S. Coast Specialty Surgery Ctr. v. Blue Cross of Cal., No. 22-55717, __ F. 4th __, 2024 WL 105317 (9th Cir. Jan. 10, 2024) (Before Circuit Judges Graber, Mendoza, Jr., and Desai).

South Coast Specialty Surgery Center sought reimbursement from Blue Cross of California, the insurer and claims administrator under a number of ERISA-governed healthcare plans, for the cost of medical services provided to plan participants. After the district court agreed with Blue Cross that South Coast lacked standing to sue for benefits because it was neither a plan participant nor a beneficiary and dismissed the suit, South Coard appealed to the Ninth Circuit, which had little trouble reversing the district court under longstanding circuit precedent.  

The salient factual point was that South Coast had obtained an assignment of benefits from each of the plan participants who received its services. Each assignment stated that it “authorize[s] my Insurance Company to pay by check made payable and directly to: [South Coast] for the medical and surgical benefits allowable, and otherwise payable to me under my current insurance policy, as payment toward the total charges for the services rendered.” It further authorized South Coast “to file a claim with my insurance company on my behalf.”

The district court construed this assignment as giving South Coast the right to receive direct payment from Blue Cross but not the right to sue for nonpayment of benefits. The Ninth Circuit disagreed.

As an initial matter, the court noted that in the past it had referred to the right to sue under ERISA as an issue of “standing.” But this was, the court concluded, a misnomer when considering whether Congress has authorized a party such as South Coast to sue, as distinct from an Article III inquiry into whether South Coast had a sufficient injury to sue, which no party disputed.

With that, the court moved on to the matter at hand. Acknowledging that the district court correctly concluded that South Coast lacked direct authority under ERISA to sue because it was neither a plan participant nor a beneficiary, the court nevertheless pointed out that ERISA permits participants and beneficiaries to assign their claims and to bestow derivative standing on an entity such as South Coast. This was well established in previous decisions from the Ninth Circuit, such as Spinedex Physical Therapy USA Inc. v. United Healthcare of Ariz., Inc., 770 F.3d 1282, 1289 (9th Cir. 2014), which Blue Cross did not challenge.   

Finally, applying normal contract law principles, the Ninth Circuit concluded that the forms signed by plan participants at issue in the case constituted valid assignments of the right to sue for nonpayment of benefits. The form clearly “conveys that South Coast and its patients intended that it operate as a valid assignment for the payment of insurance benefits.” Moreover, while the form did “not expressly state that South Coast could sue insurers on its patients’ behalf,” the court concluded that the “scope of South Coast’s patients’ assignment of benefits clearly and necessarily includes the right to sue for non-payment of benefits under section 502(a) of ERISA.”

Thus, the court rejected Blue Cross’ contrary construction – that the participants had assigned the right to receive payment but not the right to sue – as one that makes “neither textual nor practical sense,” and that would “stym[y] Congress’s purpose in enacting ERISA.” The court concluded that: “[c]onstruing an assignment of benefits as including the right to sue for non-payment thus increases patient access to healthcare and transfers any responsibility of litigating unpaid claims to the provider-an entity that is much better positioned to pursue those claims in the first place.” A nice place to end the decision and begin the year. 

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

Attorneys’ Fees

Second Circuit

Chung v. Provident Life & Cas. Ins. Co., No. 21 Civ. 9344 (AKH), 2024 WL 78366 (S.D.N.Y. Jan. 4, 2024) (Judge Alvin K. Hellerstein). The court awarded $374,754.13 in attorneys’ fees following success by the plaintiff in obtaining a post-trial judgment awarding him disability benefits. The plaintiff had apparently already paid his attorneys on an hourly basis and submitted those payments, along with the hourly rates and experience of the attorneys at Riemer Hess who represented him. The court found the amount sought to be reasonable and in fact $30,000 less than what the court described as a presumptively reasonable fee using an unexplained metric employed by that court. The court also awarded $681.63 in costs and 114,332.90 in prejudgment interest at a rate of 9% per annum.

Rhodes v. First Reliance Standard Life Ins. Co., No. 22 Civ. 5264 (AKH), 2024 WL 911322 (S.D.N.Y. Dec. 27, 2023) (Judge Alvin K. Hellerstein). Following a decision concluding that First Reliance had violated ERISA’s claims procedure and thus denied plaintiff full and fair review of his claim for benefits, the court awarded $121,999.28 in attorneys’ fees. This amount included a 10% reduction to account for any inefficiencies in litigating the case and was based on what the court determined to be a reasonable hourly rate by attorneys at Riemer Hess based on their experience and capabilities. The court, however, denied a requested $917.65 in costs, concluding that this amount expended “to keep the medical file current” was better seen as “legal work-up,” and as such was not recoverable.    

