’s state law claims. Additionally, the court found that the employer is a necessary party, that it is a citizen of the state of California, and that remanding the action back to state court is appropriate. For these reasons, the court granted plaintiff’s motions and denied defendant’s motion to dismiss.

Eleventh Circuit

Brown v. TitleMax of Ga., Inc., No. 4:24-cv-225, 2024 WL 5046312 (S.D. Ga. Dec. 10, 2024) (Judge Lisa Godbey Wood). Plaintiff Cordelius Brown did not have a good experience working for Titlemax. She complains that the money lending company’s business practices caused harm to its workers and customers alike, and filed a state law action in Georgia court asserting claims of misrepresentation of employment, fraudulent inducement and deceit, negligence, discrimination on the basis of disability, retaliation, wrongful termination, defamation, breach of fiduciary duty, intentional infliction of emotional distress, and civil conspiracy. As part of her breach of fiduciary duty claim, Ms. Brown sued not only her former employer, but also Fidelity Investments, alleging that the two defendants improperly decreased her 401(k) contributions and dividends. Because this cause of action sought to recover benefits under an ERISA-governed 401(k) plan, Fidelity removed the case to federal court on the basis of federal question jurisdiction. Recognizing the implications of ERISA preemption, Ms. Brown voluntarily dismissed all of her claims against Fidelity, as well as her breach of fiduciary duty claim, “thereby dismissing her ERISA claim upon which federal subject matter jurisdiction was based.” After making these changes to her complaint, Ms. Brown moved to remand her case to state court. In this brief decision, the court granted the motion to remand. Although it noted that removal was proper because Ms. Brown’s claim for 401(k) benefits certainly fell within ERISA’s domain, the court nevertheless agreed with Ms. Brown that her voluntary dismissals took away its federal subject matter jurisdiction over the action and that no other federal statute governs this “commonplace” employment action now. Accordingly, the court found that the revised complaint no longer presents a federal question and that the lawsuit “must be remanded to the Court from which it came.”

Pleading Issues & Procedure

Fourth Circuit

Paul v. Blue Cross Blue Shield of N.C., No. 5:23-CV-354-FL, 2024 WL 5096205 (E.D.N.C. Dec. 12, 2024) (Judge Louise W. Flanagan). Sorting actions into ERISA and non-ERISA categories is not always a simple binary exercise. This case involves a class action lawsuit against both ERISA-governed healthcare plans administered by Blue Cross and Blue Shield of North Carolina and a non-ERISA state healthcare plan likewise administered by Blue Cross. In broad strokes the plaintiffs are challenging Blue Cross’s alleged blanket policy to deny coverage of proton beam radiation therapy for the treatment of prostate cancer. There are both ERISA claims as well as state law claims. The North Carolina State Health Plan for Teachers and State Employees moved for dismissal of the claims against it for lack of subject matter jurisdiction, lack of personal jurisdiction, and failure to state a claim upon which relief can be granted. The court granted its motion in this decision, concluding that it does not have jurisdiction over the claims due to the State Plan’s sovereign immunity. The court clarified that the standard for determining whether a State has waived its immunity from federal court jurisdiction is stringent and requires proof of express language that the State intends to subject itself to lawsuits in federal court. Here, the court found that the plaintiffs could not meet this high threshold of proof. Finding that sovereign immunity bars the claims against the State Plan and deprives the federal court of jurisdiction over the matter, the court did not address the State Plan’s standing arguments nor its failure to state a claim arguments. Accordingly, the court dismissed causes of action against the State Plan, without prejudice. Finally, the court lifted the stays it had imposed on the parties’ scheduling conference activities and prior pleading challenge now that it has resolved the State Plan’s motion.

