Pizarro v. Home Depot, Inc., No. 22-13643, __ F.4th __, 2024 WL 3633379 (11th Cir. Aug. 2, 2024) (Before Circuit Judges Branch, Grant, and Carnes)

Your ERISA Watch is cheating a little in this edition, as our case of the week is not actually from last week, but the week before. Rather than relegate this case to the sidelines last week (we highlighted two Texas decisions invalidating Department of Labor rulemaking instead), we decided to hold it over to this week for a fuller treatment.

As ERISA aficionados know, breach of fiduciary duty class actions against retirement plans and their fiduciaries have been all the rage in the last few years, and the courts have struggled in their efforts to clarify how exactly the parties should plead and litigate them. One recurring issue is the burden of proof – who has the burden to show what? Does the burden ever shift sides? The Eleventh Circuit offered some answers in this decision, but in doing so deepened a split among the federal courts.

The plaintiffs in the case are employees of Home Depot, Inc. and participants in the Home Depot FutureBuilder 401(K) Plan. The plan is massive, with about 230,000 participants and more than $9 billion in assets. It is run by two committees, the Investment Committee and the Administrative Committee. The plan contained multiple investment options, but only four were at issue in this case. One was a family of BlackRock “target date” funds, one was the JPMorgan Stable Value Fund, and the remaining two were funds that invested primarily in small-capitalization companies with long-term growth potential.

The plaintiffs filed this action in 2018, alleging two counts of breach of fiduciary duty against Home Depot and the two committees. In their first claim they contended that Home Depot “failed to adequately monitor the fees charged by the plan’s financial advisor for its investment advisory and managed account services, resulting in excessive costs for plan participants.” In their second claim, plaintiffs alleged that Home Depot “failed to prudently evaluate the four challenged investment options, and that this failure led Home Depot to keep the funds available despite their subpar performance.”

The district court certified a class of plan participants but ultimately ruled against the plaintiffs on summary judgment. Although the district court agreed that genuine disputes of material fact existed as to whether the defendants breached their fiduciary duty of prudence, it ruled that the plaintiffs could not show that any breach caused them a financial loss, and thus the defendants were entitled to judgment in their favor. (Your ERISA Watch covered this ruling in our October 12, 2022 edition.)

Plaintiffs appealed. The Eleventh Circuit began by identifying the two issues before it: “First, who bears the ultimate burden of proof on loss causation? And second, what must be proven to establish that element?”

On the first issue, the plaintiffs argued that the district court had gotten it wrong by placing the burden on them to prove loss causation. They contended that if a plan participant is able to prove that the fiduciary has breached its duty, the burden should shift to the fiduciary to prove that its breach did not cause any loss.

The Secretary of Labor agreed, weighing in with an amicus brief that argued that the common law of trusts, from which ERISA derives many of its principles, has a similar requirement. Indeed, both plaintiffs and the Secretary were able to point to cases from other circuits – namely the First, Fourth, Fifth, and Eighth – holding that the burden of proof on loss causation shifts to the breaching fiduciary.

The Eleventh Circuit was unimpressed. Citing its decision in Willett v. Blue Cross & Blue Shield of Alabama, 953 F.2d 1335 (11th Cir. 1992), the court held: “Our precedent already answers this question. ERISA does not impose a burden-shifting framework; instead, plaintiffs bear the ultimate burden of proof on all elements of their claims, including loss causation.”

The court reaffirmed Willett, stating that ERISA, like most federal statutes, “does not explicitly assign the burden of proof.” Thus, the “ordinary default rule” applies, i.e., “plaintiffs bear the burden of persuasion regarding the essential aspects of their claims.” Ruling otherwise “would turn the usual principles of civil liability on their head.”

The court acknowledged that “there are exceptions to this ordinary rule,” such as when the element of proof at issue can “fairly be characterized as affirmative defenses or exemptions.” However, the court did not agree that loss causation fell into this category, ruling that “causation is not an affirmative defense; it is an element of the plaintiff’s claim.”

The court further rejected the argument that the common law of trusts supported a reversal of the ordinary rule. The court admitted that burden-shifting was often employed under trust law because of “the trustee’s superior (often, unique) access to information about the trust and its activities.” However, “ERISA is not the common law.” The court stated that it was obliged to “give effect to the plain meaning of the statute” first, and only reluctantly incorporate trust law principles. This is because ERISA is “meaningfully distinct from the body of the common law of trusts,” and thus the court must “proceed carefully, and ‘only incorporate a given trust law principle if the statute’s text negates an inference that the principle was omitted deliberately from the statute.’”

Under this approach, the court could not find “any language suggesting that Congress’s omission of trust law’s burden-shifting framework for loss causation was anything but deliberate.” The court further noted that traditional trust law’s rationale for burden-shifting – i.e., the “informational advantage” of trustees – was less persuasive under ERISA because of ERISA’s “comprehensive scheme of mandatory disclosure and reporting,” which mitigated any such advantage. Thus, the court opined that “ERISA’s text, if anything, suggests that Congress dealt with the information imbalance problem by shrinking the gap, not shifting the burden.”

Having determined that plaintiffs retained the burden of proving loss causation at all times, the court turned to whether plaintiffs had satisfied that burden. The court split this issue up into two parts, as plaintiffs had argued that (1) they were charged excessive fees, and (2) defendants imprudently retained the four challenged funds after they underperformed.

The court ruled against plaintiffs on both issues. Regarding the fees, the court noted that they fell during the relevant time period, other large plans paid the same fees, and the comparators offered by plaintiffs were unhelpful. Specifically, the court observed that the plan’s service providers offered seamless integration with the plan’s recordkeeper, which justified a higher price, and that even in a worst-case scenario – i.e., using plaintiffs’ method of calculating fees – Home Depot’s fees were not an outlier and in fact were “at or better than the median in two years during the class period, and…never worse than the second quintile.”

As for the four challenged funds, the court ruled that plaintiffs’ arguments “suffer from a common flaw,” which was that their evidence was “drawn only from short time periods during which the funds underperformed their peers. A few here-and-there years of below-median returns, however, are not a meaningful way to evaluate a plan’s success as a long-term investment vehicle.”

Furthermore, the court stated that (1) “the BlackRock target date funds’ returns matched those of their peers and market benchmarks almost perfectly,” (2) the JPMorgan fund delivered positive returns throughout the time period, “met expectations,” and mostly outperformed its benchmarks, and (3) the two remaining small cap funds only had “short periods of relative underperformance” and were consistently monitored by Home Depot.

In short, the court ruled that “plaintiffs cannot show that a prudent fiduciary in the same position as Home Depot would have made different choices on either the plan’s service providers or the four challenged funds.” Thus, it affirmed in its entirety the district court’s summary judgment ruling in Home Depot’s favor.

The Eleventh Circuit acknowledged in its decision that its approach was different from that of other circuits. However, it only did so in a footnote, apparently attempting to underplay the fact that it was further accentuating a circuit split. Will the plaintiffs take the opposite approach, highlight this difference of opinion, and try to take this issue up to the Supreme Court? Stay tuned to Your ERISA Watch to find out.

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

Breach of Fiduciary Duty

Eighth Circuit

Ruebel v. Tyson Foods, Inc., No. 5:23-CV-5216, 2024 WL 3682230 (W.D. Ark. Aug. 6, 2024) (Judge Timothy L. Brooks). The court wrote in this decision ruling on the Tyson Foods Inc. defendants’ motion to dismiss, “When a case involves ERISA fiduciary claims, the level of scrutiny applied to the alleged facts is higher than in other types of cases.” This heightened pleading burden ultimately stymied plaintiffs’ action here, wherein they allege that the fiduciaries of the Tyson Foods, Inc. Retirement Savings Plan failed to act “with care, skill, prudence, and diligence” to ensure that the bundled recordkeeping and administrative fees paid to the plan’s service provider, Northwest Plan Services, were reasonable. The participants allege that defendants failed to solicit competitive bidding or take remedial actions to deal with the fees, and as a result, the per-participant recordkeeping fees paid were exorbitant and ended up hurting the participants investing for retirement. But in the Eighth Circuit, the analysis does not so much focus on whether the participants plausibly hurt by the alleged actions, but more on whether the services and plans offered in a complaint as comparators are adequately similar to the plan at issue. In the instant matter, the court concluded they were not. With regard to the services provided, the court latched onto the fact that Tyson informed plan participants in a fee disclosure notice that Northwest Plan Services provided legal, audit, investment guidance, and investment management services, in addition to the basic bundled recordkeeping services. The court saw this allegation as an “admission that the comparator plans were charged certain fees for basic Bundled RKA services, but Tyson may have been charged higher fees for extra services means that Plaintiffs have failed to state a plausible recordkeeping-fee claim.” Moreover, the court identified a second, independent problem with plaintiffs’ allegations: “Plaintiffs’ case must be dismissed…because the comparator plans are not similar enough to Tyson’s in terms of asset size to allow for meaningful comparisons.” The court disagreed with plaintiffs that the plans they provided as comparisons were similar enough to Tyson’s plan because they had roughly the same number of plan participants. Rather, the court viewed asset size as key to determining whether two plans are similar. In this case, the court found that because the assets of the five comparator plans were either much larger or much smaller than the assets of Tyson 401(k) plan, they were not similar enough to provide meaningful benchmarks. For these two reasons, the court determined that the complaint failed to meet the Eighth Circuit’s specific ERISA fiduciary breach pleading standards necessary to take the excessive fee claims from possible to plausible. The court therefore granted the motion to dismiss under Rule 12(b)(6), albeit without prejudice.

Class Actions

Eighth Circuit

Fritton v. Taylor Corp., No. 22-CV-00415 (JMB/TNL), 2024 WL 3717351 (D. Minn. Aug. 8, 2024) (Judge Jeffrey M. Bryan). The court entered final approval of class action settlement, certification of the settlement class, and the plan of allocation, and granted plaintiffs’ motion for award of attorneys’ fees, reimbursement expenses, and class representative service awards in this class action against the fiduciaries of the Taylor Corporation 401(k) plan for plan mismanagement and breach of fiduciary duties with respect to investment fees. The court ruled that the $485,000 settlement was the result of a good-faith negotiation conducted at arm’s length, and that it was favorable to plaintiffs. Accordingly, the court granted final approval to the settlement, which it was satisfied was fair, reasonable, and adequate. Additionally, the court certified the non-opt-out settlement class of plan participants and beneficiaries pursuant to Federal Rules of Civil Procedure 23(a) and 23(b)(1) for the class period, which was defined as February 14, 2016 through April 24, 2024. The court further determined that the class notice sent to the settlement class was reasonable and sufficient, and met all of the applicable requirements of the Class Action Fairness Act, the Federal Rules of Civil Procedure, due process, and any other applicable law. Pursuant to Federal Rule of Civil Procedure 23(g), the court confirmed its appointment of Edelson Lechtzin LLP and Capozzi Adler, P.C. as co-lead counsel and Gustafson Gluek PLLC as local counsel, as it found class counsel adequately represented the class. Accordingly, the court granted final approval of the settlement, thereby releasing plaintiffs’ claims against defendants. The court also awarded class counsel attorneys’ fees of thirty percent of the common fund, equaling $145,500, as well as $19,574.41 in litigation expenses, which it stated was reasonable in light of the success achieved and the complexity and uncertainty of the case. Finally, the court awarded class representative awards of $5,000 to each of the named plaintiffs, which it held was just compensation for the time and effort they devoted to this litigation. The parties’ dispute thus reached its final resolution with this order.

Eleventh Circuit

Pettway v. R.L. Zeigler Co., No. 7:23-CV-00047-LSC, 2024 WL 3656750 (N.D. Ala. Aug. 2, 2024) (Judge L. Scott Coogler). Plaintiffs filed an unopposed motion for preliminary approval of class settlement and preliminary class certification in this putative ERISA class action seeking statutory penalties for failure to provide annual pension benefit statements. Plaintiffs also claimed that defendants failed to provide minimum funding notices, but moved to drop this claim. In fact, the court’s decision began there, by analyzing the parties’ agreed-upon dismissal of this cause of action brought under Section 502(c). Although the court noted there is not consensus around whether Rule 23(e) applies to precertification dismissals, it found that even assuming Rule 23(e) applies, there was nothing that would warrant the court disapproving the dismissal, as there is no evidence of collusion and putative class members would not be prejudiced by dismissal of the claim. Accordingly, the court agreed to dismiss this claim without the need to send notice of the dismissal to the absent class members. The court then turned to conditional class certification for settlement purposes of the one remaining cause of action. Plaintiffs moved to certify a class of all participants of the R.L. Zeigler Co., Inc. Money Purchase Pension Plan, excluding defendants. As a preliminary matter, the court found that the class representative has standing as a plan participant who did not receive annual pension benefit statements. Next, the court conditionally found that the proposed class is adequately defined and clearly ascertainable. With these matters addressed, the court proceeded to analyze the class under Rule 23(a). It held that the 178-member class is sufficiently numerous, that plaintiffs’ allegations stem from defendants’ common failure to provide annual pension benefit statements, that the claim of the class representative is typical of those of the class, and that there is every indication that the class representative and class counsel, David Martin and Brad Ponder, are adequate representatives. For these reasons, the court determined that preliminary certification of the class is appropriate under Rule 23(a). And the same was true for Rule 23(b)(3). The court ruled that common questions regarding defendants’ failure to furnish pension benefit statements predominate over any individual questions, and the relative advantages of a class action lawsuit strongly outweigh any other available methods of adjudicating the matter and making class resolution inherently superior. Accordingly, the court conditionally certified the settlement class under Rule 23(b)(3). The decision then pivoted to its consideration of the proposed $253,700 settlement and the separate $265,000 attorneys’ fee fund. Given the “strong presumption favoring the settlement of class action lawsuits,” and the uncertain and entirely discretionary damages plaintiffs sought under Section 1132(c)(1), the court was strongly inclined to find the settlement fair, reasonable, equitable, and adequate. While reserving final judgment, the court preliminarily found the terms of the settlement acceptable, favorable, and adequate relative to the alleged harm. Thus, the court granted preliminary approval to the settlement. The court also agreed to the proposed method, form, and content of giving notice to the class and stated that it considered the notice program “the best practicable notice under the circumstances,” and satisfactory under “all applicable requirements of law.” For the foregoing reasons, plaintiffs’ unopposed motion for preliminary class certification and preliminary approval of class settlement was granted by the court.