Pension Benefit Claims

Seventh Circuit

Lucero v. Credit Union Ret. Plan Ass’n, No. 22-cv-208-jdp, 2024 WL 95327 (W.D. Wis. Jan. 9, 2024) (Judge James D. Peterson). Plan participants in the Credit Union Retirement Plan Association 401(k) Plan, a multiple-employer plan with over 100 employer sponsors, sued a number of plan entities for fiduciary breaches in failing to control the plan’s recordkeeping costs. In this decision, the district court recognized that although in most circumstances, a case challenging fees charged to a 401(k) plan would be an obvious candidate for class certification, this was not such a situation. That is because rather than charging fees to all plan participants using one formula, the plan allowed separate employers to negotiate their own fees with the recordkeeper, resulting in fees that varied widely. In fact, the recordkeeping fees charged to several of the named plaintiffs were within the range that plaintiffs identified in their complaint as reasonable and, for this reason, the district court agreed with the defendants that these plaintiffs lacked standing to sue for the recovery of overly high fees. For similar reasons – because the fees at issue varied so substantially among proposed class members at least until 2021 – the court concluded that the claims of the remaining plaintiff, Brenda Lucero, were not typical of claims of the class members and Ms. Lucero was no adequate to represent the class. After 2021, fees were uniformly assessed but, as it turns out, none of the named plaintiffs were still participants in the plan at that point.  So a class could not be certified for that time period either.  The court therefore denied class certification, stating that the case could proceed on Ms. Lucer’s individual claim alone, although the court also appeared to leave open the possibility of a motion for the opportunity to propose a different, narrower class or to seek to add additional class representatives.        

Provider Claims

Fifth Circuit

Angelina Emergency Med. Assocs. P.A. v. Health Care Serv. Corp., No. 3:18-CV-0425-X, 2024 WL 102666 (N.D. Tex. Jan. 9, 2024) (Judge Brantley Starr). In this decision granting Defendants’ motion for summary judgment with respect to 182 bellweather claims in a massive lawsuit on behalf of over 50 physician associations challenging over 250,000 allegedly underpaid healthcare claims by over 50 Blue Cross entities, the court begins by analogizing the case to Frankenstein’s monster. One suspects that the judge enjoyed Poor Things, which will likely be an Oscar contender, or perhaps he is a Mel Brooks fan. In either case, the judge notes that, despite his resounding ruling in favor of Blue Cross, the monster lawsuit is (to quote another delightful movie) not dead yet. With respect to many of the claims, the court concluded that it lacked subject matter jurisdiction over these claims for one of several reasons having to do with the assignment. First, several of the assignments state that they assign the participants’ claims to the “facility” or the “facility-based physician,” neither of which, in the court’s view, includes the physician associations that brought suit under Texas law. Some of the other assignments, in the court’s estimation, did not assign the right to file suit but only a   right to be an “authorized representative.” Numerous other claims, the court concluded, lacked either a written assignment of benefits or adequate proof that such an assignment existed. In addition, the court concluded that a significant majority of the bellweather claims were precluded by anti-assignment provisions in the governing plans. Although the court recognized that in the Fifth Circuit a party could be estopped from asserting an anti-assignment clause, the court found that the plaintiffs failed to establish such estoppel because any reliance on defendants’ conduct in not asserting the anti-assignment clauses would not be reasonable in light of the clarity of the anti-assignment language. The court concluded that numerous other claims were precluded by the plaintiffs’ failure to exhaust administrative remedies (which the court concluded was contractually required even with respect to several non-ERISA claims) or to show the patent futility of doing so. Finally, the court found that two remaining claims were untimely under the applicable four-year statute of limitations.       

Statute of Limitations

Seventh Circuit

Estate of Maribeth Presnal v. Dearborn Nat’l Life Ins. Co., No. 3:23-cv-0290-HAB, 2024 WL 124787 (N.D. Ind. Jan. 11, 2024) (Judge Holly A. Brady). A widower, Edwin Presnal, was denied benefits under his deceased wife’s, Maribeth Presnal’s, life insurance plan because she was required, but failed, to convert her policy to a personal policy when she ceased employment shortly before her death. He brought suit on behalf of her estate, claiming that her employer and plan sponsor/administrator, Beacon Healthcare System, Inc., breached its fiduciary duty in failing to conduct an exit interview with her when she terminated employment due to cognitive difficulties and failed to inform Maribeth or Edwin of their conversion rights under the plan. Plaintiff also claimed that Maribeth’s cognitive condition tolled her time to make payments and convert her policy. The court concluded that Beacon had no duty to inform plaintiffs of Maribeth’s conversion rights, essentially because she had not asked about them and because the court, although “sympathetic with Plaintiffs’ predicament” was concerned with overburdening plan administrators. The court thus granted Beacon’s motion to dismiss the breach of fiduciary duty claim. Nevertheless, the court held that plaintiff stated a “plausible claim that Maribeth’s right to convert or make her premium payments was equitably tolled because of her mental capacity,” and refused to grant defendants’ motion to dismiss with respect to this claim.

Happy New Year to all our readers. Your ERISA Watch will be a little different for the next few months because our staff writer, Emily Payson, is on maternity leave with her first child (and the first grandchild for Your ERISA Watch co-editor Elizabeth Hopkins). We will continue to have a case of the week most weeks and will cover the most significant decisions but can’t promise to cover all decisions during this period. Thankfully, the year is off to a slow start so for our first issue of 2024, we will cover all six ERISA decisions that were reported within the last week.

