The Trustees of the N.Y. St. Nurses Ass’n Pension Plan v. White Oak Glob. Advisors, LLC, No. 22-1783, __ F.4th __, 2024 WL 2280632 (2d Cir. May 21, 2024) (Before Circuit Judges Lynch and Park, and District Judge Jessica G.L. Clarke)

Arbitration has been a hot topic in ERISA litigation lately. Just three weeks ago we covered the decision in Cedeno v. Sasson, in which the Second Circuit used the “effective vindication” doctrine to void an arbitration provision in a case asserting claims under ERISA Section 502(a)(2). As we discussed, the Third, Seventh, and Tenth Circuits have also invalidated similar arbitration provisions based on that doctrine.

However, these rulings all focused on whether a case can be forced into arbitration at the outset. What about cases that have already been through arbitration? What power do federal courts have over petitions regarding the decisions made there?

This question is tricky because the Federal Arbitration Act, although it expansively regulates the arbitration process, does not by itself confer subject matter jurisdiction on the federal courts. As a result, up until recently, most courts, including the Second Circuit, have used a “look-through” approach to determine whether they have jurisdiction over post-arbitration disputes.

Under this approach, the court examines an arbitration award to see if it resolves federal claims, and if it does, the court can exercise federal question jurisdiction over a petition regarding that award. This approach had the benefit of being the same one used to determine whether arbitration can be compelled in the first place, thus creating a “consistent jurisdictional principle.”

However, the Supreme Court upended this approach two years ago in Badgerow v. Walters. In Badgerow, the court rejected the “look-through” approach and ruled that federal jurisdiction exists over a post-arbitration petition only if the “face of the application” shows that federal law entitles the applicant to relief. The practical effect of this ruling is that many post-arbitration petitions must now be adjudicated in state court.

But what does this mean for ERISA cases? The Second Circuit addressed this question in this week’s notable decision. Plaintiff, Trustees of New York State Nurses Association Pension Plan, filed a demand for arbitration after it became concerned that defendant White Oak Global Advisors, LLC, which served as the investment manager for the Plan, had breached its fiduciary duties to the Plan and was violating the investment management agreement (“IMA”) between it and the Plan.

After a week-long hearing, the arbitrator largely found in the Trustees’ favor, and the Trustees filed a petition to confirm the award in federal court. White Oak cross-petitioned to vacate the award in part, but did not raise any jurisdictional issues. The district court modified the award slightly but otherwise granted the Trustees’ petition. The court also awarded the Trustees attorney’s fees pursuant to its inherent authority based on White Oak’s “meritless, ‘entirely unpersuasive,’ and even ‘borderline sanctionable’ positions throughout this litigation.”

After judgment was entered, the Supreme Court issued its ruling in Badgerow. Relying on Badgerow, White Oak filed a motion to vacate the judgment, contending that the district court lacked jurisdiction to confirm the arbitration award. The court rejected this argument and White Oak appealed.

On appeal, the Second Circuit acknowledged that the legal landscape had shifted because of Badgerow, and that the district court’s original basis for jurisdiction – that the underlying ERISA claims were federal in nature – was no longer valid.

However, this was not the death-knell for jurisdiction. The Second Circuit interpreted Badgerow to mean that “subject matter jurisdiction over a petition to confirm an award turns on the law governing the contractual rights created by the arbitration agreement, rather than the laws asserted in the underlying claims or the non-existent ‘freestanding’ rights created solely by the award.” Because contracts are typically governed by state law, this means that post-arbitration petitions should generally end up in state court.

However, as the Second Circuit explained, ERISA is different. The court noted that “the arbitration agreement that the Trustees seek to enforce is not some separate instrument governed by an entirely different body of state contract law, but rather is an integral part of the documents governing the Plan and is governed by ERISA.” Furthermore, “ERISA imposed a fiduciary obligation upon White Oak to comply with the IMA’s arbitration terms and the FAA review for which it provided.”

The Second Circuit also observed that ERISA has an expansive preemption clause and thus it “preempts state law as to the enforcement of arbitration agreements between core ERISA entities contained within plan documents or terms.” The court acknowledged that this “express preemption” does not by itself grant federal jurisdiction. In order “for jurisdiction to be proper, the petition to confirm must state a cause of action contained within ERISA or another federal statute.”

The Second Circuit found such a cause of action in ERISA Section 502(a)(3), which allows for equitable relief. The court noted that the Trustees’ petition sought “‘disgorgement’ of management fees, return of the Plan’s assets held by White Oak, and ‘[r]emoval of White Oak as the plan’s fiduciary and investment manager.’” The court held that these were classic equitable remedies, even if some of the relief sought was monetary in nature. The court further held that even if the central dispute concerned an arbitration agreement, it was effectively a suit to enforce an ERISA-governed trust, and such suits have always been equitable in nature, especially where “the Trustee’s petition seeks enforcement of an arbitral award that itself grants equitable relief.”

Moreover, even if the Trustees had “styled their petition as a contract action controlled by state law,” it could not evade federal jurisdiction because of ERISA’s “complete preemption” doctrine. The Trustees’ petition “easily satisfied” the Davila complete preemption test because “[t]he Trustees are a party authorized to sue under § 502(a)(3), and the petition to enforce the arbitration agreement, through confirmation of the award, is an action to enforce a plan term or document.” In short, because the Trustees’ petition “is cognizable as an ERISA § 502(a)(3) action,” state law could not apply and federal question jurisdiction was inescapable.

As a result, the Second Circuit determined that the rule announced by the Supreme Court in Badgerow did not divest it of jurisdiction over the matter, and it turned to the merits. White Oak did not challenge the arbitrator’s underlying factual findings or legal conclusions. Instead, it argued that the district court “exceeded its confirmation authority by entering judgment in favor of the Trustees on (1) prejudgment interest on the disgorgement of its assets, (2) the return of the ‘Day One fees,’ and (3) ‘profits.’”

The court affirmed the ruling that the Trustees were entitled to prejudgment interest on the disgorgement of assets, finding that the arbitrator’s final award was unambiguous on this issue and the intent of the arbitrator was clear. The court further affirmed the ruling that such interest began accruing as of the date the IMA expired.

The court also affirmed the district court’s ruling that White Oak was required to disgorge its “Day One fees.” These were retroactive fees White Oak imposed when the Plan joined White Oak’s investment fund, and which the arbitrator concluded were not permitted by the IMA. The Second Circuit ruled that the arbitrator’s award clearly required White Oak to return these fees and the district court did not err by enforcing it.

However, White Oak prevailed on its third issue regarding the disgorgement of “profits.” The Second Circuit agreed that “the Award’s failure to identify or calculate ‘profits’ renders this item of relief sufficiently ambiguous that we cannot discern how to enforce it. Accordingly, the Award must be remanded to the arbitrator for clarification.” The court ruled that the calculations involved were not “ministerial” and involved “numerous legal and factual questions” that the court could not resolve without further guidance.

Finally, the court agreed with White Oak that the district court’s award of attorney’s fees to the Trustees, which was based on White Oak’s litigation conduct, should be reversed. The Second Circuit ruled that the district court’s findings supporting that award lacked sufficient detail, and thus remanded for the court to “make more specific findings.”

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

Breach of Fiduciary Duty

Sixth Circuit

Moore v. Humana Inc., No. 3:21-cv-232-RGJ, 2024 WL 2402118 (W.D. Ky. May. 23, 2024) (Judge Rebecca Grady Jennings). In this class action participants of the Humana Retirement Savings Plan allege Humana Inc. and the Humana Retirement Plans Committee breached their duties under ERISA by failing to leverage plan assets and participant size to ensure that recordkeeping fees paid were prudent and reasonable. During a relatively short period of time –just seven years – the Plan grew tremendously. Its assets nearly doubled from $3.5 billion to roughly $6.5 billion and the number of participants increased by nearly 10,000 individuals. However, the yearly participant fee paid for recordkeeping services decreased in that same time period only minimally, from $37 per participant down to $28. Plaintiffs aver that $9 was not appropriate given the plan’s growth, and that a reasonable per-participant recordkeeping fee range is between $12 to $20 for a plan of this size. Defendants do not dispute that they never attempted to negotiate with their recordkeeper, Charles Schwab, for lower fees during this period as plaintiffs allege they should have. However, defendants contend that they nevertheless engaged in a prudent process by conducting a request for proposal wherein they considered more than 125 vendors, and by retaining a third-party consultant to perform annual benchmarking for the plan. Moreover, defendants argue that the fees themselves were reasonable throughout the class period. The parties each moved to exclude the other’s expert’s testimony, and also cross-moved for summary judgment. The court in this decision granted defendants’ motion to exclude as well as their motion for summary judgment, and denied plaintiffs’ motion to exclude and their summary judgment motion. The decision began with plaintiffs’ motion to exclude defendants’ expert, Pete Swisher. Somewhat surprisingly, Mr. Swisher holds a B.A. in Linguistics from the University of Virginia. However, he is a certified financial planner who has spent his career in the retirement plan industry advising on both ERISA and non-ERISA governed plans. Mr. Swisher was retained to evaluate defendants’ processes overseeing and monitoring the recordkeeping services and plan fees, and to speak to the reasonableness of the fees paid by the plan during the class period. Mr. Swisher opines that Humana implemented a prudent process to monitor recordkeeping fees and services and that the fees remained reasonable throughout. Plaintiffs challenged what they viewed as Mr. Swisher’s circular reasoning. They wrote, “Swisher is essentially saying, ‘The fiduciary process was prudent because fees were reasonable and the fees were reasonable because the fiduciaries followed a prudent process.’” The court saw it differently. It stated, “that is the nature of the inquiry – a prudent process involving competitive bidding (the RFPs), coupled with the Roland Criss reports and an independent comparison to NEPC surveys which Swisher used to show median recordkeeping fees, could form a basis for concluding that the fees were reasonable.” Essentially, the court said it viewed plaintiffs’ motion to exclude Mr. Swisher’s testimony as arguments amounting to attacks on his conclusions rather than challenges to his foundation or methodology. Accordingly, plaintiffs’ motion to exclude was denied. Next, the court analyzed defendants’ motion to exclude plaintiffs’ expert, Veronica Bray. Ms. Bray holds a B.S. in Business Administration from the University of North Carolina and, like Mr. Swisher, has spent her career in the retirement plan industry assisting plan sponsors. Ms. Bray was retained to provide expert analysis and opinions on defendants’ actions and to answer the question of whether those actions were consistent with the standards of care practiced by a prudent fiduciary acting in the best interest of the plan. Her opinion was that they were not, and that they resulted in unreasonably high plan fees. Defendants challenged Ms. Bray’s comparisons, methodology, and the reliability of her opinion in addressing the dispositive question of this case. While the court stated it is “true that Bray is generally qualified by knowledge and experience in the field, with over two decades of professional involvement within the industry in various roles,” and “Bray’s testimony may even help the trier of fact understand how the Plan’s fees generally compare to smaller plans, such as the ones she cites in her report,” the court nevertheless concluded that “Bray’s opinion applies no reliable methodology to the pertinent question in this litigation: whether Defendants’ process was prudent and whether recordkeeping fees were ultimately ‘excessive relative to the services rendered’… Bray’s method – essentially, reasoning by inference that, because the six smaller plans were able to achieve a fee in the $12-$20 range, it follows that Humana should have also been able to negotiate for fees in that range – is not a reliable basis for concluding the fees were unreasonably high.” The court therefore excluded Ms. Bray’s testimony. Left with one expert’s version of events, the court evaluated the cross-motions for summary judgment and granted judgment in favor of defendants. The court concluded that defendants used a prudent process “consistent with industry practice” and the recordkeeping fees were not excessive relative to the services rendered.

