Guenther v. BP Retirement Accumulation Plan, No. 4:16-CV-995, 2024 WL 1342746 (S.D. Tex. Mar. 28, 2024) (Judge George C. Hanks, Jr.)

As expected, we received a deluge of cases this week as the Civil Justice Reform Act reporting period drew to a close. With so many interesting decisions it was difficult to choose just one to highlight, but the findings of fact and conclusions of law from this long-running class action in Houston against the North American subsidiary of oil giant British Petroleum stood out. All employers who are considering changing their retirement plans should read this decision for valuable lessons on what not to do.

The plaintiffs are retired employees of BP America, Inc. who used to work for Standard Oil of Ohio (“Sohio”). BP acquired Sohio in 1987 and merged its retirement plan with BP’s plan. The combined BP plan calculated benefits under a “final average pay formula” and had an early retirement option. Under this plan, BP was required to purchase an annuity for retiring employees that paid a specific sum, regardless of interest rate changes.

In 1989, however, BP changed the plan. The new plan replaced the final average pay formula with a “cash balance” benefit formula. Extensive documentary evidence showed that BP initiated the change in order to reduce costs, and that it was aware the new plan would reduce benefits for a significant number of people. Under the new plan, interest rate fluctuations were a risk that was shifted to employees because BP did not have to buy employees annuities. Instead, employees received whatever sum was in their account, which was vulnerable to falling interest rates.

BP organized a promotional campaign to explain the new plan to its employees. Among its letters and brochures were statements that the old plan was “extremely complicated, and difficult to understand,” and the new plan was “much simplified.” BP represented that it – “not you – bears all the risk associated with investments in the Plan,” and “[t]he Plan is designed to provide a retirement benefit that is comparable to – and, in most cases, better than – the benefit you would have received under the prior pension formula.” BP informed employees that their opening account balance would include the early retirement benefit, but did not explain that it had been removed entirely from the new plan.

When BP acquired ARCO and Amoco, transitioning employees from those companies received an “enhancement” upon joining the plan based on BP’s acknowledgment that the plan was potentially less generous than the employees’ old plans. Heritage Sohio employees like the plaintiffs began wondering why they did not receive a similar enhancement, and lodged a complaint. BP referred the complaint to an independent ombudsman, Stanley Sporkin, a retired federal judge and former director of enforcement for the SEC.

Sporkin ultimately recommended that BP pay additional benefits to legacy Sohio employees, stating that “[t]he relevant facts of this matter are not in serious dispute.” BP’s statement that the new plan would provide “a retirement benefit that is comparable to – and in most cases, better than” the old plan was incorrect “because the interest rate environment did not meet the hoped-for expectations… The employees simply were not told that the risks associated with a decline in interest rates would be solely borne by the employees.”

BP did not implement these recommendations. Instead, it sparred with Sporkin’s office over his findings and how to communicate them to employees. Eventually, in September of 2014, BP issued a statement to affected employees in which it expressed regret that “market conditions yielded an unexpected outcome for you,” but did not inform them that Sporkin’s investigation “identified a potential discrepancy between the 1989 promise and actual retirement benefits.” Sporkin responded with his own letter in which he set forth his findings, including the discrepancy.

Plaintiffs filed this action in 2016 and it has been pending ever since. During that time it has been up to the Fifth Circuit and back (on the issue of whether plaintiffs in another case should have been able to intervene in this one). Finally, after a fourteen-day bench trial, the court issued this decision, in which it found in plaintiffs’ favor in all respects.

The court was highly critical of BP, ruling that it failed to comply with ERISA’s requirements that it (a) disclose its plan changes to participants in a manner calculated to be understood by the average plan participant, (b) notify participants of material modifications to the plan, and (c) provide notice of a significant reduction in benefits.

The court further ruled that BP violated its fiduciary duties under ERISA because “1) BP promoted only the positive aspects of the plan change to employees for the purpose of retaining the employees, 2) BP made promises to employees about comparative plan performance without warning employees about circumstances that would cause the promise to fail; 3) BP did not share with employees that BP realized benefits from the conversion other than immediate cost savings; 4) BP did not share with employees that the converted plan introduced risk to the employees they had not previously borne; and 5) BP did not explain it had removed the early retirement benefit, and what that meant to employees as they reached age 55.”

Furthermore, the court found that BP continued to mislead employees even after they became suspicious. BP “concealed all along it had no intent to fulfill its promise by enhancing the class members’ benefits to be as good or better than what the class would have received” under the old plan. BP “encouraged class members to engage in the Ombudsman process and await its outcome,” and implied that it would follow the ombudsman’s recommendation. However, “BP never intended to follow the Ombudsman’s recommendation if the Ombudsman found, as he did, that the employees’ benefits should be enhanced to fulfill BP’s promise.”

The court also addressed BP’s defenses. BP argued that plaintiffs did not exhaust their administrative remedies, but the court ruled that fiduciary breach claims do not require exhaustion, and in any event BP’s rejection of the ombudsman’s report demonstrated that any such exhaustion would have been futile. BP also argued that some of the plaintiffs had released or waived their rights, but the court ruled that there was no evidence that the plaintiffs had intentionally relinquished their right to bring a suit for breach of fiduciary duty, and in any event such releases would violate ERISA’s anti-alienation provision.

The court also rejected BP’s statute of limitations defense, finding that plaintiffs were not fully aware of their rights until the ombudsman’s report in 2014, and thus their 2016 suit was timely. The court further ruled that the claims certified in this case were dissimilar from those certified in another case against BP in the Northern District of Illinois that concluded in 2002, and thus any claims disposed of by that case did not affect this one. Finally, the court ruled that it was appropriate to impose liability on the current plan sponsor (BP Corporation North America), even though the breach was committed by the prior plan sponsor (BP America, Inc.).

In the end, the court decisively ruled that plaintiffs were entitled to equitable relief under 29 U.S.C. § 1132(a)(3) because of BP’s numerous procedural and fiduciary failures. It ordered the parties to “file supplemental briefs regarding the appropriate form of that equitable relief.”

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

Attorneys’ Fees

Ninth Circuit

Protingent, Inc. v. Gustafson-Feis, No. 2:20-CV-1551-KKE, 2024 WL 1282839 (W.D. Wash. Mar. 26, 2024) (Judge Kymberly K. Evanson). Defendant Lisa Gustafson-Feis was injured in a motor vehicle accident in 2016. She had health insurance through an ERISA-governed medical benefit plan sponsored by plaintiff Protingent, Inc., which paid for her treatment. Gustafson-Feis filed a personal injury suit, and Protingent placed a lien on it. The case eventually settled for $150,000, but Gustafson-Feis refused to reimburse Protingent, whose lien totaled $73,326.54. Protingent filed this action against Gustafson-Feis, and as we reported in our January 24, 2024 edition, it was successful on summary judgment. Protingent then filed a motion for attorney’s fees, which was decided in this order. The court ruled that Protingent was entitled to fees under the terms of the plan, which had a fee-shifting provision, and also under ERISA’s remedial scheme, 29 U.S.C. § 1132(g). The court acknowledged that Gustafson-Feis had suffered a “catastrophic financial loss” as a result of her accident, but ruled that the balance of factors weighed in favor of awarding fees to Protingent. This was because “Gustafson-Feis did not act in good faith in pursuing a litigation position not supported by facts or law, an award of fees would deter others from frivolous challenges to subrogation rights under ERISA plans, and Protingent’s position was well-supported under the relevant legal authorities.” The court threw Gustafson-Feis a small bone, however, and declined to award prejudgment interest. In the end, the court approved voluntarily reduced hourly rates of $210, $295, and $345 for Protingent’s attorneys, and awarded Protingent the full amount it requested, $66,676. As a result, a financially strapped Gustafson-Feis now owes Protingent almost $140,000, with post-judgment interest only accumulating.

Breach of Fiduciary Duty

Second Circuit

Bloom v. AllianceBernstein L.P., No. 22-CV-10576 (LJL), 2024 WL 1255708 (S.D.N.Y. Mar. 25, 2024) (Judge Lewis J. Liman). The plaintiffs are participants in defendant AllianceBernstein’s 401(k) profit sharing plan. They brought this putative class action against AllianceBernstein, an investment firm, and related defendants responsible for overseeing the plan, alleging that defendants breached their fiduciary duties and should be compelled to disgorge profits and restore losses to the plan. Defendants filed a motion to dismiss. The court addressed the duty of loyalty first. Plaintiffs contended that defendants breached this duty by including AllianceBernstein’s proprietary investment products in the plan. The court disagreed: “Accepting Plaintiffs’ theory would require the Court to create an inference of disloyalty whenever an employee retirement plan offered proprietary investment options, an approach that has been rejected on numerous occasions.” The court ruled that plaintiffs were required to “allege specific facts” showing that defendants were disloyal, which they had not done. Next, the court addressed the duty of prudence. Plaintiffs contended that “the Court can plausibly infer, based upon the underperformance of certain Plan investment options as compared to alternative, better-performing investments, that the process for selecting and monitoring the menu of investment options available in the Plan was flawed[.]” However, plaintiffs did not cite any “direct evidence regarding the investment evaluation process employed by Defendants” and the court ruled that plaintiffs’ comparators were insufficient because their results differed only slightly from those of the AllianceBernstein plan: “the alleged underperformance is not of sufficient duration or magnitude to create an inference of misconduct.” Next, because plaintiffs could not maintain their duty of loyalty and duty of prudence claims, the court also dismissed their derivative duty to monitor and co-fiduciary duty claims. Finally, the court addressed plaintiffs’ prohibited transaction claim. Defendants contended that to the extent this claim was based on the plan’s selection of AllianceBernstein’s proprietary funds in 2014-15, it was untimely under ERISA’s six-year statute of limitations. The court agreed. The court further ruled that to the extent plaintiffs’ claims were based on the plan’s retention of those funds they failed to state a claim. The court ruled that retaining funds is not a “transaction” for ERISA’s purposes and in any event plaintiffs had not alleged that the plan received unreasonable compensation. Plaintiffs’ final argument, that the fees charged by the proprietary funds constituted a prohibited transaction, also failed. The only fees charged were insurance fees, which went to insurance providers and not to any fiduciaries. The court thus granted defendants’ motion in its entirety and dismissed plaintiffs’ complaint, albeit without prejudice.

Eleventh Circuit

Su v. CSX Transp., No. 3:22-cv-849-MMH-JBT, 2024 WL 1298825 (M.D. Fla. Mar. 27, 2024) (Judge Marcia Morales Howard). Acting Secretary of Labor Julie A. Su brings this action against the fiduciaries of the CSX Corporation Master Pension Trust for prohibited transactions and breaches of their duties. As the court summarized, “Plaintiff alleges that (1) CSX has absolute authority to appoint committee members, (2) those committee members did not review the reasonableness of CSX’s fees despite their obligation to do so, and instead of appointing new committee members, (3) CSX ‘streamlined its fees calculations to the detriment of the Plans,’” meaning “CSX did not simply charge for its services or appoint members of the committees, but ‘caused the Master Pension Trust to pay itself Service Fees without any oversight.’” In this decision, the court accepted these allegations as true, denied defendants’ motion to dismiss the second amended complaint, overruled defendants’ objections to the October 11, 2023 Report and Recommendation of the Magistrate, and adopted in full the Magistrate’s report as the opinion of the court. And although the court noted that plaintiff’s pleading lacked certain precise details of all of the relevant facts, it nevertheless stated that defendants clearly did not have difficulty understanding the allegations. To the contrary, “the arguments presented by Defendants in the Motion show they have had no difficulty identifying the claims Plaintiff seeks to pursue or the factual basis of those claims.” As a result, the Secretary’s action survived defendants’ pleading challenge and will thus continue forward.

Class Actions

Fourth Circuit

Paul v. Blue Cross Blue Shield of N.C., No. 5:23-CV-354-FL, 2024 WL 1286208 (E.D.N.C. Mar. 26, 2024) (Judge Louise W. Flanagan). Plaintiffs Doug Paul and Alexander Beko, on behalf of themselves and a putative class of similarly situated individuals, are challenging defendant Blue Cross Blue Shield of North Carolina’s practice of denying claims for proton beam radiation therapy for the treatment of prostate cancer. According to the complaint, Blue Cross’ “corporate medical policies” categorically consider proton beam radiation therapy investigational for the treatment of prostate cancer. In their lawsuit plaintiffs allege causes of action under ERISA under Sections 502(a)(1)(B), (a)(3), and (g), as well as claims under North Carolina state law. Defendant moved for dismissal and to strike pursuant to Federal Rules of Civil Procedure 12(b)(1), 12(b)(6), 12(b)(7), and 12(f). Blue Cross sought dismissal of Mr. Beko’s claims “for failure to join the state plan, an assertedly necessary and indispensable party under Federal Rule of Civil Procedure 19, and for failure to state a claim upon which relief may be granted with respect to his UDTPA (North Carolina Unfair and Deceptive Trade Practices Act) claim.” Blue Cross also sought to dismiss Mr. Paul’s ERISA Section 502(a)(3) claims as duplicative of his claims asserted under Section 502(a)(1)(B). Additionally, Blue Cross moved to strike the class claims, arguing that class-wide resolution of the individual medical claims could not be maintained. Finally, Blue Cross sought, in the alterative, to dismiss “any putative class members whose claims are time-barred and who were encompassed within the proposed class” in a related action. Blue Cross’ motion was denied in its entirety in this decision. First, the court agreed that the state plan was a necessary party, but held that “joinder is feasible where North Carolina’s waiver of sovereign immunity with respect to contracts may allow it to participate in this litigation.” Next, the court analyzed the UDTPA claim and concluded that Mr. Beko “stated facts sufficient to draw plausible inference that defendant’s actions were the proximate cause of his injury.” Getting to ERISA matters, the court cited Fourth Circuit precedent holding that “alternative pleading [is] permissible in the ERISA context.” As a result, the court declined to dismiss Mr. Paul’s Section 502(a)(3) claims as duplicative of the relief available under 502(a)(1)(B). Finally, the court disagreed with Blue Cross that it was clear from the face of the complaint that plaintiffs could not meet the requirements of class certification under Rule 23 and therefore denied its motion to strike the class claims. With regard to the commonality requirement of Rule 23(a), the court wrote, “Plaintiffs allege in essence that defendant ignored the nuances of each member’s medical situation, applying instead a standardized coverage policy.” Such behavior, according to the court, may be appropriately resolved on a class-wide basis, and accepting the allegations as true for the purposes of this decision, the court held that they establish commonality between the putative class members. Nor was it clear to the court that there is a conflict of interest between the named plaintiffs and potential class members on the face of the complaint. Finally, defendant’s assertion that certification of a class would be impossible under Rules 23(b)(1) or (b)(2) was also rejected by the court. The court stated that “no portions of the complaint show plaintiffs will fail to meet these requirements and (Blue Cross’s) predictions regarding the risk of inconsistent adjudication of the consistency of its own conduct are premature in the absence of class certification discovery.” Thus, Blue Cross’s motions to dismiss and strike were denied in their entirety and plaintiffs’ action will proceed. (Plaintiffs are represented by Kantor & Kantor partner Tim Rozelle and Elizabeth K. Green of Green Health Law.)

Sixth Circuit

Sweeney v. Nationwide Mut. Ins. Co., No. 2:20-cv-1569, 2024 WL 1340262 (S.D. Ohio Mar. 28, 2024) (Judge Sarah D. Morrison). A putative class of former employees of Nationwide Mutual Insurance Company and participants in its 401(k) savings plan moved for certification in their collective ERISA action brought against Nationwide and the other plan fiduciaries. In their action, named plaintiffs Ryan Sweeney and Bryan Marshall allege that The Guaranteed Fund, the challenged plan investment, “pits Nationwide’s economic interests against Participants’ – in violation of ERISA’s provisions on fiduciary duties, prohibited transactions, and private inurement, and to Participants’ financial detriment.” Plaintiffs challenge the annuity contract supporting The Guaranteed Fund, as well as the crediting rate established and determined by Nationwide. Plaintiffs sought to certify a class of all “participants and beneficiaries in the Nationwide Savings Plan who were invested in the Guaranteed Fund at any time from March 26, 2014 through the date of final judgment in this action, excluding the individual Defendants.” In this order the court granted plaintiffs’ motion and certified their class. Applying the criteria of Federal Rule of Civil Procedure 23(a), the court found that: (1) the proposed class of more than 50,000 current and former plan participants was “sufficiently numerous to make joinder impracticable”; (2) common issues regarding defendants’ behavior unites the class members; (3) the named plaintiffs were typical of the others in the class and their “claims arise from the same events, course of conduct, and legal theories as the class claims”; and (4) the named plaintiffs were adequate representatives seeking appropriate class-wide relief and recovery on behalf of the plan. The court found “unavailing” defendants’ arguments regarding the named plaintiffs releasing their claims, lacking knowledge of the claims, having conflicting interests with the putative class, and failing to exhaust administrative remedies. The court found that the named plaintiffs had a stake in the outcome of the case, they understand the claims adequately for laypeople, and there is no insurmountable conflict between them and the other plan participants. With regard to exhaustion, the court stated that Sixth Circuit precedent in Hitchcock v. Cumberland Univ. 403(b) DC Plan, 851 F.3d 552 (6th Cir. 2017), establishes that participants and beneficiaries in ERISA actions “do not need to exhaust internal remedial procedures before proceeding to federal court when they assert statutory violations of ERISA.” Under its Rule 23(b)(1)(B) analysis, the court concluded that “because Named Plaintiffs seek recovery on behalf of the Plan, a decision in this case would practically affect the interests of others whether or not a class is certified.” In fact, were a class not to be certified, the court stated that there would be a risk that future plaintiffs would be left “without relief and without representation.” It therefore concluded that certification under Rule 23(b)(1)(B) was entirely appropriate for this kind of ERISA action under the circumstances presented in this lawsuit. Thus, the court held that the proposed class met the requirements of Rule 23 and certified the proposed group of participants.

Disability Benefit Claims

Second Circuit

Fichtl v. First Unum Life Ins. Co., No. 1:22-cv-06932 (JLR), 2024 WL 1300268 (S.D.N.Y. Mar. 26, 2024) (Judge Jenifer L. Rochon). Plaintiff Richard Fichtl was a longtime employee of New York Presbyterian Hospital and is a participant in its ERISA-governed benefit plans, including its long-term disability and life insurance plans, the subjects of this litigation. In December 2017, Mr. Fichtl filed a claim for short-term disability benefits in anticipation of an upcoming surgical procedure, a laparoscopic colectomy, to treat a colon disease called sigmoid diverticulitis. Following the surgery, Mr. Fichtl’s health only deteriorated, both physically and cognitively. He subsequently applied for long-term disability benefits. In the months and years that followed his procedure Mr. Fichtl would complain of depression, memory, and concentration issues, stomach and abdominal pain, post-operative incision issues, low energy levels, kidney disease, and diabetes. Defendant First Unum Life Insurance Company approved Mr. Fichtl’s claim for long-term disability benefits, but only for 24 months pursuant to the plan’s limitation for benefits caused from debilitating depression. However, even before the 24 months were up, on March 3, 2020, Unum concluded that Mr. Fichtl was no longer totally disabled and terminated his long-term disability and waiver of life insurance premium benefits. Ruling on the parties’ cross-motions for judgment on the administrative record under de novo review, the court granted Mr. Fichtl’s motion and denied Unum’s motion. The court agreed with Mr. Fichtl that his ability to “engage in normal life activities” on an occasional basis doesn’t equate to the ability to work full time in his demanding role as the hospital’s Director of Pharmacy. As the court put it succinctly, “[t]he core issue in this case is whether Plaintiff is ‘limited from performing the material and substantial duties of [his] regular occupation due to [his] sickness or injury.” It answered that question in the affirmative. “In deciding this issue, the Court finds that the medical opinions of Plaintiff’s treating physicians…are more probative of Plaintiff’s health and capabilities than the medical opinions of Defendant’s in-house file reviewers,” and stated, “Defendant offers no sound reason for the Court to doubt the capabilities, credibility, or integrity of any of Plaintiff’s treating physicians.” Moreover, the court determined that Mr. Fichtl’s physicians’ areas of expertise were more relevant to his ailments than Unum’s family medicine doctors who reviewed the files. Altogether, the court was convinced that Mr. Fichtl was disabled from the combined and cumulative symptoms of his diseases and unable to perform the duties of his occupation for at the least the initial 24 months. Accordingly, it decided that the denials of the disability and life insurance waiver benefits were wrong and granted summary judgment in favor of Mr. Fichtl. The court reinstated both his long-term disability benefits and premium waiver benefits for the date between the termination of coverage on March 3, 2020 and the conclusion of the first 24 months of payments. However, for benefits under both plans beyond the 24-month initial period, the court remanded to Unum to decide anew.

