Barrett v. O’Reilly Auto., No. 23-2501, __ F. 4th __, 2024 WL 3980839 (8th Cir. Aug. 29, 2024) (Before Circuit Judges Benton, Arnold, and Stras)
Our case of the week cannot be said to tread new ground. According to the Eighth Circuit, this investment fee case is “nothing new.” Like other such cases, it asserts fiduciary breaches based on allegations that the fees paid by the defined contribution pension plan were too high, resulting in diminished retirement savings for participants in the plan. And, as in a number of other cases in the Eighth Circuit, the court concludes that the plaintiffs failed to provide meaningful benchmarks for comparison of fees and therefore affirms the district court’s dismissal of the complaint.
In this case, five plan participants brought a putative class action against the company, its board of directors, and the investment committee for the plan, alleging that these plan fiduciaries caused or allowed the plan to pay too much in both recordkeeping fees for the day-to-day operations of the plan and in expense ratios for particular investments leading “to less money in the participants’ pockets and more for the recordkeeper, T. Rowe Price and the individual fund managers.” The district court granted the fiduciaries’ motion to dismiss, concluding that the plaintiffs failed to “provide meaningful benchmarks suggesting that the costs are too high for a plan of this size.”
The court of appeals agreed, pointing out that “the key” to plausibly pleading a case based on the overpayment of plan fees is a “‘meaningful benchmark’ that provides a ‘sound basis for comparison.’”
By way of example, the court of appeals pointed out that a complaint alleging that a 100,000-member plan paid $7 million in fees would not plausibly state a claim for imprudent, excessive fees if similarly-sized plans charge $120 per participant, but it would state a plausible claim if similarly-sized plans charge only $40 per participant. In the court’s view, a complaint that lacks “meaningful benchmarks…fails to meet basic pleading requirements, at least in the absence of other non-conclusory allegations of mismanagement.”
Turning to the complaint at issue, the court noted that the complaint provided benchmarks, but concluded that “none are particularly meaningful.” To determine the per-participant recordkeeping fee paid to T. Rowe Price, the plaintiffs divided the total fees reported on the plan’s Form 5500 for a number of years to determine that the plan was paying between $44 and $87 per participant annually.
The court took no issue with these numbers, as they reflected basic math. Nevertheless, the court concluded that these numbers did not tell a relevant or meaningful story because the service codes on the 5500s showed that the plan paid T. Rowe Price for services in addition to recordkeeping, such as investment management and trustee services. The comparators on which plaintiffs relied either did not provide any additional services or, in some instances, provided a different bundle of services for their fees. In the court’s view, comparing the costs in these circumstances was akin to comparing the costs of two different grocery baskets containing different items: an essentially meaningless comparison between apples and oranges.
Moving on to the overall fees and the expense ratios, the court similarly reasoned that plaintiffs’ use of aggregate data from the Investment Company Institute showed that these expenses were higher than average but did not create a plausible inference that the plan was mismanaged. The court concluded that the aggregate data simply did not contain sufficient detail to determine whether the data “provided a sound basis for comparison.”
Finally, the court addressed what it referred to as “two loose ends.” The first was the failure-to-monitor claim lodged against the company and its board of directors, which the court concluded was a derivative claim that rose and fell with the fiduciary breach claims. Because the plaintiffs had not stated a fiduciary breach claim, they likewise failed to state a monitoring claim.
The second was the district court’s dismissal with prejudice. Because the plaintiffs never requested an opportunity to amend, nor submitted a proposed amended complaint, the Eighth Circuit concluded that the district court did not abuse its discretion in declining to give the plaintiffs a second chance.
The lesson for plaintiffs in excessive fees cases: get your apples in a row and always ask to replead.
Below is a summary of this past week’s notable ERISA decisions by subject matter and jurisdiction.
