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

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

Breach of Fiduciary Duty

Third Circuit

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

Eighth Circuit

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

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

Disability Benefit Claims

Second Circuit

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

Fifth Circuit

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

Sixth Circuit

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

Life Insurance & AD&D Benefit Claims

Sixth Circuit

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

Medical Benefit Claims

Ninth Circuit

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

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

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

Pension Benefit Claims

Second Circuit

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

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

Pleading Issues & Procedure

Seventh Circuit

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

Tenth Circuit

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

Provider Claims

Second Circuit

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

Third Circuit

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

Standard of Review

Ninth Circuit

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

Venue

Ninth Circuit

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

Staffing Servs. Ass’n of Ill. v. Flanagan, No. 23 C 16208, 2024 WL 1050160 (N.D. Ill. Mar. 11, 2024) (Judge Thomas M. Durkin)

Temporary employees have it tough. They often do the same work as their colleagues, but because they are not official full-time employees at their workplace they are often not entitled to the same pay or benefits their peers receive.

The State of Illinois recently attempted to ameliorate this situation by amending its Day and Temporary Labor Services Act. Among the amendments was Section 42, which requires temporary staffing agencies to “pay temporary employees who work at a particular site for more than ninety days within a year at least the same wages and ‘equivalent benefits’ as the lowest paid, comparable, directly-hired employee employed by the third-party client.” Section 42 further allows agencies to pay “the hourly cash equivalent of the actual cost benefits” as an alternative to providing “equivalent benefits.”

This action followed. The plaintiffs, which include two temporary staffing trade associations and three staffing agencies, sued Jane R. Flanagan, the Director of the Illinois Department of Labor. The plaintiffs filed a motion for a preliminary injunction, raising several issues, but because this is Your ERISA Watch, we will focus on plaintiffs’ ERISA-related argument.

In short, plaintiffs contend that Section 42’s “equivalent benefits” provision is preempted by ERISA because it “relates to” their employee benefit plans by having a “connection with or reference to” those plans. The court agreed with plaintiffs: “Plaintiffs have made a sufficiently strong showing that Section 42 fits the bill. The provision ‘dictates the choices facing ERISA plans’… Agencies must determine the value of many different benefit plans and then determine whether to provide the value in cash or the benefits themselves by modifying their plans or adopting new ones. Such a direct and inevitable link to ERISA plans warrants preemption.”

The Department of Labor objected, arguing that Section 42’s cash alternative allowed the law to escape preemption because it enabled the plaintiffs to comply without involving their benefit plans. The court rejected this argument, however, citing the Supreme Court’s decision in Egelhoff v. Egelhoff. In Egelhoff, the Supreme Court ruled that a Wisconsin law requiring payment of non-probate benefits to certain beneficiaries was preempted, even though the law had an opt-out provision, because it required administrators to tailor their plans to individual jurisdictions rather than apply them uniformly as intended by ERISA.

The court ruled, “The same applies here. Even with the choice between providing benefits or cash, Section 42 denies agencies the ability to administer its ERISA plans uniformly.” The court noted that the law placed a burden on plaintiffs that other states did not. For their Illinois employees, plaintiffs would have to “collect and analyze benefit plan information from their client for a comparable employee, compare those plans to their existing plans, and determine whether to modify or supplement their plans, calculate and pay the cost of any benefits they do not presently provide, or both.”

The court further ruled that the cash alternative was insufficient to evade ERISA preemption because Section 42 “requires agencies to make judgment calls about employees’ eligibility and level of benefits on an individualized and ongoing basis.” Under the law, agencies have to “engage in qualitative assessments” involving “complex and particularized” and “inherently discretionary” determinations regarding seniority, working conditions, similarity of work, and other factors. These determinations required “an ongoing administrative scheme to meet the employer’s obligation,” which “raises the very concern ERISA preemption seeks to address.”

In support of its position, the Department of Labor cited cases involving other laws that had survived preemption challenges, but the court found them inapposite. The court distinguished prevailing wage cases, observing that “such statutes are afforded particular deference because public works projects are an area of traditional state regulation.” Furthermore, such laws often used a schedule of wages which made compliance straightforward, unlike “the discretionary and individualized determinations that Section 42 requires.”

The court also distinguished other minimum compensation laws cited by the Department because they “did not involve the discretionary decision-making required by Section 42.” San Francisco’s minimum healthcare benefit requirement imposed a minimal burden of “mechanical record-keeping,” while New York’s home health aide compensation law, while “somewhat closer,” allowed compliance through “any mix of wages and benefits that equaled or exceeded the specified minimum rate.” Thus, it paled in comparison to Section 42’s “ongoing, particularized, discretionary analysis.”

As a result, the court ruled that Section 42 had an impermissible “connection with” ERISA plans, rendering it preempted. As for a remedy, because plaintiffs (a) had made a strong showing of likelihood of success on the merits, (b) were “poised to incur significant costs of compliance and face the possibility of penalties,” and (c) “point[ed] to the potential departure of agencies from Illinois if Section 42 goes into effect,” the court ruled that the balance of equities weighed in their favor. Thus, the court granted plaintiffs’ motion for a preliminary injunction based on their ERISA preemption argument.

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

Arbitration

Fourth Circuit

Franklin v. Duke Univ., No. 1:23-CV-833, 2024 WL 1048123 (M.D.N.C. Feb. 29, 2024) (Judge Catherine C. Eagles). Plaintiff Joy Franklin, a former employee of Duke University and a participant in its pension benefit plan, sued Duke and its retirement board contending that they have been incorrectly calculating benefits under the plan. Specifically, Franklin alleges that Duke used “outdated and unreasonable actuarial equivalency formulas in violation of ERISA’s actuarial equivalence requirement.” She alleged a claim under ERISA § 1132(a)(2), on behalf of the plan, and under § 1132(a)(3) individually and on behalf of a putative class. Duke filed a motion to (1) dismiss both claims for lack of subject matter jurisdiction, (2) compel arbitration on Franklin’s (a)(3) claim, and (3) dismiss the complaint for failure to state a claim. On the first issue, Duke argued that Franklin had no standing to bring her claims because the plan was a defined benefit pension plan, and thus her claim was barred by the Supreme Court’s decision in Thole v. U.S. Bank, N.A. However, the court distinguished Thole, finding that Franklin had standing because she alleged that she had been injured by a reduction in her benefit, which was more concrete than the claims by the plaintiffs in Thole. On the second issue, Duke argued that while Franklin was not required to arbitrate her (a)(2) claim, the plan obligated her to arbitrate her (a)(3) claim pursuant to a 2021 amendment to the plan. The court disagreed. Although ERISA claims are “generally arbitrable,” the court found “there is no evidence that Ms. Franklin agreed to arbitrate her 29 U.S.C. § 1132(a)(3) claims.” Duke’s plan amendment was thus “unilateral” and “a far cry from mutual agreement.” Indeed, the court stated that “since the Plan gives Duke an unlimited right to amend the Plan to add an arbitration provision, the faux agreement is illusory and unenforceable. It could hardly be clearer that this is not an enforceable agreement to arbitrate under the [Federal Arbitration Act] and under North Carolina law.” Duke argued that ERISA gave it the power to enforce the arbitration provision, but the court ruled that this power did not override the FAA’s requirement that parties agree to arbitration provisions. The court further stated that allowing otherwise would be contrary to ERISA’s statutory policy goal of providing “ready access to the Federal courts.” The court also distinguished Duke’s cited cases, noting that they involved (a)(2) claims on behalf of the plan, not (a)(3) claims brought by individuals such as Franklin. Thus, the court denied the first two of Duke’s three motions. As for Duke’s third motion, for failure to state a claim, the court stated that it “remains under advisement.” It appears that it will remain under advisement for some time because Duke has already appealed this decision. We will of course keep you advised of any rulings by the Fourth Circuit in the matter.