Eighth Circuit

Garwood v. Sun Life Assurance Co. of Can., No. 22-cv-1918 (MJD/DLM), 2024 WL 1285731 (D. Minn. Mar. 26, 2024) (Judge Michael J. Davis). Plaintiff Brandon Garwood’s claim for long-term disability benefits was denied by defendant Sun Life Assurance Company of Canada pursuant to the plan’s exclusion clause which states that benefits are not payable under the policy when “caused by, contributed to in any way, or resulting from…your committing or attempting to commit an assault, felony, or criminal act.” Sun Life based its denial on the events of April 23, 2020, the date of Mr. Garwood’s gunshot wounds and the cause of his lower extremity paraplegia. On that date, in Keller, Texas, Mr. Garwood was shot after an escalating altercation found him behind the driver’s seat of his truck, ramming into an occupied motorcycle and toward a group of people in a driveway, conduct that is illegal, even in Texas. Mr. Garwood was later charged with aggravated assault with a deadly weapon, a second-degree felony. The charge was ultimately dropped “based on prosecutorial discretion.” But thanks to his actions and these charges, Sun Life determined that Mr. Garwood was ineligible for disability benefits under the plan. In this decision ruling on the parties’ cross-motions for summary judgment, the court agreed. As an initial matter, the court granted Sun Life’s motion in limine to exclude extra-record evidence, which consisted of Mr. Garwood’s Social Security Administration disability award and evidence that he was executing a “three-point turn” when he hit the motorcycle and drove into the driveway. The court found that the Social Security decision was irrelevant to the application of the crime exclusion. With regard to the evidence of the three-point turn, the court held that Mr. Garwood had failed to establish good cause for why he didn’t submit this evidence to Sun Life during the administrative review of his claim. Turning to its de novo review of the summary judgment motions, the court concluded that the plan’s exclusion applies, as the record showed that Mr. Garwood “acted intentionally and knowingly with respect to driving into the driveway toward a group of people before being stopped by running into a motorcycle.” Moreover, the court concluded that the fact the charge was eventually dropped was “immaterial to the determination of whether the exclusion applies.” Accordingly, the court found that the record established that Mr. Garwood attempted to commit or committed an assault and that the benefits were therefore not payable under the policy terms. As a result, summary judgment was granted in favor of Sun Life and its denial was upheld.

Ninth Circuit

E.L. v. Hartford Life & Accident Ins. Co., No. 22-cv-00050-PCP, 2024 WL 1336463 (N.D. Cal. Mar. 27, 2024) (Judge P. Casey Pitts). Plaintiff E.L. and defendant Hartford Life and Accident Insurance Company filed cross-motions for judgment on the administrative record under Federal Rule of Civil Procedure 52 in this dispute over Hartford’s denial of E.L.’s claim for long-term disability benefits. In this order the court granted E.L.’s motion and found that she was disabled from performing the essential duties of her own occupation under de novo review of the extensive administrative record. The court wrote that a “complete and holistic review of E.L.’s medical records paints a picture of a woman with a lengthy and complex medical history.” That complex medical history included a brain tumor located on the optic nerve, diabetes, cervical and spinal conditions, a buildup of fat deposits and excess growth from a condition known as acromegaly, hormone imbalances, and an array of mental health conditions including major depression and anxiety. “Based on these records and her ongoing and worsening symptoms, E.L. has established by a preponderance of the evidence that she has been continuously disabled under the Plan.” The combination of these symptoms prevented E.L. from performing the “non-seated” and “non-reduced work schedule” of her profession as an equipment manufacturing technician at Boston Scientific Corporation. The court found that Hartford’s failures and errors in handling E.L.’s claim “were substantive, not procedural,” and it determined that she was therefore not denied a full and fair review (which presumably would have necessitated or allowed a remand). Accordingly, E.L. was granted judgment in her favor on her Section 502(a)(1)(B) wrongful denial of benefits claim, but not on her Section 502(a)(3) claim. The decision concluded with the court ordering E.L. to provide a proposed form of judgment.

Vongkoth v. PCC Structurals Inc., No. 3:22-cv-00681-AN, 2024 WL 1286537 (D. Or. Mar. 26, 2024) (Judge Adrienne Nelson). In early November 2020, plaintiff Vilasack Vongkoth was admitted to a hospital and diagnosed with a 5.5cm liver abscess surrounded by fluid. This mass and the resulting infection required a percutaneous hepatic drain and a course of antibiotics. After his discharge from the hospital, Mr. Vongkoth continued to be under the care of a team of doctors and complained of heart pain, rapid heart rate, fatigue, chest pain, and a cough. Follow-up testing on December 4, 2020 showed that the abscess was successfully cured and that there was no long fluid or hypodensity. Nevertheless, doctors noted the underlying cause of the abscess “was unclear and required additional investigation.” This date is important, because on December 4, 2020, Mr. Vongkoth’s short-term disability benefits were terminated under the ERISA-governed disability plan of his employer, defendant PCC Structurals Inc. Mr. Vongkoth administratively appealed the denial. His doctors were all in agreement that he could not work. Then, in the midst of everything, on March 9, 2021, Mr. Vongkoth got into a car accident, only making his health worse. Results from a cardiac event monitor at the time showed labile tachycardia with a resting heart rate of 119 beats per minute and a pulse of 147.7 bpm from “light activity,” as well as skipped and fluttering heartbeats. Given these results, Mr. Vongkoth’s treating physicians once again unanimously stated they did not believe he could return to his work as a grinder which involves heavy lifting and constant motion. Nevertheless, Cigna upheld its prior decision, concluding “the medical information on file does not support [plaintiff’s] functional impairment.” Its reviewing doctor noted that the liver abscess had been adequately drained and that Mr. Vongkoth’s complaints, and his treating doctor’s findings following the car accident, “did not support any work limitations” and were based on subjective self-reported symptoms. After Cigna issued its final decision, Mr. Vongkoth challenged it in this action under ERISA Section 502(a)(1)(B). PCC Structurals moved for summary judgment under abuse of discretion review. The court denied the motion in this decision finding that there were “serious questions” and “disputed issues of material fact regarding whether [defendant’s] conclusion was implausible, illogical, and unreasonable, raising a genuine issue of material fact as to whether the administrators abused their discretion in denying plaintiff benefits beyond December 4, 2020.” The court noted that the only doctor who found that Mr. Vongkoth did not have physical limitations was Cigna’s, a doctor who never personally treated or examined Mr. Vongkoth. Moreover, the record, including the results from the cardiac event monitor, contradicted the reviewing physician’s assertion that Mr. Vongkoth’s self-reported symptoms were not supported by objective medical testing. And, as the court pointed out, many of Mr. Vongkoth’s symptoms, such as his severe fatigue, are inherently subjective, and “[n]o diagnostic testing exists” for these types of symptoms, making the opinions and credibility assessments of treating physicians all the more central. Therefore, the court questioned Cigna’s doctor’s decision to not personally examine Mr. Vongkoth and wrote that it raised “questions about the thoroughness and accuracy of the benefits determination.” Thus, even under deferential review, the court denied defendant PCC Structurals’ motion for summary judgment.

Tenth Circuit

Erickson v. Sun Life & Health Ins. Co., No. 2:22-CV-00258-JNP-JCB, 2024 WL 1307167 (D. Utah Mar. 27, 2024) (Judge Jill N. Parrish). Plaintiff Kristoffer Erickson filed this action to challenge defendant Sun Life Insurance of Canada’s denial of his claim for short-term disability benefits. Mr. Erickson became ill in March 2020 with an upper respiratory infection which may have been the result of COVID-19. Mr. Erickson’s treating physician described his symptoms as “mild” and wrote that he was “cleared to return to work without restrictions.” However, this same doctor continued to care for Mr. Erickson and subsequently changed his opinion of Mr. Erickson’s condition and his ability to work. But the damage had already been done. Relying on the doctor’s initial notes and assessment prepared during the normal course of care, Sun Life denied the claim for disability benefits. In this decision, the court ruled on Sun Life’s motion for summary judgment. The court granted Sun Life’s motion in this order and affirmed the denial under deferential review. It agreed with the insurer that it had appropriately determined Mr. Erickson was not totally disabled based on contemporaneous medical information. The court stated this type of medical information is much more persuasive and credible than any later medical records “prepared with the purpose of supporting a patient’s long-term disability application.” Further, the court found no procedural errors with the denial. It “determine[d] that the methodology that Sun Life followed in denying Mr. Erickson’s benefits claim was not an abuse of discretion.” Finally, the court agreed with Sun Life that Mr. Erickson did not submit sufficient information to prove his entitlement to benefits, which is his burden under ERISA, and therefore concluded that the denial was supported by substantial evidence. For these reasons, judgment was entered in favor of Sun Life.

Life Insurance & AD&D Benefit Claims

Fourth Circuit

Bellon v. The PPG Emp. Life & Other Benefits Plan, No. 5:18-CV-114 (GROH), 2024 WL 1303911 (N.D.W. Va. Mar. 27, 2024) (Judge Gina M. Groh). In Your ERISA Watch’s July 20, 2022 newsletter we featured as one of our two notable decisions the Fourth Circuit’s decision affirming in part, and reversing and remanding in part, the district court’s summary judgment ruling in this retiree life insurance class action. At issue was eleventh-hour discovery of critical documents which revealed that in 1969 the PPG Industries Benefits Plan “took the extraordinary step of removing the then-existing reservation of rights clause…to allay employee concern about the security of promised benefits.” This rather remarkable discovery resurrected plaintiffs’ case. The court of appeals concluded that that given this uncovered information there was a genuine issue of material fact about whether the life insurance benefits had vested, and it therefore reversed defendants’ summary judgment win and remanded to the district court with the mandate to reconsider the vesting issue anew. Before the court here were several motions: (1) defendants’ objections to Magistrate Judge Robert W. Trumble’s class certification report and recommendation; (2) defendants’ motion for summary judgment; (3) plaintiffs’ motion for summary judgment; and (4) plaintiffs’ motion for default judgment against defendants for spoliation of “the critical box” of documents. The decision began by overruling defendants’ objections to Judge Trumble’s class certification analysis. The court described defendants’ objections as both “silly” and “border[ing] on being frivolous.” And it concluded that defendants’ positions were directly in conflict with the Fourth Circuit’s reversal and the mandate rule. Accordingly, “the Magistrate Judge’s thorough and thoughtful explanation [was] explicitly incorporated” by the court and the class certification analysis provided by Magistrate Judge Trumble was adopted. In a similar vein, the court rejected defendants’ summary judgment motion. Much like defendants’ objections to class certification, the court found that defendants’ arguments in favor of summary judgment ignored the Fourth Circuit’s ruling. The court ruled that agreeing with defendants’ basic position that no evidence exists which makes vesting possible would require it to completely “ignore the Fourth Circuit’s decision.” Instead, the court agreed with plaintiffs that “PPG is rehashing arguments the Fourth Circuit expressly or implicitly rejected,” and “making new arguments it never presented to the Fourth Circuit and… therefore waived” in violation of the mandate rule. Accordingly, the court found that the issue of whether the life insurance vested remains a genuine issue of material fact appropriately left for resolution at trial. Applying this same logic, the court likewise denied plaintiffs’ motion for summary judgment, albeit with less strong language. “The problem with Plaintiffs’ argument – like the Defendants’ – is that the Fourth Circuit had nearly all the evidence and arguments before it when it held that ‘vesting is a disputed issued of material fact.’” The decision then turned to the spoliation issue. Unsurprisingly, the court did not grant plaintiffs’ motion for default judgment. “Legal precedent is clear that default judgment should be reserved for cases that present the most egregious instances of spoliation – whether that is by significant bad faith, extreme prejudice to the aggrieved party, or some combination of the two.” And while the court was not comfortable stating that this was such an instance, it did come close. “There is no question that PPG’s intentional conduct caused the destruction of potentially relevant evidence. Although proof of bad faith is lacking, the circumstances are suspicious. Indeed, the Plaintiffs paint a compelling picture PPG acted in bad faith.” Rather than default judgment, the court concluded that an adverse inference was appropriate under the circumstances given PPG’s “willful” conduct which “resulted in prejudice to the Plaintiffs.” The parties were directed to meet and confer “to discuss a mutually agreeable adverse inference for the Court’s consideration.” Finally, the decision ended with the court ordering the parties to attend mediation before a magistrate judge. Perhaps, after more than six years, this case may be drawing near its end.

Seventh Circuit

Butch v. Alcoa U.S. Corp., No. 3:19-cv-00258-RLY-CSW, 2024 WL 1283531 (S.D. Ind. Mar. 25, 2024) (Judge Richard L. Young). This is the first of two decisions issued by Judge Young last week in related but separately filed class actions asserting that Alcoa retirees had vested benefits under collectively bargained ERISA welfare benefit plans. This first case concerns retiree life insurance benefits, which Alcoa unilaterally terminated on the last day of 2019. The retirees sued, arguing that Alcoa violated the terms of the governing collective bargaining agreements (CBAs) and therefore violated the Labor Management Relations Act (LMRA) and ERISA in terminating their life insurance benefits. Previously, the court certified two classes of retirees: (1) a main class consisting of those who received life insurance benefits paid for by Alcoa; and (2) a subclass consisting of those who participated in a voluntary life insurance program under which the retirees had opted to purchase additional life insurance. In this decision, the court addressed the parties’ cross-motions for summary judgment. On the merits of the ERISA and LMRA claims asserted by the main class, the court agreed with plaintiffs that the CBAs unambiguously promised life insurance benefits to eligible retirees consisting of employees who retired after June 1, 1993 under an Alcoa retirement plan and were covered by a CBA between Alcoa and the unions. Because Alcoa “terminated the company-paid life insurance plan despite its contractual promise to the contrary,” the court granted summary judgment in favor of the main class of retirees. Similarly, with respect to the sub-class of retirees, the court found that they were also entitled to summary judgment based on the plain language of the governing CBA, which plainly and unambiguously guaranteed them a right to the voluntary life insurance program for the rest of their lives and contained no language reserving the company’s right to terminate benefits. Despite ruling in favor of the retirees on their claims to vested benefits under the governing plan language, however, the court then noted that “retirees from both classes have a problem: many signed and cashed checks agreeing to waive any claims for life insurance.” In fact, 88% of the two classes did so after receiving allegedly misleading communications from Alcoa, both before and after the suit was filed. Alcoa asserted waiver as an affirmative defense with respect to the thousands of retirees who cashed their checks, and the retirees countered that the waivers were invalid as a legal matter under both the LMRA and ERISA, and as a factual matter because they were not knowing and voluntary. The court held that the plaintiffs were wrong on the first argument because nothing in the LMRA or ERISA prevented the retirees from waiving their claims as a general matter even if some of the communications about this were misleading. With respect to the retirees’ argument that the waivers were not knowing and voluntary, the court concluded that this “presents individualized factual issues in the current posture and consequently cannot be resolved on a class-wide basis.”  On this basis, although the court refused to grant either side summary judgment on the affirmative defense of waiver, the court held that “[a]ny retiree who signed and cashed the check waiving their right to life insurance – whether members of the main or sub-class – will be decertified from this class action.” Therefore, it appears that, despite decisively winning the almost final battle, the retirees lost much of the war or at least many of their comrades.  

Medical Benefit Claims

Second Circuit

Stewart v. Cigna Health & Life Ins. Co., No. 3:22-CV-769 (OAW), 2024 WL 1344796 (D. Conn. Mar. 30, 2024) (Judge Omar A. Williams). The plaintiffs allege in this putative class action against Cigna Health & Life Insurance Company that Cigna violated ERISA in the way it handled out-of-network health claims. Specifically, plaintiffs contend that Cigna had a contract with Multiplan, LLC, a third party that contracts directly with providers. The idea behind this contract was to secure a lower rate for Cigna and its insureds for certain out-of-network services provided by physicians contracted with Multiplan. However, when insureds submitted claims for services that were covered by Cigna’s agreement with Multiplan, Cigna refused to pay the Multiplan rates, thereby saddling the insureds with large bills. Several individual plaintiffs who were affected by Cigna’s decisions convinced the American Medical Association, the Medical Society of New Jersey, and the Washington State Medical Association to join them as plaintiffs. The individual plaintiffs brought three claims: one for denial of benefits and the other two for equitable relief unavailable under their first claim. The association plaintiffs asserted four claims under state law: negligent misrepresentation, tortious interference with the patient-physician contract and/or relationship, promissory estoppel, and violation of the Washington Consumer Protection Act. Cigna moved to dismiss. Addressing the individual claims first, the court agreed with plaintiffs that it could not consider the Multiplan agreements in deciding the motion to dismiss because they were extrinsic to the complaint; the individuals’ allegations only focused on Cigna’s obligations to plaintiffs, not its obligations to Multiplan. The court further found that the plan terms supported plaintiffs’ allegations, in that “participating” and “in-network” were synonymous, and thus plaintiffs plausibly relied on these terms in thinking that Multiplan providers would be paid at a certain rate. As for the breach of fiduciary duty claims, the judge ruled that these were not “circuitous” or duplicative of plaintiffs’ claims for benefits. Instead, plaintiffs “have alleged separate and specific facts which could be relevant to the denial-of-benefit claim… but which also could form the basis for an independent claim,” which was that Cigna engaged in a “underlying scheme” in which it enriched itself by refusing to reimburse providers at the Multiplan rates. The court was skeptical that plaintiffs were entitled to equitable relief, because any restitution or disgorgement would likely go to the plans and not the individuals, but the court refused to make that ruling “at this early stage of litigation.” The court then turned to the association claims, which it dismissed for lack of standing. The associations claimed that they were injured by “(1) the uncertainty they will face when treating patients such as Individual Plaintiffs, and (2) the damage that this uncertainty will inflict upon the relationship between Multiplan Providers and patients with coverage like Individual Plaintiffs.’” The court rejected this argument as “unpersuasive” because such “uncertainty” was insufficient to establish standing. Indeed, “this uncertainty does not appear any greater than that inherent in the modern healthcare system, in which providers and patients alike often are unclear as to what the out-of-pocket cost of a particular procedure might be until after a claim is submitted, which claim may be denied by insurers for myriad reasons.” Furthermore, the associations had not shown that Cigna’s actions deterred anyone from seeking healthcare with their members. The court also criticized the associations’ claims for “sound[ing] in pseudo-contract” when their members in fact had contracts with Multiplan which were reviewable and could be enforced. Thus, “it is unclear how Defendants can be held liable for exercising an entitlement [the Association plaintiffs] fairly negotiated.” In the end, Cigna’s motion was only partly successful; the individual claims survived but the associations’ claims were all dismissed.