Breach of Fiduciary Duty
Third Circuit
Miller v. Brozen, No. 23-2540 (RK) (JTQ), 2024 WL 4024363 (D.N.J. Aug. 30, 2024) (Judge Robert Kirsch). Asbury Carbons, Inc. is a private, family-founded company that is one of America’s largest graphite producers. In 1984, the owners, the Riddle Family, established an Employee Stock Ownership Plan (“ESOP”) for the company’s employees. Nearly thirty years later, the Riddle Family sought to sell the company. This action, brought by two plan participants, arises from the purchase of Asbury Carbons, Inc. by Mill Rock Capital in 2022. According to the complaint, the company was sold for less than half of what it was worth. Plaintiffs sued the company, its ESOP, and the named plan administrator (together the “Asbury defendants”), as well as the plan’s trustee, Neil Brozen, for breaches of fiduciary duties, prohibited transaction, and co-fiduciary liability. “Plaintiffs contend that Defendants acted solely in the furtherance of the Riddle Family’s directive to sell the Company quickly to the detriment of the Plan Participants. In selling the Company for $98 million (of which the Asbury ESOP received $18.4 million), Defendants engaged in a below-market-transaction with Mill Rock in violation of their fiduciary duties owed to Plaintiffs under ERISA.” Defendants moved to dismiss the complaint for lack of Article III standing and for failure to state a claim. Plaintiffs not only opposed the motions to dismiss, but additionally moved to strike exhibits attached to both motions to dismiss. The court began its decision by addressing plaintiffs’ motion to strike, which it granted in part and denied in part. Specifically, the court found that plan documents defendants provided were both authentic and integral to plaintiffs’ complaint and that it would therefore consider them when ruling on the motions to dismiss. Nevertheless, the court declined to consider another exhibit, a fairness opinion prepared by SC&H Capital, as this document was not incorporated by reference into plaintiffs’ complaint and was not integral to their claims. This brought the court to its discussion of standing. Defendants argued for dismissal of the entire complaint for lack of constitutional standing. They claimed that plaintiffs were paid special dividends which, when combined with the stock sale, put the amounts plaintiffs received at above fair market value. The court was not persuaded, particularly at this early juncture, and stated, “additional facts need to be developed through discovery, to determine whether these dividends can be considered as part of the Mill Rock Transaction purchase price.” Moreover, the court broadly held that plaintiffs plausibly alleged that the company sold for less than the lower bounds of its estimated value, and that this was more than enough to establish financial harm and injury in fact. Accordingly, the court denied the motions to dismiss for lack of standing. As a result, the court proceeded to evaluate whether plaintiffs had stated a claim under Rule 12(b)(6). Taking a look at plan documents, the court concluded that only the plan trustee was a fiduciary with the authority over the management and disposition of the ESOP. It therefore found that the remaining defendants were not fiduciaries of the ESOP with respect to the Mill Rock transaction, and therefore dismissed the claims for breach of fiduciary duty of loyalty, duty of prudence, failure to abide by plan documents, and prohibited transaction against the Asbury defendants. However, the court denied the Asbury defendants’ motion to dismiss the derivative co-fiduciary liability claim. Turning to the plan trustee, defendant Brozen, the court determined that the disloyalty and imprudence claims survived as the complaint adequately alleges that the Mill Rock transaction was below fair market value and the trustee’s approval of the transaction caused loss to the participants of the plan. However, the court dismissed the failure to abide by plan documents claim against the trustee as the court found that under the terms of the plan participants were not entitled to vote on the sale and the trustee was not required to send a ballot to plan participants. The prohibited transaction claim also failed to survive the court’s scrutiny. The court expressed that the complaint failed to set forth any facts that the trustee engaged in any self-dealing or acted on behalf of the company rather than on behalf of the plan participants. And with regard to the Asbury defendants, the court stated that because they were not fiduciaries with respect to the challenged conduct, the prohibited transaction claim could not be sustained against them. Finally, the court dismissed the derivative co-fiduciary claim as asserted against the trustee, because there was no underlying fiduciary breach claim that survived against the Asbury defendants. As a result, very little of plaintiffs’ complaint remained. By the end of the decision, the fiduciary breach claims of disloyalty and imprudence remained against the trustee, and the co-fiduciary liability claim remained against the Asbury defendants, the ESOP, and the plan administrator. However, to the extent plaintiffs’ claims were dismissed, dismissal was without prejudice, so plaintiffs may still amend their complaint to attempt to replead their dismissed causes of action.