Remedies

Ninth Circuit

Sommer v. Regence Bluecross Blueshield of Or., No. 3:23-cv-01140-SB, 2024 WL 5047849 (D. Or. Dec. 9, 2024) (Magistrate Judge Stacie F. Beckerman). Plaintiff Brian Sommer is a participant in a medical benefit plan insured by Regence BlueCross BlueShield of Oregon. In this action, Mr. Sommer challenges the insurer’s determination that treatment he received for obstructive sleep apnea and temporomandibular joints (“TMJ”) dysfunction were not covered under a dental exclusion within the policy. Mr. Sommer contends that BlueCross erroneously relied on this inapplicable policy exclusion and seeks reimbursement of $75,000 in out-of-pocket medical expenses. In his complaint, Mr. Sommer asserts two causes of action: (1) a claim for benefits under Section 502(a)(1)(B); and (2) a claim for make-whole equitable relief under Section 502(a)(3). Defendant moved for partial summary judgment. Mr. Sommer opposed defendant’s motion and moved for leave to file an amended complaint to try to shore up any shortcomings. In this order, the court denied defendant’s motion for summary judgment, and further denied Mr. Sommer’s request to amend his complaint as redundant and unnecessary given its denial of BlueCross’s motion. The court broke Mr. Sommer’s claims into two categories of filed and unfiled claims. BlueCross sought to preclude Mr. Sommer from recovering on the unfiled claims both for failure to exhaust administrative procedures, and for failure to give notice by not alleging them in the complaint. The court disagreed. It stated that BlueCross was provided adequate notice of the claims and services generally related to this care, and that Mr. Sommer “was seeking broader relief than his Benefits Claim.” Specifically, the court held that the complaint clearly challenges BlueCross’s denial of coverage for all of the treatment related to his TMJ disorder based on the policy exclusion and that Mr. Sommer is also seeking “the full range of equitable relief for harm resulting from [defendant’s] reliance on the policy exclusion.” The court elaborated that the medical expenses incurred in connection with the TMJ surgery necessarily and logically include anesthesia, medication, a hospital stay, and both pre- and post-operative care. Accordingly, the court found that the complaint puts BlueCross on fair notice that Mr. Sommer is seeking relief beyond his filed claim for benefits, and includes a claim for equitable relief relating to the unfiled claims. Moreover, the court determined that a reasonable factfinder could conclude that the unfiled claims were “demonstrably doomed to fail,” and that it would have been futile for Mr. Sommer to submit them all individually and exhaust the administrative processes for each before filing suit. The court thus declined to grant defendant summary judgment on exhaustion grounds. Furthermore, the court allowed Mr. Sommer to proceed with simultaneous 502(a)(1)(B) and 502(a)(3) claims for his filed benefit claims because he is not seeking duplicative relief. The court clarified that Mr. Sommer may be able to recover amounts over and above the allowed amount under the policy to compensate him for his losses resulting from BlueCross’s claim denial. The court was persuaded, at least for the purposes of this summary judgment decision, that Mr. Sommer’s out-of-pocket expenses may be recoverable through the remedy of surcharge as equitable relief. The court was also open to Mr. Sommer’s arguments that by denying his surgery claim, BlueCross deprived him of a real-time opportunity to seek in-network care or challenge BlueCross’s coverage rate determination. “Viewing the facts in the light most favorable to Sommer, and drawing all reasonable inferences in his favor, the Court finds that Sommer’s requested relief for his Equitable Claim is ‘more than a repackaged claim for benefits wrongfully denied.’” Thus, the court was satisfied Mr. Sommer is seeking make-whole relief to redress his injuries which is not available solely through Section 502(a)(1)(B). For these reasons, the court denied BlueCross’s motion for partial summary judgment seeking to limit Mr. Sommer’s available avenues of recovery.

Statute of Limitations

Second Circuit

Cooper v. International Bus. Machs. Corp., No. 3:24-cv-656 (VAB), 2024 WL 5010488 (D. Conn. Dec. 6, 2024) (Judge Victor A. Bolden). Pro se plaintiff Simon J. Cooper was employed at IBM, in some manner, from the early 1980s until May of 2020, when he was notified in writing his employment would be terminated. From 1984 until 1997, Mr. Cooper was employed by IBM U.K., a British subsidiary of IBM U.S. Because of this period of overseas employment, Mr. Cooper’s pension crediting under IBM’s cash balance plan was complicated. Mr. Cooper, a retiree as of June 2020, was entitled to the greater of either his U.S. pension subject to a foreign service offset or a U.S. pension based on his U.S. only service. Although Mr. Cooper’s complaint contains many allegations that his pension election was mishandled, it notably does not include allegations that he exhausted the administrative claims processes prior to bringing his lawsuit. Even more problematic for Mr. Cooper was the date when he commenced legal action, nearly four years after these events, on March 14, 2024. IBM accordingly moved to dismiss Mr. Cooper’s suit. It argued that his claim under a European Union privacy law does not apply to this case because neither party is a European Union citizen now that the United Kingdom has left the EU. As for Mr. Cooper’s ERISA claims for benefits, statutory penalties, and breach of fiduciary duties, IBM argued that Mr. Cooper could not sustain these claims because they are time-barred, and because he failed to exhaust administrative remedies. IBM argued, and the court agreed in this decision, that Mr. Cooper’s action fell outside of the applicable and analogous statutes of limitations for all of his ERISA causes of action. Beginning with the claim for benefits, the court found the plan’s two-year statute of limitations reasonable. “But Mr. Cooper did not bring suit until March 14, 2024…well after the statute of limitations period expired and after his first benefit payment was allegedly due on September 30, 2020.” As for Mr. Cooper’s claim for penalties under ERISA, the Second Circuit has held that Connecticut’s one-year limitations period for civil forfeitures claims is the most closely analogous to ERISA Section 502(c)(1) claims for penalties, such that it is the applicable limitations period for litigants from the State. Because Mr. Cooper filed the lawsuit nearly four years after IBM should have begun paying his benefits, the action was well past the one-year statute of limitations period, making this claim untimely as well. With regard to Mr. Cooper’s breach of fiduciary duty claim, the court found that he had actual knowledge of IBM’s failure to calculate his foreign service offset by October 25, 2020, but failed to file his lawsuit until more than three years later. Moreover, the court concluded that Mr. Cooper could have brought his lawsuit earlier, and it was only through his own lack of diligence that his civil suit fell outside of the statutes of limitations. As a result, the court concluded that all three ERISA causes of action were time-barred. Independently, the court agreed with IBM that Mr. Cooper’s ERISA claims fail for lack of exhaustion of administrative remedies and could be dismissed on that basis too. Next, the court briefly agreed with IBM that the European Union General Data Protection Regulations were inapplicable to the present matter, and dismissed Mr. Cooper’s cause of action under the EU law. Finally, the court explained that it was denying Mr. Cooper any further opportunities to amend his complaint because he already did so once, and any further amendments would not cure the fact that his ERISA claims are time-barred, he failed to exhaust ERISA administrative remedies, and the EU data privacy law is inapplicable to two non-European Union citizen parties. Mr. Cooper’s complaint was thus dismissed with prejudice.