Ninth Circuit

Bracalente v. Cisco Sys., No. 22-cv-04417-EJD, 2024 WL 2274523 (N.D. Cal. May. 20, 2024) (Judge Edward J. Davila). In this putative class action participants of the Cisco 401(k) plan have sued Cisco and the plan’s committee for breaches of fiduciary duties under ERISA. Plaintiffs allege defendants breached their duties of prudence and monitoring by mismanaging the plan and retaining a suite of underperforming BlackRock LifePath Index Target Date Funds as the plan’s designated default investment options. According to the complaint, Cisco and the committee failed to engage in a prudent monitoring process to oversee the funds and to ensure that they were suitable in terms of their performance and returns. By retaining these funds, plaintiffs claim that the participants lost out on millions of dollars in retirement savings’ growth. They say that part of the alleged failure to monitor the funds stems from the committee’s failure to adhere to the plan’s investment policy statement (IPS) and also from the committee’s use of custom benchmarks. Plaintiffs allege that these bespoke benchmarks amounted to little more than “a reflection of the TDF portfolio,” which they argue is “akin to looking in a mirror.” Instead, plaintiffs contend that the fiduciaries should have compared the BlackRock Target Date Funds to other available options and had they done so they would have observed the obvious and unacceptable underperformance of the investments. Additionally, plaintiffs aver that the committee improperly characterized the challenged funds as “passive” rather than “actively” managed. Pursuant to the IPS, passively managed funds were subject to less scrutiny. “For passive investments, the Committee was required to ensure only that those investments ‘meet’ the results of their benchmark; for actively managed investments the IPS required that the Committee ensure the investments ‘exceed’ the results of the relevant benchmark or appropriate peer group.” Finally, plaintiffs alleged that the meeting minutes “reflect no discussion of the performance of the BlackRock TDFs, even though the BlackRock TDFs were obviously the Plan’s most important investment.” Taken together, plaintiffs were confident their allegations demonstrate a plausible inference that defendants fell short of their fiduciary obligations. Unfortunately for the participants, the court did not agree and in this decision granted defendants’ motion to dismiss the second amended complaint. The court parsed through each bit of circumstantial evidence individually. It held that neither the process allegations nor the underperformance allegations plausibly establish claims of imprudence and failure to monitor co-fiduciaries. The court was not convinced that defendants’ use of custom benchmarks was inappropriate. Nor was it persuaded that, to the extent the target date funds were mischaracterized as passive, defendants were violating the IPS. As for plaintiffs’ chosen comparators, the court concluded that all four were inapposite, two because they were composed of actively managed funds, and two because they employed a “through retirement” rather than “to retirement” glide path strategy. Left with allegations of underperformance alone, the court determined these allegations were based on hindsight, and under relevant case law therefore do not plausibly state claims for breaches of fiduciary duties under ERISA. Accordingly, the court once again concluded that the complaint did not meet its pleading burden and therefore granted the motion to dismiss. However, the court’s dismissal under Rule 12(b)(6) was granted with leave to amend as it believes plaintiffs may be able to cure the identified deficiencies and shore up their allegations.

ERISA Preemption

Ninth Circuit

Morton v. Rocky Mountain Hosp. & Med. Serv., No. 2:23-cv-01320-GMN-DJA, 2024 WL 2329129 (D. Nev. May. 21, 2024) (Judge Gloria M. Navarro). Plaintiff Michael Morton submitted a request for authorization to his medical insurance provider, Anthem Blue Cross and Blue Shield, for total disc arthroplasty neck surgery. Anthem denied the preauthorization request, concluding the surgery was not medically necessary. Despite the preauthorization denial, Mr. Morton went ahead with the surgery, and was left with medical expenses of more than $50,000. Mr. Morton sued Anthem in state court asserting six state law claims. Anthem removed the action to the federal system, insisting the claims are preempted by ERISA. It then moved to dismiss. In this order the court agreed with Anthem that the state law claims are preempted by federal law and granted the motion to dismiss them. As an initial matter, the court held that ERISA governs the health plan, as it is sponsored by Mr. Morton’s employer and the employer contributes to the premium payments. Thus, the court stated that the plan meets ERISA’s statutory definition of an “employee welfare benefit plan.” Having established that the plan is governed by ERISA, the court turned to assessing the impact of ERISA preemption on the state law claims. It began with complete preemption. The court concluded that Mr. Morton is a plan participant with a colorable claim for benefits under Section 502 of ERISA, and that his claims of breach of contract and contractual breach of implied covenant of good faith and fair dealing do not implicate any independent legal duty as they are based solely on Anthem’s failure to provide insurance coverage benefits under the plan. Therefore, the court found claims one and two completely preempted. It also concluded that plaintiff’s third claim, tortious breach of the implied covenant of good faith and fair dealing, was likewise based on Anthem’s failure to provide insurance benefits and pay for the surgery, and that it too was completely preempted by ERISA. Further, the court found Mr. Morton’s state law breach of fiduciary duty claim preempted, as alleged breaches of fiduciary duties “while administering the benefit plan is conduct covered by ERISA.” With regard to the claim under Nevada’s Unfair Claims Practices Act, the court relied on Nevada Supreme Court case law which has found that ERISA preempts a private right of action for violation of the act when, as here, it is based on the denial of plan benefits. Finally, the court determined that Mr. Morton’s last claim for declaratory relief “is not independent of his claim for benefits under his plan and is therefore preempted.” In sum, the court wrote that Mr. Morton’s “claims do not simply have a connection to the Group Health Plan; they are entirely based on Anthem’s denial of benefits under the Plan.” Accordingly, all six state law causes of action were dismissed. However, the court provided Mr. Morton leave to amend his complaint to replead his causes of action under ERISA.

Ninth Circuit

Alaska v. Express Scripts, Inc., No. 3:23-cv-00233-JMK, 2024 WL 2321210 (D. Alaska May 21, 2024) (Judge Joshua M. Kindred). The State of Alaska initiated this action on behalf of its citizens against Express Scripts, Inc. and its affiliated companies for fueling the opioid epidemic in Alaska in Express Scripts’ capacity as a Pharmacy Benefits Manager (PBM), mail-order pharmacy, and research provider. Originally, the State filed its suit in Alaska Superior Court and brought two state law causes of action, a claim for public nuisance and a claim for violations of the Alaska Unfair Trade Practices and Consumer Protection Act. Express Scripts removed the action to federal court. Following removal, the State moved to remand the case. However, it has since had a change of heart, and subsequently moved for leave to amend its complaint to add a federal claim for violation of the Racketeer-Influenced and Corrupt Organization Act. In a separate order this week, unrelated to ERISA, the court granted the State’s motion to amend its complaint. In this decision, the court ruled on Express Scripts’ motion to dismiss the two state law causes of action as preempted by Medicare Part D and ERISA. The court ruled that the State’s claims are partially preempted by Medicare Part D, but not ERISA. It stated that the claims are not dependent on the ERISA-governed plans, because existence of the plans is not critical in establishing or determining liability. The state’s causes of action, the court ruled, “would persist with or without ERISA-covered plans as they would proceed with respect to Express Scripts’ formularies adopted by plans offered by government or religious entities, Medicare and Medicaid plans, and individual plans offered by insurers, such as ACA exchange plans.” The court found the particulars of this lawsuit comparable to Rutledge v. Pharmaceutical Care Management Association, wherein the Supreme Court decided that an Arkansas law regulating reimbursement prices for pharmaceuticals and prescription drug coverage “does not act immediately and exclusively upon ERISA plans because it applies to PBMs whether or not they manage an ERISA plan.” Moreover, the court held that the state law claims do not have an impermissible “connection with” ERISA plans as “they do not dictate any particular scheme of substantive coverage,” even though they “target Express Scripts’ plan administration.” If the State of Alaska succeeds on its claims, the court concluded that injunctive relief barring Express Scripts from engaging in further deceptive acts, practices, and conduct would not require it to structure its formularies and benefit plans in any particular way. “That is because the State’s CPA and public nuisance claims are not merely based on the structure of the formularies, but on the manner in which Express Scripts arrived at their structure: allegedly by ignoring evidence that suggested the need for utilization management due to its financial agreements with manufacturers and desire for profits.” Accordingly, the court determined that ERISA does not preempt either state law cause of action. However, as noted, the court dismissed the public nuisance and consumer protection act claims insofar as they implicate Medicare Part D plans.

Pension Benefit Claims

Second Circuit

Estate of Hichez-Zapata v. Emerecia, No. 21 CIVIL 4261 (PKC), 2024 WL 2304704 (S.D.N.Y. May. 22, 2024) (Judge P. Kevin Castel). The children of Confessor Hichez-Zapata filed this action seeking to recover proceeds of their late father’s ERISA-governed annuity fund, which they allege were wrongfully distributed to his ex-wife. Plaintiffs sued the ex-wife, as well as the pension benefit plan, the IUOE Local Annuity Fund. The Plan moved for summary judgment on the claim asserted against it, a claim for breach of fiduciary duty. The court granted the Plan’s motion in this order. First, the court concluded that none of the children had statutory standing to sue under ERISA as no plaintiff was designated as a beneficiary. “Plaintiffs’ contention that Decedent intentionally listed his descendants as beneficiaries in one form but mistakenly omitted them in a second is unsupported conjecture and speculation that would not permit a reasonable trier of fact to conclude that he intended to list plaintiffs as beneficiaries of the annuity account.” Moreover, the court wrote, “[e]ven if Decedent erred in his paperwork, however, his subjective intention would not permit a trier of fact to find that plaintiffs are Plan beneficiaries.” Therefore, the court concluded that none of the individual plaintiffs had standing to bring a claim against the plan under ERISA. Additionally, the court held that plaintiffs provided no evidence, despite repeated court orders to do so, that plaintiff Robert Hichez is the lawful estate administrator. As Mr. Hichez made no showing that he may properly act on behalf of the estate, the estate’s claim against the plan was dismissed by the court. Issues of standing aside, the court took the time to explain that plaintiffs’ claim of fiduciary breach would also fail on the merits. They argued that the Plan breached its duties by failing to investigate Mr. Hichez-Zapata’s marital status and by failing to clarify his choice of designated beneficiaries across different plan documents. The court stated simply, “[n]either the text of ERISA nor the Plan’s governing documents create such a duty. Therefore, in addition to plaintiffs’ lack of statutory standing and inability to proceed on behalf of the Estate, summary judgment is separately granted to the Plan because plaintiffs have not identified an actionable duty breached by the Plan.” As the Plan distributed proceeds in accordance with the written beneficiary designation, the court concluded that it had not erred under ERISA. Its motion for summary judgment was accordingly granted.

Mombrun v. The N.Y. Hotel Pension Fund, No. 22-CV-4970 (PGG) (JLC), 2024 WL 2494577 (S.D.N.Y. May 23, 2024) (Magistrate Judge James L. Cott). Pro se plaintiff Marie S. Mombrun sued the New York Hotel Trades Council and the Hotel Association of New York City, Inc. Pension Fund to challenge pension benefit calculations. Ms. Mombrun alleges that she is entitled to additional pension benefits based on hours she worked in 2019 and 2020. Ms. Mombrun contends that she earned more pension credits than defendants calculated she accrued and that she is entitled to higher per credit benefits following the plan’s 2019 amendment. Further, Ms. Mombrun claims that she was entitled to begin receiving benefits two years earlier, beginning in 2020, because she had applied for Social Security Disability benefits and was therefore eligible for disability pension benefits. Accordingly, Ms. Mombrun asserts that she is entitled to back pay as well as higher monthly payments. Defendants maintain that their benefit calculations were correct and moved for summary judgment. In this report and recommendation, the magistrate judge recommended defendants’ summary judgment motion be granted. As an initial matter, the magistrate agreed with defendants that their decision was entitled to deference as the plan documents grant the Trustees discretionary authority. Under deferential review, the magistrate could not say that the decision to deny additional pension benefits was arbitrary and capricious, particularly in light of the fact that Ms. Mombrun does not dispute that she did not work the requisite 500 hours to receive pension credit in 2019 and 2020, nor even in those years combined, or any year thereafter. Therefore, the magistrate agreed with defendants’ calculations of benefits under the terms of the plan and concluded that Ms. Mombrun is not entitled to either more credits or higher rates per credit. Finally, the magistrate stated that Ms. Mombrun was not entitled to an earlier pension start date because she needed to work a combined 500 hours between 2019 and 2021 to be eligible for a disability pension. “Because defendants’ denial of Mombrun’s benefits application is supported by the plain text of the Plan documents, the denial was not arbitrary and capricious.” For these reasons, the magistrate recommended defendants’ motion for summary judgment be granted and Ms. Mombrun’s complaint be dismissed.

Tenth Circuit

Crawford v. The Guar. State Bank & Tr. Co., No. 22-2542-JAR-GEB, 2024 WL 2700668 (D. Kan. May. 23, 2024) (Judge Julie A. Robinson). Plaintiff David Crawford sued his former employer, The Guaranty State Bank & Trust Company, and the board of directors of the Executive Salary Continuation Plan for the bank under ERISA to challenge defendants’ decision to deny him benefits under the plan. Mr. Crawford worked for the bank for three decades. His work involved cattle financing and issuing agricultural loans. By the end of his tenure at the bank Mr. Crawford was wrapped up in legal trouble involving the Kansas Bureau of Investigation (KBI) and was criminally charged with two felonies for impairing a security interest and making false statements. Mr. Crawford resigned from his position as senior vice president in 2020. One year later the KBI investigation concluded and the bank was provided with the agency’s report. After receiving the KBI report, defendants determined that Mr. Crawford was ineligible for benefits under the plan pursuant to the plan’s “for cause” forfeiture exclusion for actions constituting gross negligence or neglect, willful violation of law, and breach of fiduciary duties. Mr. Crawford challenges the termination of his benefits in this action under Section 502(a)(1)(B). Both parties moved for judgment in their favor. In addition, defendants moved to strike extra-record evidence. The motion to strike was mostly denied and judgment was entered in favor of Mr. Crawford under arbitrary and capricious review. The court found that most of the exhibits challenged by defendants were either part of the administrative record or relevant to issues of defendants’ conflict of interest. However, the court did strike Mr. Crawford’s testimony and also certain documents which it agreed with defendants were properly withheld pursuant to the work product doctrine because they were communications with lawyers in anticipation of litigation. The court then addressed the merits of the board’s decision. Mr. Crawford argued that the decision to terminate his benefits was an abuse of discretion because “(1) it incorrectly interpreted the Plan when it determined that it could terminate [his] benefits based on a retroactive determination that grounds ‘for cause’ existed at the time he voluntarily resigned; (2) the initial termination decision and review of the denials contained several procedural irregularities; (3) the Board’s conflict of interest; and (4) the decision was not based on substantial evidence.” First, the court disagreed with Mr. Crawford that defendants’ interpretation of the plan language was unreasonable. The court stated that a reasonable person would read the forfeiture exclusion to apply in this instance. Second, the court found that the initial adverse determination letter complied with ERISA’s statutory requirements. Nevertheless, the court agreed with Mr. Crawford that he was denied a full and fair review during his internal appeal. The court concluded that the board ignored evidence, failed to conduct a sufficient independent investigation of the underlying facts, and failed to provide Mr. Crawford with all of the documents it considered during the appeal process. Moreover, it found these failures consequential and likely the result of defendants’ conflict of interest including their potential desire “to shift the blame for the cattle deaths and bank losses to Plaintiff.” Accordingly, the court determined that the decision to terminate benefits was arbitrary and capricious and not supported by substantial evidence. Judgment was therefore entered in favor of Mr. Crawford. The decision ended with the court concluding that remanding to defendants to conduct a full and fair review was the proper remedy because defendants’ failure to do so the first time interfered with the court’s ability to review the record for reasonableness. Finally, Mr. Crawford’s requests for interest and attorneys’ fees were determined to be premature and denied without prejudice.