Sixth Circuit
Igo v. Sun Life Assurance Co. of Can., No. 1:22-cv-91, 2024 WL 4069071 (S.D. Ohio Sep. 5, 2024) (Judge Timothy S. Black). Plaintiff Patrick Igo is the beneficiary of an Accidental Death and Dismemberment policy. He brought this action against Sagewell Healthcare Benefits Trust, Benefit Advisors Services Group (“BASG”), Bon Secours Mercy Health Inc., and Sun Life Assurance Company of Canada seeking judicial review of the amount of benefits he was paid. Specifically, Mr. Igo maintains that he was entitled to five times the amount of the decedent’s base annual salary, instead of two times the base salary. Mr. Igo settled his claims against Sun Life and Bon Secours. He also elected to abandon the state law claims he asserted. Accordingly, only Mr. Igo’s ERISA claims against Sagewell and BASG remained. Those defendants moved for summary judgment. They argued that they were not fiduciaries of the plan and that Mr. Igo’s claims against them therefore cannot be sustained. In this decision the court agreed. It held that the undisputed facts show that neither defendant functioned as a fiduciary, as neither defendant “exercised any authority or control over the Policy particularly with respect to the conduct at issue.” Thus Mr. Igo could not prove that either remaining defendant “had anything to do with determining benefits paid under the Policy.” The court went on to state that Mr. Igo failed to provide any specific facts “tending to show how [defendants] acted as fiduciaries with respect to the conduct at issue. Plaintiff cites to no deposition testimony, affidavit or declaration, or other documentation, other than the Policy itself. Indeed, Plaintiff cited zero evidence when responding to Sagewell and BASG’s undisputed facts.” Accordingly, the court found that there was no genuine dispute of material fact over the fiduciary status of the remaining defendants, and therefore entered judgment in their favor and dismissed what remained of Mr. Igo’s action with prejudice.
Disability Benefit Claims
Fourth Circuit
Krysztofiak v. Boston Mut. Life Ins. Co., No. DKC 19-0879, 2024 WL 4056975 (D. Md. Sep. 5, 2024) (Judge Deborah K. Chasanow). Plaintiff Dana Krysztofiak first submitted a claim for long-term disability benefits back in 2016. Although she suffers from several conditions, Ms. Krysztofiak submitted her disability benefits claim based on disabling fibromyalgia. Her claim was approved by defendant Boston Mutual Life Insurance Company, and she was paid monthly disability benefits for one year. This litigation, beginning in 2019, occurred after Boston Mutual terminated Ms. Krysztofiak’s benefits. Phase one of the parties’ dispute ended with the court awarding Ms. Krysztofiak 24 months of disability benefits under the policy’s “regular occupation” definition of disability, and remanding to Boston Mutual to determine if she was eligible for benefits under the ensuing “any occupation” period of disability. The remand process got messy. The first administrative remand was never decided, prompting phase two of this action when Ms. Krysztofiak moved to reopen her case. The dispute was once again live and before the court. Enter this litigation’s biggest X-factor, a “Special Conditions Limitation Rider” which limits disability benefits for certain conditions, including fibromyalgia, to a maximum of 24 months. At first, Boston Mutual presented the Rider as an amendment to the plan, and argued that it applied retroactively to Ms. Krysztofiak. On September 16, 2022, the court issued a ruling siding with Boston Mutual. It rejected Ms. Krysztofiak’s assertion that the plan should be enforced in accordance with the terms that were in existence when she became disabled in 2016, and held that Boston Mutual had the power to amend the policy because “disability benefits are not contingent upon a singular event, but upon the continued existence of a disability.” The court thus denied Ms. Krysztofiak’s motion for summary judgment and granted Boston Mutual’s motion, in part. At this point, because her counsel had recently died, Ms. Krysztofiak retained new counsel, Your ERISA Watch co-editor Elizabeth Hopkins, who then filed a motion for reconsideration. At this point, Boston Mutual changed course and contended that the Rider had always been part of the policy, even though it was not included in the copy that Boston Mutual had provided to the court. The court considered Boston Mutual’s failure over many years to assert the existence of the Rider as a basis for the denial of benefits (or to provide it to Ms. Krysztofiak) as a procedural error, and determined that remanding once again was the appropriate course of action. Boston Mutual this time issued a decision on remand. It concluded that the Rider applied to Ms. Krysztofiak and precluded her from any further disability benefits under the plain language of the plan. Ms. Krysztofiak challenged this decision, and last October, the parties filed competing motions for summary judgment. Boston Mutual argued that Ms. Krysztofiak did not satisfy her burden of proof that her claim was barred by the Special Conditions Rider. In contrast, Ms. Krysztofiak argued that the court misinterpreted caselaw to permit the record to be supplemented with the Rider at such a late stage in litigation, and that she remains disabled under the policy’s “any occupation” definition of disability and should therefore be awarded benefits. In this decision, the court found in favor of defendant. It held that the policy included the Rider, that the unambiguous Rider applies to Ms. Krysztofiak as she has always maintained that she is disabled due to fibromyalgia, and that “Defendant cannot be required to provide benefits that are plainly excluded from the Policy’s coverage.” Despite Boston Mutual’s repeated procedural violations, including its failure to issue a decision during the first court-ordered remand, the court disagreed with Ms. Krysztofiak that Boston Mutual should be precluded from relying on the Rider and that the case should be decided based on the record from the initial proceedings dating back to 2019. Notably, although the court permitted Boston Mutual to shift its rationales, it applied a different standard to Ms. Krysztofiak by rejecting her argument that she “suffered a great harm because she believed that claiming disability solely based on fibromyalgia would be sufficient.” Although Ms. Krysztofiak asked “this court to rely on fairness and award her long-term benefits,” the court stated that “ERISA does not allow for such an outcome. Although the Rider’s bar on long-term benefits has caused Plaintiff frustration and prolonged litigation, Defendant cannot be required to provide benefits that Plaintiff was never entitled to in the first place.” Accordingly, the court held that even under de novo standard of review, the denial was not unreasonable. Thus, the court granted Boston Mutual’s motion for summary judgment and denied Ms. Krysztofiak’s motion.