It was another light week at Your ERISA Watch. Perhaps the courts are exhausted as the year winds down. And speaking of exhaustion, that peculiar ERISA topic rears its head in several interesting decisions this week, so read on to learn more about this and other ERISA developments.

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-cv-10816, 2024 WL 5004326 (E.D. Mich. Dec. 6, 2024) (Magistrate Judge Kimberly G. Altman). In this putative class action, participants of the DRiV 401(k) Retirement Savings Plan and the Tenneco 401(k) Investment Plan seek to hold the plans’ fiduciaries responsible for allegedly breaching their duties under ERISA. The defendants previously moved to compel individual arbitration, but the court denied their motion and the Sixth Circuit affirmed the denial of defendants’ motion to compel individual arbitration. Defendants have since filed a petition for writ of certiorari with the United States Supreme Court, and now move to stay the case and discovery pending the Supreme Court’s ruling on their petition. In this decision, the district court denied these motions to stay. Defendants, the court concluded, could not demonstrate that there is a reasonable likelihood the Supreme Court will grant certiorari, and even if it were to do so, that it would reverse the decision of the Sixth Circuit. Nor could defendants show that they would face irreparable harm without a stay. On the likelihood of certiorari being granted, the court was unconvinced that there is a circuit split over the application of the effective vindication doctrine in ERISA plans. At the very least, the court noted that the majority of circuit courts, including the Second, Third, Sixth, and Tenth, are in lock-step. “In trying to demonstrate the existence of a split, Defendants point to an unpublished Ninth Circuit memorandum opinion, Dorman v. Charles Schwab Corp., 780 Fed.Appx. 510 (9th Cir. 2019), and a Seventh Circuit ruling stating that while ERISA claims may be arbitrable in general ‘the ‘effective vindication’ exception bar[red] application of the plan’s arbitration provision’ to the plaintiff’s ERISA claims.” To the court, this was insufficient evidence to demonstrate that a circuit split exists such that the Supreme Court is likely to grant their petition for certiorari. In fact, the court noted that the Supreme Court has denied three similar petitions already, “even after the issuance of the Seventh and Ninth Circuit opinions cited by Defendants.” Moreover, the court was seemingly unmoved by defendants’ attempt to distinguish their cert petition from the earlier failed ones by arguing that the Supreme Court will be friendlier to arguments rejecting the application of the effective vindication doctrine because of its decision in Loper Bright Enters. v. Raimondo, 144 S. Ct. 2244 (2024). The court pointed out “that a petition for certiorari has been denied following the issuance of Loper Bright in June 2024.” The court was therefore unconvinced that the fiduciaries here will fare better with their own petition. But even if they should, the court was quick to note that defendants fail to establish that they will be harmed or unduly burdened absent a stay. Accordingly, the court denied both of defendants’ motions – (1) to stay the case pending order on petition for writ of certiorari, and (2) to stay discovery pending a ruling on defendants’ “garden-variety Rule 12(b)(6) motion” to dismiss plaintiffs’ amended complaint.