Breach of Fiduciary Duty

Second Circuit

Wong v. I.A.T.S.E., No. 23 CIV. 7629 (PAE), 2024 WL 898866 (S.D.N.Y. Mar. 1, 2024) (Judge Paul A. Engelmayer). Plaintiff Ka-Lai Wong was engaged to Sean McClintock, who unexpectedly passed away in July of 2022. McClintock was a participant in defendant IATSE’s employee benefit plan. Three weeks before his death, McClintock signed, but did not submit, a form designating Wong as his sole beneficiary under the plan. IATSE refused to pay plan benefits to Wong and instead paid them to McClintock’s allegedly estranged parents, who were the default beneficiaries under the plan in the event no designated beneficiary existed. Wong sued, bringing a single claim for breach of fiduciary duty under ERISA. IATSE filed a motion to dismiss. The court addressed each of the three fiduciary duties of loyalty, care, and acting in accordance with plan documents. The court found no breach of the duty of loyalty because Wong did not plead that IATSE acted self-interestedly. Instead, she argued that IATSE’s beneficiary designation process was faulty because it did not “deploy electronic beneficiary designation processes” and did not sufficiently “educat[e] its participants,” which the court deemed insufficient. The court likewise found no breach of the duty of care because Wong did not plead that IATSE misrepresented or materially omitted any relevant facts. Wong argued that IATSE should have told McClintock that he could submit the beneficiary designation form online, but the court ruled that failing to do so did not amount to misconduct or misrepresentation. Finally, the court ruled that IATSE acted in accordance with plan documents. The plan provided, “The Fund will only recognize beneficiary forms that it actually receives before your death,” and Wong was forced to concede that IATSE adhered to this rule. Thus, ERISA required IATSE to pay the benefits to McClintock’s parents, “notwithstanding the possibility of ‘harsh results.’” As a result, the court granted IATSE’s motion to dismiss, with prejudice.

Sixth Circuit

International Union of Painters & Allied Trades Dist. Council No. 6 v. Smith, No. 1:23-cv-502, 2024 WL 1012967 (S.D. Ohio Mar. 8, 2024) (Judge Douglas R. Cole). In this case, a trade union and a number of ERISA fiduciaries who are union officials brought suit challenging the way in which a health and welfare plan for union members is being operated. The cast of characters and allegations are complicated but, in a nutshell, the plaintiffs have sued both the union-side trustees and the employer-side trustees who operate the plan, asserting that they breached their fiduciary duties to the plan by refusing to vote to remove the two union-side trustees even after the union tried to do so and amending the plan to make it quite a bit more difficult to do so. They alleged that the defendants have acted impudently by entrenching the two union-side trustees and that they have acted in a self-dealing manner by having the plan itself pay for the attorney’s fees associated with defending their actions. In this decision, the court addressed a motion for preliminary injunction filed by the plaintiffs, as well as a motion to dismiss filed by the two employer-side trustees and a motion to intervene filed by the plan. With respect to the preliminary injunction, the court was unconvinced following a hearing that plaintiffs had articulated and offered proof of irreparable harm. The court was unpersuaded that plaintiffs had articulated how they might suffer from having defendants continue to vote their own self-interest or from having plaintiffs’ votes diluted, nor had they articulated to the court’s satisfaction how any such harm would not be compensable through money damages. The court was likewise unconvinced by plaintiffs’ arguments that entrenchment was a harm in and of itself, noting that cases cited by plaintiffs dealt with situations where it was harder for both the union and the employers to replace trustees, as distinguished from this case where only the union-side trustees were allegedly entrenched. Moreover, the court found that plaintiffs had not sufficiently shown illegal entrenchment for preliminary injunction purposes, primarily because the court was not convinced that the union’s constitution ought to govern, or that “at-will” removal powers were mandated by or even consistent with ERISA’s principle that loyalty to the plan should be paramount. The court thus denied the motion for preliminary injunction. However, the court granted the motion to dismiss filed by the union trustees, concluding that the trustees were acting as settlors, not as plan fiduciaries, in amending the plan to make it harder to remove the union-side trustees. The court also concluded in a somewhat ipse dixit fashion that the trustees were not acting as fiduciaries when declining to recognize the removal and appointment notice from the union because once they had amended the pan documents, they were no longer required to do so. As far as the allegations that the trustees violated their duties by voting to reimburse the legal expenses of the union trustees in defending the case, the court concluded that this was consistent with ERISA because the legal expenses were not related to a fiduciary breach but were incurred in the management and preservation of the trust and its assets. This ruling clearly does not bode well for plaintiffs on the remainder of their case against the union-side trustees. Finally, the court granted the plan’s motion to intervene, both as of right and as a permissive matter, concluding that the plan was not already a party, its motion was timely, it had an interest in the case that would be impaired absent intervention, and none of the existing parties were advocating for the plan’s interests.    

Discovery

Sixth Circuit

DaVita Inc. v. Marietta Mem. Hosp. Emp. Ben. Plan, No. 2:18-CV-1739, 2024 WL 957734 (S.D. Ohio Mar. 6, 2024) (Magistrate Judge Kimberly A. Jolson). Kidney dialysis provider DaVita brought this ERISA benefits action against an employee medical benefit plan alleging that the plan and its benefit manager MedBen “reimburse[] dialysis services at a depressed rate.” In this order the court addressed three discovery disputes. First, DaVita requested documents from MedBen relating to plan dialysis claims dating back to 2012, but MedBen refused to produce documents prior to 2014. The court agreed with DaVita, ruling that the requested documents were relevant to DaVita’s effort to show how defendants administered dialysis claims over time. MedBen contended that production of these documents would be an undue burden because it was expensive and difficult due to HIPAA protections. However, the court ruled that MedBen did not provide sufficient evidence to support these assertions, especially since MedBen was producing similar documents for later time periods. Next, the court found that DaVita’s request for documents related to MedBen’s other clients was relevant. However, the court was more convinced by MedBen’s burden argument on these documents, because MedBen represented that it had 180 other clients, many of which had multiple plans. The court thus ordered the parties to meet and confer regarding this issue and report back to the court. Second, the court addressed DaVita’s demand for emails and electronically stored information. DaVita contended that defendants had produced very few documents, and sought more information about how they conducted their searches. The court agreed that DaVita’s concerns were “not unfounded,” but again ruled that “the parties must do more to resolve their dispute” and ordered them to meet and confer and file a report. Finally, DaVita complained that defendants had “provided little information on their litigation holds.” The court noted that litigation holds by themselves are not protected by privilege, but “litigation hold letters generally are privileged and not discoverable.” Thus, the court denied DaVita’s motion on this issue, but without prejudice in the event spoliation issues arose at a later time.