Plan Status

Fifth Circuit

Chocheles v. Heller, No. 24-647, 2024 WL 2350709 (E.D. La. May. 2, 2024) (Judge Eldon E. Fallon). This action is a life insurance dispute between a widow and her late husband’s life insurance carrier, Unum Life Insurance Company of America. Plaintiff Josephine Chocheles is the surviving wife of Christopher Thomas Chocheles. Mr. Chocheles was a partner at the law firm Sher Garner Cahill Richter Klein & Hilbert, LLC. The firm committed to guarantee life insurance benefits amounting to $1 million to its partners. The firm contracted with Unum to provide this coverage, but Unum declined and instead only provided the firm with guaranteed per-partner benefits of $750,000 with no need for any evidence of insurability. The law firm accepted this proposal and then contracted separately through another insurer to provide the additional $250,000 coverage per partner, so that each partner would still receive the promised $1 million. After her husband’s death, Ms. Chocheles submitted a claim for the full $750,000 in benefits from Unum. Unum tendered only $500,000. Unum maintained that additional evidence of insurability was required for the full $750,000 coverage. Ms. Chocheles filed suit in Louisiana state court alleging violations of state law to challenge Unum’s decision, seeking damages in the amount of $250,000 and prejudgment interest. Unum removed the action on ERISA preemption grounds. In response Ms. Chocheles moved to remand. She argued that removal was improper, as it did not satisfy the Federal Rules of Civil Procedure, and because the policy is not governed by ERISA. The court disagreed on both matters and thus denied the motion to remand. First, it concluded that defendants properly and timely removed the action in compliance with federal rules. Second, the court found that the plan was not exempt from ERISA as it was a group policy that covered employees of the law firm as well as its partners. “The group policy at issue here includes three classes…where one class comprises of partners (owners) and another includes staff of the law firm (employees)…The group policy is a single package bearing one single policy number…bargained and paid for as a package by the firm.” Accordingly, the court determined that the plan is governed by ERISA, thus making removal proper. Ms. Chocheles’s motion to remand was therefore denied. 

Pleading Issues & Procedure

Third Circuit

Seibert v. Nokia of Am. Corp., No. 21-20478, 2024 WL 2316551 (D.N.J. May. 22, 2024) (Judge Jamel K. Semper). Participants of the Nokia Savings/401(k) Plan have sued the plan sponsor, Nokia of America Corporation, as well as the Board of Directors of Nokia, and the Nokia 401(k) Committee, for breaches of ERISA’s fiduciary duties of prudence and monitoring. Plaintiffs allege that defendants breached these duties by failing to control plan costs and fees. On August 8, 2023, the court granted in part and denied in part a motion to dismiss by defendants. It held that plaintiffs adequately pled their recordkeeping and administrative cost claims, but that their claims premised on imprudent expense ratios were insufficiently pled because the complaint lacked meaningful benchmarks for comparison. (Your ERISA Watch covered the decision in our August 16, 2023 edition.) The court’s dismissal of the imprudence and monitoring claims premised on the cost of the challenged funds was without prejudice. Accordingly, plaintiffs amended their complaint to address the court’s identified deficiencies. They bolstered support for the expense ratio allegations by including two target date funds in the same Morningstar categories as the challenged funds for comparison and to demonstrate the plan’s underperformance. Now, defendants are once again moving to dismiss the complaint for failure to state a claim. To begin, the court stressed that it would not disturb its previous holding that the complaint sufficiently states claims of imprudence and failure to monitor co-fiduciaries based on allegations that defendants subjected the plan to excessive recordkeeping and administrative costs. The court therefore limited its review here to scrutinizing the previously dismissed claims as they relate to allegations that defendants failed to adequately review the plan’s investment portfolio to ensure that each option was prudent in terms of cost. Thanks to plaintiffs’ amendments, the court held that it can now plausibly infer that defendants’ process was flawed. “The Court accepts Plaintiffs’ new support for their claim[s] at the pleading stage and determines that the FAC sufficiently alleges that Defendants failed to adequately review the Plan’s investment portfolio with due care to ensure the prudence of the cost of each option.” Therefore, the court denied the motion to dismiss both the breach of the duty of prudence claim and the derivative failure to monitor claim.

Remedies

Sixth Circuit

Canter v. Alkermes Blue Care Elect Preferred Provider Plan, No. 1:17-cv-399, 2024 WL 2698405 (S.D. Ohio May. 24, 2024) (Judge Douglas R. Cole). This litigation arose after plaintiff Keith Canter’s claim for spinal surgery was denied by his healthcare plan, the Alkermes Blue Care Elect Preferred Provider Plan, and its administrator, Blue Cross Blue Shield of Massachusetts, Inc. In a previous decision the court concluded that defendants’ “reliance on an incomplete administrative record and failure to accord sufficient weight to all relevant medical factors listed in the Plan violated Canter’s procedural rights under the Plan.” The court remanded to Blue Cross for reconsideration of its decision, and held off on awarding any damages or monetary relief. (Your ERISA Watch covered this decision in our March 30, 2022 edition.) On remand, Blue Cross changed its decision and awarded Mr. Canter benefits, although not the full amount of the cost of his surgery. Believing he is entitled to more – the full cost of the surgery, plus interest, and attorneys’ fees and costs – Mr. Canter moved to reopen the case. In this order the court agreed with Mr. Canter that he is entitled to benefits equaling the full cost of his surgery plus interest to represent make-whole relief and “receive full satisfaction for his ERISA claim.” Furthermore, the court awarded Mr. Canter attorneys’ fees and costs under ERISA’s fee provision. The court stated that Mr. Canter “is entitled to prejudgment interest on his claim in this action under standard common law principles.” It clarified that because Blue Cross provided coverage for the surgery by awarding Mr. Canter benefits and paying him directly, “the legal effect of Canter’s entitlement to a sum certain amount of benefits is that he equally enjoys a right to prejudgment interest of the delay in payment of those funds.” The court determined that an appropriate award of interest would be interest calculated using the blended prejudgment interest rate pursuant to 28 U.S.C. § 1961. Agreeing with Mr. Canter that he is entitled to the full cost of his surgery plus the prejudgment interest, the court awarded Mr. Canter $100,289.01 in total, to be offset by the amount already paid on remand by Blue Cross. As for attorneys’ fees, the court found that Mr. Canter is entitled to a fee award as he had success on the merits and because a fee award is supported by the five factors laid out by the Sixth Circuit. Moreover, the court found the proposed $490 hourly rate of counsel reasonable and in line with ERISA practitioners in the area. The court also declined to reduce Mr. Canter’s counsel’s number of hours. Accordingly, the court awarded Mr. Canter the full requested amount of $204,771 in fees. His request for reimbursement of $622.75 was also granted in full, as the court found it “quite a reasonable amount after five years of litigation.” Judgment was thus entered in these amounts and the case was terminated.

Venue

Seventh Circuit

Lobodocky v. Medxcel Facilities Management, LLC, No. 1:23-cv-00767-JPH-MG, 2024 WL 2320006 (S.D. Ind. May. 22, 2024) (Judge James Patrick Hanlon). Plaintiff Vicki Lobodocky filed duplicate lawsuits, one in the Eastern District of Missouri, and this action in the Southern District of Indiana, alleging she was wrongfully denied life insurance proceeds from her husband’s ERISA-governed policy following his death. Ms. Lobodocky has sued her husband’s former employer, Medxcel, and the joint plan administrators, Prudential Insurance Company of America and Ascension Health Alliance. The three defendants moved to dismiss the action for improper venue, or in the alternative to transfer venue to the Eastern District of Missouri pursuant to the plan’s forum selection clause. In this decision the court denied the motion to dismiss for improper venue under Rule 12(b)(3), but granted the motion to transfer. As a preliminary matter, the court held that defendants failed to show that the Southern District of Indiana was a wrong or improper venue. Nevertheless, the court agreed with defendants that the plan’s forum selection clause was broad, unambiguous, applicable, and controlling. It found that Ms. Lobodocky failed to demonstrate that this was that “most unusual case” where the interest of justice could not be served by holding the parties to the terms of the clause, particularly as Ms. Lobodocky is already litigating the same matter in the Eastern District of Missouri. Therefore, the court granted the motion to transfer venue, and relocated the action to the Eastern District of Missouri.

Mator v. Wesco Distribution, Inc., No. 22-2552, __ F. 4th __, 2024 WL 2198120 (3d Cir. May. 16, 2024) (Before Circuit Judges Hardiman, Porter, and Fisher)

When the Supreme Court decided Ashcroft v. Iqbal, 556 U.S. 662 (2009), and Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), federal courts were suddenly tasked with the unenviable job of deciding when a complaint sufficiently passes the threshold from “conceivable” to “plausible.” Perhaps nowhere have courts struggled with this calculus more than in the context of suits challenging the fees paid by ERISA-governed 401(k) and other defined contribution plans. The Third Circuit’s decision in this case, reversing a district court’s 12(b)(6) dismissal of such a suit, is a perfect example of the difficult and “context-specific” analysis in which courts must engage.

Nancy and Robert Mator, two participants in a 401(k) plan, brought a putative class action lawsuit against their employer, Wesco Distribution, which was both the plan sponsor and administrator. The complaint stated two counts, one for breach of fiduciary duty in allowing the plan to pay excessive fees to the plan’s recordkeeper, Wells Fargo, and one for failure to monitor the other plan fiduciaries with respect to these fees.

The plan paid these fees both through direct asset-based fees deducted from each participant’s account, and through indirect fees in the form of revenue sharing with plan investments. The Mators alleged that together these two types of fees added up to a shocking $154 average per participant, approximately four times what the Mators alleged was a reasonable per-participant fee based on a number of different comparators, including what Wells Fargo itself charged a number of other plans, as well as the amount received by other service providers such as Fidelity and Vanguard from similarly-sized plans. With respect to the direct and indirect fees, the Mators alleged that all defined contribution plans buy essentially the same bundle of services of approximately the same quality, and they bolstered this assertion by alleging that when the plan switched to Fidelity as the recordkeeper in 2020, the plan received the same services for $54 per participant.

The Mators also alleged that Wesco caused the plan to pay too much by choosing expensive share classes for certain mutual fund investments, rather than available less expensive share classes of the same mutual funds. This led to more money going to Wells Fargo in revenue sharing on top of the already too-high direct fees Wells Fargo was already receiving through the asset-based fees.

Finally, the Mators alleged that Wesco failed to monitor the other individuals responsible for administering the plan and the decision-making processes that led the plan to overpay the fees.

The district court granted three motions to dismiss filed by Wesco, finding each iteration of the Mators’ complaint to be conclusory and insufficiently specific. After the third dismissal, the Mators appealed.

The Third Circuit saw things differently. In concluding that the Mators had stated a claim, the court relied heavily on an earlier Third Circuit decision, Sweda v. University of Pa., 923 F.3d 320 (3d Cir. 2019), in which the court likewise reversed the dismissal of an excessive fee case. (Judge D. Michael Fisher, perhaps not coincidentally, wrote for the court in both this case and Sweda.) While the fees per participant paid by the University of Pennsylvania in Sweda were allegedly higher ($220-$250 per participant), the allegations in the Mators’ case were more specific, according to the court, because the Mators, unlike Sweda, “made additional allegations about the amount of fees paid by comparator plans.”