Attorneys’ Fees

Second Circuit

Mundell v. Natsios-Mundell, No. 24-cv-2800 (JSR), 2024 WL 4979295 (S.D.N.Y. Dec. 3, 2024) (Judge Jed S. Rakoff). The family of the late Nobel Prize-winning economist Dr. Robert Mundell dispute the beneficiary designation of Dr. Mundell’s $4 million retirement account. His children and grandchildren allege that his widow fraudulently logged onto her husband’s online portal to change his designated beneficiary from his four children to name herself the sole beneficiary. The children and grandchildren sued the widow in state court to hold her liable for the alleged fraud. The widow then removed the action to federal court, arguing the family’s dispute was preempted by ERISA. Ultimately, the court disagreed, and on October 8, 2024, it issued a decision granting the plaintiffs’ motion to remand their action back to state court. (You can read our summary of that decision in Your ERISA Watch’s October 16, 2024 edition.) Plaintiffs now move for attorneys’ fees under the removal provision, 28 U.S.C. § 1447(c), for the costs they incurred from defendant’s removal. The court denied their motion in this decision, finding that the removal was objectively reasonable given the complexity of ERISA preemption. “Although plaintiffs accurately observe that governing law clearly foreclosed diversity jurisdiction as a basis for defendant’s removal, defendant’s argument that complete preemption under ERISA supplied federal-question jurisdiction presented a close call.” Simply, the court stated that although its bottom-line outcome came out in plaintiff’s favor, this result nevertheless does not provide a basis for an award of attorneys’ fees. Furthermore, the court noted that its position declining to award attorneys’ fees aligns with many other decisions addressing the same issue. Thus, plaintiffs were not awarded any fees to compensate them for the removal.

Class Actions

Fourth Circuit

Leon v. Maersk Inc., No. 3:23-cv-00602-RJC-SCR, 2024 WL 4942394 (W.D.N.C. Dec. 2, 2024) (Judge Robert J. Conrad, Jr.). Participants of the Maersk Inc. retirement plan moved unopposed for final approval of class action settlement and for attorneys’ fees, costs, administrative expenses, and a case contribution award in this breach of fiduciary duty action alleging the fiduciaries mismanaged the plan by saddling it with excessive administrative fees and recordkeeping expenses. In a very succinct order, the court granted plaintiffs’ motions, concluding that the $225,000 settlement of the class action was fair, reasonable, and adequate to the plan and the class and the result of informed, good-faith, and arms-length negotiations. The court also briefly reiterated a prior finding that the settlement for the class of participants and beneficiaries meets all of the requirements of Rule 23(a) and 23(b)(1). Moreover, the court approved the form and methods of notifying the class of the settlement. The court also noted that class members had the opportunity to voice any issues regarding the settlement and the release of claims relating to the settlement agreement and that there were no objections to the settlement or plan of allocation. Further, an independent fiduciary has reviewed the settlement and approved it, also concluding that it represents a fair and reasonable outcome for the parties. Accordingly, the court granted the motion for final approval of the settlement, and, pursuant to its terms, ordered defendants to conduct a request for proposal for plan recordkeeping services within three years following the settlement effective date. Although not discussed in any detail, the motion for attorneys’ fees, costs, expenses, and case contribution award were all granted as well pursuant to the terms of the settlement agreement. Thus, the class action settlement was given final approval, plaintiffs released their claims, and the settlement administrator was granted final authority to delegate the share of the net settlement amount to each eligible plan participant as agreed to under the plan of allocation.

Disability Benefit Claims

Fifth Circuit

Black v. Unum Life Ins. Co. of Am., No. 3:22-CV-2116-X, 2024 WL 4960010 (N.D. Tex. Dec. 2, 2024) (Judge Brantley Starr). In 2014, plaintiff Catherine A. Black underwent surgery to remove her gallbladder. Unfortunately, she suffered complications from the surgery and was unable to return to work. Ms. Black submitted a claim for disability benefits under a policy administered and insured by defendant Unum Life Insurance Company of America. Unum approved the claim. Years passed and Ms. Black was diagnosed with thoracic outlet syndrome and her symptoms persisted. In 2021, following more surgery, Ms. Black’s health began to improve. Her own doctors even cleared her to perform sedentary work. In response to this, Unum terminated Ms. Black’s disability benefits. She protested and appealed Unum’s decision, arguing her pain remained debilitating. Nevertheless, Unum affirmed its decision on appeal based on the conclusions of its reviewing nurse. Ms. Black once again requested Unum reconsider its position, and when it declined to, she filed this ERISA action. At the summary judgment stage, the court agreed with Ms. Black that Unum failed to provide her claim with a full and fair review as required under the statute. “The Court’s opinion ruled that Unum denied coverage based on medical judgment and in doing so, ‘did not meet ERISA’s procedural requirements for two reasons: (1) Nurse Abbot’s review essentially gave deference to the initial denial of Black’s claim; and (2) Nurse Abbot was not a qualified health care professional to perform the consultation.’” The court therefore granted Ms. Black’s motion for partial summary judgment and remanded the case back to Unum to conduct a new review of her claim in compliance with ERISA’s requirements. On remand, Unum consulted with a doctor of osteopathy and a vascular surgeon. Both reviewing doctors agreed that there were no clinical or diagnostic findings in Ms. Black’s medical record to support restrictions and limitations precluding her from performing sedentary occupational demands. Unum therefore denied Ms. Black’s claim again. In this decision, the court granted judgment on the record in favor of Unum on its determination post-remand. It found that the review substantially complied with ERISA’s statutory requirements because the insurer consulted with doctors who were “certainly qualified to conduct a review of Black’s medical records and form [opinions] on which Unum could rely.” More broadly, the court stated that it could not disturb Unum’s decision given that substantial evidence supports the denial, particularly as this case is unlike ones where the parties’ respective physicians disagree strongly on the plaintiff’s disability status. In this case, the court wrote the physicians “largely agree,” and Black’s own treating doctors cleared her for sedentary work as of September 17, 2021. The court therefore upheld the denial and entered judgment in favor of Unum.