Life Insurance & AD&D Benefit Claims

Fifth Circuit

Krishna v. National Union Fire Ins. Co. of Pittsburgh, No. 23-20289, __ F. App’x __, 2024 WL 1049474 (5th Cir. Mar. 11, 2024) (Before Circuit Judges Stewart, Clement, and Ho). As we reported in our June 14, 2023 edition, the district court in this case upheld defendant National Union Fire Insurance Company’s (NUFIC) denial of plaintiff Deepa Krishna’s claim for business travel accident insurance benefits after Krishna’s husband died in a plane crash. The court ruled that Krishna did not meet her burden of proving that her husband’s plane trip was “at the direction of” his employer, which was required under the plan in order to be “business travel” and thus qualify for benefits. Krishna appealed. First, she argued that the district court erred in using the deferential abuse of discretion standard of review because (a) the entities that denied her claim were not authorized to do so, and (b) NUFIC violated ERISA procedural regulations in denying her claim. The Fifth Circuit disagreed, ruling that the employer had delegated discretionary authority to NUFIC, NUFIC was permitted to delegate ministerial tasks to other entities, and NUFIC had made the final decision as required even if the other entities appeared on the denial letterhead. As for Krishna’s procedural argument, the Fifth Circuit applied its “substantial compliance” test and ruled that any delay by NUFIC in denying Krishna’s claim did not harm her, and that she had received a full and fair review of her claim. On the merits of Krishna’s claim, the Fifth Circuit upheld the district court’s ruling that the plan language was not ambiguous and that the husband’s plane trip did not qualify as business travel. Even if the language was ambiguous, the Fifth Circuit held that because NUFIC had discretionary authority, its “interpretation was a reasonable exercise of its ‘interpretive discretion.’” The judgment below was thus affirmed.

Pension Benefit Claims

Sixth Circuit

Emberton v. Board of Trustees of Plumbers & Pipefitters Local 572 Pension Fund, No. 3:21-CV-00757, 2024 WL 900209 (M.D. Tenn. Mar. 1, 2024) (Judge Aleta A. Trauger). Billy Joe Emberton’s wife, Kathy Emberton, brought this action as administrator of Mr. Emberton’s estate after his death against the defendant, an ERISA-governed pension fund. Mr. Emberton was a pipefitter who submitted a claim for early pension benefits in 2018, which the fund initially approved, but then denied, determining that Mr. Emberton was not entitled to benefits because he had not “retired” according to the plan. The plan defined “retire” as “a Participant’s complete cessation of: (i) any kind of work for an Employer, or (ii) any plumbing or pipefitting work in the construction or maintenance industries within the geographical area of the Fund.” Mr. Emberton filed this action in 2021 and the parties submitted cross-motions for judgment. The parties agreed that the “arbitrary and capricious” standard of review applied. Under this standard of review, the court agreed with Ms. Emberton that the fund abused its discretion in ruling that Mr. Emberton did not meet part (i) of the “retire” definition. The record showed that although Mr. Emberton had continued working, his employer was not an “Employer” as defined by the plan, i.e., an employer who had a collective bargaining agreement with the fund. Thus, the court moved on to the issue of whether it should address part (ii) of the “retire” definition. Ms. Emberton argued that the word “or” in between parts (i) and (ii) meant that Mr. Emberton only had to satisfy one of the two parts to be entitled to benefits, and thus there was no need to address part (ii). The fund, on the other hand, did not even address the issue of what “or” meant in its briefing. Furthermore, the court stated that “[n]either party…attempts to construe the definition of ‘Retire’ in light of the Plan as a whole.” The court thus examined other parts of the plan for assistance, as well as a Seventh Circuit decision addressing similar facts. The court noted that “the Plan contains a provision requiring the suspension of benefits for any employee who is reemployed following retirement, under certain circumstances,” which mitigated against Ms. Emberton’s position. Thus, the court ruled that while the “retire” definition’s use of the word “or,” on its own, was ambiguous, it was “rational in light of the plan as a whole” to conclude that the definition meant “that a participant is retired if he is not engaged in (has ceased) ‘(i) any kind of work for an Employer’ and is not engaged in ‘(ii) any plumbing or pipefitting work in the construction or maintenance industries within the geographical area of the Fund.’” Indeed, according to the court, “this interpretation is the only one that makes sense.” As a result, even though the fund “fail[ed] to articulate a legitimate rationale,” its decision was not arbitrary and capricious, and the court thus granted the fund’s motion and denied Ms. Emberton’s.

Pleading Issues & Procedure

Fourth Circuit

Deutsch v. IEC Grp., Inc., No. CV 3:23-0436, 2024 WL 1008534 (S.D.W. Va. Mar. 8, 2024) (Judge Robert C. Chambers). Plaintiff Daniel Deutsch, proceeding pro se, filed a form complaint in West Virginia state court alleging wrongful denial of $309.59 in medical benefits for preventative bloodwork he received. Defendant AmeriBen, the insurer of Deutsch’s benefit plan, removed the case to federal court on ERISA preemption grounds and filed a motion for a more definite statement. As we explained in our September 20, 2023 edition, a magistrate judge denied this motion but gave Deutsch an opportunity to amend his complaint to provide more factual detail in accordance with federal pleading requirements. Deutsch proceeded to file an amended complaint, AmeriBen filed another motion to dismiss, and the magistrate judge recommended that this motion also be denied. AmeriBen objected to the magistrate’s report, and thus the assigned district judge addressed those objections in this order. AmeriBen made two arguments: the magistrate judge (1) improperly “rewrote” Deutsch’s pleadings, and (2) ignored binding Fourth Circuit authority regarding Deutsch’s estoppel claim. The court rejected both arguments. On the first issue, the court ruled that AmeriBen’s arguments were “disingenuous” because Deutsch had expressly pleaded that the bloodwork he received was covered by his plan. Furthermore, by pleading that he “relied on oral and verbal representations from [] AmeriBen’s representatives that he would not bear any out-of-pocket expenses,” he had adequately pleaded estoppel. AmeriBen contended that the representations were made by a third party, not by AmeriBen, but the court agreed with the magistrate judge that the record “suggest[ed] a greater connection between the two parties.” On the second issue, the court ruled that the magistrate judge properly considered the Fourth Circuit’s controlling authority on estoppel, Coleman v. Nationwide Life Ins. Co., but neither that case nor any other Fourth Circuit case addressed “the question of whether estoppel claims are available to address ‘informal interpretations of ambiguous provisions’ of an ERISA plan.” As a result, AmeriBen’s “contention that estoppel is categorically unavailable in ERISA actions is conjectural.” Thus, the court adopted the magistrate judge’s report and recommendation, and Deutsch’s claim for $309.59 in benefits lives to fight another day.

