Dwyer v. United Healthcare Ins. Co., No. 23-50439, __ F.4th __, 2024 WL 4230125 (5th Cir. Sept. 19, 2024) (Before Circuit Judges Higginson, Willett, and Oldham)

Plaintiff Kelly Dwyer is the father of E.D., who as a preteen was diagnosed with anorexia nervosa, which has the highest mortality rate of any psychiatric disorder. Mr. Dwyer sought treatment for E.D. from an eating disorder specialist near the Dwyers’ home in Texas, but it quickly became apparent that her condition was too serious for outpatient treatment. As a result, E.D. was admitted to Avalon Hills, a residential treatment center in Utah that specializes in the treatment of eating disorders.

Mr. Dwyer submitted claims for E.D.’s treatment at Avalon Hills to defendant United Healthcare Insurance Company under his ERISA-governed medical benefit plan. At first there were no problems and United paid Mr. Dwyer’s claims. However, as E.D.’s treatment at Avalon Hills progressed, United began to push back.

First, United refused to keep paying for residential treatment, and insisted that E.D. was ready step down to Avalon’s next lower level of treatment, a partial hospitalization program (“PHP”). United denied Mr. Dwyer’s appeal of this decision, and thus E.D. stepped down to PHP.

However, E.D. continued to struggle in PHP. She spent hours per day in treatment and every meal needed to be monitored. A three-day weekend pass designed to test whether E.D. was ready for discharge was a disaster, “filled with difficult, negative experiences,” during which she lost two pounds.

At this time, “[f]or reasons that are difficult to understand…United decided it was appropriate to discharge E.D. entirely.” United terminated coverage of E.D.’s PHP treatment, contending that she was ready for outpatient-only treatment. Mr. Dwyer appealed this decision, but again United upheld it. This time Mr. Dwyer rejected United’s assessment, kept E.D. in the PHP program at Avalon Hills, and paid out of pocket for her treatment.

Meanwhile, Mr. Dwyer was engaged in another battle with United over the cost of E.D.’s treatment. United did not have a contract with Avalon Hills. However, it did have a contract with MultiPlan, a network provider that “connects insurers with out-of-network providers so that insurers do not have to make arrangements individually with those providers.”

As a result, because United had an agreement with MultiPlan, which in turn had an agreement with Avalon Hills, Mr. Dwyer reasonably believed that he would be required to pay the rate negotiated by United and MultiPlan for E.D.’s treatment instead of United’s more onerous out-of-network rates. Indeed, at first United paid claims at the MultiPlan rate. However, without warning it suddenly stopped doing so, resulting in substantial out-of-pocket payments by Mr. Dwyer.

Mr. Dwyer and Avalon Hills “repeatedly asked United to explain this discrepancy” but they did not get satisfactory answers. Eventually, Mr. Dwyer submitted an appeal in which he asked why United had shifted its payment rationale. He explained that it was difficult for him to “make critical coverage decisions” about E.D.’s treatment when he had “no idea what reimbursement formula” United would apply. United never responded to this appeal.

As a result, Mr. Dwyer initiated this action in 2017. In 2019 the district court held a bench trial, and then issued a written decision almost four years later, in April of 2023. The court ruled in United’s favor on both issues presented, deciding that United did not err in terminating E.D.’s PHP coverage, and that its payment rate was appropriate. Mr. Dwyer appealed and this published opinion by the Fifth Circuit was the result.

Under de novo review, the Fifth Circuit reversed on both issues. On the medical necessity of E.D.’s PHP treatment, the court ruled that “United’s denial letters are not supported by the underlying medical evidence. In fact, they are contradicted by the record.” The court listed each of United’s justifications for denying E.D.’s claim, including “you have made progress,” “you have achieved 100% of your ideal body weight,” “you are eating all your meals,” and “you are not trying to harm yourself…[or] others,” and, most cryptically, “you are better,” and explained why each item was either untrue or irrelevant. The Fifth Circuit agreed with Mr. Dwyer that to the extent E.D. had improved, it was because she was constantly monitored in daily treatment. These gains would have quickly evaporated if she had been discharged and therefore did not justify the denial of ongoing treatment coverage.

The Fifth Circuit also criticized the way United handled E.D.’s claim, emphasizing that ERISA requires a “full and fair review” involving a “meaningful dialogue between the beneficiary and administrator.” The court ruled that United had failed this test: “United not only failed to engage in a ‘meaningful dialogue’ with Mr. Dwyer; the ERISA fiduciary engaged in no dialogue at all.” The court found that “[n]o explanation was provided or offered” for United’s denial, and that its letter “said nothing about the plan provisions or how E.D.’s medical circumstances were evaluated under the plan.” The court cited cases from the Ninth and Tenth Circuits in stating, “We therefore join a growing number of decisions rejecting similar denial letters issued by United across the country.”

Finally, the court addressed the MultiPlan issue. Citing its en banc precedent Vega v. National Life Ins. Servs., Inc., 188 F.3d 287 (5th Cir. 1999), the court noted that “ERISA requires both the beneficiary and the fiduciary to avail themselves of the administrative process… When one party forfeits that process, it requires us to direct entry of judgment for the opposing party.” Because United never responded to Mr. Dwyer’s appeal on this issue, this rule ended the court’s inquiry and required judgment in his favor.

The court rejected United’s arguments to the contrary, ruling that (1) United’s hearsay argument was “bizarre” because hearsay rules do not apply to ERISA proceedings, (2) waiver and estoppel may not be able to create coverage under state insurance laws, but those doctrines do apply in ERISA cases, and (3) United could not advance new arguments in litigation about the plan’s payment provisions because “United is not entitled to offer such post hoc arguments… United is limited to the arguments it made at the administrative level, which were none.” In any event, the Fifth Circuit ruled that Mr. Dwyer’s understanding was correct, and that the agreed-upon MultiPlan rate should apply.

As a result, although it took seven years of litigation, the case was an unqualified success for Mr. Dwyer and another appellate defeat for United. The action will now be remanded to the district court for further proceedings as to the appropriate remedies.

Mr. Dwyer was represented by Your ERISA Watch co-editor Peter S. Sessions and Elizabeth K. Green of Green Health Law.