Seventh Circuit

Kaiser v. Alcoa U.S. Corp., No. 3:20-cv-00278-RLY-CSW, 2024 WL 1283535 (S.D. Ind. Mar. 25, 2024) (Judge Richard L. Young). In this second Alcoa case, a class of retirees obtained a more decisive victory. Plaintiff Lynette Kaiser filed a class action lawsuit on behalf of pre-1993 Alcoa retirees challenging the company’s elimination of a collectively bargained healthcare plan and its replacement with a healthcare reimbursement arrangement that she asserted reduced their benefits. Plaintiffs asserted both a claim for benefits under ERISA Section 502(a)(1)(B) and a claim for equitable relief under Section 502(a)(3), as well as a claim for violation of the LMRA. An earlier change to the healthcare plan that put a cap on healthcare spending by the company had led to a retiree lawsuit more than a decade earlier in which a Tennessee district court ultimately held, at Alcoa’s urging, that the healthcare plan had promised benefits for life but such benefits were subject to the spending cap. The Sixth Circuit affirmed, explicitly agreeing with the district court that the plan promised lifetime benefits. Based on these earlier decisions, the court in this decision held that Alcoa was judicially estopped from asserting that the plan did not provide lifetime benefits, particularly because Alcoa had advocated for this result. Thus, the court held that the only remaining issue on summary judgment was whether the new health reimbursement plan was, as Alcoa argued, “reasonably commensurate with the retirees’ prior insurance plan.” The court held that it was not for three pretty obvious reasons: (1) the new plan provided that Alcoa could cancel benefits at any time; (2) only 33% of the class would be eligible for benefits under the new plan; and (3) the burden of inflation shifted to the retirees. The judge concluded that these three factors demonstrated that the new plan “significantly reduced” the “general level of benefits,” despite some evidence suggesting that employees might be somewhat better off in the short term. The court thus granted summary judgment in favor of the retirees on the claim that Alcoa violated its promises under the collective bargaining agreements governing the plan, and therefore violated the LMRA. With respect to the ERISA claims, based on the court’s understanding that Alcoa conceded that plaintiffs may receive their requested injunctive relief under Section 502(a)(1)(B), the court granted Alcoa’s motion for summary judgment with respect to the claim asserted under Section 502(a)(3).     

Tenth Circuit

Anne A. v. United Healthcare Ins. Co., No. 2:20-CV-00814-JNP-DAO, 2024 WL 1307168 (D. Utah Mar. 26, 2024) (Judge Jill N. Parrish). From January 2016 through December 2017, plaintiff Kate A. received inpatient psychiatric care at a residential mental health facility called Chrysalis. This ERISA and mental health parity action stems from United Behavioral Health’s denial of coverage of Kate’s stay at the facility. In this order, eight years later, Kate and her mother Anne were granted summary judgment on their wrongful denial of benefits claim for the denials which caused them to incur a quarter of a million dollars in unreimbursed medical expenses. The court ruled that the United Healthcare defendants, the Apple, Inc. Health and Welfare Benefit Plan, and the Apple Inc. Small Business Health Options Program failed to engage in a meaningful dialogue with Kate’s medical records and the opinions of her treating physicians throughout the appeals process and therefore abused their discretion. Although plaintiffs attempted to administratively appeal the denial by specifically referencing the voluminous medical record, which included 1,700 pages of exhibits, defendants shut “their eyes to readily available information.” Instead of referencing specific information and expressing the reasons for disagreeing, the denial letters provided only vague and conclusory explanations, without reference to and often in conflict with the medical records. Because defendants’ denials were based on medical necessity grounds, the court stressed that they were obliged to engage with the opinions of the treating doctors, especially regarding Kate’s suicide risk. Thus, their failure to do so was out of step with the Tenth Circuit’s, and ERISA’s, requirements. The decision was not a complete victory for plaintiffs, however. Although Kate and Anne were victorious on their benefits claim, the same could not be said of their Mental Health Parity and Addiction Equity Act violation claim. In that cause of action plaintiffs alleged that defendants violated the Parity Act by requiring Kate to display acute mental health symptoms “while applying a lesser standard to residential admission for analogous non-mental health care.” The court declined to rule one way or another on this claim, finding resolution premature given its remedy decision – remand. The court assumed remand “appears to be the appropriate remedy here.” It did, however, admit confusion about the somewhat murky guidelines for determining the appropriate remedy for what the court viewed as these kinds of ERISA procedural violations. Without further guidance from the Tenth Circuit on when to award benefits versus when to remand to the claim administrator, the court attempted a compromise. It structured the remand order with certain safeguards in place. Defendants, for instance, are not allowed to rely on any of their “post-hoc” rationales, nor are they given the benefit of relying on any “citations to Kate’s medical records that were [not] included in the prelitigation denial letters.” Given these restrictions, it’s unclear how any denial on remand could be anything but another abuse of discretion, which was maybe the point. The decision ended with the court taking the opportunity to sympathize with plaintiffs’ concerns with remand as a remedy. Insurance companies, the court warned, should not be allowed to use ERISA litigation to make the same denials of benefits “now based on better reasoning.”

R.J. v. BlueCross BlueShield of Texas, No. 23-CV-00177-PAB-STV, 2024 WL 1257524 (D. Colo. Mar. 25, 2024) (Judge Philip A. Brimmer). The plaintiffs, R.J. and his minor son B.J., filed this action alleging that defendant BlueCross BlueShield of Texas violated ERISA in connection with B.J.’s behavioral health treatment at Red Mountain Colorado, a licensed residential treatment facility. Plaintiffs asserted a claim for failure to pay benefits and a claim for violation of the Mental Health Parity and Addiction Equity Act. BlueCross filed a motion to dismiss, arguing first that no benefits were payable because the benefit plan’s definition of residential treatment center required that covered facilities include 24-hour onsite nursing, which Red Mountain lacked. In response, plaintiffs argued that B.J.’s treatment was medically necessary under the plan, that their benefit claim incorporated allegations that the plan’s nursing requirement violated the Parity Act, and that BlueCross did not give them a full and fair review. The court ruled in BlueCross’ favor, holding that plaintiffs could not state a claim because they were required to, but did not, allege that “Red Mountain met the Plan’s definition for covered residential treatment facilities by having 24-hour onsite nursing care.” Next, BlueCross argued that plaintiffs’ Parity Act claim should be dismissed because “there is no disparity between the Plan’s treatment of residential treatment facilities and skilled nursing facilities… Under the Plan, both residential treatment facilities and skilled nursing facilities are required to have 24-hour onsite nursing services.” Again, the court agreed with BlueCross. Plaintiffs contended that the plan’s nursing requirement for mental health facilities was inconsistent with generally accepted standards of care, but the court ruled that this was the wrong comparison. Under the Parity Act, plaintiffs were required to show a disparity between medical and mental health coverage under the plan, but “[t]here is nothing in the complaint asserting that benefits are available for analogous medical care in the absence of the 24-hour onsite nursing services required at residential treatment facilities.” In short, “Plaintiffs’ attempt to attack the use of the same or a comparable standard by reference to a separate standard is inconsistent with the Tenth Circuit test and the underlying regulations.” The court thus granted BlueCross’ motion to dismiss, albeit without prejudice.

Pleading Issues & Procedure

Seventh Circuit

Case v. Generac Power Sys., No. 21-cv-1100-PP, 2024 WL 1284607 (E.D. Wis. Mar. 26, 2024) (Judge Pamela Pepper). In the Seventh Circuit, the pleading standard for ERISA actions alleging breaches of fiduciary duties has shifted over the past few years. For a while, even readers of Your ERISA Watch might have been left shrugging their shoulders when asked where things stood. Indeed, the Supreme Court’s ruling in Hughes v. Northwestern University itself was read differently by plaintiffs and defendants, with each side seeing in it what they liked. It was not until the Seventh Circuit set out a newly formulated, context-specific pleading standard in its remand decision of Hughes II on March 23 of last year that a more settled status took shape. As things stand now in the Seventh Circuit, where “alternative inferences are in equipoise,” or equally reasonable, courts are required to resolve the matter in favor of the plaintiffs. Thus, so long as plaintiffs plead a more prudent course of action might have been available to the fiduciaries, their complaint survives a Rule 12(b)(6) challenge. The decision in this case puts that pleading standard into practice. Here, plaintiff Dereck Case moved for leave to file a second amended complaint in his class action alleging breaches of fiduciary duties owed to the participants and beneficiaries of the Generac Power Systems, Inc. Employees 401(k) Savings Plan, which he had originally filed nearly three years ago in 2021. Mr. Case argued that under the Seventh Circuit’s new pleading standard his proposed second amended complaint “plausibly alleges that Defendants violated their fiduciary duty of prudence under ERISA by incurring unreasonable recordkeeping fees as compared to other similarly-situated plans.” Mr. Case believes that the claims in his action are analogous to the plaintiffs’ allegations in Hughes II and therefore requested the opportunity to amend his complaint to comply with the new standard outlined in the Hughes II decision. Writing that it was not “certain from the face of the complaint that any amendment would be futile or otherwise unwarranted,” the court granted leave to amend. It expressly recognized that “[s]ince the defendants filed their motion to dismiss the plaintiff’s amended complaint back in December 2021 – nearly two and a quarter years ago as of this writing – the standard for pleading ERISA breach of fiduciary duty of prudence claims in the Seventh Circuit has shifted,” and given that shift “much – if not all – of defendants’ original December 2021 motion dismiss…has been rendered moot.” Particularly because Mr. Case’s motion was based on “a change in the law and not a lack of diligence,” the court granted his motion for leave to file his proposed second amended complaint and denied as moot defendants’ motion to dismiss this putative class action.

ICI Benefits Consortium v. United States Dep’t of Labor, No. 1:23-CV-00603-JPH-MG, 2024 WL 1329935 (S.D. Ind. Mar. 28, 2024) (Judge James Patrick Hanlon). Plaintiff Independent Colleges of Indiana is a group of 29 private colleges and universities in Indiana. It created a group called the ICI Benefits Consortium, the purpose of which was to form a combined healthcare benefit plan that would reduce the cost of insuring school employees. The Consortium sought an advisory opinion from the Department of Labor asking if its plan would qualify as a single employee welfare benefit plan under ERISA, but the DOL declined to answer. The Consortium then brought this action for declaratory and injunctive relief under ERISA. The DOL responded with a motion to dismiss, arguing that the Consortium did not have standing “because it has not pled a concrete, actual, or imminent injury.” Consortium argued that “two injuries confer standing: (1) if the DOL determines that the Plan does not qualify as a single plan MEWA, the Consortium and its members could face civil liability, including up to $2,586 in daily fines; and (2) it’s a ‘reasonable inference’ that the lack of guidance from the DOL has hindered other ICI member schools from joining the Consortium.” The court rejected these arguments. The court instead accepted the DOL’s position that a “lengthy chain of events” would have to happen before the DOL imposed monetary penalties, rendering the Consortium’s claims speculative, and thus there was no “‘substantial risk’ of monetary harm.” In particular, the court noted that because the Consortium was attempting to play by the book, it was less likely that the DOL would target it over other multiemployer plans that were fraudulent or abusive. As for the Consortium’s deterrence argument, the court noted that the Consortium had not alleged that any schools had declined to join because of the DOL’s refusal to issue an advisory opinion, rendering its argument speculative. Furthermore, the alleged “failure to join” was not redressable by the court because “[t]he Court has ‘no way of knowing’ how other institutions would proceed following a ruling in the Consortium’s favor, based on its allegations.” Thus, the court granted the DOL’s motion to dismiss.

Tenth Circuit

Phillips v. Boilermaker-Blacksmith Nat’l Pension Tr., No. 19-2402-TC-BGS, 2024 WL 1328378 (D. Kan. Mar. 28, 2024) (Magistrate Judge Brooks G. Severson). This case involves plaintiff participants of the Boilermaker-Blacksmith National Pension Trust who allege that their early retirement benefits were improperly terminated. Plaintiffs contend, among other things, that the trust employed a new manner of interpreting the plan’s “separation from service” provision that resulted in benefit denials and requests for reimbursement, even though the applicable plan language itself never changed. Last year, the trust filed a motion for judgment on the pleadings which the court mostly denied, a decision Your ERISA Watch chronicled as the case of the week in our April 26, 2023 edition. In August of 2023, the court certified a class of plaintiffs. Now, plaintiffs have moved to supplement their complaint based on Congress’ December 29, 2022 enactment of Secure Act 2.0, which governs the repayment of erroneously overpaid plan benefits, arguing that the trust has not complied with its requirements. In this order the magistrate judge granted plaintiffs’ motion. The court found that plaintiffs had good cause to supplement because they were unaware of their potential cause of action until September of 2023, when the trust sent letters invoking the new law. The trust objected, arguing that plaintiffs’ amendment was futile because their Secure Act 2.0 claims would only affect “a 2-person subclass of their previously certified 100+-member class,” and this new subclass did not meet the numerosity requirements of the Federal Rules of Civil Procedure governing class actions. However, the court was persuaded by plaintiffs that this issue “would better be addressed during a class certification analysis.” The court thus granted plaintiffs’ motion to supplement their complaint with their Secure Act 2.0 claims.

Provider Claims

Third Circuit

The Peer Grp. for Plastic Surgery v. United Healthcare Servs., Inc., No. 2:23-CV-02073-BRM-MAH, 2024 WL 1328134 (D.N.J. Mar. 28, 2024) (Judge Brian R. Martinotti). The plaintiff is a medical practice that specializes in post-breast cancer plastic surgery reconstruction. It performed services on four individuals who were insured under health benefit plans insured by defendant United. Plaintiff, which is out of network with United, alleged that United gave it “gap exceptions” such that United would compensate it at the in-network benefit level. However, United failed to do so. In the end plaintiff billed United for $513,290, but only received $34,017.56. Plaintiff filed suit in New Jersey state court and United removed to federal court on diversity jurisdiction grounds. Plaintiff then amended its complaint to allege three state law causes of action, and United responded by moving to dismiss, contending that plaintiff’s claims were preempted by ERISA. Plaintiff argued that it was “well settled law in the 3rd Circuit that state law causes of action for breach of contract and promissory estoppel are not preempted by ERISA when an insurance carrier makes an agreement with an ‘out of network’ provider to cover its insureds at the ‘in-network’ benefits level.” The court disagreed, ruling that plaintiff’s claims “challenge the administration of benefits” and “could have been brought under the scope of ERISA.” The court further ruled that plaintiff did not sufficiently plead that a duty independent of ERISA existed: “The Gap Exception Letters inform the Patients that surgeries conducted by out-of-network providers would be covered at the ‘in-network’ benefit level subject to the Plans. It is impossible to determine the merits of Plaintiffs’ claims without examining the provisions of their ERISA-governed Plans.” The court stated that plaintiff’s reliance on Third Circuit authority was misplaced because the gap exception letters “explicitly reference the plan,” “do not include an agreed-upon rate of payment,” and instead provided that “payment will be based on the terms of the Plans and Defendant’s reimbursement policies.” As a result, plaintiff’s claims were preempted, the court granted United’s motion to dismiss, and plaintiff was given a chance to amend its complaint to assert claims under ERISA.

Sixth Circuit

Beaumont Health v. United Healthcare Servs., Inc., No. 2:23-CV-10982, 2024 WL 1317772 (E.D. Mich. Mar. 26, 2024) (Judge Stephen J. Murphy, III). Plaintiff Beaumont Health alleged that it treated a woman involved in a motor vehicle accident in 2020, providing services worth $208,045.39. The woman was insured through an ERISA-governed employee health benefit plan administered by defendant United. Beaumont brought this action in Michigan state court contending that United had failed to pay benefits for the treatment. United removed the case to federal court on ERISA preemption grounds and filed a motion for summary judgment. Beaumont did not respond to the motion. United’s motion was based on its assertion that Beaumont had never made a claim for the provided services. Beaumont admitted that it did not submit a claim but argued that it did not know about it until December of 2021. However, according to the court, “no evidence suggests that Plaintiff filed a claim after December 2021.” The court noted that the plan required submission of claims prior to payment, and thus “without a claim, Defendant United cannot be liable to Plaintiff to provide coverage for those services.” As a result, the court granted United’s motion for summary judgment.

Ninth Circuit

Aguilar v. Coast to Coast Comput. Prods., Inc., No. 2:23-CV-03996-MCS-E, 2024 WL 1319777 (C.D. Cal. Mar. 26, 2024) (Judge Mark C. Scarsi). The plaintiffs in this case, Christine Aguilar and her medical provider, Minimally Invasive Surgical Associates and Advanced Weight Loss Surgical Associates, are currently on their third amended complaint. They allege, in a single count under ERISA for payment of plan benefits, that defendant United Healthcare, the insurer of Aguilar’s medical benefit plan, refused to pay for Aguilar’s EGD and hiatal hernia procedure. Defendants filed a motion to dismiss, arguing that plaintiffs (1) did not have standing and (2) had failed to state a claim. The court rejected defendants’ standing argument, ruling that plaintiffs had adequately amended their complaint to address this issue. Plaintiffs had satisfactorily pleaded that Aguilar assigned her rights to the provider, and that the assignment was not conditional or revoked. Furthermore, they had alleged they were harmed by defendants’ refusal to pay, in the amount of $101,046. Defendants had more success with their second argument. The court noted that the plan provided that obesity and weight loss surgery is only covered if performed by in-network providers, and that coverage is only available for “medically necessary” services. However, plaintiffs “fail to grapple with these provisions.” Thus, “[u]ntil Plaintiffs cure their complaint to identify a provision that entitles them to benefits, their § 502(a)(1)(B) claim fails.” The court thus granted defendants’ motion on this ground, but “[b]ecause the Court has not previously dismissed on this ground, dismissal is with leave to amend.” Perhaps the fourth time will be the charm.

Remedies

Second Circuit

McCutcheon v. Colgate-Palmolive Co., No. 16 Civ. 4170 (LGS), 2024 WL 1328217 (S.D.N.Y. Mar. 28, 2024) (Judge Lorna G. Schofield). On March 22, 2023, Your ERISA Watch featured the Second Circuit’s decision in this action as the case of the week. The case involves complicated calculations of the class action plaintiffs’ cash balance pension plan benefits. After remand from the Second Circuit two issues remained: “(1) which interest rate Defendants must use to calculate the benefit attributable to employee contributions when determining a grandfathered participant’s Plan Appendix C § 2(b)(ii) Account-plus-Employee Contribution benefit and (2) whether Defendants may apply a PRMD (pre-retirement mortality discount) when adjusting the age 65 residual annuity due to a participant who takes her retirement benefits before age 65.” These two issues were cleared up in this order and were resolved in the retirees’ favor. First, the court held that defendants “must use the 20+1% interest rate to calculate the benefit attributable to (both employer and) employee contributions for a participant’s § 2(b)(ii) benefit.” The court expressed that up until now “Defendants themselves have consistently applied the 20+1% rate to both components of the § 2(b)(ii) benefit – the employer and employee contributions.” As defendants were unable to point out any clear error, change in intervening law, or new evidence, the court rejected defendants’ arguments as waived and clarified this first calculation point. The same was true for the pre-retirement mortality discount calculations. Once again, the court stressed that defendants “never previously raised [their] argument” and “under the law of case doctrine, Defendants cannot apply a PRMD to adjust the age 65 residual annuity for a participant who takes early retirement.” The court stated that the purpose of the residual annuity was to remedy the plan’s previous present value violations and therefore would permit defendants to adjust the lump sum in such a way as to decrease the value of the benefit paid to an amount lower than the accrued benefit determined by IRC § 417(e). Thus, defendants were not allowed to apply the pre-retirement mortality discount to adjust the residual annuity “from age 65 to payment age.” Having decided these issues, the court revised its final judgment, as plaintiffs requested, to clarify the manner of calculations and ensure that fancy math did not get in the way of make-whole relief.