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

Disability Benefit Claims

Fourth Circuit

Weisman v. The Guardian Life Ins. Co. of Am., Civil Action No. 7:22-cv-00595, 2024 WL 65427 (W.D. Va. Jan. 5, 2024) (Judge Elizabeth K. Dillon). In a long-term disability decision that should surprise no one, the court granted summary judgment in favor of the plan participant, Dr. Joseph S. Weisman, who presented that he was disabled from being able to perform his work as a neuro-ophthalmologist and ophthalmic surgeon by a progressive neurological condition had led to uncontrollable tremors. Although Guardian approved Dr. Weisman’s claim for short-term disability benefits, it denied his claim for long-term benefits shortly thereafter on the basis that he did not seek treatment for his condition until after he stopped working and was no longer insured under the plan. As an initial matter, the parties disagreed about the applicable standard of review applicable to Guardian’s decision given that Guardian was late in deciding Dr. Weisman’s appeal, but the court concluded it need not resolve the issue. Instead, the court determined that even under a deferential standard, Guardian abused its discretion in denying benefits.  First, the court determined that Guardian was not correct that the plan required that Dr. Weisman be employed when he applied for benefits, only that he had to have become disabled while he was still employed. Second, the court concluded that whether or not Dr. Weisman met the policy requirement that he be under the regular care of a doctor during his disability was not relevant because the court agreed with Dr. Weisman that he had reached his maximum point of recovery and was still disabled. In this regard, the court relied on the opinion of one Dr. Cramer, who examined Dr. Weisman and stated that he had received the appropriate care for his disability. Finally, the court rejected Guardian’s contention that there was inadequate evidence that Dr. Weisman was disabled before he quit his job because he was self-evaluated (and treated) up to that point and only went to Dr. Cramer after he stopped working. The court noted that an insured’s subjective assessment of his own symptoms are relevant as a general matter to determining disability, and even more so when the insured is a doctor who is fully qualified to do so. Moreover, because Dr. Weisman’s assessment was fully supported by the opinion of Dr. Cramer, the fact that she gave her opinion after the fact did not support Guardian’s contention that it should be ignored and given no weight.

Life Insurance & AD&D Benefit Claims

Fifth Circuit

Haynes v. Principal Life Ins. Co., Civil Action No. 3:22-CV-2499-N, 2024 WL 56990 (N.D. Tex. Jan. 3, 2012) (Judge David C. Godbey). In this action claiming disability benefits, the court concluded that the preponderance of the evidence established that Plaintiff Angela Haynes is disabled within the terms of the plan and therefore granted her judgment on the record. Specifically, applying de novo review, the court determined that the medical record amply supported that Ms. Haynes suffered from Ehlers-Danlos Syndrome, which cause a number of symptoms including pain, fatigue, generalized and fluctuating weakness and brain fog, all of which caused her to be disabled from her occupation as an insurance agent. The court found this conclusion supported by her subjective reports of pain and by the conclusions of the social security administration in granting her disability benefits.

Eighth Circuit

Hogan v. Zuger Kirmis & Smith, PLLP, No. 1:23-cv-047, 2024 WL 38706 (D.N.D. Jan. 3, 2024) (Judge Daniel L. Hovland). Christine Hogan was denied life insurance benefits under an ERISA plan after the death of her husband Lawrence Dobson. She brought suit for benefits and fiduciary breach against Zuger Kirmis & Smith, the law firm that formerly employed Mr. Dobson and that sponsored the plan, and against Standard Insurance Company, which insured the plan. Although her husband left the Zuger in 2014, the firm continued to pay premiums on his behalf to Standard until his death in 2021. They also assured Ms. Hogan shortly after her husband’s death that he was “all paid up.” In fact, however, the governing policy stated that coverage automatically terminates at the end of employment. Unsurprisingly, Standard moved to dismiss, and the court granted its motion.  First, the court determined that Ms. Hogan was not entitled to benefits under the plain terms of the plan since her husband had long since ceased employment with Zuger. The court likewise rejected Ms. Hogan’s fiduciary breach claim against Standard, reasoning that estoppel was not available given the plain terms of the policy, Standard was not responsible for notifying the decedent that his coverage had terminated (and in fact had no way of knowing this), nor was it responsible for educating Zuger, the plan administrator, on its obligations.  The court therefore granted Standard’s motion to dismiss the claims against it, concluding that Ms. Hogan’s claims lie solely against the plan administrator.

Ninth Circuit

Principal Life Ins. Co. v. The Estate of Sergio Botello Diaz, No. 1:23-cv-00261-CDB, 2024 WL 35453 (E.D. Cal. Jan. 3, 2024) (Magistrate Judge Christopher D. Baker).In this interpleader action regarding the proper beneficiary of over $1 million in life insurance benefits, Plaintiff Principal Life Insurance Co. sought default judgment against Rogelio Botello Diaz, the son and named beneficiary of the covered plan participant, Sergio Botello Diaz. Principal filed the interpleader action because the elder Diaz was murdered, and the police have neither charged anyone nor cleared anyone in connection with the death.  Principal therefore concluded it could not pay the insurance benefits without peril to Rogelio, the named beneficiary.  And because Rogelio had not answered the complaint, Principal sought default judgment against him, to despot the insurance proceeds with the court (minus costs for Principal), and to then withdraw from the case. The magistrate judge assigned to the case concluded that the case was properly brought as an interpleader and that, despite the large sum of money at issue, that default was appropriate against Rogelio for failing to respond. The magistrate therefore recommended that a judge be assigned to the case and that default judgement be entered against Rogelio and that he be served with a copy of the decision.