Disability Benefit Claims

Third Circuit

Zuckerman v. Fort Dearborn Ins. Co., No. 2:22-cv-01993-JDW, 2024 WL 3696469 (E.D. Pa. Aug. 7, 2024) (Judge Joshua D. Wolson). Plaintiff Brian Scott Zuckerman was diagnosed with follicular lymphoma in September of 2020 and began receiving chemotherapy treatments the following month. At the time, Mr. Zuckerman was employed by Domus, Inc. and was a participant in a group long-term disability policy insured by defendant Fort Dearborn Life Insurance Company. On November 20, 2020, the plan terminated. Accordingly, Dearborn would not cover a disability that arose after that date. When Mr. Zuckerman applied for long-term disability benefits on July 21, 2021, Fort Dearborn denied the claim, explaining that he did not qualify as disabled under the plan before the plan terminated on November 30, 2020, because he continued to receive 100% of his regular weekly salary until May of 2021. Mr. Zuckerman challenged that decision in this action. As the plan granted Fort Dearborn full discretionary authority, the court applied deferential review in its adjudication of the parties’ cross-motions for summary judgment. Under an arbitrary and capricious review standard, the court ruled in favor of Fort Dearborn. It concluded that even if Mr. Zuckerman was correct that he was disabled as of October, 2020, and unable to perform the essential duties of his work, it would not make a difference because Fort Dearborn’s decision was supported by substantial evidence as Mr. Zuckerman was receiving his full salary despite his disability and “there is no gap to close” with insurance benefits. “Long-term disability insurance is premised on a need to replace lost wages due to an employee’s disability. But Mr. Zuckerman received his full pay for many months, rendering him not disabled as defined in the Plan, and therefore ineligible for LTD benefits. Substantial evidence supported Dearborn’s decision to deny his claim for benefits, so Dearborn is entitled to summary judgment, absent any evidence that it abused its discretion in rendering its decision.”

Eleventh Circuit

McCollum v. AT&T Servs., No. 2:22-cv-1513-AMM, 2024 WL 3656742 (N.D. Ala. Aug. 2, 2024) (Judge Anna M. Manasco). Plaintiff William McCollum worked for AT&T Services for over 34 years, until he was hospitalized due to risk of suicide in the summer of 2020, and subsequently applied for short-term, and later, long-term disability benefits. Mr. McCollum’s short-term disability benefit claim was approved from July 20 to October 20, 2020, but was denied thereafter. The AT&T defendants denied the claim at this point, determining that Mr. McCollum was no longer disabled under the terms of the plan because the medical records did not show he continued to have suicidal ideation or psychotic symptoms, and did not suffer from limited cognitive impairment or an inability to perform the activities of daily living. Mr. McCollum appealed, but AT&T ultimately upheld its conclusion that Mr. McCollum’s mental health diagnoses did not prohibit him from fulfilling any of the essential duties of his job. Additionally, defendants denied Mr. McCollum’s claim for long-term disability benefits, concluding that he was ineligible to receive them because he did not receive 26 weeks of short-term disability benefits. Mr. McCollum challenged both denials in this action asserted under ERISA Section 502(a)(1)(B). The parties filed dueling motions for summary judgment. In this decision, the court affirmed the denials under arbitrary and capricious review and entered judgment in favor of the AT&T defendants. It found that the denial was not wrong as a de novo matter, and that even if it were, it was not unreasonable or unsupported by substantial evidence. The court found that the reviewing psychiatrist had an accurate understanding of Mr. McCollum’s job description and that the doctor reasonably concluded that the medical records lacked documented functional impairments. Insofar as this case presented conflicting opinions by the parties’ doctors, the court expressed that it need not credit the opinion of Mr. McCollum’s treating providers over the opinion of the reviewing medical professional, particularly in light of a deferential review standard. Accordingly, the court affirmed defendants’ decision, granted defendants’ motion for summary judgment, and denied Mr. McCollum’s cross-motion.

Tunkle v. Reliastar Life Ins. Co., No. 2:23-cv-10-SPC-NPM, 2024 WL 3638011 (M.D. Fla. Aug. 2, 2024) (Judge Sheri Polster Chappell). Dr. Alyosha S. Tunkle brought this action for judicial review of defendant ReliaStar Life Insurance Company’s denial of his claim for long-term disability benefits. Before the onset of disabling hand tremors, Dr. Tunkle worked as a general surgeon for an oncology center. The dispute between the parties is a narrow one: whether ReliaStar properly determined that Dr. Tunkle was not actively employed from March 15-May 23, 2020, and, as a result, whether Dr. Tunkle’s tremors were a preexisting condition excluded from coverage when he applied for benefits in July, 2020. Dr. Tunkle maintains that he was actively employed, i.e., working more than 30 hours per week, until the end of July, 2020, and this odd gap in March, April, and May of 2020 was the result of a strange work pivot caused by the COVID-19 pandemic. He claims that he remained on-call as a surgeon, and that the roughly five hours per week that were recorded as his work hours during this time was simply a record of the number of hours he was actively performing surgery. Beyond those hours, Dr. Tunkle states he worked at home on various other tasks like reviewing patient medical records, communicating with the patients telephonically, researching, and consulting with other doctors. Thus, he asserts that his hand tremors were not a preexisting condition, and ReliaStar manipulated the coverage start date in order to deny coverage. Reviewing the parties’ cross-motions for summary judgment de novo, the court found that the administrative record supported defendant’s conclusion as “all documentation indicates Plaintiff was not actively employed from March 15th to May 23rd. Perhaps most compelling are the hourly logs that show Plaintiff worked only 9.5 hours each pay period during these two months (despite 72-80 hours recorded the rest of the year).” The court found ReliaStar sufficiently handled Dr. Tunkle’s claim because it diligently requested further documentation from him during the appeals process to support his actual hours worked. On the other hand, the court noted that Dr. Tunkle failed to address “what he believes is missing from the record.” And while the court stated it was reasonable to assume that Dr. Tunkle had performed extra work duties outside of his surgery and appointments during this two-month period, it nevertheless stressed that Dr. Tunkle failed to produce any documents reflecting this extra work. “Perhaps Plaintiff did, in fact, work the extra duties and hours, as he claims. But if he did, he failed to validate it sufficiently. So the court agrees with Defendant’s determination that Plaintiff was not actively employed from March 15th to May 23rd.” Taking things one step further, the court stated that it agreed with defendant that Dr. Tunkle was not actively employed as of mid-March, 2020, meaning May 25th, the date he returned to active employment, became his new coverage-effective date. Since Dr. Tunkle sought treatment for hand tremors on May 14th, this date occurred during the lookback period, and the tremors were thus a preexisting condition precluded from long-term disability coverage. Accordingly, the court held that defendant’s decision to deny benefits was proper. Based on the foregoing, the court affirmed the denial of benefits and entered summary judgment in favor of ReliaStar.

Discovery

Seventh Circuit

Havlik v. Univ. of Chicago, No. 23 C 2342, 2024 WL 3650153 (N.D. Ill. Aug. 5, 2024) (Magistrate Judge Jeffrey T. Gilbert). Plaintiffs are the thirty-six grandchildren trustees of the Edward S. Lyon Trust, who filed this action against the University of Chicago to challenge its denial of their claim for retirement benefits under ERISA. Plaintiffs assert that the Trust was the named beneficiary at the time of Mr. Lyon’s death and thus they are therefore entitled to benefits. However, as plan administrator, the University of Chicago denied plaintiffs’ claim for benefits after it determined that the spousal waiver signed by Mrs. Lyon’s power of attorney was invalid under Wisconsin state law because her power of attorney did not expressly delegate to her agent the authority to waive her spousal rights under any retirement plans. Plaintiffs assert two causes of action: a claim for benefits under Section 502(a)(1)(B) and a claim for breach of fiduciary duty under Section 502(a)(3). The matter before the court here was plaintiffs’ motion for leave to conduct oral discovery. Plaintiffs’ motion was denied by the court in this decision. “In the Court’s view and in its discretion, Plaintiffs need no additional discovery.” The court emphasized that the University of Chicago’s denial based on the spousal waiver signed by Mrs. Lyon’s agent “is the crux of this dispute,” and that the issue appears to be a legal rather than factual one. Accordingly, the court did not consider discovery likely to be helpful in the ultimate resolution of the case. The court elaborated that the information already contained in the administrative record is sufficient to resolve the parties’ dispute. Moreover, it expressed that it saw plaintiffs’ discovery motion as “impermissibly seeking discovery into the basis of the Plan Administrator’s decision…which is not permitted under ERISA.” Why the administrator reached its decision was, in the court’s view, immaterial to deciding “whether that decision was right or wrong.” Accordingly, the court denied plaintiffs’ discovery motion.

Medical Benefit Claims

Seventh Circuit

Midthun-Hensen v. Grp. Health Coop. of S. Cent. Wis., No. 23-2100, __ F. 4th __, 2024 WL 3646149 (7th Cir. Aug. 5, 2024) (Before Circuit Judges Skyes, Easterbrook, and Kirsch). The parents of a minor child with autism appealed one aspect of an unfavorable summary judgment decision issued last year in this lawsuit challenging their healthcare plan’s denials for speech and sensory therapies between 2017 and 2019 as experimental, unproven treatments for autism. Specifically, the family focused their appeal on the argument that the insurer, Group Health Cooperative, placed limits on autism treatment that violated the Mental Health Parity and Addiction Equity Act. Although Group Health Cooperative has since deemed these therapies eligible for coverage (having determined that updated medical literature supports both treatments as effective), it maintains that its denials at the time were not a violation of Mental Health Parity, because any differences between benefits for autism and for physical musculoskeletal conditions were attributable to differences in the underlying medical literature on which it relied, and not to any difference in its overall treatment of mental or physical conditions writ large. The Seventh Circuit agreed with Group Health Cooperative’s position and the district court’s findings in its decision here. The court of appeals broadly held that insurance providers are entitled to rely on medical literature and to limit coverage to “evidence-based treatments,” even when that medical literature has divergent recommendations for mental health conditions, “so long as its process for doing so applies to mental-health benefits and medical benefits alike.” Here, the Seventh Circuit concluded that the restrictions on coverage for autism therapies were a reflection of what the source literature said, and therefore not a violation of the Parity Act. Moreover, the appeals court ruled that the parents’ challenge failed for an even more basic reason: they identified only a single medical benefit that was handled differently from the mental health benefits they sought for their child. The court of appeals emphasized that the statutory provision requires mental health benefit treatment limitations not be more restrictive than treatment limitations applied to “substantially all medical and surgical benefits covered by the plan.” Without defining exactly what “substantially all” means for the purposes of successful Mental Health Parity claims, the Seventh Circuit stated that “[n]o matter how much space ‘substantially’ leaves, a showing that an insurer limits a mental-health benefit more than it does one medical benefit cannot show that it so limits substantially all such benefits.” It went on to clarify that ERISA plaintiffs cannot get around this statutory language simply because a district court denied them the opportunity to pursue discovery. Underscoring “discovery is not required before summary judgment,” the Seventh Circuit held that the district court had not abused its discretion and that plaintiffs failed to show error and prejudice. Accordingly, the court of appeals did not disturb the lower court’s rulings and affirmed.