Venue

Tenth Circuit

Trevor T. v. California Physicians’ Service, No. 1:22-CV-00140 JNP, 2024 WL 1330040 (D. Utah Mar. 28, 2024) (Judge Jill N. Parrish). Plaintiffs, three family members, brought this action against California Physicians’ Service (“Blue Shield”), alleging that it unlawfully denied a claim for healthcare benefits under ERISA for treatment received by one of the plaintiffs. Plaintiffs live in Orange County, California, Blue Shield is based out of Oakland, California, and the treatment at issue was administered in Utah, where the suit was filed. Blue Shield moved to transfer venue to the Northern District of California under 28 U.S.C. § 1404(a), arguing that this location was “a closer and more convenient venue for all parties and witnesses.” Plaintiffs opposed and filed a motion for sanctions arguing that Blue Shield had misrepresented facts to the court. Addressing the venue motion first, the court agreed that the suit could have been filed in the Northern District of California and thus considered whether that venue was more appropriate. The court noted that Utah’s only connection to the dispute was the treatment facility, and “[i]n the context of ERISA, this court has routinely declined to defer to a plaintiff’s choice of forum where the location of plaintiff’s treatment was the only connection to the forum.” None of the parties resided in Utah, the plan was not administered there, the failure to pay did not occur there, and the decision to deny benefits was not made there. Furthermore, the relevant witnesses and documents were in California where the claim was administered, and a judgment against Blue Shield would be easier to enforce in California where it is headquartered. Thus, the court granted Blue Shield’s motion to transfer venue. As for plaintiffs’ motion for sanctions, the court determined it was “wholly without merit.” Plaintiffs “failed to satisfy the safe-harbor provision of Federal Rule of Civil Procedure 11(c)(2), spared no expense in briefing an argument tangential to the issue of where Plaintiffs’ claims were administered, not processed, and impugned defense counsel’s character in the process.” As a result, in a surprising turnabout, the court stated that it would issue a separate order to show cause why plaintiffs should not be sanctioned for their motion for sanctions.

Alford v. The NFL Player Disability & Survivor Benefit Plan, No. 1:23-cv-00358-JRR, 2024 WL 1214000 (D. Md. Mar. 20, 2024) (Judge Julie R. Rubin)

For faithful readers of Your ERISA Watch, the basic contours and scathing judicial critiques of the operation of the NFL Player Disability and Survivor Benefit Plan, previously known by the catchier title “The Bert Bell/Pete Rozelle NFL Retirement Plan,” are well known. Just last week, we reported on the last gasp of the Cloud case, in which Judge James E. Graves, Jr. dissented from the denial of rehearing en banc of a Fifth Circuit decision in favor of the plan. In that decision, the Fifth Circuit overturned a district court’s judgment in favor of a disabled NFL player after a week-long bench trial, but acknowledged at the same time that the NFL plan was “a lopsided system aggressively stacked against disabled players.” 

NFL players have not given up. Ten former players, including All-American running back Willis McGahee, filed this putative class action asserting claims for wrongful denial of benefits under ERISA Section 502(a)(1)(B), violations of ERISA’s claim processing provision, Section 503, and breaches of fiduciary and co-fiduciary duty. The players asserted these claims on behalf of the putative class and separately on behalf of the plan. Defendants, which included the plan, the board overseeing the plan, and various individuals, including NFL Commissioner Roger Goodell, moved to dismiss the complaint in its entirety on various bases, each of which the court addressed in this order.

First, the court refused to dismiss the players’ benefit claims for failure to exhaust administrative remedies. The court concluded that plaintiffs’ argument that it would be futile to do so could not be resolved at this stage given the “robust backdrop of alleged malfeasance and nonfeasance” spelled out in the complaint. This backdrop included an alleged “systematic pattern that the more the Defendants compensate their hired physicians, the higher the likelihood that those physicians will render flawed, inadequate, result-oriented opinions adverse to benefits applicants,” as well as a practice of providing “inaccurate,  misleading, and deceptive information about the Plan to Plaintiffs and absent Class members.”  

On the other hand, the court granted defendants’ motion to dismiss all benefit claims outside Maryland’s three-year statute of limitations applicable to such claims, finding that plaintiffs had failed to allege facts supporting equitable tolling. In this regard, the court found that nothing in the complaint “suggests the existence of Defendants’ trickery or efforts to induce Plaintiffs not to file action following a benefits denial, or any other extraordinary circumstance that might warrant tolling of the statutes of limitations.” 

For benefit claims within the statutory period, however, the court rejected defendants’ argument that plaintiffs had failed to state a claim. Instead, the court viewed defendants’ arguments as essentially merits-based and inappropriate for resolution on the pleadings. “Construed in the light most favorable to Plaintiffs (and taken as true), Plaintiffs plausibly allege that the Board acted inconsistently with the Plan’s purpose and goal, did not consider the entire record, inappropriately relied on Neutral Physicians’ conclusions, provided interpretations inconsistent with Plan provisions and ERISA requirements, failed to provide reasoned decisions, and that bad faith motives and bias influenced their decisions.”

As for the claims for fiduciary and co-fiduciary breaches on behalf of the class members asserted under ERISA Section 502(a)(3), the court agreed with the defendants that these claims were impermissibly repackaged benefit claims. The court stated that in the Fourth Circuit such claims were required to be dismissed as duplicative, even at the pleading stage, to the extent that the wrong they seek to remedy can be adequately redressed under Section 502(a)(1)(B), which the court found to be the case. The court thus dismissed plaintiffs’ Section 502(a)(3) claim.

The court reached the opposite result with regard to the Board of Trustees’ argument that the fiduciary claim against it brought under Section 502(a)(2) should be dismissed. To the contrary, the court held that “Plaintiffs adequately allege breaches of fiduciary duties by (and against) the Board: failure to act in accordance with the Plan and failure to act in sole/best interest of the Plan participants,” and further held that their allegations even met the heightened requirements for pleading fraud under Federal Rule of Civil Procedure 9(b).

The court also allowed the plaintiffs’ counts alleging violations of Section 503 to go forward, even though it acknowledged that not all courts have recognized that participants have a right of action under this provision. Moreover, the court also found that a remedy with respect to these claims would be duplicative of the claim for benefits, but only if plaintiffs were to prevail on that claim. However, the court found that if plaintiffs did not succeed on their benefit claims, the court could still mandate a remand for full and fair review as a remedy for any Section 503 violations. In short, because the court saw some daylight between the count alleging wrongful denial of benefits and the counts alleging violation of ERISA’s claim processing provision, the court refused to dismiss the Section 503 claims.

Finally, with respect to the claims against the Board members and Commissioner Goodell as individuals, the court found that “Plaintiffs here do not set forth allegations to support a conclusion that the Trustees or the Commissioner, as opposed to the Board, had adequate control over the Board.” Accordingly, the court granted the motions to dismiss these individual defendants.

After several relatively slow weeks, the winds of change are stirring as the end of the reporting period draws near. Just as parents are hesitant to choose a favorite child (out loud), it was difficult this week to choose the case of the week among the many interesting decisions. But just because we chose one does not mean that you, our readers, have to agree. So, keep reading to discover your own favorite, which might be the case in which the employer promised an employee a Ford F-150 (Johnson v. Dodds Bodyworks, Inc.), or the case involving “a fantastical tale of depravity and abject cruelty that might find a place in Hollywood, were it actually true” (Williams v. Noble Home Health Care, LLC).

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

Arbitration

Eleventh Circuit

Williams v. Shapiro, No. 1:23-cv-03236-VMC, 2024 WL 1208297 (N.D. Ga. Mar. 20, 2024) (Judge Victoria Marie Calvert). This decision is the latest in a recent line of ERISA decisions declining to compel arbitration based on the “effective vindication” doctrine, which allows a court to invalidate arbitration agreements on public policy grounds if they effectively waive a party’s right to seek statutory remedies. The plaintiff, a plan participant, asserts fiduciary breaches and prohibited transactions relating to the creation in 2017 and dissolution in 2019 of an employee stock ownership plan (ESOP). According to the complaint, the 2019 transactions resulted in the former owners of the company obtaining 100% of the company stock for at least $35.4 million less than they should have paid. Although the original ESOP plan document did not contain an arbitration clause, the directors of the company amended the plan in connection with the 2019 transactions to add an arbitration clause, as well as a very broad class action waiver provision that purported to prohibit participants from obtaining any relief “on behalf of any individual or entity” other than themselves, a non-severability provision, and a provision requiring the participant to pay the defendant’s costs, expenses, and attorneys’ fees if the arbitration was unsuccessful. Then, a month after plaintiffs filed suit in 2022, and three years after the ESOP had been terminated and its stock assets liquidated through the sale back to the former owners, the directors again purported to amend the arbitration clause to permit injunctive relief so long as that relief “does not include or result in the provision of additional benefits or monetary relief to any individual or entity other than” the individual plan participant. Based on these amendments, defendants moved to compel arbitration. The district court began its analysis by noting that the Eleventh Circuit has not yet ruled on the arbitrability of ERISA claims. Although the court further noted that numerous other circuit courts have concluded that ERISA claims are generally arbitrable because ERISA does not contain a “contrary congressional command,” this was, in the court’s view, “only the beginning of the ERISA arbitration analysis,” given ERISA’s comprehensive and “enormously complex” nature and the fact that “[a]rbitration is a matter of contract and of consent.” Instead, the court saw the arbitration analysis as turning on four things: (1) whether the particular claim or claims being brought by a participant are properly characterized as belonging to the participant or to the plan; (2) whether the proper party has assented to the arbitration clause; (3) whether the claims are within the scope of the clause; and (4) whether application of the clause would prevent the effective vindication of the participant’s rights under ERISA. With respect to the first issue, the court concluded that the complaint contained both claims under ERISA Section 502(a)(2), which belonged to the plan, and claims for reformation and rescission under ERISA Section 502(a)(3), which the court concluded “are held by the participants generally,” and not the plan. With respect to the second issue, the court concluded that while the participants themselves did not assent to the amendments containing the arbitration clause, the ESOP assented even though it had long since been terminated, because it still held one asset – its claims against the defendants – and thus still maintained a legal existence. With respect to the third issue, the court had no trouble concluding that the broad arbitration clause encompassed all the claims asserted. This brought the court “to the final question, whether the clause at issue prevents the effective vindication of an ERISA right.” This presented a more difficult question given conflicting decisions from other circuits concerning whether the effective vindication doctrine prevents compelled arbitration in the context of a defined contribution plan that contains a class action waiver and a recent Supreme Court decision, Viking River Cruises, Inc. v. Moriana, 596 U.S. 639 (2022), which rejected applicability of the effective vindication doctrine in a case involving California’s Private Attorney General Act. Ultimately, the court determined that the ERISA claims at issue were more like a representative action on behalf of a single principal, the plan, than the joinder of numerous individual claims as in Viking River, and agreed with the courts that have held that materially identical arbitration provisions were invalid because they prevented plaintiffs from obtaining some of the relief that they sought. The court thus held that the arbitration clause was invalid and non-severable.

Attorneys’ Fees

Second Circuit

Graziano v. First Unum Life Ins. Co., No. 21-CV-2708 (PAC), 2024 WL 1175143 (S.D.N.Y. Mar. 19, 2024) (Judge Loretta A. Preska). After prevailing in his action alleging that defendant First Unum Life Insurance Company violated ERISA by improperly terminating his long-term disability benefits, plaintiff Michael Graziano filed a motion for attorney’s fees. The court agreed that he was eligible for fees due to his success on the merits. The court acknowledged that Graziano’s attorneys, Riemer Hess, “specialize in high-stakes ERISA litigation and the Firm is highly regarded in the relevant legal community and by their clients.” The court also noted that Riemer Hess clients were willing to pay the hourly rates requested by the firm, which supported their reasonableness. However, Unum “cites a few cases that give the Court pause in finding the proposed rates reasonable.” Thus, the court imposed a 10% cut, awarding rates for Graziano’s attorneys ranging from $432 to $788 per hour based on their experience, which was “still above the rates found to be reasonable in other recent ERISA cases.” Unum also objected to the time Graziano’s attorneys spent on the case, but “[h]aving closely reviewed the Billing Records and Unum’s objections, the Court finds that most of the time expended is reasonable.” The court did identify some examples of duplicative work, “vague entries,” and administrative work that could have been performed at a lower rate, and determined that a “modest 5% reduction” was appropriate given that these deficiencies were “the exception among the Firm’s hours.” As a result, the court awarded Graziano $187,080.65 in fees, reduced from his request of $221,039.25, and $402 in undisputed costs.

Breach of Fiduciary Duty

Seventh Circuit

Placht v. Argent Tr. Co., No. 21 C 5783, 2024 WL 1254196 (N.D. Ill. Mar. 25, 2024) (Judge Sara L. Ellis). Plaintiff Carolyn Placht is a participant in Symbria Inc.’s Employee Stock Ownership Plan who successfully obtained class certification in this action against the plan’s trustee, Argent Trust Company. She contends Argent violated its fiduciary duties under ERISA when it oversaw the 2015 purchase by the plan of all of Symbria’s stock shares. Placht filed a motion for summary judgment, asking the court to rule that Argent’s actions constituted a prohibited transaction under ERISA Section 406, while Argent moved for summary judgment as to the entire case. Addressing Placht’s motion first, the court considered Argent’s objection that Placht was attempting “piecemeal adjudication” of one of the issues in the case, but the court ruled that Placht’s motion was acceptable under Federal Rule of Civil Procedure 56. Next, Argent admitted that under Section 406 it was a fiduciary, the selling shareholders were parties in interest, and the sale to the plan constituted “a direct or indirect sale or exchange, or leasing, of any property between the plan and a party in interest.” However, Argent argued that Placht’s motion failed because she did not show that Argent “subjectively intended to benefit a party in interest through the transfer.” The court rejected this argument, ruling that Section 406 should be read “broadly” and “subjective intent” was not an element of proof. Thus, the court granted Placht’s motion and ruled that the ESOP sale met Section 406’s definition of a prohibited transaction. The court then turned to Argent’s motion, which argued that even if the sale was a prohibited transaction, it fell within one of Section 408’s exemptions because the plan received “adequate consideration.” Both Placht and Argent presented expert witness reports with voluminous exhibits explaining why the transaction was or was not fair, and whether Argent conducted due diligence in overseeing it. The court ruled that it could not sort this issue out on summary judgment. “[F]actual questions exist as to whether Argent acted prudently…Placht’s claims and Argent’s defenses with respect to the ESOP Transaction must proceed to trial.” Argent had more success on its duty of loyalty argument. The court ruled that Placht had not provided “any evidence that would suggest that Argent acted to further its own interest or had any other type of conflict of interest that would support” such a claim. Finally, the court addressed Placht’s request that the court declare Argent’s indemnification agreement with Symbria void under ERISA Section 410, which prohibits agreements that relieve fiduciaries from their responsibilities under ERISA. The court ruled in Argent’s favor on this issue as well, finding that the agreement’s carve-out did not allow for indemnification for the alleged violations, and thus it did not violate ERISA. Thus, Placht’s Section 406 claim will go trial, subject to any Section 408 exemptions provable by Argent.

Eighth Circuit

Dionicio v. U.S. Bancorp, No. 23-CV-0026 (PJS/DLM), 2024 WL 1216519 (D. Minn. Mar. 21, 2024) (Judge Patrick J. Schiltz). This is a putative class action alleging that U.S. Bank and related defendants breached their fiduciary duties in the administration of U.S. Bank’s 401(k) employee benefit plan. Plaintiffs made three claims: (1) defendants breached their duty of prudence by incurring excessive recordkeeping and administrative fees; (2) defendants breached their duty of prudence by incurring excessive fees for managed-account services; and (3) U.S. Bank and its board failed to monitor the committees responsible for overseeing these fees. Defendants filed a motion to dismiss all three claims, which the court addressed in turn in its order. The court denied U.S. Bank’s motion on the first claim, ruling that the seven comparator plans cited by plaintiffs in their complaint were sufficiently similar to the U.S Bank plan. The court noted that U.S. Bank’s plan was “huge,” with “more assets than 99.99% of other defined-contribution plans.” Thus, plaintiffs could not be faulted for not finding exact matches: “Under defendants’ approach, plaintiffs suing exceptionally large or exceptionally small plans would face a nearly insurmountable pleading hurdle.” The other plans cited by plaintiffs were also “mega plans,” and thus were “viable comparators.” Defendants also complained that plaintiffs’ comparisons were not “apples to apples” because they did not “identify the particular services used by each plan.” However, the court noted that plaintiffs had alleged that basic recordkeeping services were “fungible” and “materially indistinguishable” from plan to plan, which was supported by case law finding such allegations plausible. As for plaintiffs’ second claim regarding managed-account service fees, plaintiffs identified six comparator plans, but the complaint was “devoid of even basic information” about those comparators, “such as the number of participants or total assets.” The complaint also did not address the fee schedules of the comparator plans, or explain what specific services they offered or how they differed from the services available in U.S. Bank’s plan. Thus, the court granted defendants’ motion on this claim. Plaintiffs’ third claim, for failure to monitor, was derivative of their other claims, and thus, consistently with its above rulings, the court denied defendants’ motion to dismiss this claim as to the recordkeeping fees but granted it as to the managed-account service fees.

Ninth Circuit

Lucas v. MGM Resorts Int’l, No. 2:20-cv-01750-JAD-NJK, 2024 WL 1199514 (D. Nev. Mar. 19, 2024) (Judge Jennifer A. Dorsey). Eboni Lucas, a former employee of MGM Resorts and a participant in MGM’s 401(k) benefit plan, brought this class action lawsuit challenging the prudence of both the investment fees associated with the chosen share-classes of mutual funds for the plan, as well as the recordkeeping fees paid by the plan. Following certification of a class of plan participants, MGM moved for summary judgment with respect to the share-class imprudence claim and to exclude as unreliable the opinion of plaintiff’s expert. By way of factual background, the court explained that in 2018 the plan began using “a separate, fixed-percentage fee that was charged to all participants’ individual accounts for recordkeeping and other administrative expenses,” and at the same time ceased using any portion of the mutual share-class fees as “revenue sharing” to pay for the recordkeeping, and instead began to credit back the revenue sharing dollars to participants’ individual accounts on a pro rata basis. The court found that plaintiffs’ expert employed a flawed methodology by not fully accounting for the revenue sharing and thus excluded this evidence as unreliable. Because defendants’ expert opined that, once the revenue sharing was accounted for, the share-classes chosen for the plan provided it “with net benefits, not net losses,” the court concluded that plaintiff had failed to meet her burden of showing losses associated with the investments and thus MGM was entitled to summary judgment on the claims based on share-class selection and retention. The court, however, denied MGM’s motion to seal the summary judgment and Daubert motion briefing and exhibits, finding that MGM’s filing of these documents under seal was “improper and certainly overkill,” and resulted “in a docketing mess.” Thus, only the claims relating to recordkeeping fees will proceed to trial.