Although the district court criticized the Mators for failing to make an “apples to apples” comparison, pointing to differences in service codes employed by the various plans, the Third Circuit concluded that the Mators’ allegation that all plans received similar services rendered their claim plausible despite the coding differences. Similarly, although Wesco criticized some of the comparators, the Third Circuit concluded that even winnowing out the more questionable comparators “would not leave the complaint bereft of allegations that help make a fiduciary breach plausible.” Furthermore, although Wesco offered a different calculation of the fees paid by the comparator plans, the court was unpersuaded that Wesco’s alternative calculation was so obvious or natural as to make the allegations of misconduct implausible. And the court was persuaded that the Mators had sufficiently stated that a cheaper comparable service was available through their allegation that the plan obtained just that when it switched service providers in 2020.   

With respect to the mutual fund shares, the court agreed with Wesco that “as the Mators have pled their fiduciary breach claim, the excessiveness of the recordkeeping fees and the impropriety of offering retail-class shares are intertwined” because the fees associated with the higher share classes were paid to Wells Fargo as indirect fees. But this did not help Wesco’s argument. “Because the Mators plausibly allege the fees were too high overall, it is therefore also plausible that it was a fiduciary breach to cause participants to pay indirect fees by offering mutual fund shares subject to revenue sharing.”

Moreover, although the Mators conceded that plan fiduciaries might prudently choose more expensive share classes with revenue sharing features in order to offset plan recordkeeping expenses, they argued that the plan in this case did not benefit from such an arrangement because they alleged that the plan was already paying too much in fees. On this basis the court concluded that “the Mators have alleged a fiduciary breach based on the Plan’s offerings of retail-class mutual fund shares,” although the court expressly “decline[d] to articulate a bright-line rule that a plan administrator breaches its fiduciary duty merely by offering retail-class investment shares.”

Finally, the Third Circuit reversed the district court’s dismissal of the failure to monitor claim, which the parties acknowledged was derivative of the fiduciary breach claim that the court had just determined passed muster.

In the end, the Third Circuit found that the district court’s “criticisms, although partly valid, only nibble around the edges of the complaint,” and thus “what remains plausibly states a claim.”       

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

Attorneys’ Fees

Sixth Circuit

The W. & S. Life Ins. Co. Benefits Comm. v. Jenkins, No. 1:23-cv-609, 2024 WL 2132416 (S.D. Ohio May. 13, 2024) (Judge Douglas R. Cole). The Western and Southern Life Insurance Benefits Committee (“W&S”) filed this interpleader action to resolve competing claims for proceeds on a $118,700 life insurance policy. W&S filed a motion (1) to deposit the proceeds with the court, (2) requesting an award of attorneys’ fees and costs, and (3) to be dismissed as a party in this action. The competing beneficiaries do not contest that W&S properly filed an interpleader action and should be allowed to deposit the proceeds and be dismissed with prejudice from the suit. The court agreed. However, the beneficiary defendants opposed the insurance company’s motion for attorneys’ fees and costs. In its order the court ruled that Sixth Circuit case law supports awarding reasonable attorneys’ fees and costs to insurance companies in ERISA interpleader actions. It disagreed with defendants’ position that fee awards to insurance companies filing interpleader actions creates perverse incentives and resolving conflicting claims for proceeds is simply a part of an insurer’s cost of doing business. On the contrary, the court held that an interpleading party is entitled to recover reasonable costs and fees when it does not claim an interest in the funds, concedes liability, and deposits the funds into the court. Accordingly, the court was satisfied that an award here was merited. However, it did not find W&S’s requested fee award of $32,465.73 in fees and costs reasonable. The court significantly reduced the requested amount on the grounds that the suit is in its nascency, is not complex, and W&S is an insurance company used to interpleader matters. Accordingly, the court found that an attorney fee award of $5,750 was reasonable. As for costs, the court awarded W&S the full requested amount of $2,790.38, as one of the defendants was in England and serving her was unusually costly. W&S was therefore ordered to deposit the disputed funds, plus interest, and minus the $8,540.38 the court awarded it in this order.

Breach of Fiduciary Duty

Fourth Circuit

Sealy v. Old Dominion Freight Line, Inc., No. 1:23-CV-819, 2024 WL 2212905 (M.D.N.C. May. 16, 2024) (Judge Thomas D. Schroeder). Three participants of the Old Dominion Freight Line, Inc. 401(k) Plan have sued the plan’s fiduciaries on behalf of a putative class alleging the fiduciaries are violating ERISA and causing millions of dollars in losses to the plan through excessive and unreasonable fees. Plaintiffs allege the plan is overpaying direct recordkeeping fees, indirect revenue sharing fees, float fees, and investment management fees. Defendants disagree with the allegations and moved to dismiss the complaint for failure to state a claim. Defendants first argued that the proposed class period extends beyond ERISA’s six-year statute of limitations for fiduciary breach claims. The court, however, saw “no reason to dismiss any claim in part at this time on [time limitation grounds] because the class, if certified, would not extend beyond the proper limitations period.” Defendants also attached several exhibits to their motion to dismiss. The court took judicial notice of the Form 5500s, which it viewed as necessarily incorporated into plaintiffs’ complaint, but declined to take judicial notice of Rule 408(b)(2) disclosures and the master services agreements between Old Dominion and its third-party recordkeepers. Although the court was receptive to defendants’ challenges to the complaint, and took time to caution plaintiffs against “any effort to game the system,” the court nevertheless recognized that it must accept plaintiffs’ allegations as true at this preliminary stage. Favoring plaintiffs’ allegations, the court was satisfied that they stated their fiduciary breach claims based on the fees and share classes. Plaintiffs compared Old Dominion’s plan with four other plans which had much lower per-participant fees. At this stage in litigation, the court was persuaded that these other plans were meaningful benchmarks and demonstrated the plausibility of plaintiffs’ allegations that defendants are breaching their fiduciary duties. The court also accepted plaintiffs’ share class allegations of nine investments in the plan. The court expressed that it could not accept defendants’ view that “expense ratios are per se reasonable simply because other cases have found higher expense ratios to be reasonable.” Accordingly, the court held that defendants did not demonstrate that they are entitled to dismissal of plaintiffs’ claims and therefore denied the motion to dismiss.

Class Actions

Seventh Circuit

Urlaub v. Citgo Petroleum Corp., No. 21 C 4133, 2024 WL 2209538 (N.D. Ill. May. 16, 2024) (Judge Matthew F. Kennelly). Plaintiffs Leslie Urlaub, Mark Pellegrini, and Mark Ferry commenced this putative class action against their former employer, Citgo Petroleum Corporation, its two defined benefit pension plans, and the fiduciaries of the plans, alleging defendants violated several provisions of ERISA by calculating joint and survivor annuity benefits using out-of-date mortality assumptions based on 1970s-era mortality tables. Plaintiffs moved to certify a class of over 1,700 individual participants and beneficiaries of the plans who are receiving a joint and survivor annuity. Plaintiffs allege that the total underpayments for the class members is at least $31,713,141. In this order the court provisionally granted the motion to certify the class subject to certain amendments outlined in the decision. To begin, the court ordered that a breach of fiduciary duty subclass be created for members who were issued checks less than six years before the date of this suit was filed whose claims are not time-barred under ERISA’s statute of limitations. The court clarified that plaintiffs Urlaub and Ferry, but not Pellegrini, will be representatives of this subclass. Additionally, the court eliminated 26 individuals from the proposed class whose benefits were not calculated using an eight-percent interest rate and the 1971 mortality table, and instead had joint and survivor annuity benefits calculated using “Tabular Factors.” The court agreed with defendants that these 26 people were not properly within the class and therefore ordered amendment of the class definition to exclude them. The court further excluded three individuals from the proposed class who received a “Subsisted Pre-Retirement Survivor Annuity.” However, after eliminating these 29 individuals, the class size was only whittled down slightly and still encompasses 1,744 members. It was with regard to this revised class that the court evaluated the requirements of Rule 23(a) and (b)(1). Starting with Rule 23(a), the court concluded that the class is sufficiently numerous; that defendants’ single course of conduct is common to all class members; that the named plaintiffs are typical of absent class members as they suffered the same financial harm in the form of lower payments; and that the named plaintiffs and their counsel are adequate representatives to act in the interest of the class. Simply put, the court expressed that the dispute at the heart of this case is whether the single life annuity to joint and survivor annuity conversion factor was within the reasonable range for all class members. Answering this question, the court stated, can and should be done on a class-wide basis. Finally, the court concluded that certification under Rule 23(b)(1) was appropriate because prosecuting separate actions would create a risk of inconsistent and varying adjudications creating potentially incompatible standards of conduct for the defendants. For these reasons, the court provisionally granted plaintiffs’ motion for class certification and directed the parties to propose amended class and subclass definitions consistent with this order.

Disability Benefit Claims

Fourth Circuit

Aisenberg v. Reliance Standard Life Ins. Co., No. CIVIL 1:22-cv-125 (DJN), 2024 WL 2154739 (E.D. Va. May. 14, 2024) (Judge David J. Novak). Over two years ago plaintiff Michael Aisenberg applied for long-term disability benefits after major open-heart surgery rendered him unable to continue working as an attorney. Reliance Standard Life Insurance Company determined that Mr. Aisenberg was not entitled to benefits and denied his claim. Mr. Aisenberg challenged that decision in court. Ultimately, the court found Reliance Standard’s decision arbitrary and capricious. It determined that the insurance company abused its discretion by failing to assess the risk of future cardiovascular harm. Accordingly, the court overturned the denial and remanded to Reliance Standard to reconsider in light of its ruling. On remand, Reliance once again determined that Mr. Aisenberg was not entitled to long-term disability benefits under the plan. Mr. Aisenberg appealed to the court for a second time. The court concluded that Reliance Standard again abused its discretion, and this time ordered it to pay Mr. Aisenberg benefits. Reliance Standard began paying benefits, but determined that it could offset monthly benefit amounts by Mr. Aisenberg’s earned-income Social Security benefits. Mr. Aisenberg disputes this conclusion. He believes that earned-income Social Security benefits do not “result” from his long-term disability and therefore cannot be offset against his monthly payments under the terms of the plan. Accordingly, Mr. Aisenberg filed a motion to determine sum certain. As a preliminary matter, the court resolved the parties’ dispute over exhaustion. Mr. Aisenberg argued that exhaustion does not pose a barrier to the court ruling on the parties’ dispute because the court has jurisdiction to adjudicate disputes related to benefit assessments. The court agreed, and stated that exhaustion would serve no purpose here. The court “therefore declines to require that Plaintiff fully exhaust his internal remedies as to the question of whether Defendant has abused its discretion in interpreting the terms of its Plan related to the benefits offset.” As for the merits of the dispute, the court held that earned-income Social Security benefits do not constitute “other income” under the plain language of the plan. “Defendant’s Plan is unambiguous; it does not permit offsetting Plaintiff’s Social Security benefits, as they result from his earned income, rather than his disability, and Defendant’s plan permits offsetting only those Social Security benefits ‘resulting from the same Total Disability for which a Monthly Benefit is payable.” Reliance Standard has in fact litigated this interpretation of the same language in federal court before, and was told “that when its Plan’s language created a relationship between Social Security benefits and disability benefits, that language must be given interpretive force.” Accordingly, the court determined that Reliance Standard abused its discretion, for a third time in this matter, and ordered it to pay Mr. Aisenberg benefits without the offset.

ERISA Preemption

Seventh Circuit

The Regents of the Univ. of Cal. v. Health Care Serv. Corp., No. 22 C 6960, 2024 WL 2209595 (N.D. Ill. May. 14, 2024) (Judge Lashonda A. Hunt). A healthcare provider, the UCLA Health System, sued defendant Health Care Service Corporation d.b.a. Blue Cross and Blue Shield of Texas in state court for breach of contract and quantum meruit seeking payment of $78,737.20 for medical treatment it provided to three individuals with health insurance plans administered by defendant. To date, defendant has not paid anything. UCLA Health maintains that it is entitled to payment in this amount under the terms of a written contract between it and Anthem Blue Cross. Defendant removed the case to federal court on the basis that the two state law claims are preempted by ERISA. UCLA Health moved to remand its lawsuit to state court. In this decision the court granted the motion to remand. It held that neither prong of the Davila preemption test was satisfied, and thus the claims are not completely preempted by ERISA. The court determined that UCLA Health is not asserting rights for benefits under the ERISA plans. Rather, it explained that UCLA Health brings state law claims independently as a healthcare provider, not as an assignee of benefits under any plan. The court held that UCLA Health’s claims are based on an implied-in-fact contract and the parties’ conduct and interactions which “are independent from any duties that arise under the patients’ ERISA Plans. Indeed, UCLA Health does not contest HCSC’s denial of coverage. Rather, UCLA Health ‘is bringing its own independent claims, and these claims are simply not claims to ‘enforce the rights under the terms of the plan.’’” Therefore, the court concluded that ERISA does not convert UCLA Health’s state law claims into federal ones, and so granted the motion to remand the matter back to state court.