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

Breach of Fiduciary Duty

Second Circuit

Reidt v. Frontier Commc’ns Corp., No. 3:18-CV-1538(RNC), 2024 WL 4252646 (D. Conn. Sep. 20, 2024) (Judge Robert N. Chatigny). Plaintiff Mary Reidt brings this lawsuit as a putative class action on behalf of the Frontier Communications 401(k) Savings Plan and its participants against the plan’s fiduciaries. Ms. Reidt alleges that defendants breached their fiduciary duties of prudence and diversification by failing to require the participants to divest themselves of legacy employer stock they brought with them when they became Frontier employees following a series of mergers and spinoffs with Verizon and AT&T. “The gravamen of plaintiff’s complaint is that, as a result of the Verizon and AT&T acquisitions, the Plan was overconcentrated in telecommunications stocks, and the Committee and its members breached fiduciary duties owed to the Plan by failing to prudently diversify the Plan’s investments…and their failure to do so caused her to retain Verizon stock in her individual account, resulting in a diminution in her account’s value when the stock price fell.” Defendants moved to dismiss the complaint for failure to state claims on which relief may be granted. First, they contend that Ms. Reidt lacks Article III standing to seek redress on behalf of other plan participants. The Second Circuit has not decided what an ERISA plaintiff must allege to have Article III standing in a representative capacity in a suit brought under Section 502(a)(2) on behalf of the plan. The court anticipated that the Second Circuit would adopt the more lenient approach with regard to constitutional standing seeking redress on behalf of the plan. That approach holds that a plan participant can seek recovery for injuries arising from the fiduciaries’ actions even for funds they did not personally invest in because the fiduciaries’ course of conduct nevertheless directly harmed every plan participant. In this case, the court concluded that Ms. Reidt was allegedly harmed by the same course of conduct she challenges with respect to her own alleged injury-in-fact, and that she therefore has constitutional standing to seek recovery for injuries suffered by the other participants. Next, defendants challenged the timeliness of the claims. They argued that any claims based on the 2010-11 Verizon stock additions are untimely under ERISA Section 413 because the last date of action was more than six years before Ms. Reidt brought her lawsuit. In response, Ms. Reidt replies that her claims are timely because defendants had a continued duty to monitor investments and remove imprudent ones, meaning the breach continued even after 2011. Again, the court agreed with Ms. Reidt. The court then discussed defendants’ position that because they provided a diverse menu of investment options in the plan from which participants may choose they did not have a duty to order divestiture of the employer stocks. The court did not agree and expressed that defendants’ view “would effectively create a new safe harbor with potentially far-ranging consequences.” Even in employee stock ownership plans where the fiduciaries have a unique exception from the duty to diversify, the court reminded defendants that those fiduciaries nevertheless have a responsibility to act prudently when buying additional shares of employer stock or otherwise increase the ESOP’s concentration risk. The court went on to state that whether the investments in the plan were insufficiently diversified remains a question of fact “unsuitable for determination at this stage.” Finally, the court addressed the claim against Frontier. First, it declined to dismiss Frontier as a defendant “because a plan sponsor who appoints a plan’s named fiduciaries exercises [discretionary] authority.” However, the court declined to recognize Ms. Reidt’s theory of respondeat superior to hold Frontier responsible for its employees’ alleged breaches. The court therefore granted the motion to dismiss this small aspect of the complaint. Otherwise, the motion to dismiss was denied as explained above.

Eighth Circuit

Payne v. Hormel Foods Corp., No. 24-cv-545 (SRN/DTS), 2024 WL 4228613 (D. Minn. Sep. 18, 2024) (Judge Susan Richard Nelson). Plaintiff Scott Payne is a participant in the Hormel Foods Corporation Tax Deferred Investment Plan A and the Hormel Foods Corporation Joint Earnings Profit Sharing Trust. Together, these two plans hold over $1.2 billion in assets under management. Despite this size, Mr. Payne alleges in this putative ERISA class action that the fiduciaries of the plan have failed to select lower cost institutional share classes for its mutual funds. In addition, Mr. Payne challenges the plans’ inclusion and retention of a Mass Mutual general account guaranteed investment contract. He contends in his complaint that this stable value investment option underperformed its counterparts for over six years, significantly affecting the long-term performance of the participants’ investments. Accordingly, Mr. Payne brings claims for breaches of fiduciary duties under ERISA against the Hormel Foods Corporation, its board of directors, and the individual employees, officers, and contractors of the corporation operating the two plans. Defendants moved to dismiss the action. They argued that the complaint fails to meet the Eighth Circuit’s meaningful benchmark standards, the alleged underperformance was not sustained for long enough to plausibly infer a flawed fiduciary process, and the cheaper share classes were either not available or not actually less expensive. Finally, the board of directors argued that allegations in the complaint fail to sufficiently allege that it acted as a fiduciary in this case. The court went through each of these arguments. It began with the Mass Mutual stable value investment option. Mr. Payne compared this investment with two others: (1) the Mass Mutual separate account guaranteed investment contract, and (2) the TIAA-CREF traditional general account fixed-annuity contract. Comparing the crediting rates of the challenged funds to these two other stable value investment options with substantially similar benefits, expectations of returns, and investment goals, Mr. Payne demonstrated that the challenged fund sustained underperformance by a rate of 0.71% to 1.58%. Even under the requirements of the Eighth Circuit’s strict pleading precedent, the court concluded that these comparators could be considered meaningful benchmarks and held that six years of sustained underperformance for investments that are purposefully stable and safe plausibly demonstrates “that a prudent fiduciary in the circumstances alleged ‘would have acted differently.’” Accordingly, the court denied the motion to dismiss on this basis. It also concluded that the complaint plausibly alleges that the fiduciaries failed to leverage their negotiating power to invest in cheaper, but otherwise identical, share classes for its mutual fund investment options. Thus, the court found that it was plausible that the plans’ fiduciaries employed a flawed process. The court added that this position was in line with similar holdings from other sister courts in the district, and has been upheld on appeal in the Eighth Circuit. As for the fiduciary status of the board of directors, the court ruled that the complaint plausibly alleges that the members of the board had discretionary authority and that they exercised that power to make investment decisions regarding the plans. Taking these facts as true, the court found that Mr. Payne alleged enough to infer that the board acted as a fiduciary. For these reasons, the court denied defendants’ motion to dismiss.

Ninth Circuit

Furst v. Mayne, No. CV-20-01651-PHX-DLR, 2024 WL 4216054 (D. Ariz. Sep. 17, 2024) (Judge Douglas L. Rayes). Husband and wife Hanna and David Furst formed the DHF Corporation in the 1980s and were the company’s sole shareholders. DHF Corp. formed the DHF Corporation Profit Sharing Plan, an employee pension benefit plan governed by ERISA. The plan sponsor is DHF Corporation, the sole employee participant of the plan was David, and the sole plan beneficiary is Hanna. Originally, the plan trustees and administrators were David and Hanna, and the plan’s assets consisted of stock, bond, and cash portfolios maintained at TD Ameritrade, Charles Schwab, and E-Trade. In February 2018 new co-trustees were appointed for the plan – brother and sister Robert Furst (plaintiff) and Linda Mayne (defendant). Then, in 2019, David Furst died, leaving Hanna Furst as the sole plan beneficiary. After David’s death, Ms. Mayne obstructed her brother’s efforts to obtain access to the plan’s accounts, and failed to productively invest the accounts or permit any further investments or disbursements. Ms. Furst was initially also a plaintiff in this action. However, she was subsequently placed under a conservatorship and the counsel retained by the conservator did not wish to pursue the claims, leaving Robert Furst as the sole plaintiff. He accuses Linda of breaching her fiduciary duties of prudence and loyalty and seeks equitable relief under Section 502(a)(3). Defendants moved for partial summary judgment, seeking judgment in their favor on the breach of fiduciary duty claim and on the equitable relief claim relating to allegations in a single paragraph of the complaint which they contend is a benefits claim in disguise, which Robert, as a fiduciary, lacks standing to bring. To begin, the court denied the summary judgment motion on the fiduciary breach claim. It stated that contrary to defendants’ assertion, genuine issues of material fact remain over whether the plan suffered a loss because of the failure to reinvest the liquidated proceeds of the TD Ameritrade and E-Trade accounts. Moreover, the court wrote, “Robert has shown that triable issues exist as to at least two of his three proposed methods of calculating damages. Defendants therefore have not shown an entitlement to summary judgment on the breach of fiduciary duty claim.” However, the same was not true for the challenged paragraph in count two. There, the court agreed with defendants that the paragraph, which reads, “In order to obtain appropriate equitable relief to redress Linda’s…violations of ERISA…Plaintiffs seek a Court order that (a) Hanna…is entitled to full distribution of her plan benefits, and (b) Linda…is prohibited from interfering with the plan distribution,” was, at bottom, seeking distribution of plan benefits. As a result, the court stated that Mr. Furst could not pursue this aspect of his equitable relief claim, because he lacks standing as a trustee to bring a claim under Section 502(a)(1)(B). The court therefore entered summary judgment in favor of defendants on this single paragraph of the complaint; otherwise their motion was denied.