Miguel v. Salesforce.com, Inc., No. 20-CV-01753-MMC, 2024 WL 1222092 (N.D. Cal. Mar. 20, 2024); Miguel v. Salesforce.com, Inc., 2024 WL 1221934 (N.D. Cal. Mar. 20, 2024) (Judge Maxine M. Chesney). Plaintiffs, former Salesforce employees, allege that Salesforce and related defendants breached their fiduciary duties in the administration of Salesforce’s 401(k) employee benefit plan. Plaintiffs made four claims: (1) defendants only offered an institutional share class of JPMorgan target date retirement funds instead of lower cost share classes; (2) defendants retained nine actively managed JPMorgan funds instead of transitioning to passively managed collective investment trusts (CITs); (3) defendants failed to substitute certain Fidelity mutual funds with CITs; and (4) defendants failed to monitor the committee overseeing the plan. Defendants filed a motion for summary judgment. On the institutional share class claim, defendants argued that the institutional shares had revenue sharing, which actually made it cheaper on a net cost basis than the lower cost share classes advanced by plaintiffs. However, the court noted that plaintiffs’ expert had disputed this, arguing that the revenue sharing did not directly offset the expense ratio because “revenue sharing ‘reduces the investment returns plan participants receive’ and ‘makes recordkeeping and administrative costs interdependent with plan participant returns.’” (In the companion order linked above, the court denied defendants’ motion to exclude plaintiffs’ expert, ruling that defendants’ criticism of his experience “goes to the weight of any opinions he may offer, not their admissibility.” Furthermore, defendants’ challenges to the expert’s methodology were “primarily directed at ‘the merits of’ plaintiffs’ claims,” and not the admissibility of his testimony.) Thus, the court ruled that there were disputed facts which precluded summary judgment on plaintiffs’ first claim. As for plaintiffs’ CIT claims, the court noted that it was undisputed that the mutual funds had higher average expense ratios than the CITs. Defendants argued that Salesforce’s delay in transitioning to CITs was “within the range of reasonable judgments” because of a lack of third-party evaluations of the CITs, different regulatory regimes, and a shorter available track record for the CITs. Defendants also cited the available revenue sharing in the mutual funds. Plaintiffs responded that “a prudent fiduciary would not consider either the lack of publicly available information regarding CITs or the differing regulatory regimes sufficient reason to exclude CITs from consideration,” and quoted defendants’ investment consultant, who had agreed that the trusts and mutual funds had “similar investment profiles and strategies.” Again, the court concluded that it could not resolve these factual disputes on summary judgment and denied defendants’ motion on these claims. The court also addressed damages. Defendants contended that plaintiffs’ damages calculations did not include a number for its claim regarding the failure to transition to CITs, but the court stated that on summary judgment the burden was on defendants to show that plaintiffs suffered no damage, which it had not done. Finally, the court ruled that because there were triable issues of fact as to plaintiffs’ duty of prudence claims, their derivative claims for failure to monitor survived as well. The court thus denied defendants’ summary judgment motion in its entirety.

Class Actions

Second Circuit

Collins v. Anthem, Inc., No. 20-CV-01969 (SIL), 2024 WL 1172697 (E.D.N.Y. Mar. 19, 2024) (Magistrate Judge Steven I. Locke). This is a putative class action alleging that defendants Anthem, Inc. and Anthem UM Services, Inc. (1) breached their fiduciary duties under ERISA, (2) unreasonably denied requests for residential behavioral mental health treatment, and (3) violated the Mental Health Parity and Addiction Equity Act of 2008. Plaintiffs filed a motion for class certification, and refined the definition of their proposed class during briefing. The court first ruled that plaintiffs had standing. Anthem agreed that plaintiffs had standing to seek declaratory relief, but argued that they could not seek injunctive relief because they did not show that they would be wronged again in the future in a similar way. The court agreed, but ruled that plaintiffs still had standing to pursue retrospective injunctive relief in the form of a reprocessing remedy. Anthem argued that a reprocessing remedy would not redress plaintiffs’ injuries, which were monetary, but the court ruled that “ultimate monetary recovery is unnecessary to show redressability.” Next, the court addressed the Federal Rules of Civil Procedure’s class action requirements. The putative class contained “at least” 358 people, satisfying the numerosity requirement, and there was commonality because “each Plaintiff and putative class member was injured because Anthem denied coverage for residential behavioral health treatment based on ‘Guidelines that were in direct conflict with [putative class members’] plans and flouted the Parity Act.’” The court ruled that plaintiffs did not have to “demonstrate that the relevant Guideline was applied to his or her claim in an identical way to establish commonality, because each denial resulted from ‘a unitary course of conduct,’” i.e., application of the guidelines. The court acknowledged that Anthem’s peer reviewers applied clinical judgment in evaluating claims, but this did not defeat commonality because Anthem’s claims manual was “emphatic that the Guidelines and Medical Policies must be applied during the medical necessity analysis.” The court further found that plaintiffs’ claims were typical of the class because even if Anthem’s guidelines did not affect every class member in the same way, they were applied in a uniform manner. The court also ruled that the named plaintiffs were adequate representatives and the class was ascertainable because it was defined based on objective criteria. The court then ruled that the class met Rule 23(b)’s requirements because Anthem acted on grounds generally applicable to the entire class and plaintiffs’ alleged injuries could be redressed through a single retrospective reprocessing order. Finally, the court appointed plaintiffs’ attorneys as class counsel, noting their “significant experience litigating ERISA class actions involving health insurance companies.” The court thus granted plaintiffs’ class certification motion, but “only as to the Plaintiffs’ claims for a retrospective injunction in the form of reprocessing, and for declaratory relief.”

Disability Benefit Claims

Third Circuit

Randall v. Plasterer’s Union Local 8 Benefit Fund, No. 3:22-CV-00243-PGS-RLS, 2024 WL 1197861 (D.N.J. Mar. 20, 2024) (Judge Peter G. Sheridan). Plaintiff Donald Randall Jr. was a member of the Plasterers’ and Cement Masons Union Local 8 and a participant in its pension plan. He became injured in 2016 and applied for Social Security disability benefits. The Social Security Administration (SSA) approved his claim, but used a benefit start date in 2018 based on his request. Randall submitted a disability claim to the pension plan as well, the terms of which explained that a “Disability Retirement Benefit shall begin effective as of the first day that he is eligible to commence receiving a disability benefit under the Social Security Act.” The plan acknowledged the SSA award and agreed Randall was disabled. However, the plan denied his claim for benefits because he “last worked in Covered Employment in February 2016, and was found to be disabled by the SSA as of October 8, 2018,” i.e., after his coverage ended. Randall sued and the parties filed cross-motions for summary judgment. At the hearing, the court asked why, if Randall alleged he was disabled in 2016, did he request that his SSA benefits begin in 2018. Randall explained in a subsequent letter brief that the SSA had told him he could not receive any benefits from 2016-18 because he received workers’ compensation benefits during that time period. Thus, he had amended his application to reflect a 2018 start date. With this information, the court ruled that there were genuine issues of material fact regarding the start date of Randall’s disability and denied both parties’ motions. In doing so, the court ruled that the plan “acted arbitrarily and capriciously by failing to investigate the reason for the change in Randall’s disability onset date when evaluating Randall’s application.” The court stated that the plan had based its decision on that change and “should have inquired why Randall’s onset date was changed and taken that information into consideration in its deliberations.” Because the plan had not conducted an adequate examination of Randall’s claim, the court ordered that “this matter be remanded to the Pension Plan for further review.”

Fourth Circuit

Learn v. The Lincoln Nat’l Life Ins. Co., No. 6:20-CV-00060, 2024 WL 1183676 (W.D. Va. Mar. 19, 2024) (Judge Norman K. Moon). Plaintiff Robert Learn was the Regional Director of Outpatient Rehabilitation at Centra Health, Inc. in Lynchburg, Virginia when he stopped working in 2017 due to symptoms of thyroid disease. He applied for benefits through Centra Health’s long-term disability employee benefit plan, which was insured by defendant The Lincoln National Life Insurance Company. Lincoln approved Learn’s claim, but terminated his benefits in 2019, asserting that he no longer met the plan’s definition of disability. Learn unsuccessfully appealed to Lincoln and then filed this action. The parties filed cross-motions for summary judgment which were decided in this order. The parties agreed that the appropriate standard of review was abuse of discretion because the plan conferred discretionary authority on Lincoln to determine benefit eligibility. Under this standard, the court ruled that Lincoln did not adequately consider the evidence presented by Learn. Learn presented evidence from several doctors demonstrating objective decline in his cognitive abilities due to his “wildly fluctuating” thyroid levels, but none of these doctors’ names appeared in the denial, nor did Lincoln describe any of their assessments of Learn’s diagnoses, impairments, and ability to work. Lincoln also did not address multiple affidavits submitted by Learn from his friends and family attesting to his decline, which it had failed to provide to its reviewing physicians. The court further dismissed Lincoln’s argument that it focused on objective evidence, noting that Lincoln itself had told Learn that objective evidence was not required. In any event, Learn had provided “ample objective evidence” in the form of neurocognitive test results showing “impaired sustained attention and mnestic dysfunction.” Lincoln criticized that testing for lacking validity measures, but the court found “there is no evidence of symptom exaggeration or suboptimal effort by Mr. Learn.” As for whether Lincoln’s decision-making process was “reasoned and principled,” the court ruled that Lincoln “arbitrarily walled off” consideration of Learn’s appeal from the prior time period when Lincoln had approved benefits. Lincoln’s physicians only reviewed records from after the denial date even though Learn’s thyroid fluctuations prior to that date “contributed to lasting and sustained objective cognitive decline” afterward. In short, “Lincoln did not engage with Mr. Learn’s evidence and medical opinions that his wildly fluctuating thyroid levels over years caused permanent cognitive decline.” Lincoln’s decision was thus not the result of a “fair and searching process.” The court granted Learn’s summary judgment motion, denied Lincoln’s, ordered Lincoln to pay Learn back benefits, and permitted Learn to file an application for costs and reasonable attorney’s fees.

Sixth Circuit

Akans v. Unum Life Ins. Co. of Am., No. 3:23-cv-79, 2024 WL 1200301 (E.D. Tenn. Mar. 20, 2024) (Judge Travis R. McDonough). Jeffrey Akans formerly worked as an equipment manager for Harrison Construction and participated in a long-term disability (LTD) plan sponsored by Harrison and insured by Unum Life Insurance Company of America. Akans ceased working in 2018 and submitted a claim for LTD benefits based on his relapsing-remitting multiple sclerosis. Unum approved his benefits beginning in September 2018 under the plan’s “own occupation” provision, notifying Akans that he would be subject to continuing review. In April 2019, Akans’ claim for Social Security disability benefits was approved. In November 2021, following its second review of Akans’ disability status. Unum informed him that it had determined that he was not disabled from performing his own occupation and it was terminating his benefits. Akans appealed, submitting letters of support from two of his treating physicians and additional testing. Unum upheld its decision to terminate benefits and Akans filed suit and moved for judgment on the administrative record. Applying a de novo standard of review of Unum’s decision, the court found that the record demonstrated that Akans could not perform his light-work occupation due to his multiple sclerosis and associated symptoms of “extreme fatigue and dominant spasticity,” which prevented him from functioning safely cognitively or physically. The court found that Akans’ treating neurologist had issued opinions to this effect both before and after Unum terminated his benefits, and that testing supported that his cognitive abilities had declined. The court quite rightly pointed out that opinions from a urologist and a retinal specialist that Akans was not disabled from a urological or optical standpoint were irrelevant to his “fatigue, muscle spasticity, cognitive issues and gait disturbances, which are the reasons he went on disability.” And the court quite logically gave greater weight to the opinion of Akans’ treating neurologist than to the opinions of the doctors whose specialties were so mismatched to the issue at hand. The court was also unpersuaded by the opinions of Unum’s reviewing doctors and disagreed that the record evidence supported their conclusions that Akans’ “symptoms on a good day demonstrate that Akans can work on any day.” The court also faulted Unum for questioning “the validity of the opinions of Akans’s testing as well as his self-reported symptoms,” noting that although “Unum was not required to examine Akans, this lack of examination renders Unum’s claim reviewers’ criticism of his symptoms and testing less persuasive.” Accordingly, the court granted judgment in favor of Akans, concluding that he had met his burden of proving that he was disabled, and that Unum had incorrectly terminated his benefits.

Parks v. Lincoln Nat’l Life Ins. Co., No. 22-12814, 2024 WL 1228968 (E.D. Mich. Mar. 21, 2024) (Judge Shalina D. Kumar). Plaintiff Angie Parks worked as a sales representative in a call center and had a history of anxiety and depression. She stopped working in July of 2020 and submitted a claim for benefits to defendant Lincoln National Life Insurance Company, the insurer of her employer’s long-term disability benefit plan. Lincoln paid benefits for a short period but then terminated them, contending that Parks no longer met the definition of disability. Parks unsuccessfully appealed and then brought this action. The parties filed cross-motions for judgment, which the court decided under the default de novo standard of review. The court first determined “the scope of this dispute.” Lincoln denied Parks’ claim because “the medical evidence did not support restrictions and limitations rendering Parks unable to perform the main duties of her occupation,” but in its briefing Lincoln raised “new reasons” for why Parks’ claim was properly denied. It contended that Parks did not personally visit her doctor – she had telehealth appointments – and thus she did not have the “regular care of a physician” under the plan. Lincoln also argued that the Social Security Administration’s denial of Parks’ application for disability benefits showed that she was “not totally disabled,” and that Parks “never identified ‘specific functional limitations’ from her mental health condition or ‘delineated each of [her occupation’s] Main Duties’ that her mental health condition precluded her from performing.” The court rejected all of these arguments because Lincoln did not assert them in its denial letter. The court then turned to the evidence in the record and found by a preponderance of the evidence that Parks had met her burden of proving disability. The symptoms from which she suffered while Lincoln was paying her claim continued after Lincoln stopped. She continued having “intense depression, anxiety, and mood swings, and even developed new symptoms such as panic attacks and loss of appetite.” Lincoln argued that Parks reduced her psychiatric appointments to once per month, which showed she improved. However, the court stated there was “no basis for the Court to conclude factually that one cannot both have a work-precluding psychiatric condition and rather infrequent treatment changes. Nor does Lincoln provide any basis for the idea that the severity of a psychiatric condition positively correlates with the frequency and intensity of psychiatric treatment.” The court also cited Parks’ low GAF score, mental status findings, and persistence of symptoms despite medication as support for her claim. The court further rejected Lincoln’s argument that Parks submitted insufficient objective evidence, noting that the plan did not require it and Parks’ condition was not susceptible to it. Thus, the court granted Parks’ motion, denied Lincoln’s, and ordered Lincoln to pay back benefits. It also allowed Parks to file a motion for attorney’s fees.

Vandivier v. Corning Inc. Benefits Comm., No. 5:23-CV-71-KKC, 2024 WL 1197868 (E.D. Ky. Mar. 20, 2024) (Judge Karen K. Caldwell). Plaintiff Lee Vandivier worked for Corning Inc. for about 25 years before stopping in 2019 due to deep vein thrombosis. He eventually went through three amputation procedures on his left leg, and suffered from other medical conditions as well. He submitted claims under Corning’s employee short-term and long-term disability benefit plans, which were both approved by the insurer of the plans, Metropolitan Life Insurance Company. However, MetLife denied Vandivier’s claim for “total and permanent disability benefits” under Corning’s pension plan, which required him to be “unable to engage in any substantial gainful activity.” Vandivier sued and filed a motion for judgment, as well as a motion to strike defendants’ supplement to the administrative record. The court addressed the motion to strike first. Vandivier argued that defendants supplemented the record hours after he filed his motion for judgment, and thus he was prejudiced in the preparation of his motion. The court disagreed and denied the motion, ruling that there was no prejudice because Vandivier had the documents at issue (the short-term and long-term disability claims files) before he even filed his complaint. Furthermore, Vandivier himself could have moved to supplement the record with the claim files, but chose not to. The court then addressed the merits of Vandivier’s total and permanent disability claim under the “arbitrary and capricious” standard, which the parties agreed was the appropriate standard. Vandivier argued that even if the court accepted the findings of MetLife’s reviewing physician, it should still rule in his favor because that physician’s restrictions and limitations were not even compatible with the Social Security Administration’s definition of sedentary work capacity. However, the court stated that the SSA “itself recognizes that ‘a finding that an individual has the ability to do less than a full range of sedentary work does not necessarily equate with a decision of ‘disabled.’’” Thus, lack of sedentary work capacity “does not necessarily render him totally and permanently disabled under this ERISA plan.” This left the issue of what work Vandivier could perform. Vandivier contended that MetLife’s analysis of this issue was flawed because it did not hire a vocational expert. The court ruled that MetLife was not required to do so, and noted that Vandivier did not offer a vocational report in support of his claim either. Furthermore, the court stated, “The objective medical evidence indicates that Vandivier can sit a whole day and stand and walk for up to one hour per day. He can climb stairs, and he can lift, carry, push, and pull up to five pounds.” This was consistent with a determination that “Vandivier’s physical limitations do not create ‘such a broad impairment as to preclude [him] from engaging in other suitable occupations.’” Vandivier cited to medical records from his treating physicians opining that he “could not stand or walk at all during an eight-hour workday and could not lift or carry anything,” but the court rejected them because MetLife’s review was more recent and considered additional evidence. Furthermore, none of Vandivier’s doctors responded to MetLife when it provided its report to them for comment. As a result, “the Court finds that MetLife’s decision resulted from a deliberate, principled reasoning process and was supported by substantial evidence,” and thus denied Vandivier’s motion.

Eighth Circuit

Conti v. Lincoln Nat’l Life Ins. Co., No. Civ. 22-1579 (JWB/JFD), 2024 WL 1216386 (D. Minn. Mar. 21, 2024) (Judge Jerry W. Blackwell). Plaintiff Christina Conti filed suit against Lincoln National Life Insurance Co., the insurer and administrator of the disability benefit plan in which she was a participant, after Lincoln terminated her long-term disability (LTD) benefits. Applying a de novo standard of review, the court concluded that “it is more likely than not that Conti remained unable to perform her job in the months after her benefits were terminated” and that Lincoln therefore improperly terminated her benefits. As an initial matter, the court rejected Lincoln’s argument that Conti was required to supply continuous proof of her inability to work, finding no such requirement in the plan. This mattered because “Lincoln never told Conti what proof of her physical limitations she failed to supply,” nor did Lincoln “require Conti to undergo a functional capacity or similar examination of her physical abilities, even though the Plan authorizes such a demand and Conti’s refusal would be grounds to terminate her claim.” The court found that “Lincoln impermissibly converted Conti’s disability process into a ‘guessing game,’” which was “not reasonable under the circumstances and weighs against denying benefits.” Weighing the totality of evidence, the court found that “Conti’s fibromyalgia, multiple arthralgias, and small fiber neuropathy, her repeated reports of symptoms and limitations consistent with those conditions, and Dr. Palguta’s years-long acceptance of Conti’s reports as precluding her ability to work make it more likely than not that Conti remained unable to perform her job” as of the date that Lincoln terminated her benefits. Moreover, the court noted that none of Conti’s providers found her not credible and none opined that her mental condition was the reason she could not work. Nor did her failure to follow every recommended treatment undermine her credibility. Moreover, the court found that the fact that she went camping or traveled to see medical providers in other states did not mean she could sustain that level of activity continuously. The court also found credible Conti’s treating physician, who had diagnosed her with severe fibromyalgia in 2019 after she reported extensive pain and showed tenderness in all eighteen trigger points used to diagnose the condition. Indeed, the court pointed out that the reviewing doctors failed to appreciate that “Conti’s history of normal and unremarkable examination results reinforced fibromyalgia as the likely culprit.” The court additionally found Conti’s disability supported by her award of Social Security disability benefit award and by Lincoln’s previous award of benefits based on information related to her fibromyalgia that did not significantly change between Lincoln’s award and termination of her benefits. Despite the court’s nuanced analysis of Conti’s condition and its many criticisms of Lincoln’s own analysis, the court remanded to Lincoln to determine whether Conti also qualified for benefits under the “any occupation” plan standard applicable after 24 months of benefits. The court noted that it would assess attorney’s fees and the exact amount of interest to be awarded for the months in which Conti was wrongfully denied benefits after the parties submitted briefs or reached an agreement on these matters.