First Reliance Bank v. AmWINS, LLC, No. CV 3:22-2674-MGL, 2024 WL 942778 (D.S.C. Mar. 5, 2024) (Judge Mary Geiger Lewis). Plaintiffs, a bank and its welfare benefit plan, sued the defendants, who were “generally involved with the implementation of the plan,” alleging five state law claims in South Carolina state court. Defendants removed the case to federal court and filed a motion to dismiss, arguing that plaintiffs’ claims were preempted by ERISA. The court chided both sides for “fail[ing] to mention,” presumably because “they are all unaware and unfamiliar with long-standing Fourth Circuit precedent,” that, “when a claim under state law is completely preempted and is removed to federal court because it falls within the scope of [ERISA], the federal court should not dismiss the claim as preempted, but should treat it as a federal claim under [ERISA].” The court thus denied defendants’ motion and ruled that it would “consider any other arguments as to the merits of Plaintiffs’ state claims at the summary judgment stage.” The court did, however, direct plaintiffs to “file a status report indicating whether they wish the Court to treat their state claims as ERISA claims going forward. If yes, they may amend their complaint, but the Court will decline to require it.”

Provider Claims

Second Circuit

Murphy Med. Assocs., LLC v. Yale Univ., No. 3:22-CV-33 (KAD), 2024 WL 988162 (D. Conn. Mar. 7, 2024) (Judge Kari A. Dooley). In March of last year the court granted the defendants’ motion to dismiss this action by plaintiff Murphy Medical Associates, LLC seeking reimbursement for COVID-19 diagnostic tests it provided to patients insured by Yale University’s medical benefit plans. However, the court gave Murphy leave to amend, cautioning Murphy that it “must provide allegations as to ‘the patients whose rights are being asserted, the alleged assignment of those rights, the specific plans under which Murphy Medical asserts claims, and whether Murphy Medical has exhausted their administrative remedies or whether such exhaustion would be futile.’” Murphy amended its complaint, prompting a new motion to dismiss from defendants. The court agreed with defendants that Murphy’s new complaint was again defective. Murphy alleged that it received assignment of benefit forms from “many” plaintiffs, that defendants’ plans did not prohibit such assignment, and attached a sample assignment of benefits form. This was not enough for the court, which deemed Murphy’s allegations “conclusory.” Murphy did not “provide enough specificity to give Defendants fair notice of whose rights Plaintiff purport to assert or the plans under which those rights derive.” The sample form was “insufficient to allow the Court to draw the inference that each beneficiary made a valid assignment.” The court also noted that Murphy’s complaint ignored an anti-assignment provision in the Yale Health Member plan document and ruled that defendants had not waived it. Furthermore, the amended complaint lacked adequate factual allegations that Murphy had exhausted its administrative remedies before filing suit, or that such exhaustion would have been futile. Murphy alternatively argued that its complaint passed muster because the Families First Coronavirus Response Act (“FCCRA”) and the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) effectively amended ERISA to allow for its claims. The court rejected this theory, ruling that FCCRA and CARES did not create a private right of action, and characterizing Murphy’s creative argument as “simply an attempted end run” around the court’s prior decision addressing these laws. In the end, the court concluded that Murphy’s amended complaint was an attempt to “sidestep” ERISA’s “well established” requirements by “seeking reimbursement for testing done on a massive scale, for individuals with a multitude of different benefit plans, who may or may not have assigned their ERISA benefits, and who may or may not have been allowed to assign their ERISA benefits. ERISA does not countenance such an effort[.]” Dismissal this time was with prejudice.

NYU Langone Hosps. v. 1199SEI Nat’l Benefit Fund for Health & Human Serv. Emps., No. 22 CIV. 10637 (NRB), 2024 WL 989700 (S.D.N.Y. Mar. 7, 2024) (Judge Naomi Reice Buchwald). Plaintiff sued two multi-employer benefit funds in New York state court, alleging that they committed breach of contract when they denied claims for the hospital stays of the newborns of three fund beneficiaries. The funds removed the action to federal court and filed a motion to dismiss. Plaintiff responded by arguing that the hospital stays were a covered maternity benefit under the Newborns’ and Mothers’ Health Protection Act of 1996 (“NMHPA”). The court was not impressed: “Whatever the merits of this contention, the Court is precluded from addressing it because plaintiff’s breach of contract claims are expressly preempted by ERISA.” The court noted that NMHPA was incorporated into ERISA, and thus any claims under it were governed by ERISA’s preemption provision. Plaintiff attempted to escape this conclusion by arguing that it was “simply seeking to enforce the terms of its own, separate contract with defendants.” However, the court ruled that plaintiff’s case law did not support this proposition. Furthermore, plaintiff’s claims “expressly challenge the scope of benefits provided to the Benefit Funds’ plan members and the Funds’ administration of their plans,” which meant that they “fall squarely within the scope of ERISA’s expansive preemption provision.” The court thus granted the funds’ motion to dismiss. The court also rejected plaintiff’s request for leave to amend its complaint for two reasons. First, plaintiff had already amended once, with knowledge of ERISA’s application, yet did not assert claims under ERISA. Second, the court ruled that amendment would be futile because the plans at issue included anti-assignment provisions precluding plaintiff from pursuing any claims under ERISA.

Redstone v. Empire HealthChoice HMO, Inc., No. 23-CV-2077 (VEC), 2024 WL 967416 (S.D.N.Y. Mar. 5, 2024) (Judge Valerie Caproni). Plaintiffs in this case are two surgeons who sued Empire HealthChoice HMO, Inc., the claims administrator of the ERISA plan of one of their patients, after Empire paid only $26,099.20 on a $671,723 claim for the first breast reconstruction surgery following the patient’s double mastectomy, and $7,2316.77 out of $131,234.22 on the second stage surgery. The doctors asserted claims for benefits under ERISA and state law claims for breach of contract, breach of implied contract, unjust enrichment, tortious interference, and third party beneficiary. Empire moved to dismiss the complaint in its entirety. The court’s analysis of the ERISA benefits claims turned on whether the plaintiffs had standing to sue based on their patient’s assignment of her claim for benefits, despite the anti-assignment provision in the plan document. The court concluded the answer was no, rejecting as “silly” the doctors’ claims that the anti-assignment clause was contradictory and unenforceable because it prohibited assignment without consent but did not define what was required to obtain consent. Although the language the court quoted did not state that any consent had to be in writing, the court concluded that the plan clearly required written consent, which the doctors had not obtained. Nor was the court convinced that Empire’s course of conduct in dealing with the doctors and partially paying the claims directly to them constituted a waiver of the anti-assignment provision. On this basis, the court dismissed all of the ERISA claims. Nevertheless, the court granted the plaintiffs an opportunity to amend their complaint despite defendants’ arguments that plaintiffs had the opportunity to do so at an earlier point in the litigation. Turning to the state law claims, the court concluded that all five depended on Empire’s payment obligations under the ERISA plan and therefore dismissed these claims with prejudice, concluding that they were preempted by ERISA’s broad preemption provision.   