C.W. v. United Healthcare Servs., No. 23-cv-04245, 2024 WL 3718203 (N.D. Ill. Aug. 8, 2024) (Judge Sharon Johnson Coleman). The pleading standard for asserting a claim for violation of the Mental Health Parity and Addiction Equity Act is fluid across the country at the moment. In the Seventh Circuit there is no clear pleading standard for a Parity Act claim. However, many courts within the Seventh Circuit have declined to implement the strict standard that defendants United Healthcare Services, Inc. and United Behavioral Health sought to impose here, where they argued that ERISA plaintiffs must identify a specific mental health benefit limitation, identify analogous medical or surgical care covered by the plan, and allege a disparity between the two in order to state such a claim. The court here “follow[ed] suit,” and denied defendants’ motion to dismiss plaintiff C.W.’s Section 502(a)(3) Parity Act violation claim. The court was satisfied that C.W. “plausibly alleged facts and hypotheses” that his health insurance plan applies more stringent and restrictive treatment limitations to mental healthcare and substance abuse treatment services than it does for medical and surgical services. The court noted that C.W. alleges that the plan depends on “generally accepted standards” of care, but imposes more restrictive guidelines to evaluating the medical necessity of residential treatment centers for the treatment of addiction and mental healthcare than it does for facilities that provide other types of medical rehabilitation. Thus, the court found that the complaint alleges a plausible disparity, and that such facts are enough at this stage to plead a claim that a plan violates the Mental Health Parity Act. For these reasons, the court declined to dismiss the Parity Act claim at this early juncture in the litigation.

Tenth Circuit

G.W.-S. v. United Healthcare Ins., No. 2:19-cv-810-RJS-DAO, 2024 WL 3652029 (D. Utah Aug. 5, 2024) (Judge Robert J. Shelby). In 2016 and 2017, plaintiff C.L. was a minor in need of psychiatric interventions, as he was experiencing suicidal ideation, auditory hallucinations, and fantasies involving satanic worship. After an acute hospital stay, C.L. received treatment at a residential treatment center for approximately eight months from July 2016 to March 2017. This case arises from United Healthcare’s denials of coverage for that treatment. C.L. and his mother, G.W.-S., asserted two causes of action against United Healthcare and its affiliates: a claim for wrongful denial of benefits under Section 502(a)(1)(B), and a claim for violation of the Mental Health Parity and Addiction Equity Act under Section 502(a)(3). The parties submitted competing motions for summary judgment. Following a succession of recent similar decisions from the District of Utah, the court entered judgment in favor of the plaintiffs under arbitrary and capricious review of the benefits claim, determined that remand was the proper remedy, concluded the Parity Act claim was moot in light of the reversal and remand, and held off deciding the matters of attorney’s fees, costs, and interest. Beginning with the plan benefit denials, the court concluded that United’s processing of the claims for benefits deprived the family of a full and fair review by not engaging with C.L.’s specific medical circumstances, ignoring the opinions of his treating providers, failing to adequately explain the basis for the denials, and by failing to engage in a meaningful dialogue to articulate why it chose not to credit the information the family submitted which supported the medical necessity of the treatment C.L. received. In addition, the court disagreed with United’s broad assertion that ERISA does not require the level of specificity plaintiffs argue for in claims denial letters. Without drawing a line describing exactly how much detail and engagement is required for denial letters to be adequate, the court said it was clear under governing Tenth Circuit precedent that United didn’t even approach the line in this instance. “What D.K. and David P. make clear is that ERISA requires something more than nothing.” Matters were only made worse, the court stated, by the fact that United arbitrarily denied the family two levels of internal appeals provided by the terms of the plans for 88% of C.L.’s claims. Accordingly, the court determined that United’s denials of the benefits for C.L.’s residential treatment was an abuse of discretion and reversed the denials. However, because the court reversed the benefit denials based on United’s failure to engage with C.L.’s medical information and failure to adequately explain its denial rationales, the court determined that remanding to United to conduct a proper review was the appropriate remedy. Nevertheless, the court cautioned United that it may only consider medical necessity on remand, as it conveyed no other rationale to the family when denying the claim for benefits. Finally, in view of the reversal and remand of the benefits claim, the court determined that the Parity Act claim was moot, and ruled that the issues of fees, costs, and interests were premature.

Pension Benefit Claims

Third Circuit

Carr v. Abington Mem’l Hosp., No. 23-1822, 2024 WL 3729861 (E.D. Pa. Aug. 8, 2024) (Judge Harvey Bartle III). Plaintiff Alice M. Carr sued Thomas Jefferson University and its defined benefit plan under ERISA after her claim for pension benefits was denied. Ms. Carr asserts two causes of action. In count one of her complaint she asserts a claim for wrongful denial of benefits pursuant to Section 502(a)(1)(B). In count two she alleges that Jefferson, as plan administrator, failed to timely furnish her with copies of her pension benefit statements, pension valuation, and personnel and wage records, and seeks daily penalties of $110 per day for each of the three items withheld under Section 502(c)(1). The parties filed cross-motions for judgment. As a preliminary matter, the court concluded that Ms. Carr’s action was timely under the terms of the benefit plan as she filed her complaint three days before the six-month window closed after she exhausted the plan’s administrative claims procedures. Having established that the claim for benefits was not time-barred, the court turned to the parties’ cross-motions for summary judgment relating to Ms. Carr’s Section 502(a)(1)(B) claim. The parties agreed that Jefferson has discretionary authority. The court therefore reviewed the denial of benefits under the arbitrary and capricious standard of review. Under this deferential review standard, the court concluded that the denial was reasonable and supported by substantial evidence, namely the employer’s contemporaneous records of Ms. Carr’s total hours of work annually. Although Ms. Carr pointed to Social Security records as evidence that she worked more than 1,000 hours for each of the five years at issue, the court noted that the records do not record her number of hours and that the documents she provided simply draw an inference that she worked 1,009 hours in 1998 based on her hourly wage. Because the administrator relied on its hourly employment records, and explained why those hours had a 59-hour mismatch with the Social Security records, the court stated that it was not unreasonable for the plan administrator to rely on those records, and that defendants afforded Ms. Carr a full and fair review of her claim. Accordingly, summary judgment was granted in favor of defendants on count one. However, the court entered judgment in favor of Ms. Carr on her statutory penalties claim and awarded her $4,070 for Jefferson’s delay in furnishing her a pension benefit statement. While the court stated that Ms. Carr may not have been prejudiced by the delay, it nevertheless found Jefferson’s conduct intentional and inexcusable, and noted the duty imposed by Congress on plan administrators under Section 502(c) to provide pension benefit statements in a timely fashion. However, because the statute does not expressly require administrators to provide personnel and wage records and pension valuations, the court declined to award additional statutory penalties for Jefferson’s failure to provide these documents to Ms. Carr.

Pleading Issues & Procedure

First Circuit

Llanos-Torres v. Home Depot P.R., Inc., No. Civ. 24-01058 (MAJ), 2024 WL 3639202 (D.P.R. Aug. 2, 2024) (Judge Maria Antongiorgi-Jordan). Plaintiff Evelyn Llanos-Torres sued her former employer, defendant Home Depot Puerto Rico Inc. and Home Depot USA, Inc., seeking payment of disability benefits under ERISA. Home Depot moved to dismiss the complaint, arguing it is not the proper party to this action because it does exercise control over the disability policy underwritten by Aetna Life Insurance Company. Home Depot attached the benefit plan to its motion to dismiss. It argued that the policy language clearly indicates that Aetna has the authority to review benefit claims and to make final claims decisions. Because Ms. Llanos-Torres did not dispute the authenticity of the document Home Depot attached, and as it is central to her claim for benefits, the court considered it while ruling on the motion to dismiss. Based on the unambiguous terms of the disability policy, as well as the allegations in the complaint stating that “the insurance company discontinued the processing of the claim,” the court concluded that Home Depot was not the entity that controls the plan and thus not a proper defendant in this action. Accordingly, the court determined that the complaint fails to state a claim against Home Depot under Section 502(a)(1)(B). Finally, to the extent that Ms. Llanos-Torres sought to assert a claim for breach of fiduciary duty under Section 502(a)(2), the court stated that such a claim also fails because suits under 502(a)(2) are derivative in nature and there is no indication that Ms. Llanos-Torres is bringing her action on behalf of the benefit plan. Home Depot’s motion to dismiss was thus granted.

Fourth Circuit

DeCoe v. CommScope, Inc., No. 5:24-CV-00025-KDB-DCK, 2024 WL 3659312 (W.D.N.C. Aug. 5, 2024) (Judge Kenneth D. Bell). Plaintiff James DeCoe sued his former employers in North Carolina state court after his employment at CommScope, Inc. of North Carolina was terminated on April 21, 2023. In his complaint, Mr. DeCoe alleges that he was wrongfully terminated, and denied wages and benefits owed under the company’s severance plan. Mr. DeCoe asserted claims for tortious interference with employment, wrongful termination, unpaid wages in violation of North Carolina’s wage and hour law, and wrongful denial of benefits under ERISA Section 502(a)(1)(B). Mr. DeCoe did not allege an ERISA interference claim under Section 510, although his complaint alleges that the company had a history of laying off employees “for cause” in order to deny them the opportunity of collecting severance benefits under the policy. Because Mr. DeCoe asserted an ERISA claim for benefits, defendants removed the action to federal court, and contended that ERISA provides the exclusive remedy for Mr. DeCoe’s unpaid wage and wrongful termination claims. In response to defendants’ removal, Mr. DeCoe moved to remand his action. Defendants, in turn, moved to dismiss the complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). In this decision, the court denied both motions. Beginning with jurisdiction, the court stated, “because DeCoe’s complaint asserts a separate claim for denial of unpaid benefits under ERISA, thereby satisfying federal-question jurisdiction, Defendants properly removed his Complaint to this Court and Plaintiff’s Motion to Remand will be denied.” The court then swiftly addressed defendants’ motion to dismiss. It concluded that at this early stage in litigation, Mr. DeCoe “alleged facts which make his claims plausible” and that matters of ERISA preemption, the parties’ intent, the employers’ past practices and application of the severance policy, and other issues along these lines would “no doubt benefit from a full period of discovery.” Accordingly, the court said these disputes are not properly resolved on a motion to dismiss, and, as a result, left Mr. DeCoe’s complaint as is by denying the motion to dismiss it.

Kimner v. Duke Energy Corp., No. 3:23-cv-00369-FDW-DCK, 2024 WL 3708901 (W.D.N.C. Aug. 7, 2024) (Judge Frank D. Whitney). In a pro se complaint, plaintiff Audrey Kimner sued Duke Energy Corporation seeking benefits under two ERISA-governed 401(k) retirement plans belonging to her ex-husband. Defendant moved to dismiss the complaint. The court granted the motion to dismiss, concluding that Ms. Kimner failed to state a claim upon which relief can be granted. Specifically, the court identified two flaws in Ms. Kimner’s complaint. First, the court agreed with defendant that Ms. Kimner failed to exhaust administrative remedies available to her under the plans before initiating this lawsuit. In fact, Ms. Kimner does not allege, and it does not appear, that she submitted a claim for benefits under either plan before suing under ERISA. Second, the court stated that Ms. Kimner failed to present a valid Qualified Domestic Relations Order (“QDRO”) entitling her to alienation of her ex-husband’s retirement benefits. As Ms. Kimner admitted in her complaint, neither the South Carolina family court judge nor her ex-husband signed a domestic relations order. In addition, defendant introduced evidence that Ms. Kimner was not entitled to alienate her former spouse from the plans, as the judge issued an order relieving her ex-husband of any financial obligation associated with the retirement plans in April of 2018. Given the lack of a valid QDRO entitling Ms. Kimner to 401(k) plan assets, the court dismissed the complaint with prejudice pursuant to Federal Rule of Civil Procedure 12(b)(6).

Standard of Review

Third Circuit

Hawks v. PNC Fin. Servs. Grp., No. 23-2636, __ F. App’x __, 2024 WL 3664599 (3d Cir. Aug. 6, 2024) (Before Circuit Judges Bibas, Freeman, and Rendell). PNC Financial Services Group, Inc. and its long-term disability plan appealed the district court’s grant of summary judgment in favor of plaintiff-appellee Rhonda Hawks in this ERISA benefits action. On appeal, PNC argued that the district court misapplied the applicable standard of review, inappropriately considered evidence outside the administrative record, and failed to consider the plan’s language by essentially ignoring the “in the national economy” language with regard to the plan’s “own occupation” disability definition. The Third Circuit agreed on all three points and accordingly vacated and remanded. To begin, the court of appeals stated that defendants did not act arbitrarily and capriciously in looking to the Dictionary of Occupational Titles to assess whether Ms. Hawks could perform sedentary work given that the plan’s disability definition “expressly calls for an analysis of how the participant’s job is ‘normally performed in the national economy.’” Next, the Third Circuit disagreed with the lower court’s conclusions that defendants failed to consider all of the medical evidence and that the plan’s insurer engaged in “self-servingly selective use and interpretation of the medical records and fail[ed] to give appropriate weight to assessments and opinions of treating physicians.” To the contrary, the Third Circuit said that the denial was supported by substantial evidence and that defendants’ review was not an abuse of discretion. Finally, the appeals court held that the denial was not arbitrary and capricious even though defendants failed to subject Ms. Hawks to an independent medical examination and their initial claim determination letter was silent regarding the Social Security Administration’s favorable determination. Taken together, the Third Circuit concluded that the district court failed to give appropriate deference to the administrator’s decision, and that it incorrectly overturned a denial that was supported by substantial evidence. Accordingly, PNC was successful on its appeal as the summary judgment decision, as well as the district court’s accompanying fee decision, were overturned by the Third Circuit. 