ERISA Preemption

Second Circuit

Cornacchia v. CB Neptune Holdings, LLC, No. 3:23-cv-796 (VAB), 2024 WL 4188460 (D. Conn. Sep. 13, 2024) (Judge Victor A. Bolden). Six months after plaintiff Bianca Cornacchia was hired as a senior account director at CB Neptune Holdings, LLC she began to suffer acute mental distress and applied for short-term disability benefits under her employer’s policy administered by Metropolitan Life Insurance Company (“MetLife”). She was approved for benefits, but when she attempted to extend her benefits, her claim was denied. On March 2, 2022, Neptune Holdings terminated Ms. Cornacchia. In response to her termination, Ms. Cornacchia sued both Neptune Holdings and MetLife. In her complaint, Ms. Cornacchia brings three claims of discrimination against Neptune Holdings under the Americans with Disabilities Act, as well as one claim against MetLife for negligence under state common law. MetLife moved to dismiss the one claim asserted against it. It argued that Ms. Cornacchia could not state her claim because “there is simply no viable legal path to pleading a common law negligence claim under duties imposed by ERISA, because ERISA contains its own exclusive remedial scheme.” In addition, MetLife maintained that even if Ms. Cornacchia had properly pled a claim for negligence against it, her claim would implicate the economic loss doctrine which bars negligence claims that arise out of and are dependent on breach of contract claims that result in economic loss only. The court agreed. It stated that the duty MetLife owed to Ms. Cornacchia arose from its obligations under the ERISA plan, and that such a claim is preempted by ERISA. Further, the court was not convinced that MetLife’s actions were the but-for cause of Neptune’s decision to terminate her, and in fact determined that MetLife’s actions were not a substantial factor in the firing at all. Moreover, the court agreed with MetLife about the applicability of the economic loss doctrine. It stated that the duty of care MetLife owed to Ms. Cornacchia arises from its duties as administrator of the disability policy and without this contractual duty, “MetLife would owe no duty of care related to conduct at issue here – the alleged improper denial to extend Ms. Cornacchia’s short term disability claim – and Ms. Cornacchia’s tort claim would not survive.” Accordingly, the court granted MetLife’s motion to dismiss Ms. Cornacchia’s negligence claim. Finally, the court concluded that because of ERISA preemption and the economic loss doctrine amendment of the claim would be futile. The negligence claim against MetLife was therefore dismissed with prejudice.

Emergency Physician Servs. of N.Y. v. UnitedHealth Grp., No. 20-cv-9183 (JGK), 2024 WL 4208400 (S.D.N.Y. Sep. 17, 2024) (Judge John G. Koeltl). The plaintiffs in this action are emergency medical care providers in New York who brought this action against UnitedHealth Group, Inc. and its related subsidiaries (collectively “United”) for systemic failure to reimburse the providers for the reasonable value of emergency medical services provided to United’s insured members. Plaintiffs’ causes of action have been whittled down after the court ruled on a motion to dismiss. Their remaining claims are for unjust enrichment and declaratory relief. United moved for summary judgment, arguing that plaintiffs’ unjust enrichment claim is preempted by ERISA and the Federal Employee Health Benefits Act (“FEHBA”), and that the providers have failed to satisfy the elements of their unjust enrichment claim. In this decision the court denied defendants’ motion for summary judgment. The court began by addressing United’s express ERISA preemption arguments. United asserted that the nature of the benefit allegedly conferred onto it was premised on the existence of the ERISA healthcare plans meaning the state law claim related to ERISA plans is therefore preempted. The court disagreed that the ERISA plans were an essential part of the unjust enrichment claim. To the contrary, the court relied on the Supreme Court’s reasoning in Rutledge v. Pharm. Care Mgmt. Ass’n to establish “the appropriate analytical framework for the defendants’ preemption argument.” Applying this framework, the court found that the unjust enrichment claim does not reference any ERISA plan as it “applies evenhandedly to both ERISA and non-ERISA plans.” Further, the court held that the claim does not have an impermissible connection to ERISA plans because the claim, if successful, would do no more than increase reimbursement costs, “and in Rutledge, the Supreme Court made clear that preemption does not apply where state laws increase ERISA plan costs without requiring payment of specific benefits or otherwise ‘governing a central matter of plan administration.’” Accordingly, the court denied United’s motion for judgment on the claims governed by ERISA. It did the same for the claims governed by FEHBA.  The court noted that there is less authority on FEHBA preemption than on ERISA preemption. Nevertheless, the court noted that FEHBA’s preemption clause closely resembles ERISA’s, as both use the phrase “relate to.” Having concluded that ERISA does not preempt plaintiffs’ unjust enrichment claim, the court extended its logic to find the same true of FEHBA. The court then addressed United’s contention that it is entitled to summary judgment because the plaintiffs fail to satisfy the elements of their unjust enrichment claim. The court took seriously United’s assertion that the underpayments conferred no benefit on them and thus plaintiffs’ theory of unjust enrichment runs afoul of equitable principles as a matter of law. It noted that other courts have reasoned that an insurance company’s obligation to pay money to its insureds could not be considered a benefit within the meaning of the unjust enrichment doctrine. However, it disagreed with this logic. The court instead agreed with the providers that “an insurance company would be unjustly enriched if it failed to pay for the reasonable value of services rendered.” It stated this was particularly true where, as here, the plaintiffs are out-of-network emergency service providers who are obligated to provide care to patients under EMTALA. The plaintiffs also claimed that the United defendants benefited from a savings fee agreement with the healthcare plans in which they were rewarded for reimbursing providers less than their billed charges. The court replied that in light of its reasoning that the providers discharged United’s obligation to its insureds, it was not necessary to rely on the savings fee theory to establish that a benefit was conferred on the insurance company. The court rejected defendants’ remaining arguments related to the elements of the unjust enrichment claim, as well as their contention that plaintiffs lack standing and their argument that the declaratory relief plaintiffs’ request is redundant to their unjust enrichment claim. Finally, the court ruled that there are genuine disputes of material fact that preclude it from awarding summary judgment to defendants. For these reasons, the court denied defendants’ motion.