AA Med. v. 1199 SEIU Benefit & Pension Fund, No. 21-CV-5239 (JS)(SIL), 2024 WL 964712 (E.D.N.Y. Mar. 5, 2024) (Judge Joanna Seybert). In this last provider case of the week (all from the Second Circuit, curiously), a surgical group sued for reimbursement of multiple claims for benefits under ERISA plans after the plans paid a fraction of one percent on billed charges for numerous surgeries and follow-up visits. Defendants moved to dismiss, arguing that the medical group failed to exhaust its administrative claims remedies under the union-sponsored healthcare plan, and that the complaint failed to allege that the fund denied benefits that were due to the patients. The court agreed with defendants that plaintiffs and their patients had failed to exhaust the required appeal steps spelled out in summary plan descriptions (SPDs) that defendants attached to their motion to dismiss, which the court concluded it could consider without converting the motion to dismiss into a motion for summary judgment. Plaintiffs, however, alleged that they had, in fact, appealed but that the fund informed them that they could not appeal and that this sufficed for exhaustion purposes. The court, however, found this conclusory and unsupported by plausible factual allegations in the complaint. The court likewise rejected plaintiffs’ contention that exhaustion was futile because they had been told by representatives of the plan that they could not appeal. Instead, the court agreed with defendants that, contrary to the allegations in the complaint, the SPDs do permit providers to appeal where authorization has been obtained from the plan and that the SPD also forbade reliance on telephone conversations. Concluding that there were no allegations in the complaint concerning such authorization, the court agreed with defendants that plaintiffs failed to make the requisite clear and positive showing of futility necessary to excuse the plan’s and ERISA’s exhaustion requirement. The court therefore dismissed the complaint but did so without prejudice.

Venue

Ninth Circuit

Plan Adm’r of the Chevron Corp. Ret. Restoration Plan v. Minvielle, No. 20-CV-07063-TSH, 2024 WL 923554 (N.D. Cal. Mar. 1, 2024) (Magistrate Judge Thomas S. Hixson). Just two weeks ago, in our February 21, 2024 edition, we reported on the court’s ruling in this interpleader action on a motion to transfer venue by two of the defendants and potential beneficiaries, Anne Minvielle and her husband. The Minvielles live in the Eastern District of Louisiana and wanted this case and a related case transferred there. The court, addressing a number of factors, denied the motion. The Minvielles promptly filed a motion for reconsideration which the court addressed in this order. The court observed that local rules required the Minvielles to obtain leave before filing such a motion, which they had not done, and thus denied on that ground. The court addressed the merits nonetheless, and again ruled against the Minvielles. The Minvielles focused their motion on potential witnesses, arguing that the court “failed to consider the witnesses they named in Louisiana,” and thus “the logical and legally correct thing to do is to transfer both cases to the Western District of Louisiana for consolidation in that district where the overwhelming number of witnesses (both doctors and lay witnesses) reside.” The court ruled that this was an inappropriate ground for moving for reconsideration because it did not represent a material difference in fact or law or an emergence of new material facts. Furthermore, the Minvielles admitted that their previous motion lacked specific detail regarding their witnesses, which could not be remedied by a reconsideration motion. In any event, the court reiterated that “there are potential witnesses in Louisiana, California, and London, and any choice of venue would be equally inconvenient to the witnesses not located in that venue.” Furthermore, “relevant evidence is likely found in at least this District, London, and Louisiana,” and “transfer to Louisiana does not serve the interests of justice because both [cases] have been pending here for some time, and this Court is likely positioned to resolve the disputes faster than a new court.” The court thus denied the Minvielles’ reconsideration motion.

Another slow week in ERISA World, sadly. We do expect things to pick up, as the Civil Justice Reform Act reporting period expires at the end of the month. As always, however, even though the numbers are down, the cases are still interesting. Read on for no fewer than three separate cases discussing application of the Mental Health Parity and Addiction Equity Act, the latest installment in a class action alleging ESOP skulduggery at the Casino Queen Hotel & Casino in St. Louis, and whether a prisoner can sue an insurer for inflicting emotional distress by mishandling his life insurance claim, among other decisions.

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

Attorneys’ Fees

Tenth Circuit

K.D. v. Anthem Blue Cross & Blue Shield, No. 2:21-CV-343-DAK-CMR, 2024 WL 840659 (D. Utah Feb. 28, 2024) (Judge Dale A. Kimball). In September of 2023, the court ruled that defendant Anthem abused its discretion in denying the plaintiffs’ claim for mental health benefits for residential treatment, and remanded the case to Anthem for further evaluation. (This decision was Your ERISA Watch’s case of the week in our September 27, 2023 edition.) The court also invited plaintiffs to file a motion for attorney’s fees, which was decided in this order. Plaintiffs’ counsel Brian S. King asked the court to award him his national rate of $600/hour, while Samuel Martin Hall, an associate in Mr. King’s office, requested a rate of $325. The court chose to reduce both rates, ruling that “this District has consistently determined that the application of a local rate is appropriate in ERISA cases,” and “a $500 per hour rate is now appropriate for Mr. King’s skill and experience level in an ERISA case in the Salt Lake City legal market.” As for Mr. Hall, he was previously awarded $250/hour by other courts in the district, but “he has gained three years of experience since those prior cases and with that increased experience and skill working on ERISA cases, the court finds that an hourly rate of $300 is appropriate for Mr. Hall.” The court also reduced, without objection, the number of hours counsel expended by 5.7 because that time was billed prior to the drafting of the complaint. As a result, Mr. King was awarded 63 hours at $500 per hour, while Mr. Hall was awarded 33.6 hours at $300 per hour, for a total of $41,580. Plaintiffs also recovered $400 in costs. The court then “administratively close[d] the case pending the conclusion of the remand process.”

Class Actions

Eleventh Circuit

Lopez v. Embry-Riddle Aeronautical Univ., Inc., No. 6:22-CV-1580-PGB-LHP, 2024 WL 775213 (M.D. Fla. Feb. 26, 2024) (Judge Paul G. Byron). Plaintiff Guillermina Lopez is a participant in Embry-Riddle Aeronautical University’s retirement plan. She alleges in this putative class action that Embry violated its fiduciary duties under ERISA by paying excessive recordkeeping fees and expenses to the plan’s third-party administrator, TIAA. She filed a motion for class certification, which Embry opposed on the grounds that (1) Lopez did not have standing, (2) her claims conflicted with other class members, (3) her claims were not typical, and (4) she lacked adequate knowledge to represent the class. The court agreed that Lopez did not have standing, ruling that she “fails to articulate in her Motion any injury in fact that she sustained.” Furthermore, the Court noted that Lopez did not respond to declarations from Embry stating that Lopez’s allegations were incorrect because Embry did not pay per-participant recordkeeping fees, Lopez herself was not economically harmed because she had not paid the fees alleged in the complaint, and she had not invested in any of the challenged funds. The court also agreed with Embry that because it calculated plan fees with an asset-based approach instead of on a per-participant basis, the claims of Lopez’s proposed class were antagonistic to the claims of other plan participants who paid different fees or who may have benefited under the current system. Having decided these issues against Lopez, the court dispensed with addressing Embry’s other arguments and denied Lopez’s class certification motion.