Whitehouse v. Unum Life Ins. Co. of Am., No. CV 22-1736 (JWB/ECW), 2024 WL 1209230 (D. Minn. Mar. 21, 2024) (Judge Jerry W. Blackwell). This second disability benefit ruling by Judge Blackwell this week involves Sara Whitehouse, who is a licensed physician and a full-time addiction medicine specialist at a hospital in St. Paul, Minnesota. The hospital was a COVID-19 patient deployment center, and in March of 2020 Whitehouse contracted COVID. She returned to work shortly thereafter but continued having difficulty with breathing and extreme fatigue. She left work again and kept treating with her physicians. During this time she was diagnosed by the Mayo Clinic as meeting criteria for chronic fatigue syndrome and central sensitization disorder. Eventually she progressed through a part-time return to work program and was able to return to work full-time in 2022. Whitehouse submitted claims for short-term and long-term disability benefits under her employer’s disability benefit plan, which was insured by defendant Unum Life Insurance Company of America. Unum approved her short-term claim but only approved partial benefits for her long-term claim. Whitehouse unsuccessfully appealed and then brought this action, where the parties filed cross-motions for judgment. Under de novo review, the court criticized the report by Unum’s doctor, Scott Norris. The court stated that his credibility was questionable because he accepted subjective symptom reports when they favored Unum but rejected them when they favored disability. Dr. Norris also failed to analyze Whitehouse’s symptoms collectively, focused too strictly on a lack of specific work restrictions, and “dismissed certain materials as ‘not time-relevant,’” which was “hardly a full and credible evaluation of Whitehouse’s claim.” Furthermore, Dr. Norris inappropriately faulted Whitehouse for “failing to provide objective evidence to verify symptoms that Unum defines as unverifiable, and relies on her history of normal test results despite Whitehouse being diagnosed with a condition that accounts for individuals with a normal test history.” The court then examined the medical records and determined that they supported Whitehouse’s claim that she suffered from chronic pain and severe fatigue throughout the disability period. Her symptoms were consistently documented, her physicians agreed that she had restrictions and limitations, and she complied with all prescribed treatment, including the pain management treatment program that allowed her to finally return to work. The court thus determined that Whitehouse was disabled and entitled to benefits, and granted her motion. Finally, the court addressed ancillary matters, ruling that (1) Whitehouse’s Time Off Time Away earnings functioned as accumulated sick leave under the policy, not as disability earnings, and thus they could be deducted from the benefits owed; (2) Whitehouse was entitled to prejudgment interest; and (3) Whitehouse could file a motion for attorney’s fees, which would likely be successful because “a prevailing ERISA plaintiff rarely fails to receive fees.”

Eleventh Circuit

Cottingim v. ReliaStar Life Ins. Co., No. 8:22-CV-1235-CEH-CPT, 2024 WL 1156483 (M.D. Fla. Mar. 18, 2024) (Judge Charlene Edwards Honeywell). Plaintiff Kevin Cottingim was Vice President of Human Resources for EmployBridge, LLC. He stopped working in 2020 based on a primary diagnosis of vascular dementia with behavioral disturbance and submitted a claim for short-term and long-term disability benefits under EmployBridge’s benefit plans, which were insured by defendant ReliaStar. ReliaStar denied Cottingim’s claims and this action ensued, in which the parties filed cross-motions for summary judgment. ReliaStar denied Cottingim’s claim because neuropsychological testing showed that although he had some deficits he performed “within normal limits,” and he did not pursue treatment recommended by his providers. Cottingim responded that ReliaStar’s decision did not account for the demands of his occupation, which required higher than average cognitive functioning, and did not acknowledge his cognitive decline after 2019. The court applied the Eleventh Circuit’s six-step Blankenship test. Cottingim argued that ReliaStar did not have discretionary authority in interpreting the plan, and thus the court should give its decisions no deference. However, the court determined that Cottingim did not get past the first step of the test, which required him to prove that ReliaStar’s decision was “de novo wrong,” and thus declined to address his standard of review argument. The court ruled that ReliaStar appropriately used the “e-DOT” vocational resource to determine Cottingim’s occupation, and that he had not demonstrated he was unable to perform that occupation. The court found that Cottingim’s brain scans were “essentially unchanged,” his neuropsychological testing was largely normal, and “medical records regarding his memory loss and inability to focus appear primarily related to his making a disability claim, as opposed to any ongoing regular treatment and care.” As a result, “the medical evidence submitted shows that his condition stayed the same or improved…and failed to reflect disabling restrictions or limitations.” The court dismissed statements from Cottingim’s co-workers, noting that they were not still employed by EmployBridge, and emphasized that Cottingim had not submitted any documents from EmployBridge showing a decline in performance. The court also suggested that any difficulties Cottingim might have had at work were due to alcoholism, which he had refused to treat, thus separately justifying the denial of his claims. As a result, the court granted ReliaStar’s motion for summary judgment and denied Cottingim’s.

Life Insurance & AD&D Benefit Claims

Seventh Circuit

Wojcik v. Metropolitan Life Ins. Co., No. 22-CV-06518, 2024 WL 1214570 (N.D. Ill. Mar. 21, 2024) (Judge Sharon Johnson Coleman). Jerold Wojcik had accidental death insurance through an ERISA-governed employee benefit plan when he died in August of 2019. He was found in his car, which had caught on fire. He was “in a pugilistic stance” with a vaping device in his hand; next to him was an open gasoline can and an empty bottle of Prozac. The medical examiner ruled that Mr. Wojcik died of “thermal and inhalation injuries due to a car fire,” and had “a higher than therapeutic level of Prozac in his blood,” but the “manner of death” was “undetermined” because it was unclear if the fire had been set intentionally. Mr. Wojcik’s wife, plaintiff Sharon Wojcik, submitted a claim for benefits to the insurer of the plan, MetLife, but MetLife denied it, contending that there was no proof that Mr. Wojcik’s death was an “accident” as defined by the plan. Ms. Wojcik filed this action and the parties filed cross-motions for summary judgment. The court applied the “arbitrary and capricious” standard of review because the plan granted MetLife discretionary authority to determine benefit eligibility. MetLife contended that Ms. Wojcik had the burden of submitting written proof that Mr. Wojcik’s death happened by accident, and she did not meet that burden because she did not submit anything in support of her claim, even after she was given multiple extensions to appeal. Thus, MetLife stated that it was reasonable to rely on the medical examiner’s report, which stated that the manner of death was “undetermined.” The court agreed: “Plaintiff never submitted evidence, even though the Plan required her to do so, which showed the death happened by accident.” Ms. Wojcik argued that MetLife had a duty to collect additional evidence showing that the death was an accident, but she cited no authority for this proposition, and the court stated it was “well settled in this circuit that an insurance company may reasonably rely on its administrative records in the absence of additional evidence when determining coverage.” The court also ruled that MetLife’s conflict of interest was insufficient to tip the balance in Ms. Wojcik’s favor. Thus, the court granted MetLife’s summary judgment motion and denied Ms. Wojcik’s.

Pension Benefit Claims

Ninth Circuit

Mills v. Molina Healthcare, Inc., No. 2:22-cv-01813-SB-GJS, 2024 WL 1216711 (C.D. Cal. Mar. 20, 2024) (Judge Stanley Blumenfeld, Jr.). In this case, participants in a defined contribution pension plan sponsored by their employer and the plan’s administrator, Molina Healthcare, challenged certain indexed target date funds (TDFs), claiming that Molina and other Molina-related fiduciaries, as well as the plan’s investment advisor, flexPath Strategies LLP, breached their duties in selecting and retaining these TDFs. Ultimately, after the court granted in part and denied in part motions to dismiss and certified a class of all participants invested in any of these indexed TDFs sponsored by flexPath, the case proceeded to a bench trial. In this decision, the court issued a final judgment in defendants’ favor because plaintiffs failed to prove that the plan suffered a loss and therefore failed to prove damages. The court was persuaded that the flexPath TDFs did not cause plan losses because they outperformed all three comparator benchmark TDFs selected by defendants’ expert, Dr. John Chalmers, as well as most other to-retirement TDFs. The court found unreliable the opinion of plaintiffs’ expert, Dr. Gerald Buetow, who concluded that the plan had suffered significant losses based on his selection of four other indices that, as it turned out, were the top four TDF performers during the period. Among other reasons for rejecting Dr. Buetow’s opinion, the court found his analysis unreliable because, although Dr. Buetow performed quantitative analysis to determine the likely top performers during the relevant period using data points available at the beginning of the period, he did not then select the indices that received top scores using his own calculations. Nor could he explain to the court’s satisfaction why he rejected the top scorers. Therefore, relying on Dr. Chalmers’ opinion, the court found that the plan suffered no losses. On this basis, the court saw no need “to determine whether any Defendant breached its fiduciary duties of prudence, loyalty, or compliance with plan documents or engaged in a prohibited transaction, whether any such breach or prohibited transaction occurred within the repose period, or whether any defendant may be vicariously liable for a co-defendant’s breach.” The court did briefly address the other remedy, disgorgement, that the plaintiffs sought in addition to damages. The court found that plaintiffs failed to explain or quantify what exactly they were seeking in this respect other than the fees that flexPath received in connection with the challenged investments, and failed to show that the investment management fees were linked specifically to the challenged investments or obtained through the use of plan assets.   

Plan Status

Third Circuit

Verdone v. Rice & Rice, PC, No. 23-CV-04224-RMB-AMD, 2024 WL 1191981 (D.N.J. Mar. 20, 2024) (Judge Renée Marie Bumb). This decision begins, “Sibling squabbles can get downright nasty.” Plaintiff Catherine Verdone and defendant Nancy Rice are sisters and lawyers. Rice established the law firm Rice & Rice with the assistance of Verdone, who was employed by the firm. Rice also established a real estate holding company called CTARP, which Verdone alleged was created “to provide tuition assistance and retirement income” to the firm’s employees, including Verdone. Verdone alleged that she invested in CTARP and had an oral agreement with Rice that she would receive 35% of its net profits when she retired. When Verdone informed Rice she was planning on retiring earlier than planned, a dispute arose between the sisters regarding their rights and obligations relating to CTARP. Their relationship at work deteriorated as well, with Verdone accusing the firm of questionable billing and accounting practices. Eventually the firm terminated Verdone, and she filed this action in New Jersey state court “raising claims ranging from whistle-blower retaliation under CEPA to anticipatory repudiation of the Retirement Agreement to unjust enrichment.” Defendants, which included Rice, the law firm, Rice’s law partner, and CTARP, removed the case to federal court asserting federal question jurisdiction under ERISA and diversity jurisdiction. Verdone filed a motion to remand and defendants filed a motion to dismiss, both of which were decided in this order. The court first addressed whether Verdone’s claims were preempted by ERISA. The court determined that the retirement agreement involving CTARP was not an ERISA benefit plan. The court agreed with defendants that ERISA benefit plans could be created through oral representations, and there were “some facts suggesting Rice created an ERISA retirement plan for Verdone’s benefit.” However, this was not enough because “no reasonable person could ascertain the procedures for receiving the benefits under the Retirement Agreement.” There were “no allegations on how the retirement income would be paid to Verdone,” and no explanation for how Verdone could challenge a benefit denial decision. Furthermore, the alleged retirement plan had no ongoing administrative scheme, the assets were not held in trust, and there was no evidence that the plan had named fiduciaries or procedures for amendment, all of which were required by ERISA. In short, “Defendants’ request for removal based on ERISA’s complete preemption has a lot of blanks that they have not filled in.” The court further ruled that it did not have diversity jurisdiction because of the forum defendant rule; Verdone had named Rice’s law partner as one of the defendants and she was a New Jersey citizen. The court rejected defendants’ argument that the partner had been fraudulently joined, finding her to be a reasonable defendant under Verdone’s state law claims. Thus, the court determined that it had no jurisdiction over the matter. It granted Verdone’s motion to remand and denied defendants’ motion to dismiss as moot, but declined to award Verdone fees relating to the removal.

Sixth Circuit

Johnson v. Dodds Bodyworks, Inc., No. 2:23-CV-741, 2024 WL 1254125 (S.D. Ohio Mar. 25, 2024) (Judge Edmund A. Sargus, Jr.). Plaintiff Harold Jeffery Johnson worked for defendant Dodds Bodyworks for more than 30 years. He alleged he was injured in an auto accident in 2021, after which he informed Dodds that he needed a six-week medical leave of absence to recover. Dodds then terminated him. Johnson contended that upon termination he was entitled to an incentive bonus, retirement benefits, and a Ford F-150 truck, and that Dodds failed to pay up. The claim for retirement benefits was based on an oral conversation between Johnson and one of Dodds’ owners, who assured Johnson that “a written agreement was unnecessary” because “her word was golden.” Johnson filed this action in Ohio state court alleging nine state law causes of action. Dodds removed the case to federal court, citing ERISA preemption, and moved to dismiss Johnson’s breach of contract claim. The court determined that it did not have jurisdiction over the action because ERISA did not apply. “Here, the only benefit Johnson seeks which could even be remotely characterized as a ‘benefit plan’ would be the alleged oral agreement for the Retirement Payment, where he would receive 25% of Dodds’ business value upon retirement or termination. This is not a ‘benefit plan’ under ERISA.” The court explained that Johnson’s “one-time” retirement payment “does not require any administrative procedures, is not ongoing, and requires Dodds ‘[t]o do little more than write a check,’” which was insufficient to qualify as a benefit plan under ERISA. The court thus did not reach the merits of Dodds’ motion and denied it as moot. It declared the removal improper and remanded the case to state court for further proceedings.

Pleading Issues & Procedure

Sixth Circuit

McKee Foods Corp. v. BFP, Inc., No. 23-5170, __ F. App’x __, 2024 WL 1213808 (6th Cir. Mar. 21, 2024) (Before Circuit Judges McKeague, Readler, and Davis). The Sixth Circuit pithily introduced this action as follows: “McKee Foods Corporation (‘McKee’) maintains that appellee BFP, Inc. d/b/a Thrifty Med Plus Pharmacy (‘Thrifty Med’) has engaged in a three-year campaign to get reinstated into McKee’s Prescription Drug Program (‘PDP’) pharmacy network – a campaign that has included Thrifty Med filing multiple administrative complaints against McKee and actively lobbying to change Tennessee pharmacy laws in its favor.” McKee filed this action, contending that it was entitled to injunctive and declaratory relief under ERISA because ERISA preempts Tennessee’s “any willing pharmacy” laws, which arguably required McKee to include Thrifty Med in its approved network of pharmacies, which it did not want to do. However, in February of 2023 the district court dismissed McKee’s action as moot because Tennessee had amended its laws to “effectively nullify the actual controversy that supported the origination of this case.” (Your ERISA Watch reported on this decision in our February 15, 2023 edition.) McKee appealed. The Sixth Circuit agreed with McKee that the new amendments “did not render its claims moot because the new law did not substantially and materially amend the pertinent statutory language[.]” The court ruled that “both provisions state that [pharmacy benefit managers] or covered entities shall not interfere with a patient’s right ‘to choose a contracted pharmacy or contracted provider of choice[.]’” The amendments were more specific as to how covered entities were prohibited from interfering, but these changes were only “relatively minor adjustments” which “do not move the needle as it relates to harm.” McKee also challenged the district court’s ruling that its claims were moot under the “voluntary cessation” doctrine. Again, the Sixth Circuit agreed. Thrifty Med argued that Tennessee had dismissed its administrative complaints and it had stipulated that it had no “current plans” to seek reinstatement in McKee’s plan. However, the court noted that “the burden to demonstrate mootness through voluntary cessation is substantial,” and “Thrifty Med’s argument falls short. Read liberally, its stipulations suggest a suspension of conduct, not the termination of conduct.” The Sixth Circuit examined Thrifty Med’s actions in pursuing relief and concluded that Thrifty Med was simply not credible: “Thrifty Med’s timing in ceasing its efforts to obtain reinstatement raises suspicion that it may not be genuine.” Most notably, Thrifty Med only contended it was not planning on seeking reinstatement after Tennessee passed amendments “explicitly applicable to ERISA plans,” which “would seemingly benefit its cause” and thus “renders the timing suspect.” Thus, the Sixth Circuit reversed the district court’s mootness ruling and remanded for further proceedings in which the district court will presumably address McKee’s preemption argument.

Seventh Circuit

Williams v. Noble Home Health Care, LLC, No. 2:23-CV439-PPS/JEM, 2024 WL 1193630 (N.D. Ind. Mar. 20, 2024) (Judge Philip P. Simon). Plaintiff Lynette Williams worked for defendant Noble Home Health Care, which terminated her in 2019. She alleges that when she was fired Noble failed to offer her continuation of her health insurance coverage in violation of ERISA’s COBRA provisions. Noble filed a motion to dismiss in which it did not challenge the substantive adequacy of Williams’ claims, but instead argued that Williams’ complaint violated Federal Rule of Civil Procedure 8, which requires “a short and plain statement of the claim showing that the pleader is entitled to relief.” In a brief order, the court denied the motion, ruling that Williams’ complaint “passes the ‘two easy-to-clear hurdles’ imposed by Rule 8(a)(2) in that the pleading provides sufficient detail to give Noble fair notice of her claims and the basis for them, and plausibly suggests that Williams has a right to relief.” Noble complained that Williams used “conclusory, inflammatory, and accusatory” language in her complaint, but the court considered this to be a “startling irony” because Noble was “throwing stones from a glass house.” For example, Noble contended that Williams “presents a fantastical tale of depravity and abject cruelty that might find a place in Hollywood, were it actually true.” Indeed, the court considered Noble to be “the worse offender, using expressions such as ‘wildly offensive,’ ‘wild-eyed allegations,’ and ‘utter nonsense of the highest order.’” The court cautioned that “a party’s argument is never enhanced by unnecessary vehemence.”