Ninth Circuit

Gray v. United of Omaha Life Ins. Co., No. 24-700, __ F. App’x __, 2024 WL 5001915 (9th Cir. Dec. 6, 2024) (Before Circuit Judges Gould, Clifton, and Sanchez). Plaintiff-appellant Kandice Gray appealed a judgment from the district court in favor of defendant-appellee United of Omaha Life Insurance Company in this ERISA disability benefits action. Under de novo standard of review, the district court held that Ms. Gray failed to meet her burden of proof to demonstrate she was entitled to additional short-term disability or long-term disability benefits under the policy. On appeal, the Ninth Circuit agreed, finding no clear error in the district court’s decision. The court of appeals stressed that Ms. Gray only submitted four doctors’ appointment records to defendant while her claim was under review, and two of these doctors were not specialists in the relevant field of medicine for her disabling condition, lumbar radiculopathy. The Ninth Circuit wrote that these “medical findings are too thin and dependent on Gray’s subjective reporting to be given substantial weight.” Moreover, despite what the court of appeals categorized as “many opportunities to submit additional medical records while her claims were still under review,” Ms. Gray failed to include MRI results or respond to United’s “repeated reasonable requests for details.” The Ninth Circuit therefore agreed with the lower court that special circumstances did not exist here which would justify considering evidence that was not before United when it made its claim determination. Accordingly, the court of appeals affirmed the judgment in favor of United of Omaha.

Discovery

Third Circuit

Stallman v. First Unum Life Ins. Co., No. Civ. 23-20975 (JXN) (LDW), 2024 WL 4988603 (D.N.J. Dec. 5, 2024) (Magistrate Judge Leda Dunn Wettre). Plaintiff Jeremy Stallman filed this action against First Unum Life Insurance Company to challenge its denial of his claim for long-term disability benefits. Mr. Stallman moved for limited discovery related to his claim. The court broke Mr. Stallman’s discovery request into three sections: (1) administrative record discovery; (2) conflict of interest discovery; and (3) affirmative defenses discovery. The decision began with the discovery seeking to confirm the completeness of the administrative record produced by First Unum. In this category of discovery, Mr. Stallman sought his short-term disability claim file, First Unum’s claims manual and guidelines, and communications relating to his long-term disability claim. First Unum agreed to produce its claims manual and guidelines and the communications, mooting these requests, but argued vociferously against producing Mr. Stallman’s short-term disability claim file. First Unum contended that the short-term disability file should not be considered part of the administrative record because it was a separate and distinct file, not considered or relied upon with regard to the long-term disability claim given that the respective claims were based on wholly unrelated disabilities – a pelvic fracture in the first instance and depression and anxiety in the second. The court was persuaded by these arguments, and thus denied Mr. Stallman’s request for production of his short-term disability claim file. Furthermore, the court denied Mr. Stallman’s request for a 30(b)(6) deposition to confirm and ensure that First Unum included all internal and external communications regarding his long-term disability claim in the administrative record. The decision next turned to the conflict of interest discovery. As a preliminary matter, the court established that such discovery is only permissible when a plaintiff expresses a reasonable suspicion that a structural conflict of interest adversely affected the way his or her claim was handled. Mr. Stallman argued that he had a reasonable suspicion of misconduct in his case given First Unum’s longstanding history of unfair claim handling practices which resulted in a Regulatory Settlement Agreement with the Department of Labor in 2004, its general practices in the way it tracks and monitors claims, and the fact that First Unum granted his claim for short-term disability benefits but denied his claim for long-term disability benefits. None of these arguments were “especially persuasive” to the court. It was unconvinced that historical or general practices create a per se reasonable suspicion of misconduct affecting all benefit claims. And the court was skeptical that the denial of Mr. Stallman’s long-term disability benefit claim immediately after his approved short-term disability benefit claim was evidence of misconduct, as the two claims related to different disabilities. Nevertheless, despite the court’s view that Mr. Stallman failed to present much in the way of compelling evidence demonstrating a reasonable suspicion, it found it appropriate to permit Mr. Stallman “to serve one interrogatory addressed to whether the compensation or performance evaluations of First Unum’s claims and medical personnel involved in plaintiff’s LTD claim decision has been based, during relevant time periods, in any respect on the outcome of their claims determinations. In the Court’s view, this is the information that most directly bears on whether any bias stemming from the structural conflict actually may have influenced the outcome of the LTD claim.” In all other respects, Mr. Stallman’s “wide-ranging” conflict of interest requests were denied. Finally, the court denied Mr. Stallman’s merits discovery request into First Unum’s affirmative defenses, as it stated this type of discovery “is prohibited in abuse-of-discretion cases.” Thus, as described above, Mr. Stallman’s motion for discovery was granted in part and denied in part by the court.