Disability Benefit Claims

Fifth Circuit

Black v. Unum Life Ins. Co. of Am., No. 3:22-CV-2116-X, __ F. Supp. 3d __, 2024 WL 873536 (N.D. Tex. Feb. 29, 2024) (Judge Brantley Starr). Plaintiff Catherine Black successfully applied for long-term disability benefits under an employee benefit plan insured by defendant Unum Life Insurance Company of America, but after several years of payments, Unum terminated her benefits in 2021, determining she was no longer disabled. Black sued and the parties filed cross-motions for summary judgment. Black contended that she did not receive a full and fair review, as required by ERISA, because Unum “denied her claim based on a medical judgment, but it failed to consult with a qualified health professional on appeal.” Unum argued that its denial “was not based on a medical judgment; rather, it denied Black’s claim because she no longer had any restrictions that prevented her from performing sedentary work.” The court, relying on a Fifth Circuit decision, agreed with Black that Unum’s determination was based on a medical judgment because “Unum consulted Black’s doctors in order to assess her medical conditions and her capability to perform sedentary work.” The court stated that Unum’s attempt to distinguish the appellate decision “just splits hairs.” The court further agreed with Black that Unum “failed to consult with a health care professional who had appropriate training and experience in the field of medicine involved in the medical judgment when deciding Black’s administrative appeal.” Unum violated this requirement because its reviewing nurse “essentially gave deference to the initial denial of Black’s claim,” and “was not a qualified health care professional to perform the consultation.” Unum contended that the nurse was merely summarizing the opinions of Black’s own physicians and was not making her own medical determination. However, the court ruled that in doing so “Unum relied on the same physicians to initially deny Black’s claim and to deny her appeal. ERISA requires more. Unum must consult a different physician on appeal than those it relied upon during its initial denial. Otherwise, the administrative appeal process is prejudicial.” Because Unum did not give Black a full and fair review, the court ruled that Unum’s decision was procedurally non-compliant. However, “[P]rocedural violations of ERISA generally do not give rise to a substantive damages remedy.” Thus, the court remanded the case to Unum “to conduct a full and fair review of Black’s disability claim consistent with ERISA’s procedural requirements as explained in this order.”

ERISA Preemption

Fourth Circuit

Davis v. Horton, No. CV PJM-23-0078, 2024 WL 839045 (D. Md. Feb. 27, 2024) (J. Peter J. Messitte). Plaintiff Bryant Davis is an inmate at Jessup Correctional Center, a prison in Maryland. He brought this action against numerous defendants in connection with the death of his wife. He alleged claims for intentional infliction of emotional distress (IIED) and deprivation of constitutional rights in connection with his inability to arrange for the burial of his wife. Davis alleged that two of the defendants, Hartford Life and Accident Insurance Company and Fidelity Workplace Services, failed to respond to his expedited request for claim forms for life insurance benefits, which added to his distress. The defendants all filed motions to dismiss. The court ruled that Davis’ IIED claim was not plausible because “[t]he conduct alleged in the complaint consists of the refusal to allow Davis access to a telephone over a matter of weeks and the failure to process forms,” which was not “outrageous” or “extreme” enough to constitute IIED under Maryland law. Furthermore, Davis’ IIED claim against Hartford and Fidelity was preempted by ERISA because it “derives from their alleged mishandling of his claim for his wife’s life insurance policy,” which was an employee benefit plan sponsored by Davis’ wife’s employer, General Dynamics. As a result, the court granted the defendants’ motions to dismiss.

Medical Benefit Claims

Second Circuit

M.R. v. United Healthcare Ins. Co., No. 1:23-CV-4748-GHW, 2024 WL 863704 (S.D.N.Y. Feb. 29, 2024) (Judge Gregory H. Woods). Plaintiff M.R., individually and on behalf of M.R.’s stepdaughter, J.S., brought this action alleging that defendant United unlawfully denied M.R.’s claims for health insurance benefits after J.S.’s stay at a wilderness therapy program. M.R. sought payment of benefits and contended that the denial violated the Mental Health Parity and Addiction Equity Act. M.R. also sought statutory penalties under ERISA against defendant Pfizer Inc. for its failure to provide plan documents upon request. Defendants filed a motion to dismiss, which Magistrate Judge Gary Stein recommended that the court deny, except to the extent the statutory penalty claim was asserted against any party other than Pfizer. (Your ERISA Watch covered this report in our December 6, 2023 edition.) Defendants were unhappy with the report and recommendation and filed objections which were decided in this order. The court agreed with the report that M.R.’s complaint was timely, even though it was filed after the expiration of the plan’s contractual limitation period, because United failed to comply with ERISA regulations requiring it to notify M.R. of the limitation. Defendants contended that M.R. knew of the time limit and thus was not entitled to equitable tolling of the deadline, but the court ruled that the concept of equitable tolling did not apply: “equitable tolling is not ‘an obstacle, or even relevant, to [the plaintiff’s] claim.’” Instead, defendants’ regulatory violation waived the deadline and thus it was unenforceable. Next, the court ruled that M.R. had properly stated a Parity Act violation. M.R. “adequately pleaded the third element of her Parity Act claim by alleging that ‘a mental-health treatment is categorically excluded while a corresponding medical treatment is not.’” Specifically, M.R. alleged that, in practice, United’s “experimental or investigational” exclusion created “a categorical exclusion ‘for even state-licensed wilderness therapy programs but not for analogous forms of inpatient medical/surgical treatment.’” The court disagreed with United’s argument that the court could find as a matter of law that wilderness therapy is not analogous to skilled nursing facilities for the purpose of the Parity Act. That question “is an issue of fact” and thus could not be a basis for dismissing M.R.’s claim. Finally, the court rejected Pfizer’s argument for dismissing the statutory penalty claim. Pfizer contended that M.R. sent the request to the “plan sponsor,” not the “plan administrator,” but the court agreed with the magistrate judge that these were the same entity and thus this was a “hyper-technical” distinction without a difference. As a result, the court “accepts and adopts the thorough and well-reasoned R&R in its entirety[.]”