Provider Claims

Fourth Circuit

Innovations Surgery Ctr., P.C. v. UnitedHealthcare Ins. Co., No. 8:21-CV-2680-PX, 2024 WL 1214003 (D. Md. Mar. 21, 2024) (Judge Paula Xinis). Plaintiffs Innovations Surgery Center and Center for Gyn Surgery challenge defendant UnitedHealthcare’s denials and partial payment of benefit claims arising from nearly 600 gynecological and surgical procedures that plaintiffs performed on an out-of-network basis on 277 patients insured by United. Plaintiffs asserted a host of state law and ERISA-based claims. Among these were claims for failure to pay benefits in violation of ERISA and a claim for statutory penalties under ERISA. Previously, United filed a motion to dismiss, which the court partially granted. In its order the court directed the parties to exchange informal discovery “to ascertain which of the 590 disputed claim lines were covered by ERISA versus non-ERISA Plans, and whether the Insureds had assigned recovery rights to Plaintiffs.” United ultimately agreed to produce “60 representative Plans which covered some, but not all, of the 590 claim lines that are the subject of this case.” Defendants then filed a new motion to dismiss which was decided in this order. The court granted United’s motion as to plaintiffs’ direct claims under state law because United had not been unjustly enriched and there was no implied-in-fact agreement between plaintiffs and United. As for the claims assigned to plaintiffs by their patients, the court ruled that plaintiffs had not alleged any “specific representations, inducements, or statements on which the Insureds relied” which might form a basis for fraudulent conduct in violation of the Maryland Consumer Protection Act. On the ERISA claims, United argued that plaintiffs had not exhausted their administrative remedies, but the court ruled that it was premature to rule on this defense. The court noted that plaintiffs had alleged their efforts in pursuing their claims, “which included pursuing Defendants’ ‘internal appeals mechanism’ and informal channels such as letters, emails, phone calls, and proposed meetings.” Furthermore, not all plan documents had been produced, which made it difficult to determine if their procedures had been followed. Next, United argued that it could not be held liable for statutory penalties under ERISA. The court agreed, ruling that such claims could only be made against plan administrators, not claim administrators like United. Furthermore, the court ruled that plaintiffs could not pursue statutory penalties because the patient assignments did not include a right to pursue such penalties; it only authorized plaintiffs to seek payment of benefits. In the end, only plaintiffs’ claims for breach of contract under non-ERISA plans and unlawful denial of benefits under ERISA plans survived. The remaining claims were dismissed, although the court left open the possibility that plaintiffs could amend their complaint on a subset of their claims if discovery warranted it.

Seventh Circuit

Affiliated Dialysis of Joliet, LLC v. Health Care Serv. Corp., No. 23 CV 15086, 2024 WL 1195607 (N.D. Ill. Mar. 20, 2024) (Judge Lindsay C. Jenkins). Plaintiff Affiliated Dialysis of Joliet, LLC provides dialysis treatment to patients, some of whom are insured by defendant HCSC. Affiliated had a contract with HCSC, which it terminated in 2020, although it continued to provide treatment to HCSC insureds. According to Affiliated, after 2020, instead of reimbursing Affiliated at out-of-network rates, HCSC continued reimbursing Affiliated at the lower rates in the terminated contract, even though Affiliated sought and received authorization for all of the services it provided. Affiliated brought this action in Illinois state court alleging violation of implied contract, or, in the alternative, quantum meruit. HCSC removed the case to federal court based on ERISA preemption and Affiliated moved to remand. The court noted that HCSC had paid Affiliated for its services, and thus “[t]he dispute here is whether HCSC paid Affiliated enough for those services… Courts have consistently held that an insurer’s alleged failure to adequately pay a medical provider constitutes a separate, independent legal duty that is incompatible with ERISA preemption[.]” HCSC contended that its contract with Affiliated controlled the correct rate. However, “the Agreement, which is focused on payment rates for specific services, has nothing to do with the ERISA plan. HCSC’s legal duty to adequately pay Affiliated is separate from its legal duty to cover the treatment as required under the ERISA plan.” In short, “Because this is a dispute over the rate of payment as opposed to the right of payment,” the court granted Affiliated’s motion and remanded the case. However, the court determined that even if HCSC’s removal was incorrect, it was reasonable, and thus refused to award Affiliated fees, noting that “the distinction between the right to payment and rate of payment has not been thoroughly explained in this district, nor explicitly adopted by the Seventh Circuit.”

It’ s been another slow-ish week here in ERISA Watch territory, with no case of the week. But keep reading for contrasting approaches (and outcomes) in pension investment fee cases, the latest in the Cloud case challenging the NFL’s disability benefit plan, and a case involving the NBA’s COVID-19 vaccination policy.

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

Breach of Fiduciary Duty

Third Circuit

Binder v. PPL Corp., No. 5:22-CV-00133-MRP, 2024 WL 1096819 (E.D. Pa. Mar. 12, 2024) (Judge Mia R. Perez). Plaintiffs are current and former employees of defendant PPL Corporation who allege that PPL and other defendants breached their fiduciary duties under ERISA by failing to prudently monitor the investments in PPL’s retirement plan. Specifically, plaintiffs allege that defendants should have terminated the plan’s arrangement with the Northern Trust Focus Funds, which caused the plan to unnecessarily invest in higher-cost shares with “unusual transaction costs and a high turnover rate.” Defendants filed a motion to dismiss. At the outset, the court noted that ERISA has a six-year statute of repose, and thus plaintiffs were time-barred from arguing that defendants’ selection of the Focus Funds in 2013 itself was a breach of fiduciary duty. The court also denied defendants’ request for judicial notice of 24 exhibits because they were outside the pleadings. On the merits, defendants argued that the complaint’s first count for imprudent monitoring and retention of the Focus Funds did not provide “meaningful benchmarks” for comparison. The court noted that the Third Circuit had not yet adopted a meaningful benchmark pleading requirement, and thus relied on the Third Circuit’s decision in Sweda v. University of Pennsylvania for guidance. The court ruled that plaintiffs’ allegations in this case were similar to those in Sweda because they had “provided substantial circumstantial evidence” that the Focus Funds were underperforming. The court again relied on Sweda in rejecting defendants’ argument regarding the second count of the complaint, which alleged that defendants imprudently retained higher-cost shares when lower-cost shares were available. The court ruled that plaintiffs had sufficiently alleged that a large plan like PPL’s, with over $1 billion in assets, could easily obtain lower-cost shares due to its bargaining power, but did not do so, thus resulting in the plan paying “150% to 350% more in fees.” Finally, the court ruled that because plaintiffs’ first two counts survived, its third derivative claim that defendants failed to monitor plan fiduciaries survived as well. The court thus denied defendants’ motion to dismiss in its entirety.

Eighth Circuit

Rodriguez v. Hy-Vee, Inc., No. 4:22-CV-00072-SHL-WPK, 2024 WL 1070982 (S.D. Iowa Mar. 7, 2024) (Judge Stephen H. Locher). Plaintiff Theresa Rodriguez and other employees of the Midwest grocery store chain Hy-Vee brought this class action alleging that Hy-Vee and other defendants breached their fiduciary duties to plaintiffs by overcharging recordkeeping fees in Hy-Vee’s 401(k) plan. Defendants filed a motion to exclude the testimony of plaintiffs’ expert and a motion for summary judgment. The court granted defendants’ summary judgment motion. The court stated that the record showed defendants “had adequate processes in place to monitor and evaluate the reasonableness of recordkeeping fees throughout the class period.” This included retaining an outside consultant, obtaining benchmarking reports six times over a four-to-five-year period, and initiating an “extensive RFI [request for information] process” in 2020. Defendants also reduced fees during the relevant time period, “which points toward prudence.” The court also ruled that plaintiffs “have not identified meaningful benchmarks against which to compare the Plan’s recordkeeping fees.” Plaintiffs’ expert identified four allegedly similar plans, but the court ruled that these were not an “apples-to-apples comparison” because the administrators of those plans, Vanguard and Fidelity, declined to respond to Hy-Vee’s RFI, thereby demonstrating that “Hy-Vee literally could not have gotten the same services for the same price from those providers.” The court also criticized plaintiffs’ expert for only measuring fees for one year and calculating those fees using a different methodology. Even if plaintiffs’ comparators did provide a meaningful benchmark, the court ruled that they were insufficient to prove that the fees were “excessive relative to the market as a whole.” The court stressed plaintiffs’ higher burden at the summary judgment stage: “[T]he court views the existence of comparator plans as a necessary but not independently sufficient condition for a plaintiff to survive summary judgment. The plaintiff also must produce evidence showing, among other things, where the defendant’s plan falls in the market as a whole for similar plans…. Plaintiffs here have not done so.” The court also dismissed plaintiffs’ concerns regarding the operation of the plan, ruling that defendants’ actions were the result of deliberate choices that properly evaluated costs and benefits. In short, the court concluded that “no reasonable factfinder could conclude that Defendants breached their fiduciary duties in their handling of recordkeeping fees.” Because the court granted defendants’ summary judgment motion, it denied as moot their motion to exclude plaintiffs’ expert.

Snyder v. UnitedHealth Grp., No. Civil 21-1049 (JRT/DJF), 2024 WL 1076515 (D. Minn. Mar. 12, 2024) (Judge John R. Tunheim). This case begins with a rather blunt conclusion: “Because a reasonable trier of fact could reasonably conclude that Plaintiff Kim Snyder caught Defendant UnitedHealth Group Inc. with its hand in the cookie jar, the Court will substantially deny United’s motion for summary judgment.” The court found “genuine disputes of material fact as to whether United breached its duties of prudence and loyalty…by investing its employees’ 401(k) savings in underperforming Wells Fargo (‘Wells’) funds for more than a decade and allowing United’s business relationship with Wells to influence that allegedly imprudent retention.” The court also found genuine issues of material fact “as to whether Wells’s fees were reasonable, and thus whether United engaged in a prohibited transaction.” The court rightly referred to the factual background as a “tangled” web involving the 401(k) plan’s target date fund default investment, which changed during the relevant period from a conservative, lower risk, lower reward approach (the “equal weighted TDF”) to what United refers to as an “enhanced TDF,” both of which were Wells Fargo products. The basic problem, as the plaintiff saw it, was that the equal weighted TDF had chronically underperformed and, although United apparently recognized the need to select a different default investment, it took too long to switch to the enhanced TDF, which was another Wells Fargo fund that plaintiff alleged was inappropriately selected. Indeed, despite not ranking in the top three recommendations from the Committee tasked with selecting a new fund, the Wells Fargo enhanced TDF was awarded the lucrative plan contract. The plaintiff alleged that this selection was improperly influenced by the fact that United had lucrative contracts with Wells Fargo as its health insurance provider, relationships that plaintiff alleges were expressly considered during the TDF selection process. United, unsurprisingly, disputed most of this, but disputes of this sort do not summary judgment make. Thus, after a somewhat lengthy and detailed analysis of the claims and the evidence pointed to by both sides, the court concluded that plaintiff could “proceed on her fact-bound claims that United acted imprudently and disloyally when it retained and re-selected Wells as the Plan’s default TDF provider,” as well as her claim that these funds were not reasonable investments for the plan. The court also concluded that plaintiff had adduced sufficient evidence to show that United had engaged in a prohibited transaction in selecting the Wells Fargo replacement fund, and that there were material disputes between the parties as to the reasonableness of the fees paid with respect to the fund, an issue on which defendants bore the burden of proof. The court, however, agreed with United that plaintiff had not shown that United “violated any enforceable provision of a governing plan document,” concluding that plaintiff had failed to show that defendants acted inconsistently with the plan’s investment policy statement. The court also concluded that the individual members of the board of directors were not fiduciaries because they had no discretionary authority or control over the plan and no duty to monitor the other plan fiduciaries. Thus, the court dropped the board as a defendant in the action. Although it was not quite a complete victory for plaintiff, it was a significant one and the bulk of the case will proceed.

Disability Benefit Claims

Second Circuit

Johnson v. The Hartford, No. 22-CV-06394 (PMH), 2024 WL 1076685 (S.D.N.Y. Mar. 12, 2024) (Judge Philip M. Halpern). Melinda Johnson, a nurse at a residential treatment facility, applied for long-term disability benefits due to the side effects of medication prescribed for the effects of smoke inhalation following a fire at the facility. Hartford approved the benefits for the 24-month “own occupation” period, and also initially approved benefits thereafter under the “any occupation” provision of the plan. However, after Hartford retained both a private investigator to conduct surveillance of Ms. Johnson and a doctor to conduct a medical examination, as well as a second medical doctor to conduct a “peer review” by speaking to Ms. Johnson’s psychiatrist, United terminated her benefits, and affirmed this decision on administrative appeal. Plaintiff filed suit for benefits and the parties cross-moved for summary judgment. Although plaintiff argued that Hartford’s decision was arbitrary and capricious because its five reviewing doctors’ determinations were contradicted by plaintiff’s treating physician, the court concluded that this line of reasoning had been rejected by the Supreme Court in Black & Decker Disability Plan v. Nord. Instead, the court concluded that “[s]ubstantial evidence in the form of an independent medical examination report and multiple independent peer review reports support Defendant’s determination.” On this basis, the court granted Hartford’s motion for summary judgment.

Fifth Circuit

Cloud v. Bert Bell/Pete Rozelle NFL Player Ret. Plan, No. 22-10710, __ F.4th __, 2024 WL 1143287 (5th Cir. Mar. 15, 2024) (per curiam, dissent by Circuit Judge James E. Graves, Jr.). In June of 2022, after a week-long bench trial, the district court in this case issued a lengthy, scathing decision in which it excoriated the National Football League’s retirement benefit plan for its shoddy claim handling. The court issued judgment in favor of plaintiff Michael Cloud on his claim that he was entitled to reclassification for the highest level of disability benefits available under the plan due to his neurological impairments. (Your ERISA Watch named that decision one of the five best of 2022.) The court also awarded Cloud $1.2 million in attorney’s fees. However, last year the Fifth Circuit overturned Cloud’s win, as we chronicled in our October 11, 2023 edition. Although the Fifth Circuit commended the district court for “expos[ing] the disturbing lack of safeguards to ensure fair and meaningful review of disability claims brought by former players,” and for “chronicling a lopsided system aggressively stacked against disabled players,” these compliments did not translate into success for Cloud. The court ruled that the plan did not abuse its discretion in denying Cloud’s reclassification request because Cloud did not make an appropriate showing of “changed circumstances” as required by the plan. Cloud petitioned for rehearing, but the Fifth Circuit denied his request in this order. Ordinarily we would not report on such a purely procedural decision, but this one contained a dissent by Judge James E. Graves, Jr., who voted in favor of rehearing, stating that “the record does not support the panel’s conclusion.” Judge Graves, like the courts before him, again emphasized that the record paints a “bleak picture” of how the plan handles appeals: “The record indicates that nobody really reads any individual applications or administrative records, there’s really no oversight, and a paralegal for outside counsel drafts the denial letters and adds language, often incorrect, that the board never considered or said, as acknowledged by the panel.” Judge Graves argued that Cloud had overcome these obstacles and proven that he had in fact established a “change in circumstances.” Judge Graves contended that the record showed that (a) Cloud’s reclassification application included new disabilities and conditions, (b) his prior award was solely based on his favorable Social Security decision and not his additional supporting information, which he was free to resubmit, and (c) the plan should have considered his worsening symptoms. Judge Graves also stated that the panel erred in ruling that Cloud had forfeited his claim for changed circumstances because the letter on which it relied only showed that Cloud wanted to make an argument in the alternative in support of his claim, and did not intend to waive anything. Furthermore, the plan itself made no such finding of forfeiture. As a result, Judge Graves “disagree[d] with the panel that Cloud ‘did not’ and ‘cannot’ demonstrate changed circumstances. Accordingly, I dissent from the denial of rehearing en banc.”

Sixth Circuit

Harmon v. Unum Life Ins. Co. of Am., No. 23-5619, __ F. App’x __, 2024 WL 1075068 (6th Cir. Mar. 12, 2024) (Before Circuit Judges Griffin, Thapar, and Nalbandian). Plaintiff Joey Harmon injured his back lifting a treadmill while working as a facilities technician for 24 Hour Fitness. He submitted a claim for benefits under 24 Hour Fitness’ long-term disability benefit plan, which Unum paid for two years but then terminated, determining that Harmon could perform sedentary work. Harmon filed this lawsuit, the district court granted Unum’s motion for judgment on the record, and Harmon appealed. On appeal, the Sixth Circuit noted that the standard of review was “arbitrary and capricious” because the benefit plan gave Unum discretionary authority to determine benefit eligibility. Harmon contended that Unum’s decision was unreasonable because Unum should not have relied on its in-house file-reviewing physician, Unum misinterpreted his doctor’s opinions, and Unum’s vocational analysis was faulty. The court rejected these arguments. The court ruled that the in-house physician’s review was proper because Harmon denied back pain, had a full range of motion in his spine, and had not been prescribed pain medication since 2016. The Social Security Administration had also found that Harmon could perform light work. The court also agreed with the district court that Unum reached out to Harmon’s doctor to resolve any issues with his opinion, and that Unum’s vocational report properly considered that Harris had moved from Memphis to Miami. Finally, the court dismissed Harmon’s concerns regarding Unum’s conflict of interest, ruling that Unum’s weekly reports tracking the opening and closing of claims were insufficient to show that Unum was biased. The Sixth Circuit thus affirmed the district court’s judgment in favor of Unum.

Life Insurance & AD&D Benefit Claims

Sixth Circuit

Bowles v. Estes Express Lines Corp., No. 2:22-CV-2660-SHL-ATC, 2024 WL 1142073 (W.D. Tenn. Mar. 15, 2024) (Judge Sheryl H. Lipman). Zrano Bowles worked for defendant Estes Express Lines and was enrolled in its ERISA-governed optional life insurance employee benefit plan. He married plaintiff Lisa Bowles in 2015 and designated her as his beneficiary under the plan. However, in 2017, premiums stopped being paid for the insurance, although the record was unclear as to why. After Mr. Bowles died in 2021, Ms. Bowles submitted a claim for benefits under the plan, which was denied by the plan’s insurer, Guardian Life Insurance Company of America, on the ground that Mr. Bowles’ coverage had lapsed due to non-payment of premiums. Ms. Bowles brought this action and filed a summary judgment motion against Estes, asserting that Estes breached its fiduciary duty under 29 U.S.C. § 1132(a)(3). Estes filed a motion to strike Ms. Bowles’ motion and a cross-motion for summary judgment asserting that it had done nothing wrong. The court denied Estes’ motion to strike, observing that because Ms. Bowles could not make a claim for benefits against Guardian under § 1132(a)(1)(B), her motion was properly filed against Estes under § 1132(a)(3) as it was her “exclusive remedy” under ERISA. On the merits, the court ruled that Estes was a fiduciary under ERISA because it was the plan administrator. The court then addressed Ms. Bowles’ two arguments for why Estes breached its duties. First, the court ruled that Estes did not breach its fiduciary duty by failing to deduct premiums and remit them to Guardian because these actions were “ministerial” tasks and not “discretionary” ones. If there was a failure by Estes, it was “remedied when Estes notified Mr. Bowles of the lapse in coverage” through his wage statements, which showed “$0.00” for premiums paid, and on Estes’ benefits portal, which informed Mr. Bowles that he had “waive[d] coverage” for his optional life insurance. Second, the court ruled that Estes did not breach a fiduciary duty by failing to notify Mr. Bowles that his coverage would terminate because it had no such duty and made no misrepresentations. Furthermore, as explained above, Estes informed Mr. Bowles that his coverage had lapsed. As a result, the court granted Estes’ motion for summary judgment and denied Ms. Bowles’ motion.