Rowe v. UnitedHealthCare Serv., No. 23-CV-0516 (OEM) (ARL), 2024 WL 4252045 (E.D.N.Y. Sep. 20, 2024) (Judge Orelia E. Merchant). A plastic surgeon and his practice sued United Healthcare Service, LLC for breach of contract, unjust enrichment, promissory estoppel, and fraudulent inducement in state court after the insurance company reimbursed plaintiffs only a fraction of their billed amounts for medically necessary breast surgery they performed. United removed the action to federal court and subsequently moved to dismiss. United argued that the claims are expressly preempted by ERISA because they require interpretation of the terms of the ERISA-governed healthcare plan. The court agreed, with very little analysis. It stated that it is clear from the face of the complaint that the providers’ state law claims “derive from coverage determinations made pursuant to a health benefit plan regulated by ERISA,” and that the “adjudication of each of Plaintiffs’ claims would require the Court to analyze the terms of the Plan to determine the benefits owed.” Accordingly, the court dismissed the state law causes of action. To the extent the providers wish to assert ERISA claims as their patient’s assignee, the court cautioned that they “must demonstrate standing to assert any such claim.”

Fifth Circuit

Broussard v. Exxon Mobil Corp., No. 22-00843-BAJ-RLB, 2024 WL 4194325 (M.D. La. Sep. 13, 2024) (Judge Brian A. Jackson). After leaving his employment with Exxon Mobil Corporation in 2022, plaintiff Jason Broussard sued the company alleging that it improperly calculated his pension benefits and that it withheld wages by failing to pay a shift differential benefit between 2015 and 2020. Mr. Broussard brought his claims under Louisiana’s Wage Payment Act in Louisiana state court. Exxon removed the action to federal court. Even after the action was removed, Mr. Broussard maintained only state law causes of action. Exxon moved for summary judgment. It argued that the pension benefits claim is preempted by ERISA, and that it would fail even as an ERISA claim because Mr. Broussard failed to submit a claim for benefits and failed to exhaust his administrative claims procedures before filing a civil action. In addition, Exxon argued that Mr. Broussard was not entitled to any monthly pay to compensate for his shift changes until January 1, 2021, and that it was not required to make any retroactive payments. The court agreed with Exxon on all of these points, and accordingly granted its motion for summary judgment. First, the court stated that regardless of how Mr. Broussard was labeling his pension claim, it is inarguably a claim for wrongful denial of coverage under an ERISA benefit plan, which is exclusively enforced under ERISA. As such, the court concluded that there was no genuine issue of material fact that the state law claims seeking pension benefits were preempted by ERISA. Putting aside the issue of preemption, the court agreed with Exxon that Mr. Broussard failed to exhaust his available administrative remedies before he filed suit. For one, the court was not convinced that Mr. Broussard’s letter to Exxon about his pension benefit calculation was a claim for benefits, as it was framed as a request for information and Exxon did not understand it to be a formal claim for benefits. But even if it was a claim, the court agreed with Exxon that Mr. Broussard did not receive a denial or exhaust any claims procedures before taking to the courts. Because Mr. Broussard did not advance any argument that attempting to satisfy the exhaustion requirement would have been futile, the court agreed with Exxon that even if the claim for pension benefits could be sustained under ERISA, Exxon would be entitled to summary judgment because Mr. Broussard failed to satisfy his administrative remedies. Finally, the court concluded that there was no genuine dispute that Exxon properly paid Mr. Broussard as their contract did not provide for shift differential pay prior to 2021. For these reasons, the court granted Exxon’s entire motion for summary judgment, and dismissed Mr. Broussard’s case.

Sixth Circuit

Ennis-White v. Nationwide Mut. Ins. Co., No. 2:24-cv-1236, 2024 WL 4216426 (S.D. Ohio Sep. 17, 2024) (Judge Sarah D. Morrison). Two pro se plaintiffs, Rusty and Jonathan Ennis-White, brought this action in Nevada state court against Nationwide Mutual Insurance Company and several other defendants to challenge, among other things, Nationwide’s handling of the Nationwide Insurance Companies and Affiliates Plan for Your Time and Disability Income Benefits. The Ennis-Whites not only seek compensatory and punitive money damages, but also court appointment “of an independent monitor to oversee Nationwide’s practices related to disability claims and ethical procedures.” Nationwide removed the lawsuit to federal court, and successfully moved to transfer it to the Southern District of Ohio pursuant to the policy’s forum selection clause. Following the transfer, Nationwide moved to dismiss the complaint. The Ennis-Whites moved for leave to file a second amended complaint. Both motions were denied in this decision, which focused on a basic question – whether the court has subject matter jurisdiction over the case. To begin, the court gave a brief overview of ERISA preemption. It summarized the fundamental difference between express and complete preemption in simple terms, stating express preemption “is a defense; it is grounds for dismissal but not for removal,” while complete preemption is the reverse, “grounds for removal but not grounds for dismissal.” The court contemplated that the Ennis-Whites might well wish to bring claims under ERISA for benefits, fiduciary breach, or retaliation, but expressed that neither party properly scrutinized ERISA preemption. “When Nationwide removed this case to federal court, it stated that the eight claims in the FAC ‘are preempted by ERISA because each claim ‘relates to’ disability benefits for Plaintiff Ennis under an employee benefits plan governed by ERISA… But, as explained above, claims merely ‘related to’ ERISA are not removable.” Without more, the court said that it could not properly assess whether it has subject matter jurisdiction over this action. Accordingly, rather than rule on either motion before it, the court ordered the parties to more fully address the issue of ERISA preemption. Finally, the court prompted the parties to focus future discussions about the merits of state law causes of action under Ohio, rather than Nevada, law. Thus, the court denied the two motions without prejudice, and ordered the parties to refrain from filing any further motions until the issue of subject matter jurisdiction is resolved.

Exhaustion of Administrative Remedies

Seventh Circuit

Blackledge v. United Parcel Serv., No. 1:22-cv-01947-SEB-MG, 2024 WL 4252958 (S.D. Ind. Sep. 20, 2024) (Judge Sarah Evans Barker). Plaintiffs Gary Blackledge and Rick Eddelman are delivery drivers for United Parcel Service, Inc. Both men used to work for UPS Group Freight, Inc., but were enticed by offers of higher wages to become employed for United Parcel. Both UPS Group Freight and United Parcel are parties to collective bargaining agreements which authorize covered employees to participate in distinct pension plans. When Mr. Blackledge and Mr. Eddelman started their new positions with United Parcel they lost their seniority and service credits that had accrued under the UPS Freight pension plan. UPS adopted two different positions. First, when Mr. Blackledge filed a grievance about the pension vesting structure, the UPS employers and his Union determined that he was a “new hire” which caused him to lose his progression rank and associated pension benefits. However, when Mr. Eddelman applied for plan benefits during a limited-time opportunity available to terminated employees, the UPS Freight pension plan denied his claim, concluding that his employment with United Parcel rendered him an “active employee” ineligible for pension benefits. Mr. Blackledge and Mr. Eddelman filed this lawsuit against their employer/employers, the pension plans, and the administrators of the plans, seeking to recover their lost pension benefits, as well as other compensation and benefits pursuant to the terms of their collective bargaining agreements. Plaintiffs asserted ERISA claims for benefits and fiduciary breach, as well as a claim under the Indiana Wage Payment Act, and one under the Fair Labor Standards Act (“FLSA”). Defendants moved for summary judgment on all claims. Their motion was granted by the court in this decision. First, the court granted judgment to defendants on plaintiffs’ ERISA benefit claims. The court agreed with UPS that neither plaintiff had offered evidence showing that he had exhausted administrative remedies by following the claims procedures set forth in the plans before commencing litigation. And the court did not agree with plaintiffs’ bald assertion that exhaustion would have been futile. Accordingly, the court determined that plaintiffs’ failure to exhaust administrative remedies entitled defendants to summary judgment on the claims under Section 502(a)(1)(B). The court then turned to the fiduciary breach claim. As a preliminary matter, the court clarified that plaintiffs could only assert their claims under Section 502(a)(3), and not under Section 502(a)(2), because they “have not brought claims on the Plan’s behalf, alleged a planwide breach, or asserted violations of § 1109(a).” However, the court also determined that plaintiffs could not sustain a Section 502(a)(3) claim either because they had a remedy available to them under Section 502(a)(1)(B) for the alleged denial of benefits. Thus, the court barred Mr. Blackledge and Mr. Eddelman from sustaining duplicative claims under subsections (a)(1)(B) and (a)(3). Finally, the court agreed with defendants that both plaintiffs’ state law wage claims and their FLSA claims relied on the men’s substantive rights on the collective bargaining agreements, and that neither man exhausted his contractual remedies by pursuing a grievance before commencing this action. Accordingly, the court did not allow plaintiffs to continue with these two causes of action, nor grant them the opportunity to pursue a claim under the Labor Management Relations Act. For these reasons, the court entered summary judgment in favor of defendants on every claim plaintiffs asserted and closed the case.