Statute of Limitations

Ninth Circuit

Construction Laborers Pension Tr. for S. Cal. v. Meketa Inv. Grp., No. 2:23-cv-07726-CAS (PVCx), 2024 WL 3677278 (C.D. Cal. Aug. 5, 2024) (Judge Christina A. Snyder). Plaintiffs Construction Laborers Pension Trust for Southern California and its Board of Trustees sued the pension plan’s former investment counseling services provider, Meketa Investment Group Inc., and its managing principal, Judy Chambers, for breaches of fiduciary duties under ERISA, and, in the event the court determines defendants are not ERISA fiduciaries, alternative claims for breach of contract, breach of common law fiduciary duty, and negligence/gross negligence. In a previous order, the court granted in part and denied in part defendants’ motion to dismiss the complaint. The court granted defendants’ motion as to fiduciary breaches that were barred by ERISA’s six-year statute of limitations, and also granted dismissal of plaintiffs’ state law claims, which the court concluded were preempted by ERISA. The court otherwise denied defendants’ motion to dismiss as to the remainder of plaintiffs’ ERISA fiduciary breach claim. The court’s dismissal was without prejudice, and plaintiffs filed a second amended complaint asserting the same four claims for relief. Defendants once again moved to dismiss. Unlike the prior complaint, the court concluded that the second amended complaint alleges throughout that “defendants took affirmative steps to conceal their imprudent vetting of [the chosen fund manager] and its principals following the execution of the [contract],” and that defendants engaged in a multi-year concealment of the fund manager’s fraud, inexperience, and ill-advised investment decisions. The court found that these additional factual allegations “satisfy the concealment exception and [] toll the statute of limitations.” In addition, the court expressed that it views the issue of whether defendants took steps to hide the alleged fiduciary breaches to be a question of fact, inappropriate for resolution on a motion to dismiss. Finally, the court reaffirmed its earlier conclusions that plaintiffs otherwise stated a plausible claim for breach of fiduciary duty under ERISA and that the state law claims are preempted by ERISA. Accordingly, the court denied defendants’ motion to dismiss the ERISA fiduciary breach claim in its entirety, but again granted the motion to dismiss the three state law claims. Dismissal of the state law causes of action was without prejudice to plaintiffs reasserting them in the event that the court ultimately finds defendants are not ERISA fiduciaries.

Federation of Americans for Consumer Choice, Inc. v. United States Dep’t of Labor, No. 6:24-cv-163-JDK, __ F. Supp. 3d __, 2024 WL 3554879 (E.D. Tex. Jul. 25, 2024) (Judge Jeremy D. Kernodle)

American Council of Life Insurers v. United States Dep’t of Labor, No. 4:24-cv-00482-O, 2024 WL 3572297 (N.D. Tex. Jul. 26, 2024) (Judge Reed O’Connor).

In November of last year, Your ERISA Watch departed from its usual practice of covering a case of the week to report on the Department of Labor’s issuance of a new proposed rule and related exemptions defining who qualifies as a fiduciary investment advisor under ERISA, and to briefly summarize the long and complicated history of the Fiduciary Rule.

In creating the rule, the Department of Labor (“DOL”) held a notice and comment period in which it received over 600 comments, and held hearings in which scores of witnesses testified over several days. Ultimately, on April 25, 2024, the DOL issued a final Fiduciary Rule and set of prohibited transaction exemptions that mostly tracked but also differed in a number of respects from the proposal. By expanding the universe of advisors who are considered fiduciaries, the Rule aims to prohibit, or at least regulate, a great deal of conflicted investment advice that is costing retirees tens of billions of dollars in lifetime retirement savings. 

As predicted, several legal challenges quickly followed. Two of these have now achieved significant, although not yet final, victories. Both involved a federal Texas district court ruling that the effective date of the Fiduciary Rule should be stayed.

In Federation of Americans for Consumer Choice, an organization made up of marketing entities and insurance agents and agencies brought suit in the Eastern District of Texas challenging the Fiduciary Rule as inconsistent with ERISA, the Internal Revenue Code, and the Administrative Procedure Act (“APA”), and as arbitrary and capricious agency action. Shortly thereafter, the Federation moved for a preliminary injunction of enforcement of the Rule or a stay of the Rule’s September 23, 2024 effective date. The Federation also moved to enjoin one of the exemptions, prohibited transaction exemption (“PTE”) 84-24, which requires insurance agents to adhere to impartial conduct standards and make specified disclosures. In his order, Judge Kernodle granted the stay until further notice.

The court started with an exhaustive trek through the history of the Rule. It began with the statutory definition of fiduciary in ERISA, which includes any person who “renders investment advice for a fee or other compensation,” 29 U.S.C. § 1002(21)(A), and then discussed a regulation promulgated by the DOL in 1975 setting forth a five-part test for who qualifies as an “investment advice fiduciary.” The court then addressed an amended regulation adopted by DOL in 2016 to narrow the five-part test, which was struck down by the Fifth Circuit as in “conflict with the plain text” of ERISA, and “inconsistent with the entirety of ERISA’s ‘fiduciary’ definition” in its treatment of financial service providers. Chamber of Commerce v. Dep’t of Labor, 885 F.3d 360 (5th Cir. 2018).

The court then turned to the four familiar factors traditionally examined in determining whether to grant injunctive relief: (1) likelihood of success on the merits; (2) the threat of irreparable harm to the challengers if no relief is granted; (3) whether other interested parties are likely to be irreparably harmed by a grant of relief; and (4) the public interest. The court determined that each factor supported the grant of a stay, which it saw as a less drastic remedy than a preliminary injunction.

With respect to the likelihood of success, the court largely agreed with plaintiffs that the 2024 Fiduciary Rule suffered from the same defects as the 2016 Rule previously struck down by the Fifth Circuit in the Chamber of Commerce decision. Moreover, in perhaps the first application in the ERISA context of the Supreme Court’s recent decision in Loper Bright Enters. v. Raimondo, 144 S. Ct. 2244 (2024), the district court determined that it “owes no deference to DOL’s interpretation of ERISA.”

The court concluded that the 2024 Fiduciary Rule conflicts with ERISA in at least two ways by eliminating two prongs of the 1975 test – that the advice be given on a “regular basis” and that it serve as the “primary basis” for the investment decisions – both of which the court saw as inexorably tied to the “relationship of trust and confidence” that the Chamber of Commerce decision identified as embedded in the statutory definition. The court also faulted the DOL’s rulemaking in numerous other respects, including that the Rule improperly elides the distinction between investment advice and sales pitches, and that it improperly exceeds DOL’s rulemaking authority by regulating IRAs.

As if that were not enough, the court also relied on the new-fangled “major questions doctrine” – which posits that extraordinary agency powers require clear grants of authority – to supply “an additional basis for concluding that the 2024 Fiduciary Rule violates the APA.” In this regard, the court reasoned that “[a]ccepting DOL’s interpretation of ERISA would grant it ‘virtually unlimited power to rewrite’ the statute’s text” after 50 years with regard to the definition of investment advice.

Relying mostly on the Chamber of Commerce decision, the court also found that DOL acted arbitrarily and capriciously in amending PTE 84-24, finding, among other things, that DOL improperly created a private right of action to enforce some of the “best interest”/impartial conduct standards on newly regulated entities.

The court next found that allowing the Rule to go into effect would indisputably subject the plaintiffs to substantial compliance burdens. Finally, with respect to the fourth and fifth factors, the court found “that the injuries likely to occur if a stay is not granted easily outweigh ‘any harm that will result if the injunction is granted.’”

The court therefore issued an indefinite stay of the effective date of the regulation and of PTE 84-24. The court declined to limit the stay to the parties in the case, finding such a limitation would be both unwarranted and unwieldy.          

In American Council of Life Insurers, another insurance group brought a similar suit challenging the Fiduciary Rule in the Northern District of Texas. Judge O’Connor took note of Judge Kernodle’s decision issued just two days earlier and stated that he “agrees with and fully incorporates that analysis here.”

However, Judge O’Connor also noted that “two [additional] aspects of the Rule remain at issue here: Amendment to Prohibited Transaction Exemption 2020-02, 89 Fed. Reg. 32,260 (Apr. 25, 2024) and Amendment to Prohibited Transaction Exemptions 75-1, 77-4, 80-83, 83-1, and 86-128, 89 Fed. Reg. 32,346 (Apr. 25, 2024).” Those aspects of the Rule also failed to pass muster in Judge O’Connor’s estimation and thus he ruled that a stay of the effective dates of those PTEs was likewise warranted.

The court stated the four relevant factors slightly differently – (1) a substantial likelihood of success on the merits; (2) a substantial threat of irreparable harm; (3) the balance of hardships weighs in the movant’s favor; and (4) issuance of a preliminary injunction will not disserve the public interest – and noted that the third and fourth factors merge when the government is the defendant. All of the factors, the court found, supported staying the Rule.

On the first factor, Judge O’Connor found not just likelihood of success, but virtual certainty, for essentially the same reasons as Judge Kernodle. Essentially, the court found that “Defendants arguments are nothing more than an attempt to relitigate the Chamber decision.”

The court next found that plaintiffs would suffer undisputed irreparable harm by having to expend costs on compliance that would not be recoverable. As to the third and fourth factors, the court found that “Plaintiffs’ strong showing of a likelihood of success is dispositive of these final factors because ‘there is generally no public interest in the perpetuation of unlawful agency action.’”

As in the Federation decision, Judge O’Connor found that a stay was justified as a less drastic remedy than a preliminary injunction, and like Judge Kernodle he declined to “limit its relief to only the parties in this case.” Moreover, given the court’s conclusion that success on the merits was virtually guaranteed, it declined to remand to DOL as “inefficient and a potential waste of resources.”  

The importance of the Rule for retirees is hard to overstate given overwhelming evidence of the negative impact of conflicted investment advice on retirement savings, especially for low and moderate income retirees. Nevertheless, the prospect that the stays will be lifted in either district court, or that DOL will ultimately prevail in those courts, appears dim. Indeed, as noted above, Judge O’Connor bluntly stated that “Plaintiffs are virtually certain to succeed on their claims that the Rule exceeds DOL’s statutory authority.”

So, once again, it appears up to the Fifth Circuit whether any or all of the Fiduciary Rule will ever go into effect. We at Your ERISA Watch remain ever hopeful. Stay tuned as always for updates on this important topic.   

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

Attorneys’ Fees

First Circuit

Gomes v. State St. Corp., No. C.A. 21-cv-10863, 2024 WL 3596892 (D. Mass. Jul. 30, 2024) (Judge Mark L. Wolf). This April, the court preliminarily approved a proposed class action settlement in this litigation alleging breaches of fiduciary duties under ERISA regarding the State Street Salary Savings Program retirement plan. If the court grants final approval of the proposed settlement after the August 8 fairness hearing, defendants will contribute $4.3 million to a common fund, out of which class members will receive distributions minus litigations costs, attorneys’ fees, and other expenses. Plaintiffs moved for attorneys’ fees, seeking a common fund fee award totaling $1,433,333.33, or 33.3% of the settlement fund. Plaintiffs are represented by lead counsel Scott + Scott and co-counsel Peiffer Wolf Carr Kane Conway and Wise. In their motion, plaintiffs’ counsel calculated their lodestar as $1,592,595 and argued that this amount supports the reasonableness of their requested common fund fee. They assert that their lodestar was calculated using the attorneys’ regular hourly rates charged for their services and that these amounts “have been accepted in other complex or class action litigation, subject to subsequent annual increases.” However, neither firm represented that they actually charge their clients these hourly rates, as their practices are primarily contingent. This detail was significant to the court, which deferred ruling on plaintiffs’ fee motion. The court ordered counsel to file affidavits explaining why the requested one-third common fund fee award is reasonable in view of two other settled class action lawsuits in which Scott + Scott served as lead counsel and the attorneys were awarded fees between 20-30%. In addition, the court required counsel to discuss whether either law firm has billed any clients on an hourly rather than contingent basis, and, if so, to state which of their attorneys billed clients hourly, how many clients were billed on an hourly basis, and the hourly rate that each attorney charged. The court stated that once it has these facts it will then possess the necessary information to determine whether the requested fee award is indeed fair and reasonable.