Medical Benefit Claims

Ninth Circuit

Scott D. v. Anthem Blue Cross Life & Health Ins. Co., No. 23-CV-05664-RS, 2024 WL 1123210 (N.D. Cal. Mar. 14, 2024) (Judge Richard Seeborg). Plaintiff Scott D. challenges defendant Anthem’s denial of his claim for mental health benefits related to treatment his son received at an outdoor behavioral health program and a residential treatment center. He brought two claims under ERISA, one for unlawful denial of benefits and one for breach of fiduciary duty. Defendant Anthem moved to dismiss, arguing that plaintiff’s breach of fiduciary duty claim was duplicative of his claim for benefits, and that plaintiff should not be permitted to bring a claim under the Mental Health Parity and Addiction Equity Act. The court noted the “difficulty in establishing whether claims are duplicative at the pleading stage” and ruled that it would be premature to dismiss plaintiff’s breach of fiduciary duty claim. The court stated that plaintiff was seeking relief under this claim that might not be available in his claim for benefits, such as reformation of the plan and equitable surcharge, and thus the claims were not duplicative. As for Anthem’s Parity Act argument, plaintiff responded that he was not asserting a separate Parity Act claim. Instead, he was asserting a Parity Act violation “as an element of his breach of fiduciary duty claim.” Plaintiff alleged that Anthem had violated the Parity Act because it applied less stringent coverage requirements for equivalent intermediate care medical facilities, such as skilled nursing facilities, than it did for mental health residential treatment facilities. The court ruled that these allegations “go beyond the merely conclusory or formulaic” and were “enough to plead an as-applied Parity Act violation.” The court thus denied Anthem’s motion to dismiss.

Lou v. Accenture United States Grp. Health Plan, No. 22-cv-03091-HSG, 2024 WL 1122427 (N.D. Cal. Mar. 14, 2024) (Judge Haywood S. Gilliam, Jr.). Joe Lou, a participant in a healthcare plan sponsored and administered by his employer, Accenture, filed suit after Accenture denied some of his claims for benefits for in-home skilled nursing care for his minor daughter, A.L., who suffered from a rare genetic disorder. Before the court were cross-motions for summary adjudication. At issue was the impact of a separation agreement and waiver that Mr. Lou had signed after filing suit on his claims for coverage. Although Mr. Lou communicated with Accenture in an effort to carve out his claims from the release, Accenture refused to change the language in the way suggested by Mr. Lou, who ultimately signed the agreement with the original language. Ultimately, the court concluded that Mr. Lou had released his claims. The court relied most heavily on the very broad language of the release, which stated that it released “any and all claims of any nature whatsoever,” as well as plaintiffs’ conduct, which the court saw as clearly reflecting plaintiffs’ understanding that the release bore on his claims. The court therefore granted Accenture’s motion for judgment and denied plaintiff’s motion.

Solis v. T-Mobile U.S., Inc., No. 2:23-cv-04024, 2024 WL 1117897 (C.D. Cal. Mar. 14, 2024) (Judge Stephen V. Wilson). Two participants in the T-Mobile healthcare plan, Jannet Solis and Michael Ortega, challenged denials of their benefit claims by United Healthcare, the claims administrator, for out-of-network hiatal hernia repair and gastric sleeve surgery. Plaintiffs first objected to some of the evidence United included in the administrative record. The court held that transcripts of call recordings pertaining to the medical procedures, the National Correct Coding Initiative Policy Manual, and United’s own policies were properly included and therefore overruled plaintiffs’ objections with respect to these materials. The court also agreed with defendants that two expert declarations and some additional medical information that plaintiffs submitted after the bench trial should be excluded. The court found that United’s unilluminating denials did not meet the applicable standard for a “meaningful dialogue” in the Ninth Circuit, thus warranting application of a “tempered abuse of discretion” standard, but not de novo review, as the “procedural violations were not sufficiently flagrant to frustrate ERISA’s underlying purposes.” Having cleared these matters, the court moved on to the merits of the denials. The court had no problem affirming United’s denial of coverage for the gastric sleeve surgery under the plan’s exclusion for weight loss surgery except in narrow circumstances. The court likewise held that United’s conclusion that the hiatal hernia repair was sufficiently related to the weight loss surgery to be excluded was reasonably supported by the evidence. The court therefore concluded that United did not abuse its discretion in denying coverage entirely for the procedures at issue.  

Pension Benefit Claims

Second Circuit

Kowal v. Hooker & Holcombe, Inc., No. 21-CV-1299-LJV, 2024 WL 1094959 (W.D.N.Y. Mar. 13, 2024) (Judge Lawrence J. Vilardo). The two plaintiffs in this case are the daughters of Lynn Keller, who participated in a pension plan sponsored by her employer, HealthNow. Keller stopped working in 2015 when she was diagnosed with cancer, after which she successfully applied for disability benefits. She died in 2020, shortly after receiving pension benefit election forms. Keller completed those forms, but plaintiffs contended that she made a “clerical error” by selecting a life annuity as her pension benefit instead of a benefit with a fixed term or survivor benefit. Defendants, the claim administrators of the plan, refused to “rectify the clerical error,” so plaintiffs sued under ERISA. Defendants filed a motion to dismiss, contending first that plaintiffs lacked standing because they were not “beneficiaries” as defined by ERISA. The court quickly rejected this argument, ruling that this was not a jurisdictional argument, but “an argument that [plaintiffs] do not have a cause of action under ERISA.” The court then addressed defendants’ second argument, which was that plaintiffs failed to state a claim. The court agreed with defendants that plaintiffs “are not entitled to benefits for several reasons.” First, Keller clearly indicated that she had selected a life annuity benefit. Second, even if that election was invalidated, under the terms of the plan her benefits “would ‘default’ to a life annuity under section 5.3 of the Plan,” so plaintiffs still would not be entitled to benefits. Finally, the court noted that even if it ruled that Keller’s benefit election should be changed to an option urged by plaintiffs, Keller died before those benefits were scheduled to commence, which under the plan meant the selection was “void and of no effect.” The court thus granted defendants’ motion to dismiss.

Mauer v. National Basketball Ass’n, No. 23-CV-4937 (JPO), 2024 WL 1116848 (S.D.N.Y. Mar. 13, 2024) (Judge J. Paul Oetken). Plaintiff Kenneth Mauer is a former NBA referee. Before the 2021 season, the league and Mauer’s union implemented a COVID-19 policy that required referees to be vaccinated. Mauer applied for a religious exemption, which was denied on the ground that his beliefs were “not sincerely held.” Mauer was suspended and ultimately terminated in 2022. He and two other terminated referees have sued the league arguing that their terminations were unlawful. He also filed this action challenging the denial of his claim for pension benefits. The pension plan committee denied Mauer’s claim because, due to his other litigation, it was uncertain whether he might return to work as a referee, and thus the committee concluded that he had not “‘attained a distribution event,’ ‘such as retirement or termination of employment,’ within the meaning of the Plan.” Mauer filed a motion for summary judgment, and defendants filed a motion to dismiss. The court granted defendants’ motion in part, ruling that the NBA and NBA Services Corp. were not proper defendants. As for the merits, the court first determined that the appropriate standard of review was “arbitrary and capricious” because the plan “clearly vests the Committee with broad discretionary authority to interpret ambiguous language in the Plan and determine eligibility for benefits.” Under this standard of review, the court examined the key plan language, which provided that benefits are paid upon “termination of employment.” Defendants argued that this term was ambiguous given Mauer’s circumstances, because he might return to work, and thus the court should adopt its interpretation under the deferential standard of review. The court disagreed, ruling that the plan “does not require that severance of the employer-employee relationship be permanent and irrevocable.” Indeed, “The Plan explicitly contemplates that a former referee could be re-hired by the employer,” which undermined defendants’ position. Thus, the court ruled that “Mauer experienced a termination of employment and is thus entitled to his pension benefits in accordance with…the Plan.” The court granted Mauer’s summary judgment motion against the plan and ordered the parties to confer on a proper remedy.

Pleading Issues & Procedure

Seventh Circuit

Bangalore v. Froedtert Health, Inc., No. 20-CV-893-PP, 2024 WL 1051104 (E.D. Wis. Mar. 11, 2024) (Judge Pamela Pepper). This putative class action, in which plaintiff argues that defendants violated their duties of loyalty and prudence under ERISA in the administration of a retirement benefit plan, languished on the docket while the Supreme Court decided Hughes v. Northwestern University. After that decision, which vacated a key Seventh Circuit ruling relied upon by defendants, defendants refiled their motion to dismiss. After briefing on that motion was completed, plaintiff sought leave to file a second amended complaint based on a recent decision from the Seventh Circuit interpreting Hughes, Albert v. Oshkosh Corp. Then, the Seventh Circuit issued its ruling on remand in Hughes, after which plaintiff sought to file a new and different second amended complaint, arguing that the new Hughes decision “narrowed the holding” in Albert and “clarified the pleading standard in ERISA excessive fee cases like this one.” Faced with plaintiff’s motion to file a second amended complaint and defendants’ motion to dismiss his first amended complaint, the court granted plaintiff’s motion and denied defendants’ motion as moot. Defendants contended that the new Hughes decision by the Seventh Circuit did not announce a new standard, and that plaintiff’s proposed second amended complaint was futile because his amendments did not “salvage” his complaint. However, the court ruled that “defendants’ contention…is difficult to reconcile with the fact that in the Seventh Circuit’s own words, Hughes II described a ‘newly formulated pleading standard.’” The court further ruled that it was “premature” to rule that plaintiff’s amendments were futile because the new standard had just been announced. The court acknowledged that granting plaintiff’s motion would mean a new motion to dismiss from defendants, which would cause delay, and possibly some prejudice, but such prejudice “does not warrant denial of the plaintiff’s motion to amend. The plaintiff correctly points out what the defendants seem reluctant to acknowledge – that since the plaintiff filed the initial complaint in June 2020, the standard for pleading ERISA breach of fiduciary duty claims has shifted…. Given that shift, the plaintiff’s request for leave to amend the complaint is reasonable. The delay is regrettable, but it is due in great part to the time it has taken for the issue to become settled in the Seventh Circuit.”

Tenth Circuit

Pension Benefit Guar. Corp. v. Automatic Temp. Control Contractors, Inc., No. 2:22-CV-00808-CMR, 2024 WL 1093774 (D. Utah Mar. 13, 2024) (Magistrate Judge Cecilia M. Romero). In this action the Pension Benefit Guaranty Corporation (PBGC) seeks to enforce a final agency determination that defendant Automatic Temperature Control Contractors, Inc. (ATCC) failed to pay pension benefits to four plan participants. ATCC filed a motion for leave to amend its answer to add a counterclaim and three affirmative defenses, centered around an argument that the plan contained “a scrivener’s error.” ATCC alleged that it should be allowed to equitably reform its plan so that the participants at issue did not “benefit from a windfall.” PBGC opposed the motion, arguing that amending would be futile. The court started by noting that ATCC’s motion was timely filed and there was no evidence of bad faith. The court ultimately declined to engage in the futility analysis proposed by PBGC because it determined that this analysis would be better addressed on dispositive motions. In doing so, the court relied on case law from the Third and Seventh Circuits addressing the viability of equitable plan reformation which it “understands…to, at this pleading stage, allow for the Counterclaim and second affirmative defense to be asserted.” However, the court “expresse[d] no opinion on the viability of the allowed amendments,” and observed that the standard for proving equitable plan reformation was “hefty.”

Provider Claims

Second Circuit

Gordon Surgical Grp. v. Empire HealthChoice HMO, Inc., No. 1:21-CV-4796-GHW, 2024 WL 1134682 (S.D.N.Y. Mar. 14, 2024) (Judge Gregory H. Woods). The plaintiffs in this action are three affiliated general surgery providers who provided services to 126 patients who were insured by defendant Empire. In their complaint they alleged two federal and five state law causes of action seeking “over $1 million in reimbursement of their charges for 291 ‘medical claims’ governed by 72 different health insurance plans”; 209 of those claims are governed by ERISA. Empire filed a motion to dismiss, which a magistrate judge recommended granting, and plaintiffs objected. The district court judge largely upheld the recommendation in this order. The court first ruled that plaintiffs had failed to exhaust their ERISA-governed claims. Plaintiffs had alleged two examples of exhaustion, but the judge ruled that this was insufficient to establish exhaustion as to all 209 of their claims. The court acknowledged the “administrative nightmare of sorting through and complying with these various appeals processes,” but just because “exhausting one’s administrative remedies may be time-consuming or burdensome does not obviate Plaintiffs’ need to do so.” The court further agreed with the magistrate judge that plaintiffs had not established the futility of engaging in those appeals. Next, the court ruled that plaintiffs did not adequately allege that they were entitled to benefits because they again pleaded “illustrative examples” and did not “specify the terms of the plans that allegedly entitle them to a particular benefit.” The court also ruled that plaintiffs lacked statutory standing as to 84 of the claims because they did not adequately plead that the patients had assigned their benefits to plaintiffs. The court found that Empire had not waived these provisions, the direct payment provisions in the plans did not render the anti-assignment provisions ambiguous, and the plans’ requirements regarding paying for emergency services did not override the anti-assignment provisions. The court further upheld the magistrate judge’s ruling that 37 of the claims were time-barred, although it disagreed with the magistrate’s reasoning on this issue. The magistrate judge ruled that Empire’s failure to cite the relevant time limitations in its denials, which is a violation of ERISA regulations, did not stop the limit from triggering. The district court, on the other hand, concluded that it was an open question as to “whether any regulatory noncompliance suffices to toll the plan limitations period.” Nevertheless, “the Court need not reach the issue” because plaintiffs “have not adequately pleaded that the Defendants violated the DOL Regulation as to each allegedly denied medical claim,” and thus it was proper to dismiss the claims. The court then dismissed plaintiffs’ breach of fiduciary duty claims because they were based on the same rejected allegations supporting their benefit claims, and declined to exercise supplemental jurisdiction over plaintiffs’ state law claims. Finally, the court deviated from the magistrate judge’s recommendation of dismissal with prejudice, even though plaintiffs had been allowed to amend twice and had conducted discovery. The court agreed with plaintiffs that dismissal with prejudice was unwarranted because their prior amendments did not have the benefit of the court’s input. However, the court cautioned plaintiffs that “the principal defects in the complaint stem from the fact that Plaintiffs have attempted to consolidate their claims for 291 medical claims that arise under 72 separate health insurance plans in a single federal action containing only seven claims for relief. The Court has substantial concerns that these claims have been improperly joined into a single federal action.” The court also requested separate briefing regarding its “substantial concerns regarding whether the Court has supplemental jurisdiction over the claims under non-ERISA plans.”

Third Circuit

Atlantic Spine Center, LLC v. Deloitte, LLP Grp. Ins. Plan, No. 2:23-CV-00614-BRM-JBC, 2024 WL 1092526 (D.N.J. Mar. 12, 2024) (Judge Brian R. Martinotti). Plaintiff Atlantic Spine Center filed this action seeking benefits arising from lumbar surgery it performed on a patient insured by Deloitte, LLP’s medical benefit plan. The plan moved to dismiss, arguing first that Atlantic did not have standing because it did not plausibly allege that it had been assigned the right to sue on behalf of its patient. Atlantic responded that the patient’s checking of a box on a health insurance claim form constituted evidence of an assignment, and that the plan had waived its standing argument because it had already made a direct payment to Atlantic for its services. The court ruled in Atlantic’s favor on this issue, finding that its allegations regarding assignment were sufficient to assert derivative standing at this early stage of litigation. The court then turned to the plan’s argument that Atlantic failed to state a claim for relief. The plan contended that pursuant to a summary of material modifications it was authorized to “calculate reimbursement for out-of-network services using a variety of different methods,” and that it was not obligated to pay “100% of whatever an out-of-network provider deems as its usual and customary charge,” as alleged by Atlantic. Atlantic argued that the language on which the plan relied was invalid because it conflicted with the summary plan description (SPD). The court ruled in the plan’s favor on this issue, stating that “although Plaintiff has identified a specific provision of the SPD which purportedly entitles it to relief, it has failed to plead how its demand for reimbursement is covered under the terms of the provision.” Specifically, while the SPD referenced “competitive fees in the geographic area,” Atlantic “does not specify any data or data source suggesting its fees are similar to other providers in the geographic area[.]” Instead, Atlantic only provided “conclusory” allegations that its “fees are competitive based on unnamed sources.” The court thus granted the plan’s motion to dismiss but gave Atlantic leave to amend to provide further factual support for its “comparable fee” allegations.

Standard of Review

Ninth Circuit

Rampton v. Anthem Blue Cross Life & Health Ins. Co., No. 23-CV-03499-RFL, 2024 WL 1091194 (N.D. Cal. Mar. 5, 2024) (Judge Rita F. Lin). In this dispute over ERISA-governed life insurance benefits, plaintiff Cheryl Rampton filed a motion to determine the standard of review. The court agreed with Rampton that the proper standard was de novo, regardless of whether the plan granted defendant Anthem discretionary authority to determine benefit eligibility, because California’s insurance code voided any such grant. Anthem conceded the application of California law, but “expresse[d] concern that a ruling on the standard of review would constitute an advisory opinion.” The court characterized this concern as “unfounded. There is undeniably an active case or controversy concerning the denial of ERISA benefits here, on which the parties are to begin briefing the merits shortly. In similar cases, courts routinely determine the standard of review as a threshold matter prior to consideration of the merits.” Anthem further contended that Rampton’s “waiver theory of liability” obviated the need to determine the standard of review because the insurance coverage at issue “never went into effect.” The court ruled that this argument did not alter the standard of review because, regardless of Rampton’s theory of liability, she was still seeking benefits under an ERISA plan and thus “the Court must still decide whether the insurer’s denial of benefits should be reviewed de novo or for abuse of discretion.” Anthem also filed a sur-reply regarding discovery, but the court refused to rule on the issues raised in it because they were unrelated to the standard of review: “Though the Court understands Anthem’s concerns, the Court cannot entertain motions raised in the sur-reply briefing for a different motion.”

Venue

Ninth Circuit

Ennis-White v. Nationwide Mut. Ins. Co., No. 2:23-CV-01863-APG-DJA, 2024 WL 1137942 (D. Nev. Mar. 14, 2024) (Judge Andrew P. Gordon). The plaintiffs in this case are spouses proceeding pro se; one is a participant in an employee disability income benefit plan administered by defendant Nationwide. They filed a complaint in Nevada state court asserting eight claims against various defendants and alleging that “[t]his is not an ERISA suit and does not seek any remedies under ERISA with respect to the suit.” Nevertheless, Nationwide removed the suit to federal court based on ERISA preemption and filed a motion to sever the claims against it and transfer them to the Southern District of Ohio pursuant to the plan’s forum selection clause. Plaintiffs filed a motion to remand the entire case. The court agreed with Nationwide that the claims were preempted by ERISA because plaintiffs alleged “leveraging of the ERISA products” managed by Nationwide, and the complaint was “replete with additional allegations confirming that the plaintiffs’ claims against Nationwide relate to Ennis’ benefits under the Plan.” The court also agreed that the claims against Nationwide should be transferred to the Southern District of Ohio pursuant to the forum selection clause because such clauses are “prima facie valid” and plaintiffs had not alleged that the clause was “induced by fraud, overreaching, or bad faith.” Finally, the court severed the claims against Nationwide from the remaining claims against the other defendants. The court ruled there was no federal question jurisdiction over the remaining claims, because they were based on state law, there was no diversity jurisdiction because one of the defendants was a Nevada resident, and there was no supplemental jurisdiction because the claims against Nationwide were not “part of the same case or controversy” as the claims against the other defendants. Thus, the court granted Nationwide’s motion in full and denied plaintiff’s motion to remand as moot.