Eighth Circuit
Hardy v. Unum Life Ins. Co. of Am., No. Civil 23-563 (JRT/JFD), 2024 WL 4043540 (D. Minn. Sep. 4, 2024) (Judge John R. Tunheim). Plaintiff Mark W. Hardy was a partner at a law firm specializing in medical malpractice litigation. He stopped working after a diagnosis of incurable multiple myeloma. Mr. Hardy began receiving long-term disability benefits after defendant Unum Life Insurance Company of America concluded that the combined effects of the cancer and Mr. Hardy’s treatments and medications rendered him unable to perform the material duties of his very specialized and demanding work, i.e., litigating. In this action, Mr. Hardy alleges that Unum improperly terminated his long-term disability benefits on December 10, 2020. The parties each moved for judgment on the administrative record pursuant to Federal Rule of Civil Procedure 52. Upon de novo review of the administrative record, the court found that Unum wrongfully terminated Mr. Hardy’s benefits. The court found Mr. Hardy’s self-reported symptoms credible, especially when coupled with the opinions of his treating oncologist, those of his family and colleagues, and the medical literature which lists his symptoms as common side effects of both his cancer and its treatments. The court stated that when it factored in Mr. Hardy’s pain, difficulty sitting, cognitive decline, as well as his fatigue, lack of stamina, and gastrointestinal discomfort and irritation, it easily considered Mr. Hardy disabled from performing the many demands of his profession. Moreover, the court noted that every doctor who personally treated or evaluated Mr. Hardy agreed that his condition was disabling, and that Unum itself found Mr. Hardy’s symptoms credible and disabling throughout the period when it paid his claim. The court also concluded that there was no significant evidence of improvement at the time when Unum terminated benefits, which it found cut against Unum’s position. Accordingly, the court agreed that Mr. Hardy’s consistently reported limitations rendered him unable to complete his required material duties of his work “for long hours or consecutive days.” Judgment was thus entered in favor of Mr. Hardy. The decision ended with the court ordering Unum to reinstate benefits, as well as pay back benefits, and holding that Mr. Hardy is entitled to attorneys’ fees and interest, although the court reserved setting these specific amounts until after further briefing.
Ninth Circuit
Burleson v. The Guardian Life Ins. Co. of Am., No. 8:23-cv-01036-JWH-DFM, 2024 WL 4041461 (C.D. Cal. Sep. 3, 2024) (Judge John W. Holcomb). Late July 2021 was a period of upheaval and trauma for plaintiff Douglas Burleson. First, on July 26, 2021, his employment as manager and loan officer for Nations Direct was terminated as a result of company-wide layoffs. Then, one day later, on July 27, 2021, Mr. Burleson was hospitalized with pneumonia, septic shock, empyema, and acute hypoxic respiratory failure. He was intubated and remained on a ventilator in the hospital for three weeks. He remained in a hospital for long-term acute care until September 17, 2021. In the middle of all of this, Mr. Burleson’s wife contacted Guardian Life Insurance and filed a claim for short-term disability benefits on her husband’s behalf. That claim was approved, as was Mr. Burleson’s claim for long-term disability benefits which he applied for after being discharged from the hospital. On June 3, 2022, Guardian concluded that Mr. Burleson’s symptoms associated with his hospitalization and prolonged intubation due to lung infection rendered him disabled. However, it simultaneously found that Mr. Burleson’s diagnoses of COVID-19, rheumatoid arthritis, depression, anxiety, and PTSD were all pre-existing conditions that were not covered under the terms of the Plan. By October 22, 2022, Guardian had terminated Mr. Burleson’s benefits. The denial letter stated that Guardian no longer viewed the medical records as supporting an inability to return to work either from physical impairments or cognitive issues. Mr. Burleson appealed. His appeal prompted Guardian to order an Independent Medical Examination with a neuropsychologist. Mr. Burleson performed poorly throughout the examination. His own treating doctor viewed his poor performance as evidence supporting his cognitive decline. The neuropsychologist who conducted the exam, however, viewed the below-average scores as evidence that Mr. Burleson was not expending full and consistent effort during his testing. Based on this, Guardian upheld its denial. Mr. Burleson responded by filing this action. In this