Breach of Fiduciary Duty

Ninth Circuit

Johnson v. Carpenters of W. Wash. Bd. of Trs., No. 23-35370, __ F. App’x __, 2024 WL 3579492 (9th Cir. Jul. 30, 2024) (Before Circuit Judges Friedland, Mendoza, and Desai). Three union carpenters who were participants in two multi-employer pension plans appealed the dismissal of their putative class action against the Carpenters of Western Washington Board of Trustees and Callan, LLC in which they alleged fiduciary breaches and plan mismanagement. In this decision the Ninth Circuit reversed and remanded. The court of appeals concluded that plaintiffs had standing, and that they sufficiently stated their claims of imprudence and failure to monitor under ERISA. First, the Ninth Circuit held that plaintiffs need not allege absolute losses to their retirement accounts to sufficiently allege a concrete financial injury. Instead, plaintiffs’ allegations that the value of their accounts would be greater today had defendants not invested in the challenged indexes was considered by the Ninth Circuit to be more than sufficient. Moreover, the appeals court agreed with plaintiffs that their injury was fairly traceable to defendants’ actions. In addition, the court of appeals disagreed with the district court’s position that the COVID-19 pandemic was the intervening and independent cause of plaintiffs’ injury. Rather, it held that it was plausible “that the pandemic was simply the trigger that revealed the alleged consequences of Defendants’ actions,” and that defendants’ alleged conduct “left the Plans vulnerable to a negative market event,” making COVID not an independent cause of plaintiffs’ loss, “but part of the foreseeable consequences of Defendants’ actions, according to Plaintiffs.” Furthermore, the Ninth Circuit held that plaintiffs stated their claims under ERISA by adequately alleging that defendants violated their fiduciary duties when they chose to make the challenged investments and when they failed to monitor and remove them. “We have held that a fiduciary violated its duty of prudence under similar circumstances, in which an investment advisor recommended investing a large portion of a retirement plan into investments that were excessively risky given the plan’s conservative aims.” Based on the foregoing, the court of appeals reversed the dismissal of plaintiffs’ complaint and remanded to the district court.

Disability Benefit Claims

Sixth Circuit

Halleron v. Reliance Standard Life Ins. Co., No. 3:22-CV-00633-GNS-CHL, 2024 WL 3585139 (W.D. Ky. Jul. 29, 2024) (Judge Greg N. Stivers). Dr. April Halleron stopped working and applied for short-term and long-term disability benefits in the summer of 2022 after she was diagnosed with postural orthostatic tachycardia syndrome (“POTS”), a condition linked with low blood pressure, high pulse rates, dizziness, fatigue, and fainting. Dr. Halleron believed she could no longer work as a physician due to her low energy levels, dizziness, light-sensitivity, body pains, weakness, and episodes of near fainting. However, the insurance company responsible for her disability coverage, Reliance Standard Life Insurance Company, disagreed and denied both of Dr. Halleron’s claims. It concluded that Dr. Halleron’s POTS was a preexisting condition making her ineligible for short-term benefits. Her long-term claim, while not barred by a preexisting conditions exclusion, was still denied after Reliance determined that Dr. Halleron did not meet the policy’s definition of total disability. In this action, Dr. Halleron challenges both denials. The parties filed competing motions for summary judgment. In this decision the court granted Dr. Halleron’s motion for judgment and denied Reliance Standard’s summary judgment motion. To begin, the court stated that it need not resolve the parties’ dispute over the applicable review standard because “the denials do not survive even an arbitrary and capricious review.” Next, the court disagreed with Reliance Standard that Dr. Halleron’s claims for benefits are barred because she failed to appeal its denials through the administrative appeals process. The court deemed Dr. Halleron to have exhausted her administrative remedies because Reliance Standard failed to strictly comply with ERISA’s claims handling regulations, and thus Dr. Halleron is entitled to “immediate access to judicial review.” As for the denials themselves, the court concluded that neither one was “the product of a deliberate, principled reasoning process.” With regard to the long-term disability benefit claim, the court criticized Reliance Standard’s one-paragraph decision, which it stated lacked substance, supporting evidence, medical analysis, and consideration of whether Dr. Halleron’s symptoms prevent her from performing her job functions. It found that the denial did little more than recite Dr. Halleron’s medical history, and that it completely failed to address her treating physician’s opinions, which rendered the denial arbitrary and capricious. And with regard to the short-term disability denial, the court found that the denial was cursory and lacked a detailed analysis of why it determined the POTS diagnosis was a preexisting condition. Accordingly, the court said that it too was arbitrary and capricious. For these reasons, the court entered judgment in favor of Dr. Halleron. However, it chose to remand back to Reliance Standard as the flaw here was the integrity of the decision-making process, and remanding to the plan administrator is generally considered the appropriate remedy under such circumstances. Finally, the court ordered Reliance Standard to file a brief in response to Dr. Halleron’s request for attorneys’ fees and costs.

Eighth Circuit

Weyer v. Reliance Standard Life Ins. Co., No. 23-2862, __ F. 4th __, 2024 WL 3577374 (8th Cir. Jul. 30, 2024) (Before Circuit Judges Colloton, Shepherd, and Stras). This ERISA benefits action was filed by Kelsey Weyer after her long-term disability benefits were terminated by defendant Reliance Standard Life Insurance Company. Ms. Weyer suffers from a host of medical conditions which have left her with serious physical and cognitive limitations. Given these limitations, and based on the entirety of Ms. Weyer’s medical record, the district court entered judgment in her favor when it ruled on the parties’ cross-motions for summary judgment. In reaching its decision, the district court concluded that the evidence in the record supported that Ms. Weyer was totally disabled from performing any occupation. Reliance Standard appealed the district court’s order. It argued that Ms. Weyer is not totally disabled, and even if she were, her mental health conditions, including a history of anxiety and depression, caused or contributed to her total disability such that her benefits should be limited to a maximum of 24 months pursuant to the plan’s mental health maximum lifetime benefits clause. On appeal, the Eighth Circuit found no clear error in the district court’s de novo review of Reliance Standard’s decision and thus affirmed. It held that the district court, as the factfinder, reasonably interpreted what it saw as the overwhelming evidence in the record establishing that Ms. Weyer lacked even sedentary work capacity. On the other hand, the evidence cited by Reliance Standard in support of its decision to terminate benefits was viewed by the appeals court as not enough to conclude that “a definite and firm…mistake has been made.” Accordingly, the Eighth Circuit stated the lower court did not clearly err in finding that Ms. Weyer was totally disabled under the terms of the policy. In addition, the court of appeals found no fault with the lower court’s findings that Ms. Weyer’s physical conditions independently rendered her disabled and that Ms. Weyer’s anxiety and depression were not the cause of her disability but “simply downstream effects of her physical illness.” Thus, the Eighth Circuit was not persuaded that the district court clearly erred in any of its holdings and upheld the judgment in its entirety.

ERISA Preemption

Ninth Circuit

University of S. Cal. v. Heimark Distrib., No. CV 24-5550 FMO (SSCx), 2024 WL 3582625 (C.D. Cal. Jul. 30, 2024) (Judge Fernando M. Olguin). The University of Southern California sued Heimark Distributing, LLC in California state court, on behalf of its hospitals, alleging state law claims for breach of implied contract, unfair business practices, unjust enrichment, quantum meruit, and accounts stated, seeking reimbursement for medical services provided to a patient insured under Heimark’s employee health plan. Heimark removed the action, asserting that the federal court system has subject matter jurisdiction because the state law claims are preempted by ERISA. In this decision the district court disagreed and remanded the lawsuit back to state court. The court found that the complaint failed the two-part Davila complete preemption test because USC does not allege anywhere in the complaint that it was assigned benefits. Noting that a defendant bears the burden of showing that a plaintiff’s claims are completely preempted, the court concluded that Heimark did not meet that burden on the face of the complaint. Moreover, it stated that “the mere fact that no written contract exists between plaintiff and defendant does not require the conclusion that the Patient assigned his or her ERISA benefits to plaintiff.” Accordingly, the court found it lacked jurisdiction over the matter and sent the case back to the Superior Court of the State of California.

Life Insurance & AD&D Benefit Claims

Third Circuit

Gratz v. Gratz, No. 3:19-cv-1341, 2024 WL 3598835 (M.D. Pa. Jul. 31, 2024) (Judge Julia K. Munley). Plaintiffs Jillian and Tyler Gratz are the children of decedent Dr. Richard Gratz. In this ERISA action the siblings allege that Dr. Gratz’s older brother, defendant Michael Gratz, exercised undue influence on their father to procure a change in beneficiary on his life insurance coverage following the death of his wife. Defendant moved for summary judgment. His motion was denied as the court concluded that plaintiffs raised questions of material fact regarding whether their father had a weakened intellect following his wife’s death and whether Michael had a “confidential relationship” with Dr. Gratz which influenced his change in beneficiary. “Notably, the inquiry into the exercise of undue influence is a highly fact-intensive one.” Viewing the evidence in the light most favorable to plaintiffs, the court stated that a reasonable finder of fact could conclude that Dr. Gratz suffered from severe mental distress and mental health disorders after the death of his wife, and that these mental health concerns could have left him in a weakened intellectual state and potentially subject to undue influence. Further, the court agreed with plaintiffs that it is plausible that the brothers had a close personal relationship. Moreover, the court expressed that it could only determine the absence of undue influence after assessing the credibility of the parties and other witnesses. “As credibility is at issue, summary judgment in favor of the defendant regarding the absence of undue influence is inappropriate.” For these reasons, the court found that summary judgment should not be granted.

Pension Benefit Claims

Third Circuit

Rombach v. Plumbers Local Union No. 27 Pension Fund, No. 2:20-cv-01348, 2024 WL 3554571 (W.D. Pa. Jul. 26, 2024) (Judge Mark R. Hornak). For over thirty years plaintiff Clyde Rombach, III worked for W.G. Tomko, Inc (“Tomko”) and contributed to a multi-employer pension fund, the Plumbers Local Union No. 27 Pension Fund. In his later years of employment, Mr. Rombach worked as a Project Manager at Tomko. This position remained covered by the Union and required Tomko to make contributions to the fund on Mr. Rombach’s behalf. Then, in 2009, Mr. Rombach assumed a new position, Senior Project Manager. As Senior Project Manager, Mr. Rombach took on some new responsibilities and his Union membership and contributions to the plan ended at this time. Neither the Union nor the Plan took issue with these status changes. On August 15, 2016, Mr. Rombach turned 60 and applied for early retirement benefits under the Plan. The Trustees acknowledged that Mr. Rombach was eligible for early retirement benefits based on his age and years of covered service, “but simultaneously suspended his pension benefit based on his then-current work at Tomko in the position of Senior Project Manager.” Following an ultimately unsuccessful administrative appeal of the benefit decision, Mr. Rombach commenced this litigation alleging the Plan improperly suspended his early retirement pension benefits from October 2016 to December 2019 under the terms of the plan in violation of ERISA. The parties cross-moved for summary judgment under abuse of discretion review. The court concluded that the Trustees’ ultimate decision “was inherently arbitrary” and entered summary judgment in favor of Mr. Rombach. The court ordered the Plan to “take all steps necessary to reverse the financial and any other impact on Rombach of the suspension during the time window at issue, including payment over of the suspended early pension benefits, prejudgment interest, and post-judgment interest…each at the statutorily applicable rate.” It was significant to the court that Mr. Rombach’s change of position from Project Manager to Senior Project Manager resulted in Union membership ending and plan contributions stopping, and stated that these changes “must logically…carry meaning.” However, as the court noted, the Trustees equated the two positions and entirely failed to explain or even address the differences between the two for the purposes of Mr. Rombach’s eligibility for early retirement benefits. By treating the two jobs as “one and the same,” simply because some of the daily tasks of the work at each position overlapped, the court concluded that defendants had abused their discretion. In fact, as the Trustees noted, the Senior Project Manager was responsible for supervising the Project Managers, “plainly placing it at least one step above the Project Manager position.” It was important to the court that the Trustees did not address this fact when deciding to suspend the early retirement benefits. Zooming out, the court took issue with defendants’ broader proposition that all jobs at Tomko were necessarily included within the Union’s industry trade. It stated that such a reading “would lead to the result that an employee moving into a top executive position from a Plan-covered position would also be considered to be employed in a ‘trade or craft in the industry.’ Under any standard of review, that unreasonably gives too broad a reading to the suspension language within the Plan’s provision. In adopting such a theory in Rombach’s case, the Trustees acted unreasonably, erroneously, and arbitrarily.”

Pleading Issues and Procedure

Tenth Circuit

Andrew C. v. United Healthcare Oxford, No. 2:18-cv-877-HCN, 2024 WL 3553301 (D. Utah Jul. 26, 2024) (Judge Howard C. Nielson, Jr.). Plaintiffs Andrew and Paige C., individually and on behalf of their minor child, sued United Healthcare Oxford under ERISA seeking judicial review of denied claims for healthcare benefits. After the lawsuit was filed the parties filed a stipulated motion to dismiss the action without prejudice under Rule 41(a)(1)(A) after they agreed that United would reconsider the family’s claims for benefits. The court granted that motion. However, the family was not satisfied by United’s reconsideration of their claims, and subsequently moved to reopen the case pursuant to Federal Rule of Civil Procedure 60(b). The court stressed that relief under Rule 60(b)(6) is only available in “extraordinary circumstances,” and “appropriate only when it offends justice to deny such relief.” The court ruled that plaintiffs failed to meet these demanding standards. In particular, the court emphasized that the voluntary nature of the plaintiffs’ dismissal weighed strongly against the requested relief, as the plaintiffs are free to file a new action challenging United’s denial of their claims for benefits. Accordingly, the court denied the motion to reopen the case.