Tenth Circuit

Jensen v. Life Ins. Co. of N. Am., Case No. 2:22-CV-293-DAK-DAO, 2024 WL 54433 (D. Utah January 4, 2024) (Judge Dale A. Kimball). This case concerns a life insurance claim by Jill Jensen, the wife and beneficiary of a man, Steven Jensen, who was determined in an autopsy to have accidentally died in his sleep from “oxycodone and clonazepam toxicity.” Mr. Jensen had been prescribed oxycodone for chronic pain and had been taking it, appropriately according to his doctor, for five years before his death.  Two days before his death, a psychiatrist he went to see for his anxiety prescribed him clonazepam and this combination of medically-prescribed drugs proved deadly. The policy governing the ERISA plan only provided benefits for accidental death and the insurance company (“LINA”) claimed that Mr. Jensen’s death did not qualify for two reasons: (1) LINA’s reviewing doctor concluded Mr. Jensen did not take the medications as prescribed and, as a result, overdosed on these medications; and (2) LINA claimed that because the medications which caused his death were prescribed to treat Mr. Jensen’s pain and anxiety, the death therefore came within the policy exclusion for death stemming from illness. LINA abandoned the first claim and only pressed the second in the district court. As an initial matter, the court determined that Utah’s ban on discretionary clauses applied, even though it was first passed eight years after the policy went into effect (but long before Mr. Jensen’s death). Although Utah law generally precludes retroactive application of substantive laws, the court agreed with Ms. Jensen that the law was a procedural change that could be applied retroactively to require de novo review of her claim for benefits which arose after the enactment of the law. However, even under that favorable standard, the court agreed with LINA that the policy unambiguously excluded coverage of the death, which arose from the treatment of illness.

Venue

Sixth Circuit

Walton v. The Guardian Life Ins. Co. of Am., No. 2:23-cv-1693, 2024 WL 47700 (S.D. Ohio Jan. 4, 2024) (Magistrate Judge Chelsey M. Vascura). Plaintiff Denise Walton filed suit for disability benefits against Guardian Life, the insurer for her ERIRA-governed disability plan, in the Southern District of Ohio, rather than in West Virginia where she worked and lived. Guardian moved to dismiss or transfer, claiming that venue was improper and alternatively sought discretionary transfer to West Virginia. The court agreed that venue was not proper in the Southern District of Ohio because the plan was not administered there, the breach did not take place there and because Guardian did not have minimum contacts with the district sufficient to reside or be found there for purposes of venue. Rather than dismiss, however, the court transferred the case to the Northern District of West Virginia.

D.L. Markham DDS, MSD, Inc. 401(k) Plan v. Variable Annuity Life Ins. Co., No. 22-20540, __ F.4th __, 2023 WL 8642231 (5th Cir. Dec. 14, 2023)(Before Circuit Judges Clement, Haynes, and Oldham)

This published decision from the Fifth Circuit Court of Appeals turned on the court’s resolution of two important ERISA issues: (1) the recurring issue of who is a fiduciary and, in particular, when is a service provider to a plan acting as such; and (2) when does a service provider become a party in interest for purposes of ERISA’s prohibited transaction provisions. The case attracted competing amicus curiae briefs from the Department of Labor, which supported the plaintiffs, who were the sponsors and named administrators of a small 401(k) plan for employees of a dental practice (“Markham”), and from the Chamber of Commerce, which supported the insurance company, the issuer of the 401(k) plan’s group annuity contract and a service provider that maintained the retirement platform for the plan. The Fifth Circuit resolved both issues in favor of the insurance company.

Variable Annuity Life Insurance Company (“Variable Life”), entered into an annuity contract with the plan, and apparently also a separate contract with respect to the other services it provided. The annuity contract provided for a 5% surrender fee for funds transferred out of the contract that had been contributed within the past 60 months.

When the owners of the dental practice decided to terminate the annuity contract and discontinue services with Variable Life, the insurance company declined to waive the surrender fee. Instead, it imposed a 5% fee on all of the assets in the annuity contract to the tune of $20,703, a small amount to be sure, but approximately 4.6% of the assets of this small plan. The dental practice, through its husband and wife owners, then filed a putative class action suit claiming that by doing so Variable Life breached its fiduciary duties and engaged in a prohibited transaction.

Although the case was originally filed in California, it was transferred to the Southern District of Texas. That court granted Variable Life’s motion to dismiss on the grounds that it was neither a fiduciary nor a “party in interest” under ERISA with respect to its actions in imposing or collecting the surrender fee.