decision, the court issued its findings of fact and conclusions of law under de novo standard of review. It concluded that Mr. Burleson failed to show that he was entitled to continuing benefits under the policy. First, the court agreed with Guardian that Mr. Burleson’s mental health conditions and arthritis were pre-existing conditions excluded from coverage. Moreover, the court agreed with Guardian that beyond October 22, 2022, Mr. Burleson did not suffer from disabling pulmonary symptoms. The decision concentrated instead on Mr. Burleson’s cognitive impairment diagnosis and accompanying symptoms. As a result, the IME featured prominently in the court’s thinking. Unlike self-reported complaints of pain, the court held that a plaintiff’s subjective reports of cognitive impairment “do not establish disability under an ERISA plan.” To the court, there was “virtually no objective medical evidence in the record to indicate that Burleson has a cognitive impairment.” Rather, the court was persuaded by the neuropsychologist’s opinion that Mr. Burleson was attempting to score poorly throughout the IME and openly considered the possibility that he was “exaggerating in an effort to win benefits.” Ultimately, the court concluded that objective testing of the IME outweighed Mr. Burleson’s “unsupported subjective complaints.” Accordingly, the court found that he failed to show by a preponderance of the evidence that he remained disabled and therefore affirmed the termination. Judgment was entered in favor of Guardian and against Mr. Burleson.
ERISA Preemption
Third Circuit
New Jersey Staffing Alliance v. Fais, No. 1:23-cv-2494, 2024 WL 4024090 (D.N.J. Aug. 30, 2024) (Judge Christine P. O’Hearn). On February 6, 2023, the State of New Jersey enacted the Temporary Workers’ Bill of Rights, a new law that requires companies that hire temporary workers and staffing agencies who supply them to pay temporary workers the same rate of pay and benefits, or their cash equivalent, of employees performing the same or substantially similar jobs. New Jersey businesses, industry associations, and staffing agencies wanted to prevent the law from going into effect. Accordingly, they banded together and sued, seeking a temporary restraining order and preliminary injunction to enjoin the Act in its entirety on constitutional grounds. But they were not successful. The district court denied the request for injunctive relief, the Third Circuit affirmed, and the Act went into effect on August 5, 2023. Plaintiffs are now taking “the proverbial second bite at the apple.” One year after first seeking emergency injunctive relief, plaintiffs amended their complaint to add a claim that ERISA preempts the Act. The court in this decision denied plaintiffs’ renewed application for emergency injunctive relief to prevent the continued enforcement of the equal benefits provision of the Act. The court concluded that while plaintiffs may ultimately succeed on the merits, they are not likely to do so. The court held that plaintiffs failed to show they would be irreparably harmed absent the injunction, particularly considering the significant public interest factors, including the harm to workers that would result from granting plaintiffs’ requested relief. The court noted that plaintiffs’ one-year delay indicated that the status quo can continue and belies their claim of irreparable harm. Moreover, the court viewed altering the status quo now that the statute has gone into effect as deeply problematic because it “would undoubtedly cause substantial harm” to temporary workers and their families who “have likely made important life decisions in reliance upon continued receipt of these increased wages and benefits.” The court stated that it was not inclined to cause such disruption, especially in light of its prior denial of injunctive relief before the effective date of the Act. Additionally, the court pointed out that agencies and businesses are already complying with the law and yet, “when the Court inquired at argument as to the staffing agencies’ experience with administration of the Act thus far and requested details to support Plaintiffs’ arguments that it unreasonably burdens and interferes with ERISA, plaintiffs were not able to do so.” Therefore, the court was not convinced that the Act does interfere with ERISA, nor that the Act requires staffing agencies or employers to establish an ERISA-governed benefit plan, or interferes with the administration of any already in existence. Accordingly, the court found on balance that factors did not support a preliminary injunction and thus denied plaintiffs’ motion.