Exhaustion of Administrative Remedies

Third Circuit

Murray v. United Healthcare Servs., No. 2:23-cv-02073 (BRM), 2024 WL 4986725 (D.N.J. Dec. 5, 2024) (Judge Brian R. Martinotti). Plaintiff Kathryn Murray alleges that, before undergoing two medically necessary breast reconstructive surgeries, her health insurance provider, defendant United Healthcare Services, Inc., made clear and definite promises to grant her a “gap exception” for her surgeries, essentially guaranteeing to cover the surgeries at the “in-network” benefit level because United lacked in-network physicians in her geographic location who could perform them. When all was said and done, though, United reimbursed the providers only about $6,500 for each of the two surgeries, leaving Ms. Murray with out-of-pocket expenses of $143,495.26 and $18,444.52 respectively. In this action Ms. Murray seeks the reimbursement she alleges she was promised by United. United moved to dismiss Ms. Murray’s complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). It argued that her sole cause of action under ERISA Section 502(a)(1)(B) must be dismissed because she failed to allege facts to demonstrate she exhausted administrative remedies available, and because her complaint fails to tie her claim for benefits to the specific terms of her healthcare plan. The court addressed both arguments. To begin, the court declined to dismiss the complaint for failure to exhaust administrative remedies, noting that defendant bears the burden to show failure to exhaust and that exhaustion is an affirmative defense, “not generally the basis for dismissal under Rule 12(b)(6).” The court stated it could not definitively conclude whether pursuing administrative remedies would have been futile for Ms. Murray and therefore rejected defendant’s arguments for dismissal based on failure to exhaust. Regardless, the court agreed with United that the complaint as currently pled fails to link the claim for benefits to the terms of the plan, stating, “[it] is unclear from the face of the [complaint]…what plan provisions entitle [plaintiff] to the full amount of $161,939.78 for the surgeries performed. Even when construing Plaintiff’s complaint in the light most favorable to her…it cannot be said that Defendant’s ‘clear and definite promises to Plaintiff to grant her a ‘gap exception’’ also include a promise to pay for Plaintiff’s surgeries. Instead, the plan terms indicate Defendant will pay only ‘Eligible Expenses’ incurred by ‘Covered Health Services received from an Out-of-Network provider as a result of an Emergency or as arranged by [United.]’” Stated differently, the court latched onto Ms. Murray’s apparent responsibility for any charges beyond the “Eligible Expenses,” suggesting that the plan terms seem to contradict Ms. Murray’s under-reimbursement allegations. Accordingly, the court agreed with United that the complaint is currently deficient. However, pursuant to the Third Circuit’s lenient precedent regarding leave to amend, the court allowed Ms. Murray to amend her complaint to provide additional factual content to cure this deficiency, and therefore denied United’s request that the complaint be dismissed with prejudice.