Provider Claims

Third Circuit

Samra Plastic & Reconstructive Surgery v. Cigna Health & Life Ins. Co., No. 23-21810 (MAS) (RLS), 2024 WL 3568844 (D.N.J. Jul. 29, 2024) (Judge Michael A. Shipp). An out-of-network plastic and reconstructive surgery center, Samra Plastic & Reconstructive Surgery, filed this lawsuit on behalf of itself and as an assignee of its patient against Cigna Health and Life Insurance Company and Bottomline Technologies, Inc. seeking reimbursement of 80% of the patient’s breast surgery, or $154,256. Samra asserted causes of action under ERISA, as well as state law claims for breach of contract, promissory estoppel, and account stated. Defendants moved to dismiss the complaint. They argued that Samra lacks derivative standing to assert ERISA claims, the state law claims are preempted by ERISA, and that Samra also fails to state its claims. The court tackled each issue independently. First, the court agreed with defendants that the plan contains a clear and unambiguous anti-assignment provision which precludes Samra from bringing an ERISA suit as an assignee. Accordingly, the court granted the motion to dismiss the ERISA causes of action. Nevertheless, the court disagreed with defendants on the issue of ERISA preemption. With regard to complete preemption, the court held that Samra could not bring claims under Section 502 and that its state law claims relate to an independent oral contract or quasi-contract between the parties which took place prior to the surgery and therefore are independent of the ERISA plan. The same was true regarding the court’s analysis of Section 514 conflict preemption. The court held that the claims at issue do not require any examination of the ERISA plan, meaning the plan is not a “critical factor in establishing liability.” Instead, the court agreed with Samra that its claims arise from a separate agreement between the parties wherein Cigna agreed to pay 80% of billed charges. Moreover, the court explained that the complaint sufficiently and plausibly states each of its three state law causes of action. For these reasons, the court denied defendants’ motion to dismiss the breach of contract, promissory estoppel, and account stated claims. Thus, the motion to dismiss was granted in part and denied in part, as detailed above.

Suchin v. Fresenius Med. Care Holdings, No. Civ. JKB-23-01243, 2024 WL 3495778 (D. Md. Jul. 22, 2024) (Judge James K. Bredar)

Lovers of Don Quixote, and we count ourselves among them, might fondly recall scenes of Sancho Panza sitting as a judge and earnestly attempting to dole out justice. He endeavored, if not always successfully, to follow Don Quixote’s guidance:

“Never let yourself be guided by arbitrary law, which is favored by the ignorant who think they’re so clever…. 

When equity can and should find favor, don’t put the whole weight of the law on the delinquent, because the fame of the severe judge is no more than that of the compassionate one.”

Perhaps, like many a judge before and after him, Sancho Panza struggled mightily and most acutely while sitting as a court of equity.

Equitable remedies have always been a particularly tricky issue in ERISA cases. When it enacted ERISA fifty years ago, Congress expressly incorporated equitable principles into the statute, authorizing future plaintiffs to sue for “other appropriate equitable relief” under Section 502(a)(3) in instances where no other provision of the notoriously complex statute provides an adequate remedy. Where other provisions of ERISA expressly enumerate the remedies they provide, Section 502(a)(3) broadly opens up the realm of possibilities by empowering courts to award typically equitable forms of relief.

For years the Supreme Court has weighed in on matters of equitable remedies – what they are, whether and when they are appropriate, and how courts should think of them. In Holland v. Florida, 560 U.S. 650 (2010), the Supreme Court emphasized “the need for flexibility and avoiding mechanical rules” in “a tradition in which courts of equity have sought to relieve hardships, which from time to time, arise from hard and fast adherence to more absolute legal rules, which, if strictly applied, threaten the evils of archaic rigidity.”

The district court in this week’s notable decision invoked this language and applied these equitable principles in its consideration of the equitable remedies sought by plaintiff Dr. Craig Suchin in his quest to right fiduciary wrongs under ERISA.

Dr. Suchin, a former radiologist, is terminally ill with a neurological disorder. He alleges that his former employer, defendant Fresenius Medical Care Holdings, misrepresented the terms of its employee long-term disability and life insurance benefit plans, stating they provided far greater benefits than they actually did, and failed to provide him with ERISA-mandated documents, including summary plan descriptions, which would have cleared up matters.

Because of these misrepresentations and omissions, Dr. Suchin and his wife expected that his long-term disability benefits would be worth 60% of his monthly salary – about $23,000 per month – and that the life insurance proceeds would be worth $1.2 million.

However, the terms of the plans actually capped long-term disability benefits at $10,000 monthly, subject to offsets for Social Security disability insurance payments, and provided life insurance benefits worth only $400,000. Dr. Suchin maintains that had he known the benefits were much less generous than he anticipated, he would have purchased supplemental policies to cover his family’s needs. Now that he is battling a debilitating and terminal illness, it is too late to do so.

Dr. Suchin asserts three causes of action against Fresenius. Counts one and two allege that Fresenius breached its fiduciary duties to Dr. Suchin regarding the long-term disability and life insurance plans, respectively, and seek equitable relief under Section 502(a)(3). Count three alleges that the employer failed to produce statutorily-mandated documents and seeks penalties pursuant to Section 502(c)(1)(B).

On February 6, 2024, the court dismissed counts one and two of Dr. Suchin’s complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). Your ERISA Watch covered that decision in our Valentine’s Day newsletter earlier this year. In that decision, the court rejected many of Fresenius’s arguments in favor of dismissal. It held that Dr. Suchin’s life insurance fiduciary breach claim was ripe even though he is still alive. It also concluded that counts one and two were properly brought under Section 502(a)(3) rather than Section 502(a)(1)(B), and that Fresenius was a fiduciary that plausibly breached its fiduciary duties with respect to both plans. Despite reaching these conclusions, the court dismissed the first two causes of action “on the grounds that Suchin failed to show he was entitled to the requested remedies of reformation, equitable estoppel, or surcharge.”

However, the court’s dismissal was without prejudice, and Dr. Suchin amended his complaint, reasserting the same three causes of action. Fresenius responded by once again moving to dismiss. Upon consideration, the court granted the motion in part and denied it in part.

To begin, the court stressed that it saw no reason to revisit any of its holdings from its February analysis that were favorable to Dr. Suchin. Thus, it proceeded “on the assumption that these issues have been resolved for the purposes of this stage of the litigation.” Instead, the decision narrowed its focus to analyzing whether the amended complaint now adequately states a claim for equitable estoppel or reformation.

Breaking its decision in two, the court tackled equitable estoppel first. As the court stated, “[e]quitable estoppel is a ‘traditional equitable remedy’ that operates to place the plaintiff ‘in the same position he would have been in had the representations been true.’” To state a claim for equitable estoppel under Section 502(a)(3), the court clarified that a plaintiff must plausibly allege five things: “(1) a promise; (2) reasonable reliance on that promise; (3) injury caused by the reliance; (4) injustice if the promise is not enforced; and (5) the presence of extraordinary circumstances justifying equitable relief.” The court then explained why it found that Dr. Suchin adequately alleged all five elements with respect to both plans.

Unlike the original complaint, the amended complaint alleges that Fresenius made a promise to Dr. Suchin by stating the more generous benefit amounts for both plans on its employee website. “These allegations, which were not present in the original Complaint, suffice to elevate Fresenius’s alleged communications from the realm of omission to the realm of affirmative misrepresentations.”

As for whether reliance on these promises was reasonable, the court said that Dr. Suchin is only required to plead plausible facts from which it can infer reasonable reliance, but that he is not required to affirmatively prove that his reliance was reasonable at this stage. “Viewing the facts in the light most favorable to the plaintiff, the Court cannot conclude that as a matter of law Suchin’s reliance on Fresenius’s misstatements – coupled with the alleged omissions – was unreasonable.”

On the third prong, the court held that Dr. Suchin has sufficiently alleged he was injured by relying on Fresenius’s actions. The court also found that, assuming Dr. Suchin’s account of what occurred is true, “it would be unjust to deny him relief.”

Fifth, and last, the court found that the allegations in the complaint of Fresenius’s failure to provide plan documents and its website that misstated benefit amounts constitute extraordinary circumstances justifying equitable relief. At best, the court found the complaint’s allegations paint a picture of gross negligence, and at worst, intentional deception.

In addition, the court rejected Fresenius’ argument that Dr. Suchin cannot receive equitable relief that is at odds with unambiguous plan terms. The court explained that “to hold that estoppel cannot vary unambiguous plan language even when the defendant never provided the plaintiff with that language would be to defeat ERISA’s policy of ‘requiring the disclosure and reporting’ of plan information ‘to participants and beneficiaries.’” The court found the idea of such a ruling absurd. It stressed that plan documents, no matter how clear, are of no use to employees “if they have no way to read that plan.” 

For these reasons, the court denied the motion to dismiss counts one and two insofar as they seek equitable estoppel.

Nevertheless, the court reached a different result with regard to reformation. In contrast to equitable estoppel, the court concluded that Dr. Suchin did not adequately plead entitlement to reformation in counts one and two. The court reiterated that reformation for fraud is only an available remedy where the fraud is in the formation of the contract, and not where, as here, the allegations of fraud and misrepresentations center on events that took place after Dr. Suchin already agreed to be bound by the terms of the plans. Because “the alleged fraud was subsequent to and unrelated to the plaintiff’s assent to the contract,” the court granted the motion to dismiss the claims for reformation, this time with prejudice.

Regardless of the dismissal of reformation as a form of relief available to Dr. Suchin, the decision allows all three of Dr. Suchin’s claims to proceed past the pleading challenge. What equity will require at the end of the journey remains to be seen.

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

Attorneys’ Fees

Second Circuit

E.V. v. United HealthCare Oxford, No. 22 Civ. 2855 (VM), 2024 WL 3534405 (S.D.N.Y. Jul. 25, 2024) (Judge Victor Marrero). Last September, the court granted summary judgment in favor of plaintiffs E.V. and L.V. on their claim for healthcare benefits and ordered the United Healthcare defendants to pay for the costs of L.V.’s stay at a residential treatment center in this ERISA medical benefits action. In that same decision, it should be noted the court denied plaintiffs’ motion for judgment on their claim for violation of the Mental Health Parity and Addiction Equity Act. Plaintiffs have since moved for attorneys’ fees, costs, and interest pursuant to Section 502(g)(1). Plaintiffs moved for an award of $48,105 in attorneys’ fees, $400 in costs, and prejudgment interest at 8.5%. In this decision the court granted plaintiffs’ motion. As a preliminary matter, the court agreed with plaintiffs that they achieved success on the merits which entitles them to fees. The court was also “mindful that ‘ERISA’s attorney’s fee provisions must be liberally construed to protect the statutory purpose of vindicating employee benefits rights.” It therefore wished to fully compensate attorneys Brian King, Robert Liebross, Samuel Hall, and Tara Peterson for their work. Plaintiffs submitted the following rates per hour: Brian King, lead counsel – $600, Robert Liebross, local counsel – $600, Samuel Hall, associate – $325, and Tara Peterson, associate – $325. In addition, plaintiffs submitted the following numbers of hours each attorney worked on the matter: King – 66.8 hours, Liebross – 4.6 hours, Hall – 0.7 hours, and Peterson – 15.5 hours. Defendants did not dispute that the hourly rates were reasonable, but argued in favor of a 50% reduction in the number of hours to reflect that plaintiffs were only successful on half of their claims. The court agreed that the hourly rates were reasonable and in line with prevailing rates and therefore did not reduce the rates. But the court disagreed with defendants’ assertion that partial success should result in a severe reduction of plaintiffs’ award. And more generally, the court found the time spent on the complaint was reasonable. The only reduction the court applied to the requested fee award was a 10% reduction in response to counsel’s decision to put their most senior attorney on tasks like legal research and preparing initial drafts of case documents, which were tasks the court found more suitable for more junior lawyers. Accounting for this $4,810.50 reduction, the court was left with an attorneys’ fee award totaling $43,294.50. The court did not, however, reduce the requested $400 in costs, as this amount was simply the cost of the complaint’s filing fee in the case and defendants did not object. Finally, the court agreed with plaintiffs that 8.5 percent interest fairly compensates them and therefore granted their request for prejudgment interest at this rate.