Ninth Circuit

California Brain Inst. v. United Healthcare Servs., No. 2:23-cv-06071-ODW (RAOx), 2024 WL 2190983 (C.D. Cal. May. 15, 2024) (Judge Otis D. Wright, II). Plaintiff California Brain Institute provided medical treatments to two patients insured under healthcare plans administered by defendant United Healthcare Services, Inc. First, California Brain Institute provided medical services to Patient RH. It submitted bills to United for these treatments. United paid the submitted claims for reimbursement, but later claimed that they were overpaid. Accordingly, when California Brain Institute submitted bills for a different patient, Patient MV, United kept the funds to offset them for the mistaken overpayments it made for Patient RH’s separate and entirely unrelated medical services. In this action, California Brain Institute seeks to recover the amounts of the unpaid medical bills from United. It asserts four causes of action: three common law causes of action in its own individual capacity, and one cause of action for recovery of benefits under ERISA Section 502(a)(1)(B) as Patient RH’s assignee. United moved to dismiss the three state law claims. United argued that these claims are conflict preempted under ERISA Section 514(a). The court agreed, and granted the motion to dismiss the common law claims with leave to amend. The court found that the three claims California Brain Institute asserted in an individual capacity are all premised on the existence of the ERISA plan and that it would have no claim to the funds it seeks from United “without the ERISA Plan’s coverage of ‘eligible expenses.’” In addition, the court noted that the overpayment recovery provision is also part of the two ERISA plans, and resolution of the dispute requires interpreting and analyzing the plans. “Accordingly, MV’s ERISA Plan will necessarily play a ‘critical factor in establishing’ United’s liability for [plaintiff’s] claims, which are therefore preempted under § 514(a)’s ‘reference to’ test.” The court further held that the individual state law claims were preempted under the “connection with” test as it viewed these claims as pursuing an alternative enforcement mechanism for benefits due under ERISA-regulated plans. Thus, because the court found the complaint explicitly alleges that the provider and United did not have any separate contract and fails to allege any independent representation made by United to pay benefits, the court determined that California Brain Institute’s “claims are essentially claims for wrongfully withheld benefits.” The three state law claims were accordingly dismissed.

Fiscu v. UKG Inc., No. 3:23-cv-01240-AN, 2024 WL 2153537 (D. Or. May. 13, 2024) (Judge Adrienne Nelson). Plaintiff Ovidiu Fiscu became ill in the fall of 2021 and took extended leave from his employment at UKG Inc. In February 2022, Mr. Fiscu applied for benefits under UKG’s supplemental long-term disability plan (“SLTD plan”). His request for benefits was denied. In response, Mr. Fiscu commenced a lawsuit in state court, alleging state law claims. UKG removed the action to federal court and subsequently moved to dismiss for failure to state a claim, arguing the state law claims are preempted under ERISA. The court agreed with UKG that the claims are preempted and thus granted the motion to dismiss, with leave to amend, in this order. First, the court construed the SLTD plan as an ERISA-governed plan. It concluded that Mr. Fiscu did not show that the SLTD plan satisfies all four requirements of ERISA’s “safe harbor” provision. Specifically, the court noted that Mr. Fiscu did not address whether UKG endorsed the program and whether UKG receives no consideration for the program. Accordingly, the court considered the plan to be an ERISA plan and therefore progressed to analyzing whether the state law claims are preempted by ERISA. It began by evaluating whether the claims are completely preempted under the two-prong Davila test. As to the first prong, the court found that Mr. Fiscu is a participant in the plan with “a colorable claim for vested benefits,” and his “complaint appears to seek benefits under an ERISA plan and to clarify his rights under an ERISA plan.” Thus, the court held that prong one of the Davila test was satisfied. Further, the court determined that Mr. Fiscu’s breach of contract and declaratory judgment claims do not arise independently of the ERISA plan and its terms, and that they are therefore completely preempted. However, Mr. Fiscu’s negligence claim was not found by the court to be completely preempted by ERISA, as the “legal implications of [UKG’s] alleged misrepresentation and negligent actions would exist whether or not the SLTD plan was governed by ERISA.” Nevertheless, the court found that the negligence claim was preempted by Section 514 of ERISA because the claim “would not exist but for the fact that UKG allegedly denied plaintiff benefits.” Accordingly, the court agreed with UKG that ERISA governs this action and Mr. Fiscu cannot sustain his state law claims. The court ended its decision by granting Mr. Fiscu leave to amend his complaint to plead causes of action under ERISA, or to plead sufficient facts to establish that the SLTD plan is not governed by ERISA.

Sagebrush LLC v. Cigna Health & Life Ins. Co., No. 24-00353-CJC (JDEx), 2024 WL 2152458 (C.D. Cal. May. 13, 2024) (Judge Cormac J. Carney). A mental health and substance abuse treatment center, plaintiff Sagebrush LLC, sued Cigna Health and Life Insurance Company and Cigna Healthcare of California, Inc. in California state court for failing to properly reimburse it for treatment it provided to 24 patients insured under Cigna healthcare plans. Sagebrush seeks payment of $7,267,347.06 under the following state law causes of action: violation of California’s unfair competition law, breach of implied contract, unjust enrichment, quantum meruit, and accounts stated. The Cigna defendants removed the action to federal court. Defendants maintain that the state law claims are preempted by ERISA. Sagebrush disagrees. It moved to remand its action back to state court. In this decision the court agreed with Cigna on the issue of preemption. It held that Sagebrush is a provider with assigned benefits for at least one of the patients, meaning it has standing to sue for benefits under ERISA. Moreover, at heart, the court determined that the claims in this action “in effect, seek benefits that are owed under an ERISA plan.” Finally, the court evaluated whether there was an independent legal duty implicated by defendants’ actions. Cigna argued that at least the unfair competition law is completely preempted by ERISA because it is entirely dependent on the existence and terms of the ERISA plans. Once again, the court agreed. It found that plaintiff’s claim seeks reimbursement for medically necessary services at rates tied directly to the ERISA-regulated benefit plans. Because ERISA completely preempts at least one of Sagebrush’s state law claims, the court held that removal was appropriate and therefore denied the motion to remand.

Life Insurance & AD&D Benefit Claims

Ninth Circuit

Wilcox v. Dearborn Ins. Co., No. 23-55484, __ F. App’x __, 2024 WL 2130598 (9th Cir. May 13, 2024) (Before Circuit Judges Tallman, Forrest, and Bumatay). Plaintiff-appellant Kevin Wilcox sued Dearborn Insurance Company under ERISA Section 502(a)(1)(B) seeking to recover waiver-of-premium life insurance benefits provided to disabled plan participants under his policy. Following a trial, the district court entered judgment in favor of Dearborn. Mr. Wilcox appealed the unfavorable ruling to the Ninth Circuit. Reviewing the district court’s legal conclusions de novo and factual findings for clear error, the court of appeals affirmed in this short unpublished decision. The Ninth Circuit held that the lower court had not erred by concluding that “in the absence of ongoing symptoms, the evidence presented by Wilcox was insufficient to show that he could not work in any occupation.” The appeals court disagreed with Mr. Wilcox that the district court had improperly required him to demonstrate “persistent symptomatology” to establish an inability to work in any occupation. Rather, the Ninth Circuit viewed the district court’s conclusion as based on a plausible and reasonable reading of the medical records. Additionally, the court of appeals rejected Mr. Wilcox’s argument that the district court improperly considered reasons for denial that Dearborn itself did not provide during its administrative appeal process. It stated that Dearborn provided a clear and specific reason for its denial to “ensure meaningful review,” and that the district court appropriately examined only Dearborn’s rationales for its denial in its review. The district court’s decision was accordingly affirmed.

Medical Benefit Claims

Ninth Circuit

Lawrence B. v. Anthem Blue Cross Life & Health Ins. Co., No. 23-cv-06529-JSC, 2024 WL 2112866 (N.D. Cal. May. 8, 2024) (Judge Jacqueline Scott Corley). Plaintiff Lawrence B. paid out of pocket for his daughter’s treatment at a residential treatment facility after defendant Anthem Blue Cross Life & Health Insurance Company denied the family’s claim for coverage by concluding the care was not medically necessary under the terms of the ERISA-governed healthcare plan. In this action, plaintiff seeks to recover those benefits. He asserts two claims, a claim for plan benefits under Section 502(a)(1)(B), and a claim for equitable relief for breach of fiduciary duty under Section 502(a)(3). Anthem moved to dismiss the second cause of action for breach of fiduciary duty. It argued that plaintiff cannot sustain both claims, insisting that the two counts are duplicative because they are both premised on allegations Anthem failed to follow plan terms. In addition, Anthem challenged the sufficiency of the claim on the grounds that “Plaintiff fails to plead any fact which would allow this Court to reasonably infer the MCG clinical guidelines fail to align with the Plan’s definition of medical necessity.” In this decision, the court ruled that the complaint currently fails to state a fiduciary breach claim against Anthem and therefore granted the motion to dismiss. It concluded that “the complaint is devoid of facts to support” its allegations that MCG Behavioral Health Guidelines used by defendant are inconsistent with the plan’s definition of “medically necessary” treatment. Thus, the court stated that it cannot currently infer that Anthem’s reliance on the MCG clinical guidelines to determine medical necessity for mental health benefits violates plan terms and is more restrictive than generally accepted standards of medical care. The court therefore agreed with Anthem that plaintiff failed to state a fiduciary breach claim, and accordingly granted the motion to dismiss the second cause of action. However, dismissal was granted with leave to amend, as the court broadly rejected Anthem’s argument that plaintiff cannot sustain claims one and two. The court concluded it was premature to determine whether plaintiff’s Section 502(a)(3) claims for relief are duplicative of his claim for benefits at this stage.

Pension Benefit Claims

Second Circuit

Grosso v. AT&T Pension Benefit Plan, No. 22-1701-cv, __ F. App’x __, 2024 WL 2180316 (2d Cir. May. 15, 2024) (Before Circuit Judges Leval, Merriam, and Kahn). Plaintiffs-appellants Vincent C. Grosso and Patricia M. Wing were each eligible to begin receiving early retirement benefits at the age of 55. However, neither filed a written request for benefits until 2017, when Mr. Grosso was 62 and Ms. Wing was 59. Along with their elections to receive early retirement benefits, plaintiffs also sought to receive retroactive payments dating back to when each was age 55. The AT&T Pension Benefit Plan denied their claims for retroactive pension benefits. The Plan concluded that under the governing plan terms Mr. Grosso and Ms. Wing had to have filed written applications for early retirement benefits at age 55 to receive the benefits at that time. Because they waited, they were not entitled to retroactive benefits. This litigation followed the denials of the retroactive pension benefits. The district court ultimately granted summary judgment to AT&T under abuse of discretion review. It held that defendants reasonably interpreted the plan to require participants to file an election to become entitled to the early retirement benefits. Mr. Grosso and Ms. Wing appealed the district court’s denial of their motion for summary judgment to the Second Circuit. In this order the court of appeals affirmed. The Second Circuit agreed with the district court that the denials were reasonable and supported by substantial evidence “and that summary judgment in favor of defendants was therefore appropriate.” Finding the denials for retroactive early retirement benefits “at minimum, not arbitrary and capricious,” the appeals court affirmed the grant of summary judgment to the AT&T defendants on plaintiffs’ claim for benefits under Section 502(a)(1)(B).

Statute of Limitations

Tenth Circuit

J.H. v. Anthem Blue Cross Life & Health Ins. Co., No. 2:23-CV-00460-TS-DBP, 2024 WL 2243316 (D. Utah May. 16, 2024) (Judge Ted Stewart). Plaintiff A.H., a beneficiary in an insured ERISA-governed healthcare plan, was treated at a residential treatment center from July 1, 2020 to June 4, 2021. Anthem Blue Cross Life and Health Insurance Company denied the claim for benefits for this treatment, determining that it was not medically necessary. The family appealed the adverse decision, and on August 12, 2021, Anthem affirmed its denial of benefits and informed the family that it was a final adverse determination. In its letter, Anthem informed the family that under their plan they had one year to bring a civil lawsuit under ERISA Section 502(a) to challenge the decision in court. Before bringing a lawsuit, the family submitted an external review request for the denied claim. On October 21, 2021, the external review agency upheld Anthem’s denial of coverage. The family would eventually file this action, but not until July 17, 2023. Viewing this litigation as untimely, Anthem referred to the plan terms and moved to dismiss the complaint. Relying on the unambiguous limitation period in the plan which states: “If you bring a civil action under Section 502(a) of ERISA, you must bring it within one year of the grievance or appeal decision,” the court concluded that plaintiffs needed to file their complaint no later than October 31, 2022 to comply with the Plan’s one year statute of limitations. Because they filed their complaint almost a whole year after this date, the court agreed with Anthem that the complaint was untimely and barred. Thus, the court granted the motion to dismiss.

Bafford v. Admin. Comm. of the Northrop Grumman Pension Plan, No. 22-55634, __ F. 4th __, 2024 WL 2067884 (9th Cir. May 9, 2024) (Before Circuit Judges Christen, Desai, and Johnstone)

For the second time in close to as many years, the Ninth Circuit reversed the district court’s dismissal of this action brought by two participants and one beneficiary of the Northrop Grumman Pension Plan, an ERISA-governed defined benefit plan, against the administrator of that plan.