Sixth Circuit

Martinez v. Zepf Ctr., No. 3:24 CV 810, 2024 WL 4932502 (N.D. Ohio Dec. 2, 2024) (Judge James R. Knepp II). Plaintiff Henry Martinez filed this action seeking $6,000 in short-term disability benefits under a fully insured ERISA-governed plan offered by his former employer, defendant Zepf Center. Mr. Martinez stopped working following a cancer diagnosis in 2022. He originally filed this lawsuit in state court, but the action was removed by the employer. After transferring the case to federal court, the employer moved for summary judgment. Mr. Martinez failed to timely respond to defendant’s motion. In this decision the court granted the employer’s motion for summary judgment. Defendant argued, and the court agreed, that it was entitled to summary judgment on three bases: (1) Mr. Martinez cannot state an ERISA claim because he was a per diem employee and per diem employees were not eligible to participate in the short-term disability plan; (2) even if Mr. Martinez could show he was the type of employee entitled to coverage under the plan, Mr. Martinez never submitted a claim for benefits under the terms of the plan or provided written proof of disability, and the time to do so has expired under the plan’s timing requirements; and relatedly, (3) Mr. Martinez’s claim fails as a matter of law because he did not exhaust the administrative remedies provided by the plan before bringing a lawsuit.

Tenth Circuit

David P. v. United HealthCare Ins., No. 2:19-cv-00225-JNP, 2024 WL 4988990 (D. Utah Dec. 5, 2024) (Judge Jill N. Parrish). In ERISA-world, we sometimes get inured to the oddities and peculiarities which are part and parcel of our field of coverage. Two of the many strange, some may even argue absurd, conventions to which we have become accustomed are those of court-ordered “remands” to plan administrators and the judicially-crafted requirement that claimants exhaust all administrative remedies prior to commencing legal action. The court tackled these two topics in this unusual ruling intervening in defendant United Healthcare’s decision on remand of a family’s claims for coverage of the daughter’s mental and substance-use disorder treatment at two residential treatment centers. Plaintiffs filed their federal ERISA lawsuit to challenge United’s denial of their claims for benefits, arguing successfully that United acted arbitrarily and capriciously by entirely failing to consider the daughter’s substance use as an independent basis for coverage. For relief, the court awarded plaintiffs benefits outright. However, United appealed the district court’s order, and although the Tenth Circuit agreed with the lower court that the denial was an abuse of discretion, it nevertheless reversed the district court’s chosen remedy. The court of appeals directed the lower court to instead remand the claim back to United for further consideration. Here’s where things went awry. Rather than wait for the district court to issue a remand order, or move for the court to order one, the United Healthcare defendants took it upon themselves to reconsider the claim. Once again they denied the $175,000 in benefit claims, this time strengthening their denials by providing significantly more detailed explanations and addressing the substance abuse bases for the claims. In response to this, plaintiffs moved to reopen the case for the court to review the denial of their benefit claims on reconsideration. The United defendants, for their part, argued that the family needs to once again exhaust the internal appeals processes before the court may grant their motion to reopen. The court was of an entirely different opinion altogether. It concluded that the case was never closed and that United’s voluntary reconsideration of the claims “is without legal effect because it was not made pursuant to a remand order by this court,” answering the novel question: “what legal effect, if any, does Defendants’ second denial letter have absent a remand order from this court?” The court clarified that judicial remand orders to plan administrators are not merely ministerial exercises of formal protocol, but rather serve important and practical purposes, including setting guardrails on the specific issues which can be considered on remand and structuring the procedures that must be followed to ensure the parties’ respective rights and obligations. The court elaborated that “judicial remand orders set the scope and framework for remand and provide the court a yardstick against which to evaluate the insurer’s redeterminations if the plaintiffs move for judicial review again.” The court disagreed with defendants’ assertion that the court of appeals’ decision itself constituted a remand order. Undermining this position, the court stated, was the plain language of the Tenth Circuit’s opinion requiring “a remand order from this court.” Regardless, the court specified that even if it were to construe the Tenth Circuit’s opinion itself as ordering a remand to the defendants, which it did not, it was entirely unconvinced that plaintiffs would be required to pursue the multi-step administrative appeals process anew, as such a requirement would give the administrator additional opportunities “to course correct.” Thus, displeased with United’s self-start, the court nullified its redetermination and ordered plaintiffs’ claims be remanded to the insurance company with limitations. Among these court-ordered restraints was a court-placed restriction on the scope of what United may consider during remand. The court decisively disposed of defendants’ ability to evaluate the claims based on the substance abuse rationale on remand because they entirely ignored that basis during the initial determination process. The court permitted defendants only “an opportunity [on remand] to elaborate on the rationales previously raised and conveyed.” Additionally, the court set the timeframe for the remand process. It gave defendants 60 days to reevaluate the claims, and plaintiffs 60 days to respond and object, if so desired. Assuming plaintiffs do object, United then has one month to respond to the objection. Thus, the court essentially provided the parties a one-level internal appeal process. It specified that plaintiffs must exhaust this one-level appeal before they may return to the court for any further judicial intervention. Finally, the court stated that it retains jurisdiction over the case pending the outcome on remand. Having arrived at these conclusions, the court denied plaintiffs’ motion to reopen the case as premature.