The Fifth Circuit agreed. First, the court of appeals considered and rejected Markham’s argument that Variable Life acted as a fiduciary in refusing to waive the fee, which it had the contractual discretion to do. The court saw its case law as clearly establishing “that a party must have discretion over more than the acceptance of payment to act as a fiduciary.” The court reasoned that Variable Life “merely charged the agreed upon surrender fee,” noting that other circuits “have held that accepting predetermined compensation does not constitute a fiduciary act.” The court concluded that “although VALIC had discretion to waive the fee, the PD Contract set a maximum fee and gave VALIC the right to retain it.”

With respect to the prohibited transaction issue, the court first noted that ERISA Section 406(a)(1)(C) applies to transactions for the “furnishing of goods, services, or facilities,” with a “party in interest,” which ERISA elsewhere defines to include “a person providing services to such plan.” Applying this definition, the court saw the relevant issue as whether Variable Life was “providing services to a plan” when it first entered into a contract with the plan.

The court concluded, contrary to the argument of the Department of Labor, that because Variable Life was not providing services to the plan when it contracted for the surrender fee, it was not a party in interest when it collected that fee.  In so holding, the court found unpersuasive a statement in the preamble to a DOL regulation concerning ERISA Section 408(b)(2), a prohibited transaction exemption, asserting that to be a “person providing services to a plan” does not require a preexisting relationship. The court was likewise unpersuaded that a 2021 amendment to ERISA section 408(b)(1) was on point because, in the Fifth Circuit’s view, there was no indication that Congress intended to broaden the definition of “party in interest,” and the amendment itself applies solely to group health plan providers, not pension providers.

The court also rejected Markham’s alternative argument that even if the contractual fee provision itself was not a prohibited transaction, the collection of the surrender fee was such a transaction. In this instance, the court looked to Section 408 as informing its analysis and concluded that the language of Section 408(b)(2)(A) “suggests that a ‘transaction’ refers to the establishment of rights and obligations between the parties – not the payment of funds pursuant to an existing agreement.” It found this reading consistent with what the court saw as the aim of Section 406 to “limit[] scrutiny to contracts involving preexisting relationships in order to prevent favoritism at the expense of plan beneficiaries.” The court distinguished a decision from the Fourth Circuit – Peters v. Aetna Inc., 2 F.4th 199 (4th Cir. 2021) – which the court read as holding that “a contract violation is a separate transaction rather than the continuation of an initial agreement.” Because plaintiffs did not contend that Variable Life violated the contract in refusing to waive the surrender fee, the court found Peters unhelpful to plaintiff’s position.          

Finally, the Fifth Circuit upheld the district court’s denial of the plaintiffs’ motion to amend their complaint. The court of appeals held that the district court acted within its discretion in denying the motion on grounds of undue delay and also because the motion did not provide sufficient detail about the new allegations or how they would cure the defects in the initial complaint.

With respect to the prohibited transaction holding in this case, it would seem impossible now in the Fifth Circuit to challenge unreasonable fees paid to a first-time service provider to a plan. This is a strange result indeed considering that prohibited transaction claims are usually brought not by plan fiduciaries but against them. And it is hard to imagine a more unreasonable and indeed abusive contractual term than one that locks a plan into a contract by penalizing any attempt to end the contractual relationship.     

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

Attorneys’ Fees

Ninth Circuit

Asner v. SAG-AFTRA Health Fund, No. 2:20-CV-10914-CAS-JEMx, 2023 WL 8529996 (C.D. Cal. Dec. 7, 2023) (Judge Christina A. Snyder). Your ERISA Watch thought this breach of fiduciary duty class action involving the merger of the Screen Actors Guild and the American Federation of Television and Radio Artists and their respective health plans was over when, in October, the court issued a final order approving a settlement and judgment. (That order was Your ERISA Watch’s case of the week in our November 1, 2023 edition.) However, plaintiffs have since challenged the court’s award of attorney’s fees. Plaintiffs argued that while the court properly based its fee award on its valuation of the benefit to the class, the valuation was too low because it did not adequately reflect future payments into plaintiffs’ reimbursement accounts. The court rejected this argument, stating that it was “impossible” to calculate the amounts at issue, and even if did consider those amounts, its fee award was still fair and reasonable under Ninth Circuit case law: “The touchstone for an award of attorneys’ fees is reasonableness, not the result of a mechanical application of either a percentage of recovery or a lodestar-multiplier approach.” The court thus denied plaintiffs’ motion, and stayed any distributions from the settlement fund while plaintiffs decide whether to appeal.