In this decision, the Ninth Circuit recognized the harm that is done to employees planning their retirement when they receive inaccurate pension information. As the Ninth Circuit put it, “[u]nlike a participant who does not receive any pension benefit statement and therefore does not know their retirement benefit, a participant who receives a significantly inaccurate statement may be affirmatively misled into believing that their pension will be greater than it is and make inadvisable decisions as a result.”

The plaintiffs allege they did not automatically receive benefit statements from the plan. Instead, they requested such statements from the plan’s administrative committee while they were working at Northrop in order to plan their retirements.

However, the responses they received grossly overstated their benefits. The mistake apparently resulted from the erroneous treatment of plaintiffs’ salaries during their two periods of employment with Northrop, the second of which was for a company that was eventually acquired by Northrop. The retirement benefit statements plaintiffs received used salary data from their second period of employment following the acquisition, leading to monthly benefit calculations that were more than twice the amount to which plaintiffs were actually entitled.

Unfortunately, plaintiffs only learned of these miscalculations in 2017 after they had already retired and begun receiving their pensions at the much higher rates. In this action, plaintiffs are seeking to redress the committee’s violations of ERISA’s disclosure requirements.

The Ninth Circuit addressed four issues in resolving the appeal: (1) whether plaintiffs adequately alleged that the committee failed to send triennial pension benefit statements or annual notices of the availability of such statements under § 1025(a)(1)(B)(i); (2) whether allegations that the committee furnished inaccurate pension benefit statements state a cognizable cause of action under § 1025(a)(1)(B)(ii); (3) whether plaintiffs sufficiently alleged they made written requests for benefit statements; and (4) whether remedies are available for the committee’s alleged failure to provide pension benefit statements in compliance with ERISA.

First, the panel held that plaintiffs adequately alleged their claim under § 1025(a)(1)(B)(i). The court of appeals stated, “[T]his record does not establish that Plaintiffs received an SPD or Annual Funding Notice at least once each year that they were employed at Northrop and participating in the Plan… The record before us shows only that the Committee provided an SPD in 2014 and Annual Funding Notices in 2014, 2015, and 2016; Plaintiffs each worked for Northrop for over a decade after they returned to the company in 2002. At this stage of the litigation, we cannot conclude that the Committee satisfied § 1025(a)(3)(A).”

The Ninth Circuit then turned to the claim under § 1025(a)(1)(B)(ii), and adopted the logical proposition that ERISA requires accurate benefit statements. The appeals court concluded that the language of the statute requiring participants be furnished with statements informing them of their “total benefits accrued” under § 1025(a)(2)(A) has the same meaning as “accrued benefit” in 29 U.S.C. § 1002(23)(A), and therefore requires statements be accurate. The panel further held that this reading was consistent with the core purpose of ERISA to protect the interests of employees and their beneficiaries. This goal, the court wrote, “would be entirely frustrated if plan administrators could satisfy their disclosure duties by providing grossly inaccurate pension benefit statements.” Accordingly, the Ninth Circuit was satisfied that plaintiffs adequately alleged the committee violated § 1025(a)(1)(B)(ii) by not providing them with pension benefit statements in accordance with the plan’s formula and “grossly overstat[ing] their benefits.”

In the decision’s next section, the Ninth Circuit held that plaintiffs sufficiently alleged they made written requests for benefit statements. “The Committee’s argument that Plaintiffs did not make written requests because they ‘conveyed their requests via the telephone’ is not well taken,” the Ninth Circuit stated. Plaintiffs alleged that they diligently followed the directions of the SPD and Annual Funding Notices to input data electronically, thereby satisfying the statute’s requirement that participants make written requests for pension benefit statements. According to the court, this was sufficient to trigger the duty to produce the benefit statements.

In so ruling, the appeals court was unpersuaded by the committee’s contention that plaintiffs were not requesting statements, but only pension “estimates.” The Ninth Circuit held that the committee’s argument presented a factual dispute not appropriate for resolution on a motion to dismiss “because it requires making factual findings concerning the type of documents Plaintiffs requested, which is not possible on the present record.”

Finally, the decision closed with a discussion of remedies. The court rejected the committee’s argument that there were no remedies available for the alleged ERISA violations. To the contrary, the panel determined that daily statutory penalties under § 1132(c)(1), for failure to furnish documents under § 1025(a), is an available and appropriate remedy. Furthermore, this remedy does not require allegations of bad faith. The court was convinced, under the plain text of the statute, that a colorable claim alleging grossly inaccurate pension benefit statements “falls within the scope of ERISA’s penalty provision.” The Ninth Circuit, however, declined to address whether equitable remedies under § 1132 were available because the district court did not consider the issue below.

Accordingly, the Ninth Circuit reversed the district court’s dismissal of plaintiffs’ claims and remanded for further proceedings.

Plaintiffs are represented by Your ERISA Watch’s own co-editor, Elizabeth Hopkins, along with her colleague and partner Susan L. Meter of Kantor & Kantor LLP, and Teresa S. Renaker and Kirsten G. Scott of Renaker Scott LLP.

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

Breach of Fiduciary Duty

Sixth Circuit

Bonds v. Heeter, No. 23-12045, 2024 WL 2059721 (E.D. Mich. May. 8, 2024) (Judge George Caram Steeh). In this action a participant of an employee stock ownership plan, the Flat Rock Metal and Bar Processing Stock Ownership Plan (“the ESOP”), brings claims for breaches of fiduciary duties and prohibited transactions against the ESOP’s trustee and selling shareholders in connection with a 2020 transaction wherein the plan purchased one hundred percent of outstanding shares of SAC Ventures Inc. for $60 million. Plaintiff alleges the company was revalued one month later at $3,649,046, signaling that the plan grossly overpaid for its assets. Plaintiff contends that the $60 million figure was the result of unrealistic growth projections and comparisons. “The complaint alleges that the sale was financed by the sellers because they were unable to arrange for bank financing, which would have required due diligence to ensure that the stock was worth the price paid.” The complaint further alleges that the purchase price was not properly discounted to reflect that the selling shareholders retained control of the company. Defendants moved to dismiss the complaint. To begin, the court addressed standing. It held that allegations in the complaint that the plan overpaid for stock, injuring plan participants, satisfied the standing elements of injury in fact, causation, and redressability. The court disagreed with defendants’ proposition that the nature of a leveraged transaction inherently precludes a finding of injury. “Plaintiff makes no allegation about the equity value of the stock immediately after the transaction; rather, he contends that post-transaction valuations, along with flaws in the initial valuation methodology, raise an inference that the ESOP overpaid.” Having determined plaintiff has standing, the court turned to the merits of the prohibited transaction claims. It determined that “the face of the complaint does not conclusively demonstrate that [exemptions] appl[y],” and that it is not an ERISA plaintiff’s burden to plead the absence of exemptions to prohibited transactions. Accordingly, the court denied the motion to dismiss the prohibited transaction claims under Sections 406(a)(1)(A) and (B). However, the court did find the claim under Section 406(a)(1)(D) subject to dismissal, as subsection (D) requires a complaint to create a reasonable inference showing that the trustee had a “subjective intent” to benefit a party in interest by transferring plan assets under Sixth Circuit precedent. Next, the court analyzed the claims for breach of the fiduciary duties of prudence and loyalty. Plaintiff contends that the trustee breached these duties by failing to thoroughly investigate the company stock and was financially incentivized to please the selling shareholders, as ongoing fees and future business was tied to approving the ESOP transaction. “These allegations,” the court wrote, “are sufficient to state a claim for breach of the duties of loyalty and prudence.” The court also denied the motion to dismiss the knowing participation and co-fiduciary liability claims asserted against the selling shareholders. It agreed with plaintiff that the shareholders knew or should have known the true stock valuation as well as other relevant facts surrounding the allegedly prohibited transaction. For these reasons, the court held the complaint satisfied Rule 8 notice pleading and denied the motion to dismiss the claims asserted against the selling shareholders. Accordingly, with the narrow exception of the prohibited transaction claim under Section 406(a)(1)(D), the court denied the motion to dismiss and allowed the action to proceed.

Disability Benefit Claims

Seventh Circuit

Artz v. Hartford Life & Accident Ins. Co., No. 23-2269, __ F. 4th __, 2024 WL 1986000 (7th Cir. May. 6, 2024) (Before Circuit Judges Scudder, Jackson-Akiwumi, and Pryor). Plaintiff-appellant Donald Artz worked at an electric utility company for over two decades. In 2019 symptoms of his longstanding multiple sclerosis left him feeling unable to continue working the arduous 12-hour shifts of his job as an electric distribution controller. Mr. Artz therefore applied for short-term disability benefits, as well as disability benefits from the Social Security Administration. He was granted these benefits and stopped working. When his short-term disability benefits ended, Mr. Artz applied for long-term disability benefits under his ERISA-governed policy. The plan administrator, Hartford Life & Accident Insurance Company, denied the claim. It concluded that Mr. Artz was not totally disabled due to his fatigue and cognitive impairments to the point of being unable to perform one or more of the essential duties of his job. Mr. Artz challenged the denial through an internal appeal, and when that proved unsuccessful, in litigation. Ultimately, the district court ruled that Hartford had not abused its discretion in denying the claim. It concluded that Mr. Artz was placing too much emphasis on the duties of his specific position, i.e. the 12-hour shifts, rather than the essential duties of his job in the general workplace as required by the policy. In particular, the district court latched onto the fact that one of Mr. Artz’s treating neurologists opined that he could perform regular 8-hour-a-day 5-day-a-week work in his current condition. Hartford’s reviewing doctors agreed with the neurologist’s conclusion when they reviewed the medical records. Accordingly, the district court held that Harford’s reading of the medical records was reasonable and substantial evidence supported the benefits denial. Furthermore, the district court rejected Mr. Artz’s contention that approval of both short-term disability and Social Security Administration benefits entitled him to benefits under the long-term disability plan. Mr. Artz appealed the unfavorable ruling, but the Seventh Circuit affirmed in this decision. Given the arbitrary and capricious review standard, the court of appeals could not find evidence that the district court erred in concluding that the denial was reasonable. “Several physicians concluded that [Mr. Artz] did not present enough objective evidence to show ‘severity and frequency’ of symptoms ‘such that functional impairment was established.’ This evidentiary record leaves us no choice but to AFFIRM.”

Ninth Circuit

Kim v. The Guardian Life Ins. Co. of Am., No. 8:23-cv-01579-DOC-ADS, 2024 WL 2106240 (C.D. Cal. May. 9, 2024) (Judge David O. Carter). Plaintiff Jason Kim commenced this ERISA benefits action to challenge The Guardian Life Insurance Company of America’s adverse decision on his claim for long-term disability benefits. Mr. Kim was employed as an art director at Dreamhaven, Inc. when on January 4, 2021, he became symptomatic for COVID-19 and subsequently developed sudden and severe physical, cognitive, and mental health symptoms, including psychosis. Mr. Kim’s psychological symptoms became profound and escalated. As the court noted, while it is uncommon, the COVID-19 virus has been documented to cause psychosis, as well as a variety of other mental health problems. The onset of these symptoms was debilitating. “He started showing signs of altered cognition, affect, and behavior, including pacing all night.” A neurologist diagnosed Mr. Kim with tardive dyskinesia and tardive akathisia. By March 2021, Mr. Kim’s condition was so severe that he attempted suicide and spent two months hospitalized. It was in fact while Mr. Kim was in the hospital, on March 25, 2021, that he submitted his claim for long-term disability benefits. Guardian denied the claim, concluding that while Mr. Kim was disabled, his disability was caused by pre-existing conditions excluded under the policy. Guardian cited Mr. Kim’s medical history of depression, anxiety, and ADHD. The court disagreed and held that Mr. Kim’s pre-COVID-onset mental health conditions were minor and non-disabling. “The Record contains sufficient evidence to establish that Plaintiff’s condition had subsequently changed from common anxiety and depression to something far more severe and unconnected to his documented prior conditions.” Accordingly, the court found that the pre-existing condition exclusion did not apply. The court stated that Mr. Kim’s “minimal prior anxiety and depression were categorically different than the symptoms he suffered beginning in early 2021, such that any preexisting condition did not substantially contribute to his disability.” Moreover, the court concluded that Mr. Kim met the policy’s definition of total disability and that he was entitled to benefits under the plan. The court thus overturned Guardian’s decision and awarded benefits, pre-judgment interest, and attorneys’ fees and costs.