Life Insurance & AD&D Benefit Claims

Fifth Circuit

Wicks v. Metropolitan Life Ins. Co., No. 23-11247, __ F. App’x __, 2024 WL 4212891 (5th Cir. Sep. 17, 2024) (Before Circuit Judges King, Stewart, and Higginson). Jackie Wicks died in a hospital on June 26, 2021 after nurses administered intravenous pain medications including morphine, fentanyl, hydromorphine, and dilaudid. Mr. Wicks stopped breathing and became unresponsive, prompting lifesaving procedures, including the administration of Narcan. Mr. Wicks was in the hospital to receive gastric sleeve laparoscopic surgery to treat obesity and obstructive sleep apnea. The surgery itself was successful and complication free. Sadly, the Narcan had no effect, and the hospital was unable to revive Mr. Wicks. But was his death an accident? Was it the result of the unintentional narcotic overdose from the pain medication his physicians prescribed? Or was it a natural death caused by cardiac arrest resulting from underlying health morbidities? The administrator of Mr. Wicks’ ERISA-governed accidental death and dismemberment coverage, defendant Metropolitan Life Insurance Company, concluded that the death was not an “accident,” and even if it was, the plan’s “Illness/Treatment Exclusion,” which states that benefits will not be paid for any death caused or contributed to by an illness or treatment of such an illness, prohibited payment of benefits. MetLife determined that the death resulted from complications following the surgery that Mr. Wicks underwent to treat his obesity. In the denial letter, MetLife informed Mr. Wicks’ widow, Fonda Wicks, that “There is no indication of an accident, certainly not one that was independent of other causes.” Ms. Wicks challenged MetLife’s determination in the courts. On August 14, 2023, the district court entered judgment in favor of MetLife under de novo standard of review. It concluded that Mr. Wicks’ death resulted from an underlying illness and “occurred from the standard complications of standard medical treatment for a disease,” and was therefore not a covered accidental death, independent of other causes. Ms. Wicks appealed the district court’s judgment to the Fifth Circuit. In this decision the court of appeals affirmed the lower court’s holdings. It agreed that Ms. Wicks did not satisfy her burden to prove entitlement to the benefits because the autopsy report concluded that Mr. Wicks’ death was caused only in part by the post-operative narcotics he was given. “Wicks failed to provide evidence that the narcotics were the ‘Direct and Sole Cause’ of the ‘Covered Loss,’ i.e., Mr. Wicks’s death.” The Fifth Circuit stated that the district court correctly construed the terms of the plan to require the accidental injury to be the direct and sole cause of the death. “[T]he district court’s reasoning is supported by applicable caselaw as well as the medical expert reports and other evidence in the administrative record when read in the context of the terms of the Plan.” The Fifth Circuit noted that the district court’s decision was supported by its precedent in Thomas v. AIG Life Ins. Co., 244 F.3d 368 (5th Cir. 2001), which held that “‘the standard complications of standard medical treatment’ for obesity were the foreseeable result of treatment for the disease rather than a covered accident.” On these grounds, the court of appeals concluded that the district court correctly determined that Ms. Wicks was not entitled to the accidental death benefits. This was especially true under the circumstances of Mr. Wicks’ policy which requires that the accidental cause of death be the direct and sole cause. “Wicks failed to carry her burden of establishing that Mr. Wicks’s death was caused solely and directly by an accidental injury, given his preexisting infirmity of morbid obesity.” Finally, the Fifth Circuit rejected Ms. Wicks’ arguments on appeal that she was entitled to coverage through some of the plan’s exclusions or exceptions, “because the administrative record and applicable law support the district court’s determination that Wicks failed to carry her burden of establishing her entitlement to AD&D coverage under the terms of the Plan.” Accordingly, the Fifth Circuit affirmed the district court’s judgment in favor of MetLife.

Sixth Circuit

Sherman v. MedMutual Life Ins. Co., No. 5:23CV2313, 2024 WL 4240137 (N.D. Ohio Sep. 19, 2024) (Judge Christopher A. Boyko). On December 4, 2020 Zachary Sherman died in an ATV accident. His wife, plaintiff Julie Sherman, was also in the accident but survived. After her husband’s tragic death, Ms. Sherman submitted a claim for accidental death and dismemberment benefits under her late husband’s policy insured by defendant MedMutual Life Insurance Company. Ms. Sherman’s claim was denied by MedMutual pursuant to the plan’s intoxication exclusion. MedMutual asserts that Zachary’s blood alcohol concentration level was 0.256 when he was admitted to the hospital, far exceeding Ohio’s legal limit of 0.08. In addition, the insurance company noted the death certificate’s statement that alcohol intoxication was a significant contributing factor in the accident and in Mr. Sherman’s death. Ms. Sherman appealed. After MedMutual affirmed its denial she commenced this ERISA litigation. On appeal and in her complaint, Ms. Sherman argued that her husband had just recently purchased the ATV and was not comfortable driving at the time of the accident. “Plaintiff also contends that Zachary lost control of the ATV when the tires struck gravel on the side of the roadway and ‘fishtailed.’” The parties filed cross-motions for judgment on the administrative record. In a brief decision the court affirmed the denial under deferential review and granted judgment in favor of MedMutual. “The Court finds that the evidence in the record reasonably supports Defendant’s decision; and the denial of benefits is rational in light of the provisions in the AD&D policy.”