Sanchez v. MetLife, Inc., No. 23-23073 (ES) (MAH), 2024 WL 4024105 (D.N.J. Sep. 3, 2024) (Judge Esther Salas). In this decision the court adopted in full a magistrate’s report and recommendation denying plaintiffs’ motion to remand to state court a putative class action involving two employer-sponsored disability plans and New Jersey’s Temporary Disability Benefits Law. The magistrate concluded, and the court in this decision agreed, that plaintiffs’ state law contract and RICO claims were completely preempted by ERISA regarding allegations involving the ERISA-governed short-term disability plan. Under the two-part test of complete ERISA preemption, the court determined that the beneficiary plaintiffs are able to bring claims under Section 502(a) asserting that their claims challenging premium payments for short-term disability benefits seek a declaration as to their rights under the terms of the ERISA plan. As such, these claims overlap with Section 502(a)’s cause of action and therefore could have been brought under ERISA. Second, the court determined that the only legal duty giving rise to plaintiffs’ claims regarding the allegedly improper charging of premiums to increase short-term disability benefits arises from ERISA. For these reasons, the court agreed with the report and recommendation that the state law causes of action relating to the short-term disability benefit plan are completely preempted. In addition, the court took the magistrate’s advice to exercise supplemental jurisdiction over the claims relating to the non-ERISA-governed temporary disability benefits plan. Plaintiffs’ objections to the report and recommendation were thus overruled and their motion to remand was accordingly denied.
Medical Benefit Claims
Tenth Circuit
S.M. v. United Healthcare Oxford, No. 2:22-cv-00262-DBB-JCB, 2024 WL 4028259 (D. Utah Sep. 3, 2024) (Judge David Barlow). Father and son S.M. and L.M. sued United Healthcare Oxford to challenge its denial of coverage for L.M.’s stays at a residential treatment facility and a partial hospitalization program for the treatment of mental health conditions. Plaintiffs asserted two causes of action: a claim for wrongful denial of benefits and a claim for violation of the Mental Health Parity and Addiction Equity Act. The parties filed cross-motions for summary judgment. Applying de novo standard of review, the court mostly ruled in favor of the family on their benefits claim. It concluded that Untied was required to pay for L.M.’s stay at the residential treatment program after the external review organization (“ERO”) that reviewed the family’s claim overturned United’s denial: “because the ERO provided a favorable decision regarding the [residential treatment facility] claim, payment is required by the Plan.” Moreover, the court expressed that its review of the medical and administrative record “further confirms Plaintiff’s entitlement to payment,” as L.M. displayed concerning aggressive behaviors throughout his treatment at the facility and because his treating providers agreed that his care was medically necessary. Accordingly, the court ordered United to pay the family’s $19,170 claim for the residential treatment center care. With regard to the partial hospitalization program (“PHP”) treatment, the court arrived at a more complicated decision. It split L.M.’s PHP treatment into two phases, and concluded that his treatment was only medically necessary for the first half. The court held that L.M.’s treatment was medically necessary from April 15, 2019 until September 27, 2019, but not thereafter. During the first phase of L.M.’s PHP treatment, the court concluded that “he still exhibited concerning behaviors,” and that he therefore “could not have been effectively or safely treated at a lower level of care.” Nevertheless, the court viewed the continuing treatment past late September as primarily functioning as custodial care, and therefore concluded that the family was not entitled to reimbursement of this latter half of the stay. Finally, the court found in favor of United on plaintiffs’ Mental Health Parity claim. It determined that the family failed to offer evidence that United applied treatment criteria more stringently to mental health treatment than to analogous sub-acute medical or surgical care centers. Thus, it determined that plaintiffs could not prove by a preponderance of the evidence that the Milliman Care Guidelines for psychiatric care were in violation of the Parity Act. For these reasons, the court granted in part and denied in part each party’s cross-motion for summary judgment.