Breach of Fiduciary Duty

Second Circuit

Cunningham v. USI Ins. Servs., LLC, No. 21 CIV. 1819 (NSR), 2023 WL 8603123 (S.D.N.Y. Dec. 12, 2023) (Judge Nelson S. Román). Plaintiff Lauren Cunningham, a participating employee in the USI Insurance Services, Inc. 401(k) retirement plan, brought this class action alleging that defendants breached their fiduciary duties of prudence and loyalty, and failed to adequately monitor other fiduciaries, in their administration of the plan. Defendants filed a motion to dismiss, which the court granted in March because plaintiff “(1) failed to allege sufficient facts to allow a reasonable inference that the same services were available from other retirement savings plans for a lower price and (2) failed to provide ‘any figures, estimates, or formulas’ to determine how she calculated the total direct and indirect fees paid by the Plan.” (Your ERISA Watch discussed this order in its April 6, 2022 issue.) Ms. Cunningham filed an amended complaint, and defendants once again filed a motion to dismiss. The court ruled that although plaintiff had cured the deficiencies related to her calculation of the fees, she failed to “sufficiently plead USICG’s fees are excessive or unreasonable compared to similarly-sized RSP providers providing similar services.” The court found that plaintiff’s allegations on this issue were “conclusory,” offered “apples to oranges comparisons,” and did not “sufficiently allege the same ‘basket of services’ provided by USICG were available for less on the market.” Thus, the court once again granted defendants’ motion to dismiss, but allowed plaintiff to file a second amended complaint to address the court’s concerns.

Eighth Circuit

Kloss v. Argent Tr. Co., No. 23-CV-0301 (WMW/TNL), 2023 WL 8603131 (D. Minn. Dec. 12, 2023) (Judge Wilhelmina M. Wright). Plaintiff Jessica Kloss is a former employee of Torgerson Properties, Inc. (TPI) and was a vested participant in its employee stock ownership plan (ESOP). She alleges that defendant Argent Trust Company, the trustee of the ESOP, terminated the ESOP and sold it to a friend of TPI’s CEO for below market value. She brought this action against Argent, TPI, TPI’s ESOP committee, and the CEO. Plaintiff contends that (1) Argent breached its fiduciary duties of prudence and loyalty under ERISA, (2) the TPI defendants are liable as co-fiduciaries for Argent’s breaches, and (3) the TPI defendants failed to adequately monitor fiduciary activity. The defendants moved to dismiss. The court mostly denied these motions, ruling that although plaintiff’s allegations were not substantial, they were sufficient to satisfy circumstantial pleading requirements. However, the court granted the CEO’s motion to dismiss, finding that the complaint did “not adequately allege a fiduciary role” for the CEO because he was not a part of the ESOP’s governing structure. For the same reason, the court granted Argent’s motion as to the claim of co-fiduciary liability with the CEO.

Tenth Circuit

Carimbocas v. TTEC Servs. Corp., No. 1:22-CV-02188-CNS-STV, 2023 WL 8555384 (D. Colo. Dec. 11, 2023) (Judge Charlotte N. Sweeney). Plaintiffs are participants in TTEC’s defined contribution 401(k) benefit plan who brought this class action alleging that TTEC and other defendants breached their fiduciary duties to plan participants by “failing to monitor and negotiate appropriate annual fees charged by trustees and by causing Plan participants to incur excessive investment fees.” Defendants filed a motion to dismiss. The court noted that plaintiffs’ claims were divisible into two general categories: one alleging that defendants charged excessive administrative and recordkeeping fees, and one alleging that defendants selected investment funds that carried excessive “expense ratio” fees. Addressing the first category, the court ruled that plaintiffs failed to “adequately identify a ‘meaningful benchmark’ comparator offering the same services as the TTEC Plan’s trustees at a lower price.” Similarly, regarding the second category, the court ruled that the complaint did not offer a “meaningful comparison between the investment objectives, strategies, or risk profiles” of TTEC’s plan funds versus other plans. Furthermore, because plaintiffs’ breach of fiduciary duty claims failed, their claim for breach of duty in monitoring other fiduciaries failed as well. The court thus granted defendants’ motion to dismiss, but gave plaintiffs leave to amend.

Class Actions

Ninth Circuit

In Re LinkedIn ERISA Litig., No. 5:20-CV-05704-EJD, 2023 WL 8631678 (N.D. Cal. Dec. 13, 2023) (Judge Edward J. Davila). This is a class action alleging breach of fiduciary duty and failure to monitor fiduciaries and co-fiduciary breaches under ERISA, based on defendants’ administration of a participant-directed 401(k) benefit plan. While motions to dismiss and for class certification were pending, the parties mediated the matter and reached an agreement, which was ratified by the court in this order granting final approval of class action settlement. Under the agreement, defendants agreed to pay $6.75 million into a fund to be allocated on a pro rata basis. This amount includes attorney’s fees and costs, the cost of class notice and settlement administration, taxes, and contribution awards. Class counsel agreed to seek to recover no more than one-third of the gross settlement amount in fees. The court ruled that the settlement was fair, reasonable, and adequate due to the risks of litigation and the fact that the settlement provided “monetary relief of approximately 68% of the midpoint, or $9,941,637.25, of the most likely range of losses from $3,943,017 million to $15,940,213 million.” No class members objected. The court did reduce the requested service awards of the named plaintiffs from $12,500 to $6,500, but otherwise approved the settlement in full, awarding plaintiffs’ counsel $2.25 million in fees and $119,386.02 in litigation costs.