Medical Benefit Claims

Second Circuit

Tindel v. Excellus Blue Cross Blue Shield, No. 5:22-cv-971 (BKS/MJK), 2024 WL 4198368 (N.D.N.Y. Sep. 16, 2024) (Judge Brenda K. Sannes). This action arises over a grievance about reimbursement rates for spinal surgery. Plaintiff Kevin Heffernan is a beneficiary of a self-funded ERISA-governed welfare plan administered by Excellus Blue Cross Blue Shield. On July 10, 2019, Mr. Heffernan experienced severe pain in his upper spine radiating between his shoulder blades and down his arm. This pain prompted Mr. Heffernan to seek medical attention and he ended up in the emergency room. At the hospital Mr. Heffernan was diagnosed with an extreme and rapidly progressing spinal cord compression and was informed that if he did not undergo emergency surgery he faced possible paralysis, loss of limbs, permanent loss of balance, and loss of bladder control. A few weeks after being evaluated in the emergency room, Mr. Heffernan experienced a fall in his kitchen resulting from a difficulty with balance caused by his spinal cord problems. From the fall, he ended up back in the hospital. The next week, one month after the initial ER visit, Mr. Heffernan underwent the surgery. Of the total $357,480 of billed charges, Blue Cross reimbursed the surgeons only $4,708.69. After exhausting the administrative appeals process to challenge the paid amounts, Mr. Heffernan and his providers commenced this litigation against the insurer. Plaintiffs brought claims for benefits under ERISA and the provider plaintiffs also brought a breach of implied-in-fact contract claim. The parties filed competing motions for summary judgment. As an initial matter, the court agreed with defendants that the providers could not sustain their ERISA cause of action because the plan contains a valid and unambiguous anti-assignment provision. Thus, the court evaluated Mr. Heffernan’s ERISA claim for benefits. Because the plan grants Blue Cross discretionary authority, the court evaluated the denial of benefits for an abuse of discretion. The parties argued over whether it was appropriate for Blue Cross to take the position that the surgery was not an emergency service. But the court did not decide this issue. Instead, the court ruled that it was an abuse of discretion for Blue Cross to fail to respond to the arguments the plaintiffs advanced on appeal. “[W]hile Defendant did explain how the claims were computed, none of Defendant’s responses addressed the relevant decision – i.e., the decision not to consider the services Heffernan received to be Emergency Services under the SPD – which then determined the computation rate. Without any reason provided, it is impossible for the Court to evaluate ‘whether the decision was based on a consideration of the relevant factors.’… Accordingly, the Court finds that the determination was an abuse of discretion.” Nevertheless, the court declined to award benefits outright, and instead remanded to Blue Cross for reconsideration and further analysis. Turning to the state law contract claim, the court entered judgment in favor of defendant after it concluded that the provider failed to raise a genuine issue of material fact regarding the existence of an implied-in-fact contract between the parties. For these reasons, judgment was entered in favor of Mr. Heffernan on the ERISA claim and in favor of Blue Cross on the breach of implied-in-fact contract claim.

Plan Status

Third Circuit

Dunne v. Elton Corp., No. 23-1526, __ F. App’x __, 2024 WL 4224619 (3d Cir. Sep. 18, 2024) (Before Circuit Judges Shwartz, Phipps, and Montgomery-Reeves). In 1947 Mary Chichester duPont established a trust to provide pension benefits to her employees and to the employees of her children and grandchildren. The trust was funded with a sizable grant of duPont stock. No contributions have been made to the trust since, but assets have been taken out of it. As a result, the trust’s assets have dwindled over the years, and today the trust is severely underfunded. Despite the fact that the trust was created by an employer with the intent to provide pension benefits to employees, the trust has never been operated in compliance with ERISA. Instead, the plan’s trustee, Elton Corporation (a company owned by several of the duPonts), and the duPont employers administered the trust in such a way that it failed to comply with ERISA’s funding, vesting, notice, and other requirements. But there was always an open question among the family about whether this was correct and they disputed among themselves what to do about the trust. This lawsuit is the direct result of that question. It was originally brought by two of the grandchildren employers. The plaintiffs sought declaratory judgment confirming that the trust is an employee benefit plan covered by ERISA and sought judicial relief to bring the Trust into compliance with ERISA and to pay for the alleged violations of ERISA. The parties have realigned over the years. Today the plaintiff is T. Kimberly Williams, a former employee of the original plaintiff, Ms. Wright. The defendants now include the grandchildren employers, as well as Elton Corporation, the trustee that replaced it, First Republic, and the trust itself. In a summary judgment decision, the district court concluded that the trust is an employee benefit plan covered by ERISA, and that Ms. Williams has Article III standing to sue. Following a trial, the district court concluded that First Republic, Elton Corp., and each of the grandchildren violated ERISA, and it found them jointly and severally liable for the trust’s underfunding. The district court also appointed a special master to serve as trustee, but stayed the case before the special master got to work pending defendants’ interlocutory appeal. The Third Circuit accepted the interlocutory appeal. In this unpublished decision, the Third Circuit resolved that appeal. It may not take much to establish an ERISA plan, but here the Third Circuit held that no ERISA plan existed, despite a trust that provided pension benefits to employees of the duPont family for over 50 years. Before it addressed the question of the plan’s status, however, the appeals court began with questions of jurisdiction and discussed whether Ms. Williams showed that she has standing to sue under Article III of the Constitution. It concluded that she did. To establish constitutional standing, a civil plaintiff must show that she suffered a concrete injury in fact caused by the defendants which would likely be redressed by the requested judicial relief. Defendants argued that Ms. Williams did not have standing to sue the grandchildren she did not work for, and further argued that she did not show an injury because the trust has not failed to pay her any benefits currently due. The Third Circuit determined that Ms. Williams could sue all of the employers, as she alleged that the trust is one plan covering all eligible employees of the relevant members of the duPont family. “That premise might be false… But we must assume that it is true when analyzing Article III standing.” The appeals court also accepted as true Ms. Williams’ assertion that she was harmed because the defendants depleted the trust’s assets in violation of ERISA: “if the Grandchildren harmed the Trust, they necessarily harmed the purported single-employer plan in which Williams participates, as the Trust used a common pool of assets to pay benefits.” Thus, the court concluded that Ms. Williams has a concrete and particularized stake in ensuring the trust does not lose its assets. Moreover, the court agreed with Ms. Williams that given the trust’s insolvency today, that failure is imminent and non-speculative. Finally, the Third Circuit noted that judicial intervention could redress this imminent harm. Accordingly, the Third Circuit rejected defendants’ contention that Ms. Williams lacked standing to sue. Even so, the Third Circuit’s decision was not a good result for Ms. Williams, as it determined next that the trust is not covered by ERISA. ERISA applies to employee benefit plans that are “established or maintained by any employer engaged in commerce or in any industry or activity affecting commerce.” Before the Third Circuit addressed whether the trust was established or maintained by an employer, it attempted to identify the relevant employer or employers and considered “whether it is possible that Williams participates in a multiple-employer plan covering all employees eligible to receive a pension under the Trust.” The Third Circuit addressed whether the grandchildren employers had a bona fide connection to one another. The grandchildren argued that there was no connection between them unrelated to the provision of benefits. On the other hand, Ms. Williams responded that the grandchildren have a natural connection as they are a family, and this relationship is not related to the provision of benefits. The court of appeals was not convinced. Instead, it concluded that the appellants had “the better argument,” and stated that the grandchildren’s status as employers is only connected to each other through the trust. As such, the Third Circuit concluded that “if Williams participates in an employee benefit plan at all, that purported plan must be a single-employer plan sponsored by – and only by – her employer, Wright.” The court then discussed whether Ms. Wright established or maintained the plan. It quickly brushed aside the notion that the plan was established by Ms. Wright, as it was set up by Ms. Chichester duPont. The court did not contemplate at all whether Ms. Chichester duPont was an employer who established an employee benefit plan. Instead it asked whether Ms. Wright maintained the plan. Ms. Williams’ argument was fairly straightforward. She claimed that Ms. Wright maintained the trust because she named employees to receive pensions from it, she provided the trustees with information and analyzed the financial viability of the plan, and she arranged for her employees to receive trust benefits when they reached eligibility. Despite these efforts, the Third Circuit did not agree that this showed maintenance under ERISA. Instead, it determined that Ms. Wright did not “support, continue, or care for the Trust,” and that these actions were instead done by the trustees. The Third Circuit viewed all evidence as showing that Ms. Wright “lacked legal or practical power to support, continue, or care for the Trust,” and that her actions were “wholly passive conduct [which] falls short of showing that Wright supported, continued, or cared for the Trust.” With this determination, the Third Circuit found that ERISA does not apply to the trust and accordingly the defendants were “entitled to judgment on all claims.” The judgment of the district court was thus reversed, and the Third Circuit remanded the case with instructions to enter judgment in favor of Elton Corp., First Republic, and the duPont grandchildren.