Pension Benefit Claims
Ninth Circuit
Flores v. Vantage Assocs., No. 23-CV-2170 TWR (AHG), 2024 WL 4048866 (S.D. Cal. Sep. 4, 2024) (Judge Todd W. Robinson). Plaintiff Edgar Flores left his employment with Vantage Associates Inc. on October 9, 2018, at which time he submitted a claim electing to diversify 25% of the value of company stock held in his account in Vantage’s Employee Stock Ownership Plan (“ESOP”). The ESOP committee denied Mr. Flores’s diversification claim. He appealed. After the committee failed to respond to his appeal, Mr. Flores filed a lawsuit against the company, the committee, and the ESOP to enforce his rights pursuant to ERISA (“Flores I”). Flores I ended after the parties entered into a settlement agreement and release. Under the terms of the settlement, defendants agreed to pay Mr. Flores $17,750 and further agreed that Mr. Flores was entitled to elect diversification of his ESOP shares “going forward, pursuant to the terms of the ESOP.” In exchange, Mr. Flores released his claims and dismissed Flores I. Defendants completed the diversification claim for the plan year ending on June 30, 2019, as required under the terms of the agreement. However, in this litigation, Mr. Flores contends that defendants breached the agreement by failing to honor further diversification claims he submitted for plan years 2020, 2021, 2022, and 2023. Mr. Flores sued the same parties as in Flores I as well as the ESOP trustee, Miguel Paredes, alleging three causes of action: breach of contract, breach of the implied covenant of good faith and fair dealing, and false promise. Defendants maintain that under the terms of the ESOP, the next potential payment will be for the plan year ending on June 30, 2025, at which point Mr. Flores may elect to diversify another 25% of his ESOP shares, and that for now he is not eligible for any further diversification elections. In ruling on defendants’ motion to dismiss, the court agreed. Before it got there, however, the court granted Mr. Flores’s voluntary motion to withdraw his complaint as to all defendants except the trustee. As this still left one defendant, the court then proceeded to analyze the defendants’ motion to dismiss for failure to state a claim. The court expressed that it viewed this lawsuit as “the result of an unfortunate – if understandable – misinterpretation of the ESOP plan document and [settlement agreement] on Plaintiff’s part.” The court detailed the terms of the ESOP and explained that defendants had correctly interpreted the plan, stating that it was clear “that Defendants have complied with the requirements of the ESOP plan document and Agreement,” and that Mr. Flores “necessarily fails to state a claim for breach of contract, breach of implied covenant of good faith and fair dealing, or false promise.” Accordingly, the court dismissed the action with prejudice.
Pleading Issues & Procedure
Ninth Circuit
Carrillo v. Amy’s Kitchen, Inc., No. 23-cv-01359-RFL, 2024 WL 4049868 (N.D. Cal. Sep. 3, 2024) (Judge Rita F. Lin). Participants of Amy’s Kitchen, Inc.’s defined contribution pension plan sued the plan’s fiduciaries under ERISA Section 502(a)(2) for breaches of their duties. Plaintiffs allege the fiduciaries mismanaged the plan by retaining allegedly costly Transamerica funds and by failing to bring down costs paid to the plan’s financial advisor, Cetera. Defendants moved to dismiss the action for lack of standing. In addition, defendants moved to strike plaintiff’s jury demand. Both motions were granted by the court in this order. The court agreed with the fiduciaries that the participants lacked standing as they were not personally invested in the challenged funds. Moreover, insofar as the complaint attempts to challenge “a ‘plan-wide’ decision-making process that injures all plan participants,” the court stated that the complaint fails to plausibly allege such a basis for standing because it is “entirely devoid” of necessary information like what fees were “allegedly received and why they were excessive.” In addition, the court explained that in its view the complaint appeared to be at odds with the plan’s Form 5500s and that it struggled to see where plaintiffs were getting their fee numbers from. “There are no facts alleged in the FAC that support the approximately $300,000 figure claimed by Plaintiffs or that otherwise support the allegation that Cetera was overpaid.” Therefore, the court granted defendants’ motion to dismiss for lack of standing. However, dismissal was with leave to amend, and plaintiffs have the opportunity to add more to their complaint to address the standing issues the court identified. Finally, the court granted defendants’ motion to strike plaintiff’s jury demand. The court stated that plaintiffs’ claims are equitable in nature and therefore do not entitle them to a jury under the Seventh Amendment.