Disability Benefit Claims

Ninth Circuit

Atanuspour v. Reliance Standard Life Ins. Co., No. 22-55765, __ F. App’x __, 2023 WL 8663879 (9th Cir. Dec. 15, 2023) (Before Circuit Judges Graber, Christen, and Owens). In this brief memorandum disposition, the Ninth Circuit affirmed the district court’s ruling upholding defendant Reliance Standard’s decision to deny plaintiff Theodor Atanuspour’s claim for ERISA-governed long-term disability benefits. Plaintiff argued that the district court erred by ruling that medical evidence from after the benefit plan’s waiting period could not demonstrate disability during that time period. However, the Ninth Circuit “read the district court’s decision differently,” and concluded that the district court did not clearly err by finding that the additional records were insufficiently persuasive.

ERISA Preemption

First Circuit

Bernier v. Metropolitan Life Ins. Co., No. 22-CV-11660-ADB, 2023 WL 8623402 (D. Mass. Dec. 13, 2023) (Judge Allison D. Burroughs). This is an action for benefits under an ERISA-governed life insurance employee benefit plan. Defendant MetLife denied plaintiffs’ benefit claim, contending that the decedent lost her supplemental coverage when she stopped working. Plaintiffs filed this action in state court, alleging breach of contract and bad faith insurance practices. MetLife removed the case to federal court and filed a motion for summary judgment, arguing that plaintiffs’ claims are preempted by ERISA. The court granted MetLife’s motion in this order. The court ruled that an ERISA plan existed, and that plaintiffs’ claims “relate to” the plan because they “stem from MetLife’s alleged failure to pay Plaintiffs $250,000 under the Decedent’s supplemental life insurance coverage.” The court gave plaintiffs 30 days to file an amended complaint stating causes of action available under ERISA.

Second Circuit

Rowe Plastic Surgery of N.J., LLC v. Aetna Life Ins. Co., No. 23-CV-8521 (JSR), __ F. Supp. 3d __, 2023 WL 8534865 (S.D.N.Y. Dec. 11, 2023) (Judge Jed S. Rakoff). A medical provider sued Aetna for breach of contract and other state law causes of action in state court for underpaying benefits. Aetna filed a motion to dismiss, arguing that the claims were preempted by ERISA and failed to state a claim. The court began by refusing to consider documents defendant offered from outside the complaint, including the summary plan description, because they were not incorporated by reference in the complaint, were not integral to the complaint, and were not subject to judicial notice. The court also refused to dismiss on preemption grounds because the complaint did not mention ERISA or any plans governed by ERISA. However, the court granted the motion because plaintiffs’ claims were “legally defective.” Specifically, the court ruled that (1) Aetna’s telephone calls with plaintiff about the reimbursement rate were not an “offer to pay,” (2) Aetna did not make a clear and unambiguous promise, (3) Aetna was not unjustly enriched, and (4) Aetna’s telephone calls did not represent a fraudulent inducement. The court thus granted the motion to dismiss, with prejudice.

Life Insurance & AD&D Benefit Claims

Fifth Circuit

King v. Metropolitan Life Ins. Co., No. 3:23-CV-01175-M, 2023 WL 8656023 (N.D. Tex. Dec. 14, 2023) (Judge Barbara M.G. Lynn). Plaintiff Laureen King filed this action in state court, alleging that defendant Metropolitan Life Insurance Company committed breach of contract by failing to pay her accidental death benefits. MetLife responded by removing the case to federal court based on ERISA preemption and filing a motion to dismiss for failure to state a claim. MetLife argued that the decedent did not have accidental death benefit coverage at the time of his death because he died six days after he voluntarily terminated his employment, which under the employee benefit plan triggered the termination of his coverage. The court was persuaded, granted MetLife’s motion, and dismissed the action with prejudice.

Sixth Circuit

Johnson v. Metropolitan Life Ins. Co., No. 22-11779, 2023 WL 8602987 (E.D. Mich. Dec. 12, 2023) (Judge Sean F. Cox). As the court noted, this is a “somewhat unusual insurance interpleader case, in that none of the potential claimants appeared in this case and asserted that the insurance proceeds should be awarded to them.” The administrator of the decedent’s estate originally filed suit against MetLife in probate court seeking to stop MetLife from distributing life insurance proceeds to the decedent’s ex-husband. MetLife removed the action to federal court based on ERISA preemption, and filed a third party complaint for interpleader against three potential beneficiaries. However, none filed a responsive pleading. As a result, MetLife filed a motion for default judgment against all of the defendants based on their failure to appear, which the court granted in this order. The court further ordered that the insurance proceeds be paid to the decedent’s estate pursuant to a plan provision which states that if there is no beneficiary at the time of death, benefits may be paid to the estate.

Medical Benefit Claims

Ninth Circuit

Elazouzi v. Aetna Life Ins. Co., No. EDCV 22-0858-JGB-SPx, 2023 WL 8530010 (C.D. Cal. Dec. 7, 2023) (Judge Jesus G. Bernal). Plaintiff Eula Elazouzi underwent a Roux-en-y gastric bypass. She submitted a claim to her ERISA-governed medical benefit plan, which was administered by defendant Aetna. Aetna, following its clinical policy bulletins (CPBs), denied the claim on the ground that the treatment was excluded from coverage because it was “experimental and investigational.” The parties filed trial briefs, and the court issued its decision in this order. Under de novo review, the court ruled that Ms. Elazouzi “has carried her burden of establishing that her claim is not excluded under the Plan as ‘experimental and investigational.’” Specifically, the court found that the plan language regarding “experimental and investigational” treatment listed five restricting criteria, none of which were cited by Aetna in denying the claim. Instead, Aetna relied on its CPBs, but these were not referenced or mentioned by the plan and thus the court ruled that Aetna could not rely on them. As a result, the court ruled in plaintiff’s favor, and remanded the action to Aetna to make a medical necessity determination.