Pleading Issues & Procedure

Second Circuit

Sacerdote v. New York Univ., No. 16 Civ. 6284 (AT), 2024 WL 4227186 (S.D.N.Y. Sep. 18, 2024) (Judge Analisa Torres). In this long-running class action, professors and administrators of New York University who participate in the college’s retirement plans have sued the plans’ fiduciaries under ERISA for breaches of their fiduciary duties. Plaintiffs allege that the fiduciaries mismanaged the plans by allowing them to incur excessive administrative costs, by maintaining a costly and inefficient multi-recordkeeper structure, by including higher cost retail share classes in the plan despite the availability of cheaper identical share classes, and by retaining investment options in the plan with sustained track records of underperformance. As part of their amendments to their complaint, plaintiffs included a jury demand. Defendants moved to strike plaintiffs’ jury demand. Defendants argued, and the court agreed, that plaintiffs waived their right to a jury trial when they did not oppose an earlier motion to strike the jury demand in the First Amended Complaint. The court concluded that nothing in the Second Amended Complaint substantively altered the nature of the lawsuit, and agreed that “Plaintiffs previously waived their right to have a jury hear that ‘general area of dispute’ and their reassertion of the Share Class Claim component of Count V does not change that fact or alter the ‘character of the suit.’… Nor does the fact that the SAC adds three additional defendants to the claim.” The court further clarified that it would not exercise its discretion under Federal Rule of Civil Procedure 39(b) to order a jury trial. Its reasons were two-fold. One, the court acknowledged that most courts are of the opinion that plaintiffs do not have a right to a jury trial under ERISA or the Constitution. Two, the court held that defendants would be strongly prejudiced if it were to order a jury trial now, over six years after plaintiffs waived their jury right.

Third Circuit

Bornstein v. McMaster-Carr Supply Co., No. 23-2849 (ESK/EAP), 2024 WL 4252736 (D.N.J. Sep. 20, 2024) (Magistrate Judge Elizabeth A. Pascal). In this qualified domestic relations order (“QDRO”) action, pro se plaintiff Arthur Bornstein alleges that defendant McMaster-Carr Supply Company violated ERISA by improperly releasing funds from his ex-wife’s retirement fund without notice to him. Mr. Bornstein claims he is entitled to part of his ex-wife’s pension assets under the terms of their QDRO. In addition, Mr. Bornstein advances allegations of fraud, malpractice, failure to respond to a subpoena, commingling of monies, grand larceny, and obstruction of justice. Although Mr. Bornstein only brought his action against McMaster-Carr Supply Co., his complaint makes many allegations against his ex-wife, her son, his former attorneys, and several judges. Finding Mr. Bornstein’s complaint difficult to decipher, McMaster-Carr moved for a more definite statement pursuant to Federal Rule of Civil Procedure 12(e). The company argued that it could not respond to the complaint’s allegations as currently stated due to the complaint’s failure to identify legal claims, establish jurisdiction, and identify what actions it is alleged to have taken or what claims are brought against it. The court agreed that the complaint contained these deficiencies. At bottom, it concluded that the complaint is currently so vague and ambiguous that it did not satisfy Rule 8’s notice pleading provisions. For this reason, the court found that a more definite statement was warranted and thus granted defendant’s motion.

Fifth Circuit

Morris v. Kelly-Moore Paint Co., No. 4:24-cv-0050-P, 2024 WL 4244544 (N.D. Tex. Sep. 19, 2024) (Judge Mark T. Pittman). Plaintiff Nathaniel Morris brought this action on behalf of himself and other similarly situated employees of Kelly-Moore Paint Company, Inc. after it was acquired by Flacksgroup, LLC and there were mass layoffs of employees. Mr. Morris filed this putative class action suit to recover wages and ERISA benefits as a result of Flacksgroup allegedly ordering Kelly-Moore to terminate its employees. Mr. Morris brought claims under ERISA and the Worker Adjustment and Retraining Notification Act (“WARN Act”). Kelly-Moore and Flacksgroup both moved to dismiss the complaint for failure to state a claim. In addition, Flacksgroup moved independently to dismiss the claims against it for lack of personal jurisdiction. The court granted the motion to dismiss in part and denied it in part. To begin, the court agreed with Flacksgroup that it lacks sufficient minimum contacts with Texas to support jurisdiction. The court stated that the fact Flacksgroup dissolved in September of 2023, before the alleged injury, was dispositive of the personal jurisdiction question. “Here, Mr. Morris argued that the essential contacts with the state of Texas were that Flacksgroup had directed the termination of the Kelly-Moore employees in January of 2024…Thus, if Flacksgroup ever had sufficient minimum contacts with Texas, those contacts could not have led to the injuries suffered in the present case because Flacksgroup, as a corporate entity, did not exist during the alleged injuries.” Accordingly, the court dismissed the claims against Flacksgroup with prejudice. However, the court denied the 12(b)(6) challenge to Mr. Morris’s complaint. Defendants challenged the putative class and alleged that it is not defined or clearly ascertainable. Nevertheless, since filing the motion to dismiss the parties conferred and Mr. Morris filed an unopposed motion for class certification. Consequently, the court concluded that defendants’ arguments were moot and accordingly denied the motion to dismiss for failure to state a claim.