Tenth Circuit

S.B. v. BlueCross BlueShield of Tex., No. 4:22-CV-00091, 2024 WL 778054 (D. Utah Feb. 26, 2024) (Judge David Nuffer). Plaintiff S.B. is a participant in an ERISA-governed medical benefit plan and the father of R.B., who was admitted to Solacium Sunrise, a residential treatment center (RTC) for adolescent girls with mental health, behavioral, and substance abuse problems. Plaintiffs submitted claims for these benefits to the plan’s insurer, defendant BlueCross, which denied them on the ground that Sunrise did not have 24-hour on-site nursing, which the plan requires for RTCs. Plaintiffs filed this action alleging two claims, one for plan benefits under ERISA and another for violation of the Mental Health Parity and Addiction Equity Act. BlueCross responded with a motion to dismiss both claims. Plaintiffs argued that the plan’s nursing requirement did not apply to RTCs for children and adolescents, but the court ruled that this interpretation was not plausible because it was “directly contradicted by the express terms of the plan,” which applied the nursing requirement to all RTCs. Plaintiffs also contended that they did not receive a full and fair review from BlueCross. The court found these allegations plausible, but ruled that they were irrelevant because the plan’s nursing requirement barred coverage and thus there was no prejudice. The court was slightly more sympathetic to plaintiffs’ Parity Act claim. Plaintiffs contended that the plan exceeded generally accepted standards of care (GASC) with its RTC nursing requirement, but did not impose the same requirement on comparable medical and surgical facilities, and thus there was a parity violation. The court ruled that this was sufficient to get past the pleading stage. However, the court noted that plaintiffs’ Parity Act claim was on thin ice, because BlueCross had submitted a document from the American Academy of Child & Adolescent Psychiatry setting forth GASC for RTCs stating that one of the two ways RTCs can conform with GASC is by having 24-hour onsite nursing. Thus, if on-site nursing is an element of GASC, the plan did not exceed GASC by requiring it for RTCs, and the Parity Act claim would fail. However, the court refused to consider this document in ruling on the motion because it was outside the pleadings. Thus, the court granted BlueCross’ motion to dismiss plaintiffs’ claim for benefits, but “Plaintiffs’ Count II Parity Act claim survives” for now.

J.W. v. United Healthcare Ins. Co., No. 2:23-CV-193-DAK-DBP, 2024 WL 840714 (D. Utah Feb. 28, 2024) (Judge Dale A. Kimball). Plaintiff J.W. is a participant in an ERISA healthcare plan that denied claims for coverage of his child’s mental health treatment at two inpatient facilities: Open Sky Wilderness Therapy and Waypoint Academy, the former because it was determined to exclude experimental and investigational treatment and the latter because it was determined not to qualify as residential treatment. J.W. sued his employer, S&P Global Inc. (“SPGI”), the plan itself, and United Healthcare Inc. (“United”), the claims administrator, asserting three claims: (1) a claim for benefits; (2) a claim for violation of the Mental Health Parity Act; and (3) a claim for penalties for failure to provide requested plan documents. Defendants moved to dismiss, and the court partially granted and partially denied the motions. Turning first to United’s motion to dismiss the claim for penalties, the court determined that because United was not the plan administrator, the claim for penalties was not properly asserted against it. It thus dismissed United as a defendant with respect to this count, but declined to dismiss the claim on the merits to the extent it was asserted against the administrator. But that presented a separate problem, as the plaintiff had failed to assert the claim against the named plan administrator – the U.S. Benefits Committee. Instead, the plaintiff insisted that because the Committee was an informal subdivision of SPGI, it was sufficient that he had named SPGI as a defendant. The court disagreed, holding that neither SPGI nor the plan were proper defendants as to this claim, just as United was not. However, the court granted plaintiff 30 days to amend to name the Committee as the defendant with respect to the claim for penalties. As to the claim for benefits, the court held that because SPGI did not control the administration of the plan or its benefits, it was not a proper defendant for that claim and the court accordingly granted SPGI’s motion to dismiss it as defendant on this claim. Turning finally to the Parity Act claim, the court dismissed SPGI as a defendant based on plaintiff’s concession that this claim was not properly asserted against the company. The court, however, disagreed with the plan’s contention that the claim was duplicative of the benefits claim, noting that plaintiff sought injunctive relief with respect to that claim, but agreed with the plan that the complaint did not specifically address whether it was asserting a facial or as-applied challenge. Again, however, the court granted plaintiff the opportunity to amend the complaint to more clearly articulate “his Parity Act claims against the Plan.”             

Pension Benefit Claims

Seventh Circuit

Hensiek v. Bd. of Dirs. of Casino Queen Holding Co., No. 20-cv-377-DWD, 2024 WL 773633 (S.D. Ill. Mar. 6, 2023) (Judge David W. Dugan). On several occasions, Your ERISA Watch has previously reported on developments in this putative class action brought by former employees of the Casino Queen Hotel & Casino, a riverboat casino, challenging the creation of and subsequent transactions involving the Casino Queen’s employee stock ownership plan (“ESOP”). The facts are complicated and were covered at length when we wrote about two prior decisions declining to dismiss the complaint in our March 15, 2023 edition. In a nutshell, plaintiffs allege that the owners of the company came up with the idea of creating an ESOP to buy the company after trying unsuccessfully for six years to sell the company to unaffiliated third parties. They did so in several stages. First, in October 2012, they created a holding company for Casino Queen. Then, the selling shareholders exchanged their Casino Queen Stock for the holding company’s stock and placed themselves on the newly formed board of the holding company. Two months later, in December 2012, the shareholders and the holding company established the Casino Queen ESOP and facilitated the terms of the ESOP stock purchase of the holding company’s outstanding stock for $170 million. In order to finance this transaction, the ESOP borrowed $130 million from Wells Fargo, $15 million from an unnamed third party, and $25 million from the defendants at the “draconian interest rate” of 17.5%. Following the 2012 stock purchase, the ESOP proceeded to sell all of the Casino Queen’s real estate to a third party gambling company, Gaming and Leisure Properties, Inc., for $140 million. Plaintiffs alleged that the real value of these assets totaled only about $12.1 million. Then, Casino Queen leased back the property it had just sold for $140 million for the hyper-inflated price of $210 million, to be paid over 15 years (for more annually than what plaintiffs claimed the properties were worth). In any event, following the court’s denial of the motion to dismiss, the plaintiffs filed an amended complaint adding several new defendants whom they claim were former shareholders of the company and parties-in-interest for purposes of ERISA’s prohibited transaction provisions. Two of the original defendants moved to dismiss the complaint again as untimely, but this time asserted that the untimeliness was jurisdictional. The district court, however, disagreed and concluded that the statute of limitations in ERISA Section 1113 was not jurisdictional. Moreover, the court agreed with plaintiffs that it should not consider additional evidence submitted by the two moving defendants or convert their motion to dismiss into a motion for summary judgement but should instead allow plaintiffs more time for discovery into whether the fraud or concealment exception to ERISA’s general six-year statute of limitations applies. Another of the original defendants moved for judgment on the pleadings based on more than two dozen documents he attached to his answer. Agreeing with plaintiffs that the documents had not been authenticated and might not even be relevant, the court refused to consider them. Moreover, even if it were to consider them, the court held that these documents were insufficient to establish “beyond doubt” that plaintiffs could not prove any set of facts to support their claims and thus did not support judgment on the pleadings for this defendant or that the court should convert the motion to a motion for summary judgment. Finally, the court dismissed, without prejudice, the motions to dismiss filed by certain third-party defendants, granting leave to refile by March 27. So, it appears that this lawsuit will proceed full steam ahead.