Medical Benefit Claims

Ninth Circuit

Craig H. v. Blue Cross of Idaho, No. 1:23-cv-00221-DCN, 2024 WL 1975507 (D. Idaho May. 2, 2024) (Judge David C. Nye). In this action a family seeks benefit payments for their son’s residential mental healthcare treatment. Plaintiffs asserted four causes of action against the plan sponsor, Micron Technology, Inc., and the plan administrator, Blue Cross of Idaho: (1) recovery of benefits; (2) failure to provide a full and fair review; (3) violation of the Mental Health Parity and Addiction Equity Act; and (4) a request for statutory penalties for failure to supply documents upon request. Defendants moved to dismiss all the claims except the first for plan benefits. As a preliminary matter, the court took judicial notice of the plan document, concluding it was incorporated by reference into the complaint. However, the court declined to consider emails defendants attached to their motion to dismiss. The decision then addressed the full and fair review claim asserted under Section 502(a)(1)(B). While the court disagreed with defendants that the family is foreclosed from bringing a separate cause of action for violation of a full and fair review of the benefit claims, it nevertheless concluded that the family could not sustain this cause of action as currently pled under Section 502(a)(1)(B) because the requested relief, recovery of benefits due, is duplicative of their first cause of action. Accordingly, the court granted the motion to dismiss count two. Nevertheless, the court recognized that plaintiffs may cure this deficiency through amendment, and therefore informed plaintiffs they may replead to request some kind of equitable relief under Section 502(a)(3). The court addressed the Parity Act claim next. It stated that it would not entertain defendants’ arguments about treatment limitations, non-quantitative treatment limitations, and medical necessity, as these issues required factual discussions inappropriate for consideration on a motion to dismiss. The court therefore only addressed defendants’ argument that the family lacks standing to bring its Parity Act claim because there is no nexus between plan terms and the stated reasons for denial. Because the family “clearly alleges that it was Defendants’ use of the medical necessity criteria that created the disparity between mental health requirements and requirements for other coverage,” the court ruled that plaintiffs presented a plausible cause of action that defendants violated the Parity Act. As a result, the count was not dismissed. Finally, the court declined to consider the statutory penalties claim at this juncture, as questions over whether defendants acted in compliance with ERISA’s disclosure requirements “are very fact driven.” Thus, the court denied the motion to dismiss count four. For these reasons, the motion to dismiss was granted in part and denied in part.

Pension Benefit Claims

Seventh Circuit

Urlaub v. Citgo Petroleum Corp., No. 21 C 4133, 2024 WL 2019958 (N.D. Ill. May. 6, 2024) (Judge Matthew F. Kennelly). Three participants of the CITGO Petroleum Corporation’s two defined benefit plans sued CITGO, the plans, and the Benefits Committee on behalf of a putative class of similarly situated individuals for violations of ERISA in connection with the plans’ use of the 1971 Mortality Table to calculate joint and survivor annuity benefits. Plaintiffs assert four causes of action centering on the use of this allegedly outdated table. Count one alleges that use of the table reduced their benefits to less than the actuarial equivalent value of single life annuity benefits in violation of Section 1055. Similarly, count two alleges that the use of the table reduced the value of joint annuities below that of similarly situated single life annuities in violation of Section 1054(c). Count three alleges defendants violated ERISA’s anti-forfeiture provision, Section 1053. Finally, count four alleges the Benefits Committee breached its fiduciary duties of loyalty and prudence by providing inaccurate information to class members and failing to prudently make benefit determinations. Defendants moved for summary judgment. In their motion, defendants argued that the claims are untimely, plaintiffs failed to exhaust available internal appeals processes prior to filing suit, and plaintiffs cannot sustain their claims. The court mostly disagreed. It began by addressing the timeliness of the claims. The parties agreed that the analogous four-year statute of limitation under Texas law applies to counts one through three asserted under ERISA Sections 1055, 1054, and 1053. However, the parties dispute when plaintiffs’ claims accrued and thus when the clock started. The court ruled that there is a genuine question of fact about whether the plaintiffs knew or should have known the relevant facts of their claims regarding the mortality table more than four years prior to suing. “The Court cannot say that defendants have shown that no reasonable factfinder could conclude that the packets were insufficient to appraise participants that their [joint and survivor annuity] benefits might be less than the actuarial equivalent of their hypothetical [single life annuity] benefits.” The court then scrutinized the breach of fiduciary duty claim under ERISA’s six-year statute of repose. It concluded that two of the named plaintiffs’ fiduciary breach claims were timely under the six-year statute, but the third plaintiff’s claim was not because he received his first benefit check seven years before the lawsuit commenced. The court rejected plaintiffs’ “continuing breach” theory that the Committee continues to underpay the plaintiffs monthly in repeated violation of their fiduciary duties under ERISA. The court stated this was an instance “where a single decision has lasting effects.” Moreover, the court noted that plaintiffs pointed to no steps the Committee took to “cover their tracks” or “to hide the fact of the breach” to trigger the fraud or concealment exception. Therefore, the court concluded that plaintiff Pellegrini’s claim for breach of fiduciary duty was barred by ERISA’s statute of repose and granted summary judgment to the Committee on this narrow matter. Next, the court held that it would not require exhaustion in this case as it was not persuaded doing so “would serve any useful purpose,” and was reasonably convinced exhaustion would have been futile in any event. Finally, with regard to all four claims, the court agreed with plaintiffs that there are genuine disputes of material facts which render summary judgment inappropriate. Whether the Committee’s assumptions were reasonable and whether defendants violated ERISA will be resolved at trial. The remainder of defendants’ summary judgment motion was therefore denied.

Ninth Circuit

Lundstrom v. Young, No. 18-cv-2856-GPC-MSB, 2024 WL 2097900 (S.D. Cal. May. 9, 2024) (Judge Gonzalo P. Curiel). In compliance with a qualified domestic relations order (“QDRO”) signed by a state court judge in Texas, defendants Ligand Pharmaceuticals, Inc. and the Ligand Pharmaceuticals, Inc. 401(k) Plan distributed plaintiff Brian Lundstrom’s entire 401(k) account balance to his ex-wife, defendant Carla Young. Mr. Lundstrom brought this ERISA action to challenge that decision. In this order the court granted the motion for summary judgment brought by Ligand and the Plan. The court ruled that Mr. Lundstrom could not sustain his premature distribution claim as he failed “to adequately identify how premature distribution harms him,” as the 401(k) assets under the QDRO no longer belonged to Mr. Lundstrom “and thus the Court fails to see how Plaintiff may have been harmed.” Further, the court stated that even assuming Mr. Lundstrom could demonstrate harm, the claim would fail on the merits because the distribution was consistent with both ERISA and the terms of the Plan. Second, the court ruled on Mr. Lundstrom’s claim for failure to provide written procedures for determining the qualified status of a domestic relations order. “Again, Plaintiff must identify ‘downstream consequences’ of that violation…Again, Plaintiff has failed.” As Mr. Lundstrom could not prove he was injured by Ligand’s failure to promptly provide him procedures in writing, the court granted the Ligand defendants’ motion for summary judgment. Finally, the court addressed Mr. Lundstrom’s retaliation claim. Mr. Lundstrom alleges that Ligand retaliated against him for filing this lawsuit by reducing his bonus, limiting his merit increase, and eventually terminating his employment. Ligand insisted that Mr. Lundstrom waived his retaliation claim pursuant to a release in the parties’ written settlement agreements. The court agreed with Ligand that the negotiated confidential settlement agreements’ releases “explicitly released claims for wrongful discharge and claims brought under ERISA arising from Plaintiff’s termination,” and that these claims did not fall within the releases’ carveouts for the ongoing litigation claims. Accordingly, the court granted judgment to Ligand and the Plan on all of the claims asserted against them.

Pleading Issues & Procedure

Fifth Circuit

Thomas v. Group 1 Auto., No. H-23-1416, 2024 WL 1962890 (S.D. Tex. May. 3, 2024) (Judge Lee H. Rosenthal). Plaintiff Craig Thomas brought a wrongful termination lawsuit against his former employer, Group 1 Automotive, Inc. alleging race and age discrimination. Mr. Thomas’ action was filed on April 17, 2023. Almost a year later, and seven months after the deadline to amend pleadings ended, Mr. Thomas moved for leave to amend his pleadings to add a new cause of action under ERISA, presumably under Section 510. Mr. Thomas seeks to plead that he was fired in connection with a serious medical condition. He speculates that his employer terminated him in part to interfere with his right to employee medical benefits. In this order the court scrutinized the motion under Federal Rules of Civil Procedure 15(a) and 16(b). It stressed that Mr. Thomas’ motion was silent about the year-long delay in seeking to amend, and offered no explanation for failing to include an ERISA claim earlier. “Thomas’s counsel offers no excuse for the omission or the delay.” The court went on to express that it could not assess the importance of the amendment as the complaint does not plead a specific section of ERISA that was allegedly violated. Finally, the court found that defendant would be prejudiced if the motion were granted because it would have to consider adopting a new strategy and approach with changes in its motions. It stated, “[t]he prejudice is neither minimal nor easily curable, even with a short continuance.” Accordingly, the court found the one-year wait to add an amended cause of action “dilatory and unexplained” and therefore concluded that Mr. Thomas did not meet his burden of establishing good cause to justify granting the motion. For these reasons, the motion for leave to file an amended complaint was denied.

Seventh Circuit

Lysengen v. Argent Tr. Co., No. 20-1177, 2024 WL 2032927 (C.D. Ill. May. 6, 2024) (Judge Michael M. Mihm). This action involves the sale of Morton, Buildings, Inc. stock to an employee stock ownership plan and the concerns of participant-plaintiff Jackie Lysengen that the stock price was artificially inflated above its fair market value to the detriment of the plan and its participants. Ms. Lysengen, in a representative capacity, seeks plan-wide relief against defendant Argent Trust Company under ERISA Sections 409 and 502(a)(2). Early on, the court denied Ms. Lysengen’s motion for class certification. It based its denial “on certain conflicts that existed between [Ms. Lysengen] and the proposed class members, which the Court found benefitted differently from the ESOP transaction and its valuation.” However, the motion to deny class certification was not a death knell, as the court later ruled that Ms. Lysengen may proceed in a representative capacity under Section 502(a)(2), notwithstanding its denial of class certification. It reasoned that the conflicts it identified which precluded Rule 23 certification were not implicated as “any benefits would inure to the Plan as a whole, not individual members.” The court further noted in that decision that Section 502(a)(2) does not expressly require a plaintiff to proceed under Federal Rule of Civil Procedure 23. Now, Argent has moved to certify for interlocutory appeal the court’s order permitting Ms. Lysengen to proceed on behalf of the plan. In this order the court determined that the applicable conditions for certifying its decision for interlocutory appeal were met. The court therefore granted Argent’s motion. As a threshold matter, the court concluded the motion to certify was timely. It also agreed with Argent that the issue of “whether an individually named Plaintiff may seek plan-wide relief in a representative capacity under ERISA Section 502(a)(2), without doing so on behalf of a certified class,” is a contestable, difficult, and central question of law, appropriate for interlocutory resolution by the Seventh Circuit. On top of that, the court stated that “the question of law is dispositive of the litigation because Plaintiff seeks relief only in a representative capacity under Section 502(a)(2), and not on an individual basis…Thus, if the Court’s Order and Opinion was reversed on appeal, the outcome would be determinative of the litigation. The question of law, therefore, is vital to the future of this litigation[.]” Accordingly, the court granted Argent’s motion, certified the order for interlocutory appeal, and stayed the case pending appeal.  

Ninth Circuit

Plan Adm’r of the Chevron Corp. Retirement Restoration Plan v. Minvielle, No. 20-cv-07063-TSH, 2024 WL 1974544 (N.D. Cal. May. 3, 2024) (Magistrate Judge Thomas S. Hixson). Two ERISA actions have stemmed from the death of Margaret Broussard. In the first, the Chevron Corporation interpleads benefits from two benefit plans held by Ms. Broussard, the Retirement Restoration Plan and the Long-Term Incentive Plan. In the second, Ms. Broussard’s ex-husband, Martin Byrnes, asserts twelve causes of action under ERISA and state law seeking benefits under a defined benefit plan, The Chevron Corporation Retirement Plan, and a defined contribution plan, The Chevron Corporation Employee Savings Investment Plan. The combined benefits under the four plans are worth many millions of dollars. Mr. Byrnes moved to consolidate the two cases pursuant to Federal Rule of Civil Procedure 42. The motion to combine the actions was denied in this order. Although there is significant overlap in the parties and some of the factual and legal issues in the two cases, the court ultimately felt that the existence of the common issues did not weigh in favor of consolidation. In particular, the court carefully noted that benefits under each of the four plans “are provided and governed by written documents with their own terms,” meaning to the extent either case is decided on the terms of the relevant plan documents, those determinations are not relevant to the other case. Further, the court disagreed with Mr. Byrnes that questions over Ms. Broussard’s competence are entirely common to both cases, as her health and mental status deteriorated over time and her mental acuity was therefore not fixed. Accordingly, the court held, “a finding as to competence at one moment in time would [not] govern competence at a later time.” Therefore, the court found that critical differences weigh against consolidation. Additionally, the court ruled that consolidation posed the risk of being both prejudicial and confusing. Finally, the court held that there is no risk of inconsistent judgments and that consolidating the two lawsuits would “frustrate, rather than promote, judicial economy.” For these reasons, the court declined to consolidate the two actions and denied Mr. Byrnes’ motion.