Perkins v. PM Realty Grp., No. H-24-0566, 2024 WL 4171349 (S.D. Tex. Sep. 12, 2024) (Judge Sim Lake). In this action five former employees of PM Realty Group, L.P. allege that they were wrongly deprived of benefits under the real estate company’s deferred compensation plan following a merger of PM Realty Group with Madison Marquette Real Estate Services, LLC. Plaintiffs allege that the two companies entered into their transaction with the intent “to provide an escape from liability under the Plan.” Madison Marquette did not assume liability for the workers’ deferred compensation benefits, and PM Realty Group denied all claims under the plan by maintaining that it was insolvent after the merger and lacked sufficient liquidity to pay its obligations. Seeking their benefits, the employees sued both PM Realty Group and Madison Marquette, as well as the plan, and its administrator, Rick Kirk. Plaintiffs asserted claims for benefits and equitable relief under ERISA Section 502, and for interference/retaliation under ERISA Section 510. Additionally, plaintiffs alleged state law claims for anticipatory repudiation, fraud, tortious interference with contract and/or business relationships, unjust enrichment, equitable accounting, constructive trust, and punitive damages. Defendants moved to dismiss the complaint. In this decision the court denied the motion to dismiss the ERISA causes of action, and granted the motion to dismiss the state law claims as preempted by ERISA. To begin, the court stated that it would not decide the status of the plan and whether, as defendants argue, it is a “Top Hat” plan. The court stated the issue was not ripe as “the current record is not sufficient…to find that the EDCP is a top hat plan.” Regardless, the court held that even if it assumed the plan is a top hat plan, plaintiffs could nevertheless maintain their claims for benefits because they allege they were not paid benefits in accordance with the plan documents. As for the 510 retaliation claim, the court concluded that plaintiffs plausibly alleged that that they experienced an adverse employment action undertaken with the intent to interfere with their rights to plan benefits because they alleged that defendants transferred their employment from PM Realty Group to Madison Marquette without recognizing a separation of service triggering their rights to payment under the plan and that the merger between the two companies was fraudulent and intended to provide an escape from liability under the plan. For these reasons, the court was confident the complaint alleged plausible causes of action under ERISA, and therefore denied the motion to dismiss insofar as it related to the ERISA claims. However, the court dismissed all of the state law causes of action because it determined that each was premised on an alleged denial of benefits under an ERISA-governed retirement plan and therefore falls under “an area of exclusive federal concern that requires construction of plan terms and directly affects the relationships between the plan and the participants.”

Provider Claims

Fifth Circuit

Columbia Med. Ctr. of Arlington Subsidiary v. Highmark Inc., No. 4:24-cv-00080-O, 2024 WL 4229307 (N.D. Tex. Sep. 18, 2024) (Judge Reed O’Connor). A group of hospitals in the Dallas/Fort Worth metropolitan area of Texas sued Highmark Blue Cross Blue Shield (a licensee of Blue Cross and Blue Shield Association) under ERISA, as assignees of their patients, and under state law for breach of contract in connection with healthcare services they provided to four patients insured under ERISA plans administered by Highmark which they contend were underpaid. Plaintiffs allege the payments they received were in conflict with both the terms of the ERISA plans and the terms of their in-network contract with Blue Cross Blue Shield of Texas. Defendant moved to dismiss pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). The court denied the motion to dismiss in this decision. First, the court concluded that the hospitals have derivative standing to sue under ERISA as assignees of the patient beneficiaries. “Plaintiffs allege in their complaint that they are entitled to enforce the terms of the Subscribers’ plans as the Subscribers’ assignees, and that each patient signs a form that includes an assignment of the patient’s health insurance benefits…Furthermore, Plaintiffs specifically pled they have standing to sue through the Subscribers’ assignments of benefits and rights via the forms the Subscribers signed upon admission to Plaintiffs’ hospitals.” To the court, this was more than sufficient to withstand a 12(b)(1) motion to dismiss for lack of standing. Accordingly, the court denied the motion to dismiss the ERISA causes of action. It also denied the motion to dismiss the breach of contract claim even though the contract which was breached is between the providers and non-party Blue Cross Blue Shield of Texas. Regardless, the court concluded that the complaint makes it at least plausible that Highmark impliedly assumed liability on the agreement, making dismissal on this ground inappropriate at the pleadings. Furthermore, the court agreed with the providers that they allege specific terms of the contract that were breached. Finally, the court denied Highmark’s motion to strike plaintiffs’ jury demand. Although the court agreed with defendant that there is not a right to a trial by jury for claims under ERISA, it reminded the insurer that plaintiffs only seek a jury trial for their state law breach of contract claim and jury trials are available in Texas for breach of contract claims.

Venue

Ninth Circuit

Matula v. Wells Fargo & Co., No. 24-03504 WHA, 2024 WL 4245408 (N.D. Cal. Sep. 18, 2024) (Judge William Alsup). In June of 2024, plaintiff Thomas Matula Jr. filed this putative class action against the fiduciaries of the Wells Fargo 401(k) Plan alleging a prohibited transaction, breach of fiduciary duty, and breach of ERISA’s anti-inurement provision for using forfeited nonvested plan assets to reduce future employer contributions rather than to defray costs for the benefit of plan participants. Wells Fargo’s 401(k) plan contains a forum selection provision requiring civil actions be brought in the District of Minnesota. The plan itself is administered in the state of Minnesota. Given the forum selection clause both sides filed a joint stipulation to transfer venue from the Northern District of California to the District of Minnesota. The court granted the motion and transferred the action in this decision. As an initial matter, the court determined that the forum selection clause in the plan is valid. It further agreed with the parties “that ERISA permits both sides to enforce that clause,” and concluded that holding the parties to the terms of the clause served the interest of justice. In fact, the court concluded that it could find no public interest factor which weighed against transfer. Unsurprisingly then, the court declined to stand in the way of the parties’ desire to relocate this action and granted the motion to transfer.

Tenth Circuit

Brian H. v. United Healthcare Ins. Co., No. 2:23-cv-00646 JNP, 2024 WL 4252912 (D. Utah Sep. 20, 2024) (Judge Jill N. Parrish). Plaintiffs Brian H. and M.H. brought this action against Lendlease Americas Holdings, Inc. Choice Plus Plan, and its administrators United Healthcare Insurance Company and United Behavioral Health, seeking a court order requiring defendants to pay for treatment M.H. received at a treatment facility in Utah. Defendants moved to transfer venue from the District of Utah to the Western District of North Carolina. They argued that the only connection to Utah, i.e. M.H.’s treatment, is tenuous and superficial. Instead, they proposed that North Carolina is a superior venue because it is where the plan is located, where the claim was handled, and where the denial occurred. The court exercised its broad discretion to grant the motion to transfer venue. To begin, the court said there was no dispute that either forum “is technically proper.” Accordingly, the only dispute was whether the Western District of North Carolina was a more appropriate forum to handle this case. The court said that it was unaware of any material difference between the two venues “regarding the cost of making necessary proof, or the ability to receive a fair trial. Additionally, because this is a federal case involving the application of federal law, concerns regarding conflicts of law and the interpretation of local laws were not present.” Thus, these factors were entirely neutral to the court. The court next addressed plaintiffs’ choice of forum. It stated bluntly that “[i]n the context of ERISA, this court has routinely declined to defer to a plaintiff’s choice of forum where the location of plaintiff’s treatment was the only connection to the forum.” The court declined to deviate from this norm here, as it said doing so would “encourage forum shopping and undermine the ability to litigate ERISA cases in forums most closely aligned with the facts and parties of each case.” The court ruled that North Carolina had more connection to this case because “the decision whether to award benefits occurred exclusively in North Carolina.” In addition, the Western District of North Carolina has a less congested docket than the District of Utah. Taken together, the court concluded that the relevant factors weighed in favor of transfer, and thus granted defendants’ motion. The case will proceed in the Western District of North Carolina.