Pleading Issues & Procedure

Seventh Circuit

Tran v. Veolia Util. Res., No. 1:24-cv-00121-HAB-SLC, 2024 WL 4930164 (N.D. Ind. Dec. 2, 2024) (Magistrate Judge Susan Collins). Plaintiff Hien Tran brought this action against Sun Life Assurance of Canada, Veolia Utility Resources LLC, and Lincoln Life Assurance Company of Boston seeking ERISA-governed life insurance benefits due to the death of her husband. In the alternative, Ms. Tran also asserted a breach of fiduciary duty claim against defendants. After the lawsuit was filed, Sun Life received a competing claim for the same benefits from the decedent’s former wife, Sally Ann Lombardo. In response to this, Sun Life has moved to join Ms. Lombardo as a new party to this matter. Additionally, Sun Life asked the court to bifurcate the benefit claim from the alternative breach of fiduciary duty claim. It argues that bifurcation of the two causes of action would promote judicial economy and avoid prejudice to the parties. The court addressed joinder first and agreed with Sun Life that the competing claims for benefits present a classic example of a case where a party could be prejudiced by a decision made in his or her absence and where the insurance company would be subject to a substantial risk of inconsistent judgments from multiple lawsuits. Furthermore, the court rejected Ms. Tran’s argument that joinder of Ms. Lombardo would be futile because her competing claim for the benefits lacks merit. The court stated that futility arguments about the inability of the plaintiff to prevail on the merits are not well suited to joinder analysis and arguments about futility only hold water if they refer to the inability to state a claim. Therefore, the court declined to prevent joinder of Ms. Lombardo’s claim based solely on arguments regarding the merits. Accordingly, the court granted Sun Life’s motion to join Ms. Lombardo. However, the court was not persuaded by Sun Life’s motion to bifurcate because “the Court does not foresee a scenario where separation of the two claims avoids prejudice to a party or promotes judicial economy.” Therefore, the court denied Sun Life’s motion for bifurcation of the claims in this case.

Provider Claims

Ninth Circuit

Cleanquest, LLC v. United Healthcare Ins. Co., No. 8:23-cv-00148-JWH-ADS, 2024 WL 4940540 (C.D. Cal. Dec. 2, 2024) (Judge John W. Holcomb). Plaintiff Cleanquest, LLC is a toxicology lab that provides testing services for substance abuse treatment facilities. Cleanquest is out-of-network with defendants UnitedHealthcare Insurance Company, United HealthCare Services, Inc, and United Behavioral Health. It alleges that United has stopped paying claims or is underpaying for Cleanquest’s medical services. In this action, the provider seeks payment for testing of 166 patients with plans insured by United. This action was originally brought in state court. The United defendants removed the action to federal court. Cleanquest has since amended its complaint to assert claims under ERISA Sections 502(a)(1)(B), 502(a)(2), 502(a)(3), and 1132(c), as well as three state law claims for implied contract, quantum meruit, and California’s unfair competition law. Defendants moved to dismiss the amended complaint. The court granted the motion in part and denied the motion in part in this order. To begin, the court found that the provider stated a viable claim for benefits under ERISA Section 502(a)(1)(B), as its amended complaint sufficiently pleads that United violated specific terms of the ERISA plans and plausibly alleges that defendants have misapplied plan terms and underpaid claims. Additionally, the court concluded that Cleanquest alleged it exhausted its administrative remedies prior to bringing its action. The motion to dismiss the ERISA benefit claim was therefore denied by the court. However, the court granted defendants’ motion to dismiss the Section 502(a)(2) claim as the court found it clear from the face of the complaint that this action is not brought on behalf of the healthcare plans, but plainly on behalf of the healthcare provider in its own capacity. Nevertheless, the court was not receptive to defendants’ arguments with regard to the Section 502(a)(3) claim. The court found it appropriate to leave this cause of action because it concluded Section 502(a)(1)(B) may not allow the court to appropriately remedy all of the provider’s harm given the fact that some of the plans at issue may be self-funded while others are fully insured. The court also allowed plaintiff to proceed with its claim for failure to provide requested plan documents. However, the court agreed with defendants that all of Cleanquest’s state law claims were expressly preempted by ERISA Section 514. The court concluded that these three causes of action were all premised on coverage and reimbursement under the terms of the plans rather than on independent obligations owed to the provider or promises of payment, and that they therefore could not be resolved without reference to the ERISA plans. Defendants’ motion was thus granted with respect to the three state law claims. Finally, the court clarified that the four causes of action it was dismissing were dismissed without leave to amend, as it concluded that amendment would be futile because no additional revisions could cure these deficiencies.