Tenth Circuit
Carlile v. Reliance Standard Ins. Co., No. 2:17-cv-1049-RJS, 2024 WL 4043347 (D. Utah Sep. 4, 2024) (Judge Robert J. Shelby). Plaintiff David Carlile brought this action against defendant Reliance Standard to challenge its determination that he was not actively employed when he became disabled and was therefore ineligible for disability benefits. Mr. Carlile was successful; the district court entered judgement in his favor and the Tenth Circuit upheld the district court’s decision. Your ERISA Watch’s summary of the Tenth Circuit’s ruling was featured as one of two notable decisions in our February 24, 2021 edition. Although the district court awarded benefits to Mr. Carlile “because Reliance admitted in a denial letter that Plaintiff ‘would have been deemed Totally Disabled’ when plaintiff stopped working,” the court did not rule on the amount of benefits owed and remanded to Reliance to make a determination regarding that issue. Accordingly, the insurance company approved the claim for long-term disability benefits and calculated Mr. Carlile’s benefits, determining that he was entitled to monthly benefits equaling sixty percent of his salary, offset by Social Security, federal and state taxes, and severance pay. Mr. Carlile contests Reliance’s calculations and the length of the disability period and asserts that Reliance erred by including his severance pay and by failing to pay any interest on the accrued benefits. After Reliance maintained its position regarding the calculations and length of the disability, Mr. Carlile filed the present motion asking the court to reopen the case pursuant to Federal Rule of Civil Procedure 60(b). In this brief ruling the court denied Mr. Carlile’s motion, citing Supreme Court precedent clarifying that the exclusive remedy for an alleged improper processing of an ERISA benefits claim is through a civil enforcement action under the statute. “Plaintiff may dispute the amount of coverage, including interest, in an ERISA § 1132 civil enforcement action. Because an ERISA § 1132 civil enforcement action is the only avenue to seek enforcement or adjust benefits, the court cannot grant Plaintiff’s motion.” For this reason, the motion to reopen was denied and Mr. Carlile was directed to file a new civil enforcement action under ERISA should he wish to do so.
Provider Claims
Third Circuit
Mininsohn Chiropractic & Acupuncture Ctr. v. Horizon Blue Cross Blue Shield of N.J., No. 23-01341 (GC) (TJB), 2024 WL 4025957 (D.N.J. Aug. 30, 2024) (Judge Georgette Castner). Plaintiff Mininsohn Chiropractic & Acupuncture, LLC, sued Horizon Blue Cross Blue Shield of New Jersey seeking payment for treatment of a dozen patients covered under healthcare plans issued or administered by Horizon Blue Cross. In its complaint, the provider included claims for benefits under ERISA Section 502(a)(1)(B), fiduciary breach under ERISA Section 502(a)(3), and breach of contract under state law. Horizon moved to dismiss the complaint for seven of the twelve patients. Its justifications for dismissal were manifold, and together they paint a miniature landscape of the complexity of American healthcare. For the first two patients, Horizon Blue Cross argued that they were covered by New Jersey State Health Benefit Plans to which ERISA does not apply and thus the court lacked subject matter jurisdiction over their claims. For the third patient, Horizon pointed to the healthcare plan’s unambiguous anti-assignment provision to support its position that the provider lacks standing to sue as an assignee under ERISA. As for the fourth patient, Horizon Blue Cross demonstrated that the patient was covered by a federal employee plan and thus federal regulations require the provider to first exhaust all available United States Office of Personnel Management appeals and then sue the Office of Personnel Management, not it. Finally, Horizon argued that the last three patients were all covered by plans issued or administered by Empire Blue Cross Blue Shield of New York and not Horizon Blue Cross and Blue Shield of New Jersey. The court was persuaded by all of Horizon’s arguments, except the last. It dismissed the claims relating to the patients with both federal and state government healthcare plans, as well as the patient with the ERISA plan containing the anti-assignment provision. However, the court was not convinced, at least not at this juncture, that Horizon Blue Cross is not involved with Empire Blue Cross. It stated that defendant was not a trustworthy source “whose accuracy cannot be questioned” on the matter, and expressed that Horizon’s statement alone “does not include any uncontroverted information proving Horizon’s separateness from ‘Empire BCBS.’” Thus, the motion to dismiss was granted for the first four patients, and denied with regard to the claims of the last three patients. Accordingly, the provider’s action against the insurer will continue for the claims of eight of the twelve patients.
Retaliation Claims
Second Circuit
Gilani v. Deloitte LLP, No. 23-CV-4755 (JMF), 2024 WL 4042256 (S.D.N.Y. Sep. 4, 2024) (Judge Jesse M. Furman). Pro se plaintiff Asad Gilani sued his former employer, Deloitte Consulting LLP, and related defendants for retaliation, discrimination, hostile work environment, and ERISA-related retaliation under ERISA Section 510. Defendants moved to dismiss the complaint. Even construing the complaint liberally, the court held that it could not infer age-related discrimination, retaliation, or hostile work environment from the allegations in the complaint and therefore dismissed these claims. By contrast, the court held that disability discrimination and retaliation and related aiding-and-abetting claims were plausible and denied the motion to dismiss this aspect of Mr. Gilani’s complaint. Finally, the court dismissed the ERISA Section 510 claim. The court held that the complaint never specified “the nature of the alleged violation,” and it did not allege that Mr. Gilani was terminated in order to prevent his pension benefits from vesting.