Breach of Fiduciary Duty

Third Circuit

Kruchten v. Ricoh U.S., Inc., No. 23-1928, __ F. App’x __, 2024 WL 3518308 (3d Cir. Jul. 24, 2024) (Before Circuit Judges Shwartz, Rendell, and Ambro). Relying on its decisions in Sweda v. University of Pa., 923 F.3d 320 (3d Cir. 2019), and, more recently, in Mator v. Wesco Distrib. Inc.,102 F.4th 172 (3d Cir. 2024), clarifying the pleading standards for excessive investment fee claims under ERISA, the Third Circuit Court of Appeals reversed the district court’s dismissal of this fiduciary breach fee action asserted against the fiduciaries of the Ricoh USA, Inc. defined contribution plan. Upon consideration of its own precedents, the Third Circuit agreed with the participant plaintiff-appellants that their allegations closely matched those of the Sweda and Mator plaintiffs and that they therefore sufficiently pleaded plausible claims alleging defendants breached their responsibilities and fiduciary duties under ERISA. Specifically, the appellate court found plaintiffs established meaningful benchmarks by compiling a list of retirement plans and the recordkeeping and administrative fees they paid and comparing those figures to the Ricoh plan. Moreover, the court stated that, contrary to defendants’ position, “the Complaint’s allegations that the RK&A services market is commodified and competitive are not mere ‘conclusions’ that we must reject… While Defendants contend that there are varying types of RK&A services and the charges logically diverge, this is a factual claim that must be determined at a later stage in the case.” Further supporting the court’s conclusion that plaintiffs stated claims for fiduciary breach was the fact that plaintiffs alleged other wrongful behavior and supporting circumstantial evidence, such as defendants’ failure to solicit bids from competing recordkeeping providers. While the Third Circuit clarified that these allegations on their own are not enough to state plausible claims, they nevertheless found them to be important supporting evidence of plan mismanagement. The court of appeals also rejected defendants’ attempts to pick apart plaintiffs’ calculations, reminding the parties that at this early stage in the litigation “plaintiffs will necessarily be limited to calculations based on publicly available data.” Finally, the Third Circuit said any differences in the particular details between this action and those of the Sweda and Mator cases were immaterial. “Instead, the lesson from Mator is that plaintiffs need to establish that the comparisons they provide are appropriate. We believe Plaintiffs here satisfied this requirement with factual allegations showing how peer plans were indeed similar.” For this reason, the district court’s order dismissing the complaint was reversed and the action was remanded for further proceedings.

Class Actions

Seventh Circuit

Holloway v. Kohler Co., No. 23-CV-1242-JPS, 2024 WL 3518644 (E.D. Wis. Jul. 24, 2024) (Judge J.P. Stadtmueller). Four participants of the Kohler Co. Pension Plan initiated this action both individually and on behalf of a putative class of similarly situated participants and beneficiaries receiving pension benefits in the form of a joint survivor annuity from the plan. Plaintiffs allege that the Kohler Co. and the pension plan are violating ERISA by using outdated mortality tables and actuarial assumptions to calculate joint and survivor annuity benefits, thereby miscalculating benefits which are not the actuarial equivalent of the single life annuity benefits offered under the plan. This April, the parties notified the court that they had reached a settlement. Plaintiffs subsequently moved for preliminary approval of class action settlement. In this decision the court granted the motion, conditionally certified the 500-member class, and preliminarily approved the parties’ proposed $2.45 million settlement agreement. Starting with the proposed non-opt out settlement class of participants and spouse beneficiaries receiving a joint and survivor annuity, the court agreed that “at this juncture, there is no barrier to conditional certification of the proposed class.” It also found the definition of the settlement class clear and based on objective criteria. Moreover, the court agreed with plaintiffs that the class satisfies Rule 23(a)’s numerosity, commonality, typicality, and adequacy requirements. The court was additionally persuaded that certification of the non-opt out class under Rule 23(b)(1) was appropriate as failure to certify the class would run the risk of individual claims resulting in contradictory and inconsistent rulings. Thus, the court found that certification will prevent differential treatment of class members by the plan. Accordingly, the court preliminarily certified the proposed class. Turning to the terms of the proposed settlement, the court concluded that it is “within the range of possible approval’ with respect to the criteria set forth in Rule 23(e)(2) and that the Court ‘will likely be able to…approve the proposal under Rule 23(e)(2).’” While stipulating that it was reserving full examination of the settlement until the final approval stage of the proceeding, the court stated that it generally agreed on first inspection that the settlement, representing approximately one-third of the damages calculated by plaintiffs’ actuarial expert, is a favorable result for the class, and noted that “Judge Lynn Adelman recently approved a similar settlement in a virtually identical case.” The court also completely held off considering the proposed award of attorneys’ fees and class representative awards. The decision concluded with instructions on sending notice to the class members and outlining the protocols for submitting objections at the fairness hearing.

Disability Benefit Claims

Eleventh Circuit

Sami v. The Guardian Life Ins. Co. of Am., No. 23-cv-20168-ALTMAN/Reid, 2024 WL 3495322 (S.D. Fla. Jul. 22, 2024) (Judge Roy K. Altman). Plaintiff Hari Sami brought this action to challenge The Guardian Life Insurance Company of America’s termination of his long-term disability benefits. Mr. Sami contends that Guardian’s decision was wrong on the merits. Mr. Sami also maintains that he did not receive a full and fair review of his appeal because Guardian failed to timely provide him with new evidence, including medical file review reports from two reviewing doctors and a vocational transferability of work skills report, and thus denied him “a reasonable opportunity to respond” to this information it relied upon in upholding its denial on appeal. In fact, Guardian provided this additional evidence to Mr. Sami on the very same day that it issued its final denial of his claim. Guardian’s handling of Mr. Sami’s administrative appeal was the central focus of this decision, ruling on the parties’ cross-motions for summary judgment on Mr. Sami’s Section 502(a)(1)(B) claim. To begin, the court clarified that Mr. Sami’s long-term disability benefit claim, originally filed on October 20, 2016, was “under the purview of the [Department of Labor’s] 2018 Amendment’s procedures.” As such, the court specified that Guardian was required to supply “any new or additional evidence considered, relied upon, or generated…in connection with the claim…sufficiently in advance” of the determination deadline to give the claimant the opportunity to engage and respond to that evidence. Here, the court was unequivocal that Guardian failed to do that and thus “unlawfully deprived Sami of ‘a full and fair review of his claim and adverse benefit determination.’” Before issuing its final ruling, the court engaged with Guardian’s three arguments advancing its view that the delay in furnishing the vocational and doctors’ reports was not improper. These three arguments were: (1) the reports were provided “as soon as possible” as required under the regulation because they were provided to Mr. Sami as soon as they were completed; (2) Mr. Sami should not be able to argue that Guardian deprived him of the opportunity to respond to the review because he denied its request for an extension of review-period deadline; and (3) even if its lateness in supplying Mr. Sami with the new evidence was a technical procedural violation, such a violation was de minimis. The court disagreed on all three points. First, it reminded Guardian that the statute mandates that new evidence be provided both as soon as possible and sufficiently in advance of the date of the final adverse benefit determination to give the claimant the opportunity to respond. In this instance, the evidence was not provided in advance at all. The court therefore concluded that Guardian did not meet its requirements under the regulation. Second, the court flatly rejected Guardian’s attempt to shift the blame for its untimely disclosure onto Mr. Sami, stating, “it was Guardian’s responsibility – not Sami’s – to ensure that the appeal was given a full and fair review within the prescribed period.”  It clarified that it would not “rewrite the regulation’s timing requirements to add an exception for claimants who consent to further delays.” Third, the court held that Guardian’s “technical procedural violation” argument was absurd and wrote that “[b]y definition, this failure deprived Sami of a full and fair review within the meaning of ERISA.” For these reasons, the court agreed with Mr. Sami that Guardian failed to conduct a full and fair review of his claim under ERISA and thus entered judgment in his favor and against Guardian. However, the court stressed that Guardian’s failure resulted in an incomplete administrative record, leaving it unable to rule at this juncture on the merits of Guardian’s decision to deny Mr. Sami’s claim. As a result, the court found that remanding to Guardian was the proper remedy under the circumstances. Finally, the court denied Mr. Sami’s request at this time for attorney’s fees under ERISA Section 502(g)(1), as it concluded that it would be inappropriate to award fees prior to Guardian’s review on remand. 

Discovery

Ninth Circuit

Truong v. KPC Healthcare, Inc., No. 8:23-cv-01384-SB-BFM, 2024 WL 3496865 (C.D. Cal. Jul. 17, 2024) (Magistrate Judge Brianna Fuller Mircheff). Plaintiff Sandra Truong moved to compel defendants to provide documents in response to her requests for production of documents in this employee stock ownership plan case. In Ms. Truong’s first motion, she requested the court order the KPC defendants to supplement their responses to provide documents reflecting internal discussions between committee members in response to Ms. Truong’s letters, as well as documents discussing the filing or anticipated filing of any Department of Labor Form 5500s. In her second motion, Ms. Truong sought production of engagement agreements between the plan and its trustee, defendant Alerus. The court granted both discovery motions, with the caveat that it did not agree with Ms. Truong that defendants had waived the ability to assert attorney-client privilege. However, the court agreed with Ms. Truong that the documents she seeks are relevant and proportional to the needs of the case and thus discoverable. To the extent that defendants wish to assert privilege, the court instructed that they have the burden of proving that privilege applies to each specific document or communication and that they must strictly follow the Ninth Circuit’s rules when producing the privilege log identifying the withheld documents. Finally, the court denied Ms. Truong’s motion for sanctions, holding that it did not find defendants’ conduct sanctionable.

Tenth Circuit

Phillips v. Boilermaker-Blacksmith Nat’l Pension Tr., No. 19-2402-TC-BGS, 2024 WL 3471333 (D. Kan. Jul. 19, 2024) (Magistrate Judge Brooks G. Severson). In this certified class action former boilermaker workers allege that the fiduciaries of a multi-employer defined benefit pension plan, the Boilermaker-Blacksmith Pension Trust, violated ERISA when they terminated early retirement benefits by employing a new manner of interpreting the plan language to implement an unwritten “90-day separation of service rule” which makes retirees ineligible for pension benefits when they engage in any postretirement work for employers who contribute to the plan within 90 days after retiring from their boilermaker jobs. The matter at issue here was plaintiffs’ motion to compel recordings of defendants’ phone calls with class members related to pension benefit administration discussing the 90-day rule. Despite using these recordings thirty times during depositions and attaching a transcript of one of the recordings to their answer, defendants objected to producing them and have stonewalled plaintiffs’ prior attempts at obtaining the calls. In response to plaintiffs’ motion, defendants argued that the phone calls are irrelevant, and that producing them would impose an undue burden that is disproportionate to the needs of the case. It is important to note, however, that each party’s absolutist views regarding the calls – plaintiffs’ insistence that they are entitled to them as part of the administrative record and defendants’ contention that they are wholly irrelevant – stand in stark contrast to a compromise the parties reached over production of the written call logs in late March/early April of this year wherein defendants agreed to produce the call logs for ten class members identified by plaintiffs, a total of 144 out of the 2,963 calls related to all 111 class members. In this decision ruling on plaintiffs’ discovery motion, the assigned magistrate judge decided the proper course of action was to hold the parties to what was already agreed upon and order defendants to produce the remaining 135 recordings requested in the initial sample of 144 (defendants previously produced 9 of the call logs in question). The magistrate ruled that the calls are unquestionably relevant and beneficial to plaintiffs’ action as they “readily bear on a central issue of Plaintiffs’ case…and Defendants, themselves, have used calls relating to Plaintiffs’ benefits administration on numerous prior occasions.” The court nevertheless determined that production of all 2,963 call logs would be unduly burdensome and time consuming, estimating production would take approximately 1,753 hours and cost as much as $740,750. Instead, the court viewed the compromise already reached as just and appropriate and therefore ordered production of the sampling as previously agreed upon. Plaintiffs’ motion to compel was thus granted in part to reflect this decision.

ERISA Preemption

First Circuit

Buiaroski v. State St. Corp., No. 1:23-cv-12241-JEK, 2024 WL 3509884 (D. Mass. Jul. 23, 2024) (Judge Julia E. Kobick). Plaintiff Debapriya Buiaroski was substituted as the plaintiff in this action after her husband, Robert Buiaroski, died. Ms. Buiaroski alleges that her husband’s former employer, State Street Corporation, and its severance plan violated ERISA and state law by failing to pay severance benefits and other forms of promised compensation following Mr. Buiaroski’s resignation from State Street. Defendants moved to dismiss the breach of contract claim on the grounds that it is preempted by ERISA. The court granted the motion to the extent the claim seeks to recover severance benefits under the plan, but concluded that the claim survives to the extent it seeks to recover the non-plan forms of compensation allegedly promised to Mr. Buiaroski. The court did not agree with defendants that the breach of contract claim seeking promised bonuses, compensation, and moving expenses functioned as an “end run around ERISA.” To the contrary, the court held that “such a claim is not an alternative enforcement mechanism to ERISA’s civil enforcement scheme,” but instead “concerns an independent legal duty allegedly created by the separate oral contract.” The court disagreed with defendants that the breach of contract claim will duplicate or supplant an ERISA claim, require interpreting the plan, or relate to the plan or plan administration in any way. Thus, the court permitted the breach of contract claim to proceed insofar as it seeks other forms of compensation not related to the ERISA-governed severance plan.

Fourth Circuit

Western Va. Reg’l Emergency Physicians v. Anthem Health Plans of Va., No. 3:23-cv-781, 2024 WL 3497920 (E.D. Va. Jul. 22, 2024) (Judge M. Hannah Lauck). Plaintiffs are a collection of ER staffing groups who are out-of-network with the Anthem Blue Cross defendants. They initiated their state law action in state court in Virginia. Prior to defendants’ removal of this action, the state court dismissed all but one of plaintiffs’ claims with prejudice. Only their claim for quantum meruit remains. In this count, plaintiffs assert that they are entitled to restitution for providing emergency medical services to patients insured with Anthem Blue Cross. Defendants removed the action, arguing the quantum meruit claim is completely preempted by ERISA. The ER groups moved to remand their action. Their motion to remand was granted in this decision. The court agreed with plaintiffs that their claim was not completely preempted because they lack both statutory and derivative standing to sue under ERISA Section 502(a), notwithstanding the fact that they are assignees of benefits of some ERISA-governed health plans, “because the ER Groups assert no claims based on those assignments. In fact, the ER Groups expressly disclaim them.” And because complete preemption requires plaintiffs to have standing to assert their claims, the court concluded that it need not analyze whether the claims fall within the scope of any provision of ERISA or whether the claim is capable of resolution without interpreting the terms of any ERISA-governed welfare plan. Accordingly, the court granted the motion to remand the action back to state court for further proceedings.