Pleading Issues & Procedure

Second Circuit

Cudjoe v. Bldg. Indus. Elec. Contractors Ass’n, No. 21-CV-05084 (DG) (ST), 2024 WL 866070 (E.D.N.Y. Feb. 28, 2024) (Judge Diane Gujarati). Plaintiff Martin Cudjoe is a participant in a number of multi-employer (Taft-Hartley) plans (the “Benefit Funds”), which include a pension fund, an annuity fund, a welfare benefit fund, and an apprenticeship fund. He claimed that under both the Taft-Hartley Act and ERISA the Benefit Funds were required to be jointly administered by an equal number of union and management trustees, but were instead operated only by management-side trustees. He also claimed that the Trustees had mismanaged the Benefit Funds by paying themselves over $1 million in plan assets, in violation of ERISA’s prohibited transaction rules. He brought a six-count putative class action complaint against various union entities and individuals asserting claims under both the Taft-Hartley Act and ERISA. Defendants filed motions to dismiss under both Federal Rule of Civil Procedure 12(b)(1) and 12(b)(6). Addressing the 12(b)(1) motion, the court held that Mr. Cudjoe failed to establish Article III standing and therefore dismissed the complaint in its entirety. Specifically, the court found that Mr. Cudjoe failed to establish an injury in fact by asserting, without more, that had it not been for the mismanagement of Fund assets, the participants, himself included, would have received richer benefits. The court found the Supreme Court’s decision in Thole v. U.S. Bank N.A., 140 S. Ct. 1615 (2020) to be “instructive, but not dispositive.” The court concluded that even with respect to one plan, the Annuity Fund, which was a defined contribution pension plan, Mr. Cudjoe’s claim should still be dismissed because the complaint did not explain how “the alleged mismanagement necessarily affected Plaintiff’s benefits with respect to” that Fund. The court therefore granted the motion to dismiss without leave to amend as plaintiff had previously been afforded the opportunity to do so.

Fourth Circuit

Nordman v. Tadjer-Cohen-Edelson Assocs., Inc., No. DKC 21-1818, 2024 WL 895122 (D. Md. March 1, 2024) (Judge Deborah K. Chasanow). Plaintiff, a former employee of Tadjer-Cohen Edelson Associates (TCE) filed suit against TCE and others seeking additional benefits under multiple TCE-sponsored retirement plans, including the PS Plan, the TCE Employee Stock Ownership Plan (ESOP), and a profit sharing plan. TCE is the administrator of these plans with full discretionary authority. In 1988, plaintiff signed waivers of his rights to receive pension benefits under the PS Plan and under a profit sharing plan. The court previously dismissed some of the eight counts and two of the plaintiffs. Plaintiff missed his deadline for filing a motion for summary judgement and a little over a week later filed a motion for leave to file a motion to extend the deadline for filing and then filed the motion, requesting a one-month extension, all of which defendants opposed. Even so, Plaintiff filed a motion for partial summary judgment, albeit a day late even assuming his requested extension was granted. Defendants also cross-moved for summary judgment, apparently in a timely fashion, and, after defendants filed a reply to plaintiff’s opposition, plaintiff also filed a motion to file a sur-response (and then filed motions to extend the briefing on this). With respect to plaintiffs’ motions to extend, the court found equities in both directions and ultimately granted the motions, finding no utility to striking plaintiff’s partial summary judgment motion as untimely because it covered the same ground as defendants’ motion. However, the court was not so lenient with respect to the motions regarding the sur-reply, which the court denied. The court also considered all of the documents attached by plaintiff to his motion, with the exception of a handwritten note, the contents of which he could not authenticate and which he did not claim to have written. Clearing these procedural hurdles, the court proceeded to consider summary judgment, which largely turned from the defendants’ perspective, on whether plaintiff had the right to revoke the waiver and whether he did so by applying for and being accepted as a participant. The court concluded that the cited evidence appeared to conflict both on whether the waivers are revocable and on whether plaintiff later joined the plans. Consequently, the court found a material dispute on this issue and refused to grant summary judgment to either side on this basis. The court turned to Count IV of the complaint, which requests $394,900 in penalties for alleged failures and delays in providing requested documents. The court found that plaintiff had never made written requests for some of the documents, and that with respect to the 2016-17 PS Plan document and ESOP SARs, defendants produced them in a timely manner upon written requests. However, the court found that defendants did not prove that they met their obligations to produce these documents for the 2017-18 and 2018-19 plan years after plaintiff made a written request, and thus granted summary judgment as to liability on this part of Count IV, but deferred imposition of a monetary penalty until final disposition of the whole case. Finally, the court concluded that this count was timely asserted because the most analogous statute of limitations in Maryland was the three-year period, not the one-year period for which defendants had advocated.  

Provider Claims

Eleventh Circuit

Griffin v. Blue Cross Blue Shield Healthcare Plan of Ga., Inc., No. 22-14187, __ F. App’x __, 2024 WL 889560 (11th Cir. Mar. 1, 2024) (Before Circuit Judges Rosenbaum, Grant, and Black). W.A. Griffin is a dermatologist, proceeding pro se. This is one action among many she has filed in which she contends that various defendants have breached their fiduciary duties under ERISA by underpaying medical benefit claims. The district court granted defendants’ motion for summary judgment, concluding that “(1) all of the patient plans at issue contained valid anti-assignment provisions; (2) ERISA permits, as a matter of federal common law, such provisions regardless of any state laws to the contrary; and (3) Griffin lacked statutory standing to bring her suit because she was not a beneficiary under her patients’ plans.” In this unpublished per curiam decision, the Eleventh Circuit affirmed. Citing a recent Eleventh Circuit decision in which Dr. Griffin was also the plaintiff, the court stated, “We have repeatedly rejected identical or nearly identical arguments by Griffin in published and unpublished opinions.” The court ruled that there were “valid unambiguous anti-assignment provisions in each plan document, so the district court did not err in finding those provisions barred Griffin’s patients from assigning their entitlement to plan benefits to her.” Griffin argued that this conclusion was “at odds” with two Supreme Court cases, Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724 (1985), and Kentucky Ass’n of Health Plans, Inc. v. Miller, 538 U.S. 329 (2003). However, the Eleventh Circuit noted that its precedents upholding anti-assignment provisions post-dated those cases and thus Griffin’s arguments were “foreclosed by the prior panel precedent rule.” In any event the court ruled that these two cases did not help Griffin, because both involved analyzing when a state law is an insurance regulation for the purposes of ERISA preemption, which was not the issue here. Thus, the Eleventh Circuit affirmed the judgment against Griffin.

Severance Benefit Claims

Seventh Circuit

Pool v. The Lilly Severance Pay Plan, No. 1:23-cv-00631-JMS-MKK, 2024 WL 866580 (S.D. Ind. Feb. 29, 2024) (Judge Jane Magnus-Stinson). Scott Pool, a participant in a severance plan sponsored by his former employer Eli Lilly, sued Lilly and the plan claiming he had been underpaid benefits from the plan and that the company had breached its fiduciary duties in miscalculating his benefits. The dispute centered around the meaning of the term “Service” in the plan, and, in particular, whether only Mr. Pool’s second period of employment counted in calculating his years of service. Essentially, applying a deferential standard of review to Lilly’s interpretation of the plan language, the court found it reasonable that Lilly interpreted the term “Service” to include “only years of continuous employment after the date of reemployment,” as the plan apparently expressly stated. Nor did Lilly breach its fiduciary duty by calculating and paying Mr. Pool benefits in accordance with this definition. Therefore, the court granted summary judgment in favor of defendants.