Truong v. KPC Healthcare, Inc. Emp. Stock Ownership Plan Comm., No. 8:23-cv-01384-SB-BFM, 2024 WL 1984569 (C.D. Cal. May 3, 2024) (Judge Stanley Blumenfeld, Jr.). In 2020, participants of the KPC Healthcare Inc. Employee Stock Ownership Plan (“ESOP”) filed a class action lawsuit alleging breaches of fiduciary duties and prohibited transactions for violations surrounding a 2015 debt-leveraged purchase of KPC stock by the ESOP. That action ended in March 2023 when this court approved a class settlement of the claims. But the story doesn’t end there. Unbeknownst to the plan participants, in late December 2021, while the class action challenging the 2015 transaction was still pending, the ESOP leadership, through its trustee, Alerus Financial, N.A., sold the entirety of its KPC stock to Victor Valley Hospital Acquisition, Inc. and converted the ESOP into a profit-sharing plan. It turns out that Victory Valley Hospital was by no means unaffiliated with KPC Healthcare. To the contrary, the two companies were owned by the exact same individuals; two of the individual defendants were the sole owners of Victor Valley and its only board members. Defendants did not disclose the 2021 sale until eight months later, on August 24, 2022, and even then the notification did not disclose the sale price, or defendants’ interest in the purchasing company, to the ESOP participants. Upon learning of the December 2021 sale, plaintiff Sandra Truong, a plan participant, submitted a written request to the ESOP committee for information she believes she is entitled to under ERISA, including the valuation reports used to determine the sale price of the KPC stock. One month later, the ESOP committee responded and sent most of the requested documents, but maintained that Ms. Truong was not entitled to valuation reports under ERISA and refused to provide them. The committee also stated that it could not provide the valuation documents because they were in the sole possession of Alerus, which refused to produce the documents to either the ESOP committee or Ms. Truong. In this action, Ms. Truong has sued the KPC defendants and Alerus alleging violations of disclosure and reporting requirements under ERISA and seeking to obtain the information about the stock valuation as well as statutory penalties and attorneys’ fees. Defendants moved to dismiss on jurisdictional grounds pursuant to Federal Rule of Civil Procedure 12(b)(1), and also for failure to state a claim under Rule 12(b)(6). Their motions were granted in part and denied in part in the court’s meaty decision. Ms. Truong’s first three causes of action are asserted against the KPC defendants for (1) failure to update the SPD, (2) failure to timely file the annual Form 5500 report for the 2022 plan year, and (3) failure to provide the requested valuation documents. Claims four and five are asserted against Alerus. Claim 4 alleges Alerus breached its fiduciary duties by failing to provide the valuation reports. Claim 5 alleges Alerus knowingly participated in the KPC defendants’ breach of fiduciary duty by refusing to provide the valuation report to the KPC defendants. The decision started, logically, with the KPC defendants’ Article III challenge to the complaint. The court agreed with the KPC defendants that Counts 1 and 2 were moot because they eventually provided an updated SPD to Ms. Truong and filed the Form 5500. Under these circumstances, the court agreed that there remains no justiciable dispute over the SPD or the Form 5500. Accordingly, counts 1 and 2 were dismissed. Nevertheless, the court was unpersuaded by the KPC defendants’ position that Ms. Truong lacked standing to assert her valuation documents claim based on lack of redressability. “Plaintiff identifies authority holding that a plan administrator was not relieved of its obligation under ERISA to produce documents in a third party’s possession even when the third party (the claims administrator) refused a request to turn them over to the plan administrator.” Thus, the court found that Ms. Truong’s alleged injury in Count 3 could be redressed by a favorable decision and therefore she has standing to pursue the claim. However, the court was not finished with its analysis of Count 3, as defendants challenged it on the merits as well. They argued that valuation reports do not fall within the category of documents that ERISA § 104(b)(4) requires. At the pleading stage at least, the court was not convinced, and relied on Ninth Circuit case law to conclude that under certain circumstances valuation reports “can…be categorized as instruments under which the plan was operated, especially when requested by participants…who question the accuracy of the computation of their benefits.” The court thus rejected defendants’ position that valuation reports categorically are not encompassed by § 104(b)(4), and denied the motion to dismiss Count 3. The decision then segued to the two counts asserted against Alerus. To begin, the court once again established that Ms. Truong has standing and that she plausibly alleges that she has requested information to which she is, or at least may, be statutorily entitled (the valuation reports) and has been unable to obtain to date. “Plaintiff has adequately alleged an injury in fact – namely, that the withholding of the requested valuation report in violation of ERISA prevents her from fully understanding the benefits to which she is entitled under the plan.” The court then turned to the merits of Counts 4 and 5. First, Ms. Truong failed to convince the court that the valuation reports were plan assets, such that Alerus refusing to produce the report makes it an ongoing fiduciary even now when it no longer acts as trustee. “Plaintiff relies on general trust principles about a trustee’s duty to maintain records, which belong to the trust, but she does not cite a single case – binding or otherwise – holding or suggesting that an ERISA plan has a property interest in a valuation report commissioned by a trustee.” The court thus declined to adopt this novel interpretation of plan assets. Further, the court disagreed with Ms. Truong that Alerus had a duty to produce the valuation report to the committee during its time as the ESOP’s trustee under the terms of their trust agreement. The court held that Ms. Truong’s reading of the trust agreement was “incomplete and unclear.” Accordingly, the court determined that Ms. Truong could not sustain her breach of fiduciary duty claim against Alerus and therefore dismissed Count 4. The same was not true of Count 5, which alleged knowing participation in a breach of fiduciary duty. The court was satisfied that the complaint pled facts sufficient to show that there was a remedial wrong, that the relief sought is appropriate equitable relief under Section 502(a)(3), and that Alerus had actual knowledge of the alleged breach because it knew of Ms. Truong’s request for production from the KPC defendants and still refused to provide the valuation reports. For these reasons, the court denied the motion to dismiss Count 5. Finally, the court clarified that the dismissed claims were all dismissed without prejudice, and granted Ms. Truong the opportunity to move for leave to amend her complaint, should she wish to address the identified deficiencies and restore her complaint back to its fuller form.

Remedies

Second Circuit

Amara v. Cigna Corp., No. 3:01-CV-02361 (SVN), 2024 WL 1985904 (D. Conn. May. 6, 2024) (Judge Sarala V. Nagala). For twenty-three years the participants of the Cigna cash balance plan have been litigating the way Cigna calculated benefits after its traditional pension plan transitioned to the cash balance plan. Plaintiffs successfully argued that Cigna did not provide them with honest and appropriate disclosures regarding the new plan. ERISA aficionados are familiar with this lawsuit and its many twists and turns, including most notably its time before the Supreme Court in 2011. By 2014, the plan participants had prevailed, after their success in the district court was affirmed in the Second Circuit. Nevertheless, thirteen years of litigation had only established that wrongdoing had occurred, and that equitable remedies were available and appropriate. Implementing the relief has presented its own set of obstacles. That relief, called the “Amara benefit,” is a remedy reforming the plan to provide class members all accrued benefits from the defined benefit pension plan (“Part A”), plus all accrued cash balance plan benefits (“Part B”). A+B it turns out is not elementary. Adding two sums together sounds simple enough, until you consider how each of the two sums are calculated. The court spent five more years of work adopting a methodology to measure Parts A and B, which is complex, in part, because the two sums are not entirely independent. As the court noted, “the benefits class members accrued under Part A prior to the Plan transition in 1998 had been rolled over as a lump sum to form the opening cash balance (the ‘Initial Retirement Account’) of the Part B accounts… After years of accumulating interest and benefit credits in the Part B account, the piece of the Part B account that appropriately represented the Part A benefit was difficult to ascertain.” This was especially true because Cigna did not maintain records of the amounts each class member accrued under Part A. Further complicating matters was the fact that Cigna was entitled to credit itself for the Part A benefits through offsetting. Particularly important to the present matter was the court’s 2017 decision on the use of “floor rates” in offset calculations of the A+B remedy. Under the terms of the cash balance plan, the annuity paid under Part B is calculated using the annual rate of interest on 30-year Treasury securities for November the year before benefits are commenced. However, Cigna would not use the 30-year Treasury security rate if that rate is lower than the applicable interest rate in effect on July 1, 2009 – the floor rate. The court ruled previously that Cigna could not use floor rates to calculate offsets on lump sum Part B benefits because those rates fixed interests rates at an artificial floor “which was not actually representative of the value received by class members who had received their Part B benefits as a lump sum; in other words, Cigna could not receive credit for an amount that was greater than that actually provided.” Plaintiffs believe Cigna has been disobeying the court’s orders by using the floor rates to calculate the offsets for participants who elected to receive their Part B benefits in annuity form, leading to a greater offset and thus a decrease in the A+B relief. They also contend that the notices provided to class members are in violation of previous court orders. Plaintiffs therefore moved for an accounting or post-judgment discovery based on their belief that defendants are improperly calculating award payments in violation of court orders. Defendants responded that they are not using floor rates in an inappropriate manner and that they are implementing relief in compliance with all court orders. The court agreed with the Cigna defendants. It held that plaintiffs did not raise significant questions regarding noncompliance with previous orders to justify granting their motions. Broadly, the court stressed that its previous orders addressing the use of floor rates was carefully constricted within the narrow bounds of offsets for participants already paid lump sums, and was silent about the use of floor rates to calculate Part B annuity payments. Accordingly, the court did not find that Cigna was in violation of its orders and did not determine that class members were receiving payments that were lower than they ought to have been. Nor did the court identify any obvious problems with the notices themselves. “Given the numerous ways plaintiffs have challenged Cigna’s calculations over time…the Court finds that Plaintiffs’ suggestion that a fundamental aspect of this methodology (using the Part B payment to calculate the offset) is somehow inappropriate is too little, too late.” Thus, within the court’s narrow scope focused on whether there were significant questions regarding Cigna’s compliance with its prior orders, it did not feel that there was enough to go on to grant the motion for accounting or post-judgment discovery. Plaintiffs’ motion was therefore denied.

Retaliation Claims

Third Circuit

Prolenski v. Transtar, LLC, No. 21-545, 2024 WL 1973495 (W.D. Pa. May. 3, 2024) (Judge W. Scott Hardy). Two trainmen, plaintiffs Joshua Prolenski and Dennis Paceley, on behalf of themselves and similarly situated individuals, have sued their former employers, Union Railroad Company and Gary Railway Company, and their corporate owner Transtar, LLC, for violation of ERISA Section 510 by systematically terminating employees who are participants in the Carnegie Pension plan. According to the complaint, the pension plan has become unsustainably expensive and is underfunded by approximately $1.24 billion. Plaintiffs aver that defendants are looking for ways to reduce their contribution obligations, which cost defendants hundreds of millions of dollars annually. Plaintiffs allege defendants have undertaken a cost-cutting scheme targeting pension plan participants by manipulating disciplinary policies and dispensing “demerits” to plan participants to either terminate them before they vest or to force them into signing last chance agreements in a way that affects their pension rights. “Plaintiffs allege that as a result of this unlawful targeting of [plan participants] their number was dramatically reduced from 77,452 employees to just 51,800 employees between 2013 and 2019.” The allegations regarding Mr. Prolenski’s termination are particularly striking. The complaint alleges that Mr. Prolenski was issued 100 demerits for lateness after he was given permission to take time off to care for his wife who had cancer. Sadly, Mr. Prolenski was later diagnosed with cancer himself and was fired immediately after he returned from FMLA leave, shortly before his vesting period. The rail companies moved to dismiss. Their motion was granted, without prejudice, in this order. To begin, the court held that plaintiffs’ claims are not precluded by the Railway Labor Act. It held that plaintiffs are seeking to assert a right that stems from ERISA, not the terms of the collective bargaining agreement, and that interpretation of the collective bargaining agreement is not required. Thus, the court concluded that it has jurisdiction to consider the alleged ERISA claims. However, it found that those claims currently do not satisfy Rule 8 pleading, as it found the allegations conclusory and speculative. In order to plead their causes of action, the court advised plaintiffs to plausibly link the cost-saving strategy alleged “with the purposeful interference with pension benefits, particularly in relation to the two plaintiffs here.” Because plaintiffs may cure this shortcoming through an amended complaint, the court granted the motion to dismiss without prejudice.

Venue

Ninth Circuit

Higuera v. The Lincoln Nat’l Life Ins. Co., No. 24-cv-744-MMA-KSC, 2024 WL 2031666 (S.D. Cal. May. 7, 2024) (Judge Michael M. Anello). Plaintiff Jose Higuera commenced this ERISA action against The Lincoln National Life Insurance Company seeking judicial review of his claim for disability benefits. On April 25, 2024, the court ordered Mr. Higuera to show cause why his case should not be dismissed or transferred for improper venue. Pursuant to the court order, Mr. Higuera had until May 3, 2024, to respond in writing. To date, he has not done so. Accordingly, the court issued this order dismissing the case on the ground that venue in the Southern District of California was improper. The court based its decision on the fact that Mr. Higuera is a resident of Tulare, California, which is located within the geographic limits of the Eastern District of California. The court stated that “a substantial portion of the events giving rise to Plaintiff’s claim arose in the Eastern District… And Plaintiff does not plead that The Lincoln National Life Insurance Company’s presence within this District is such that it can be deemed a resident here.” Therefore, the court concluded that Mr. Higuera failed to allege facts suggesting venue is proper in the Southern District of California, and because the case is in its infancy, the court decided to dismiss it, without prejudice, rather than transfer the action.