Pension Benefit Claims

Fifth Circuit

Pedersen v. Kinder Morgan Inc., No. 4:21-CV-03590, 2024 WL 3541583 (S.D. Tex. Jul. 25, 2024) (Judge Keith P. Ellison). This class action lawsuit concerns retirement plan changes affecting early and normal retirement pension benefits for the retirees of Kinder Morgan Inc. The plans, now known as the Kinder Morgan Retirement Plans A and B, have changed hands several times over the years through a series of corporate mergers and acquisitions. Various iterations of the plans were created through these series of corporate transactions over the decades. The parties’ dispute in this action concerns four separate features of the Kinder Morgan retirement plans: (1) the formula used to calculate benefit accrual of normal retirement benefits which plaintiffs contend violates ERISA’s prohibition on backloading benefit accruals; (2) an amendment ending the plan’s previous policy of granting early retirement eligibility to employees who turned 55 and completed five years of service, which plaintiffs maintain violates ERISA’s anti-cutback rule; (3) a plan provision that was interpreted to reduce monthly retirement benefits for participants who began working for the company before the age of 35; and (4) the plan’s chosen mortality tables and interest rate which plaintiffs contend violate ERISA’s actuarial equivalence requirement. Four motions were before the court. Plaintiffs moved for summary judgment. Defendants cross-moved for summary judgment and also moved to exclude the testimony of plaintiffs’ expert and for leave to file a sur-reply in opposition to plaintiffs’ summary judgment motion. In its decision the court granted in part and denied in part each party’s motion for summary judgment and denied defendants’ motions to exclude and for leave to file a sur-reply. Plaintiffs bring six causes of action under ERISA; (1) violation of ERISA’s anti-backloading provisions; (2) violation of ERISA’s anti-cutback provision for normal retirement benefits; (3) failure to provide participants with proper notice of plan changes as required by ERISA’s disclosure requirements; (4) impermissible elimination of early retirement benefits in violation of ERISA’s anti-cutback provision; (5) wrongful interpretation of plan provisions to deprive participants access to their accrued early retirement benefits; and (6) violation of ERISA’s actuarial equivalence requirement (count six was pled in the alternative to counts four and five). The court entered judgment in favor of defendants on counts one and two, dismissed count six without prejudice as moot, and entered judgment in favor of plaintiffs on counts three, four, and five. Before addressing the merits of the six claims, the court specified that claims one and five involve issues of plan interpretation subject to abuse of discretion review, while claims two, three, four, and six present questions of statutory interpretation reviewed de novo. Also, the court denied defendants’ motion to exclude the testimony of actuarial expert Michael L. Libman, a pension actuary with over forty years of experience and expertise on pension issues. The court stated it found Mr. Libman’s testimony reliable and helpful. With these preliminary matters addressed, the court transitioned to assessing the merits of the six claims. First, the court found that defendants’ interpretation of the plan provisions permitting the “projected Credited Service” figure to allow for it to exceed a 30-year maximum and concluding there is no limit on credited service projected to the normal retirement was not an abuse of discretion or a violation of ERISA’s anti-backloading rule, Section 204. The court ruled that the plan language was clear and that it could have imposed a 30-year limitation on the relevant provision, but did not. Therefore, the court concluded that the administrator’s determination was correct and that the plan complied with ERISA’s fractional rule. Next, the court disagreed with plaintiffs that defendants retroactively changed the plan’s formula to decrease any already-accrued benefits in violation of ERISA’s anti-cutback provision for normal retirement benefits. The court accordingly granted judgment in favor of defendants on counts one and two. However, the court agreed with plaintiffs that defendants failed to understandably disclose to participants how the fraction used to compute retirement benefits worked in the summary plan descriptions “to communicate to an average participant that employees hired before age 35 would not earn benefits equal to 2% of their average pay, as described in the normal retirement benefit formula.” It held that the SPD’s “lack of clarifying examples and illustrations has the effect of misleading participants.” The court also agreed with plaintiffs that defendants violated ERISA’s anti-cutback provision with regard to early retirement benefits and that the challenged plan amendments “unlawfully eliminated their ability to accumulate service that would make them eligible for early retirement benefits.” The court also interpreted the plan “such that Plaintiffs [are] entitled to unreduced benefits at age 62,” and thus concluded that defendants’ most recent interpretation of the plan holding otherwise amounts to an abuse of discretion. Thus, judgment was granted in favor of plaintiffs on these three causes of action. Finally, because the court granted plaintiffs’ motion for summary judgment as to claims four and five, it declined to address plaintiffs’ alternative arguments advanced under claim six and therefore dismissed this claim as moot. Complex ERISA cases have complex ends.

Ninth Circuit

Metaxas v. Gateway Bank F.S.B., No. 20-cv-01184-EMC, 2024 WL 3488247 (N.D. Cal. Jul. 18, 2024) (Judge Edward M. Chen). This action was filed in 2020, when plaintiff Poppi Metaxas challenged a denial of benefits under a supplemental executive retirement plan, a top-hat plan, following her disability-related retirement in 2013. Ms. Metaxas filed claims under ERISA Sections 502(a)(1)(B) and (a)(3). In August of 2022, the court granted summary judgment in favor of Ms. Metaxas on her claim for benefits and remanded to the plan’s administrative committee for reconsideration. In March 2023, the committee found that Ms. Metaxas was entitled to monthly benefits of $9,252.95 since the date of her retirement on May 1, 2013. Ms. Metaxas appealed this decision. She believes she is entitled to benefits of $19,626.16 per month as well as interest on back benefits. In addition, she maintains that she is entitled to statutory penalties for failure to produce plan documents and relevant claim information upon written request under Section 502(a)(1)(A), as well as equitable relief for breach of the duty of good faith under ERISA Section 502(a)(3). The court reopened the case this March and permitted Ms. Metaxas to file a supplemental complaint asserting these three claims. Defendant Gateway Bank moved to dismiss for failure to state a claim. Its motion was granted without prejudice. First, the court concluded that to state a claim for benefits alleging entitlement to higher benefits and interest Ms. Metaxas will need to include a statutory basis, ERISA provision, or Plan term that entitles her to these benefits. It therefore granted dismissal of the claim in part with leave to amend. Next, the court found that Ms. Metaxas failed to establish that the relief she seeks under Section 502(a)(3) is appropriate equitable relief against a non-fiduciary. In particular, the court stated that the additional monetary relief beyond the plan benefits amounts to an equitable surcharge against the bank to compensate her for financial losses resulting from its breach and “a claim for equitable surcharge lies only against a fiduciary.” Again, this claim was dismissed without prejudice and Ms. Metaxas was instructed “to provide additional cases that support her use of duty of good faith in contract law for top-hat plans under ERISA sufficient to support a claim for equitable relief as sought here.” Finally, the court identified two issues with the claim for failure to produce required documents. One, it agreed with the bank that it is not a proper defendant under section 502(c) because it is not the plan administrator. Two, it determined that Ms. Metaxas failed to allege which documents she requested and the specific ERISA provision that governs disclosure of those documents. Like Ms. Metaxas’ first two claims, this claim too was dismissed with leave to amend to address these deficiencies.

Plan Status

Tenth Circuit

Bessinger v. Cimarex Energy Co., No. 23-cv-00452-SH, 2024 3498489 (N.D. Okla. Jul. 22, 2024) (Magistrate Judge Susan E. Huntsman). Plaintiff Jay Bessinger commenced this lawsuit in state court after he was denied severance benefits he alleges he is due under the Cimarex Energy Co. Change in Control Severance Plan following a corporate merger and a relocation of his job from Tulsa, Oklahoma to Houston, Texas. Cimarex removed the action to federal court and then promptly moved to dismiss Mr. Bessinger’s two state law claims. In its motion Cimarex argued that the severance plan is governed by ERISA and that the state law claims seeking benefits under the plan are preempted by ERISA. Mr. Bessinger disputes that the benefit plan is governed by ERISA and maintains that the plan does not require ongoing administration. However, Mr. Bessinger did not dispute that the plan is a welfare benefit plan established and maintained by his employer that provides benefits to a class of beneficiaries with a source of financing and claims procedures in place. As Mr. Bessinger did not dispute these other elements of the plan, the court focused its discussion on whether the severance plan requires ongoing administration. It concluded that it does for several reasons. First, the court noted that benefits under the severance plan are triggered by at least two events, including first a change in control and second any number of secondary triggering events varying from person to person which could be a reduction in pay, change in position, termination without cause, or, as in Mr. Bessinger’s case, relocation of employment beyond a 50-mile radius. Next, the court highlighted that the severance plan benefits consist of both a lump-sum bonus payment and monthly compensation for up to 24 months, as well as an obligation that Cimarex provide medical, dental, vision, disability, and life insurance benefits. “The monthly payments contemplated by the Severance Plan – along with the provision of medical, dental, vision, disability, and life insurance benefits to participants and their dependents over a potential four-year period – is enough to indicate that an ongoing administrative scheme was necessary.” But there was more. The court also pointed out that the plan has an administrative regime in place, that it grants discretionary authority, and that it requires individual analysis of benefit claims for each employee applying for benefits, meaning the benefits are contingent in nature. Taken altogether, the court was confident that the severance plan had all of the hallmarks of an ongoing administrative scheme and therefore found the plan to be governed by ERISA. Finally, the court agreed with Cimarex that Mr. Bessinger’s state law claims seeking benefits under the severance plan were clearly preempted by ERISA. Accordingly, the court dismissed the state law causes of action. Nevertheless, the court freely granted Mr. Bessinger leave to amend his complaint to plead causes of action under ERISA.

Pleading Issues & Procedure

Third Circuit

Bennett v. Schnader Harrison Segal & Lewis LLP, No. 24-592, 2024 WL 3511618 (E.D. Pa. Jul. 22, 2024) (Judge John Milton Younge). Attorney Jo Bennett brings this action on behalf of herself and a putative class against the fiduciaries of her old law firm’s 401(k) plan alleging numerous violations of ERISA. Broadly, Ms. Bennett alleges that during a period of financial difficulty the law firm failed to remit withheld compensation to the plan, improperly commingled funds meant to be plan contributions with the firm’s general assets, and used these deferred funds for the firm’s own purposes during the dissolution of the firm. Ms. Bennett further alleges that even prior to this period of financial stress and eventual dissolution the law firm allowed the funds to remain commingled for unreasonably long periods of time, which was inconsistent with plan terms, and thereby deprived participants of the opportunity to earn greater interest. Ms. Bennett asserts claims under ERISA Sections 102, 404(a)(1)(A), 404(a)(1)(D), 404(a)(1), 406(b), 405(a), and 502(a)(3). Defendants moved to dismiss the action pursuant to Federal Rules of Civil Procedure 12(b)(6) and 12(b)(1). Their motion was denied in this order. The court concluded that Ms. Bennett’s complaint plausibly states claims for interrelated violations of ERISA and expressed that the legal sufficiency of these claims could only be appropriately “assessed following discovery.” It added that there are disputes of fact between the parties, including whether the contributions in question are employee or employer contributions, what knowledge and involvement each of the relevant parties had, what inconsistencies may exist between the plan, policies and practices the fiduciaries engaged in, and the extent and length of the commingled funds. Given these factual issues present in the case, the court stated that dismissal would be inappropriate. Finally, the court stated that defendants’ arguments related to Ms. Bennett’s standing in her class action claims are premature and clarified they will be addressed later at the class certification stage.

Tenth Circuit

Jamie C. v. Health Care Servs. Corp., No. 24-2229-JAR-GEB, 2024 WL 3511532 (D. Kan. Jul. 23, 2024) (Magistrate Judge Gwynne E. Birzer). This is an ERISA health care benefits dispute involving the denial of claims for the residential treatment of a minor suffering from mental health conditions. Plaintiff Jamie C., the mother of the minor, moved for leave to proceed anonymously. She argued that this case is of a highly sensitive and personal nature, involving the private mental health history of her son, and that proceeding under a pseudonym herself is the only way to protect his privacy and prevent further trauma for them both. The court agreed with plaintiff and granted her motion. In reaching this decision, the court stressed the need to protect the identity of a minor with a history of severe mental health problems including suicide attempts and drug addiction, which are both highly sensitive and personal issues. The court was sensitive to the need to protect the family from further trauma, particularly the child, and also recognized that the insurance company knows the identity of the family and will not be prejudiced in the defense of this case with the plaintiff proceeding under a pseudonym. Accordingly, the court exercised its discretion to allow Jamie C. to proceed anonymously.