Tenth Circuit

S.H. v. Cigna Health & Life Insurance Co., No. 2:22-CV-552-TC, 2023 WL 8530123 (D. Utah Dec. 8, 2023) (Judge Tena Campbell). The plaintiffs in this action are a parent (S.H.) and son (J.H.) who sought medical benefits from Cigna for J.H.’s treatment at two behavioral health facilities in Utah. The parties filed cross-motions for summary judgment, which were decided in this order. The court first addressed J.H.’s treatment at Evoke at Entrada. Cigna denied coverage at Evoke on the ground that the treatment was “wilderness therapy” and thus was “experimental, investigational or unproven.” Plaintiffs contended that they submitted to Cigna “lengthy peer-reviewed reports and documents that they claim establish that wilderness therapy is not ‘experimental,’” which Cigna ignored and did not address. The court agreed that Cigna did not give plaintiffs a full and fair review because it did not present “a sufficient or reasoned basis as to why J.H.’s treatment at Evoke was within the Plan’s exclusion.” The court also noted that Cigna’s own internal policies showed that “the efficacy of wilderness therapy is not static but is evolving.” The court thus remanded to Cigna “to explain[], consistent with the Plan, ERISA, and this court’s decision, why the Plan’s experimental exclusion applies to J.H.’s treatments at Evoke.” As for J.H.’s treatment at the second facility, Live Strong, the court ruled that Cigna’s denial was confusing because it used residential treatment criteria when in fact the treatment J.H. received was intensive outpatient treatment. Cigna also “failed to engage with the materials and opinions presented by the Plaintiffs as to the appropriateness of J.H.’s care,” and relied on improper guidelines. The court thus remanded this claim as well so that Cigna can use proper standards to evaluate J.H.’s treatment at Live Strong.

Pleading Issues & Procedure

Ninth Circuit

Fremont Emergency Servs., LTD v. UnitedHealthcare Ins. Co., No. 2:22-CV-01118-CDS-BNW, 2023 WL 8556229 (D. Nev. Dec. 8, 2023) (Judge Cristina D. Silva). The plaintiff, a Nevada-based group of emergency medical professionals, sued UnitedHealthcare Insurance Company, alleging that it illegally “downcoded” medical benefit claims, and requested injunctive relief. However, United had previously sued plaintiff’s corporate parent, TeamHealth, in the Eastern District of Tennessee, alleging that TeamHealth was illegally “upcoding” medical benefit claims. United filed a motion to dismiss this action under the “first-to-file” rule on the ground that the actions are part of the same dispute. The court mostly agreed with United, ruling that the Tennessee suit was filed first, the parties were substantially similar, and the issues were substantially similar. However, the court chose to stay the action rather than dismiss it, and instructed the parties to notify the court when the Tennessee suit resolved.

Eleventh Circuit

Taylor v. University Health Servs., Inc., No. CV 123-047, 2023 WL 8654395 (S.D. Ga. Dec. 14, 2023) (Judge J. Randal Hall). The plaintiffs in this action are 174 former employees of defendant University Health Services who alleged they entered into a written contract with UHS providing that when they reached age 65, they would be furnished with a Medicare supplemental insurance policy at no cost. Piedmont Healthcare, Inc. took over the operations of UHS at plaintiffs’ location and informed plaintiffs that it did not think it was contractually obligated to continue paying the benefits, but would do so anyway on a voluntary basis. Plaintiffs filed an action in state court requesting declaratory relief. Defendants removed the case to federal court, citing ERISA preemption, and filed a motion to dismiss based on lack of standing. The court agreed that plaintiffs had no standing, ruling that because they continued to receive benefits, they had not yet suffered any actual harm. Because plaintiffs had no standing, the court had no jurisdiction, and thus its “only option” was to remand the case back to state court.

Venue

Sixth Circuit

Burdine v. Burdine, No. 1:22-CV-00383, 2023 WL 8539427 (S.D. Ohio Dec. 11, 2023) (Judge Jeffery P. Hopkins). This is a pension benefit case in which plaintiff Chuck Burdine has accused other members of his family of improperly influencing his father to change his beneficiary before he died. Burdine filed an action alleging several state law causes of action. The defendant pension fund responded with a motion to change venue, arguing that the plan contained a forum selection clause requiring parties to litigate disputes in the federal district court for the District of Columbia. The court agreed and granted the motion, finding the clause enforceable. The court acknowledged the Burdine defendants’ complaints regarding the financial strain of litigating elsewhere, but ruled that they had “not shown that this is one of the very rare cases where public-interest factors tilt the scales towards non-enforcement of an otherwise enforceable forum-selection clause.”