Ian C. v. UnitedHealthcare Ins. Co., No. 22-4082, __ F. 4th __, 2023 WL 8408199 (10th Cir. Dec. 5, 2023) (Before Circuit Judges Bacharach, Phillips, and Eid)

Thanks largely to the efforts of Brian S. King, an attorney representing plaintiffs in Salt Lake City, the Tenth Circuit Court of Appeals has recently been at the forefront of litigation involving ERISA-governed medical benefits, specifically benefits involving mental health and substance abuse treatment. In the past few years, Your ERISA Watch has covered several of these decisions, most notably D.K. v. United Behavioral Health, which was the case of the week in our May 24, 2023 issue.

Today’s notable decision continues this trend, as the Tenth Circuit has once again examined the claim administration of insurance juggernaut UnitedHealthcare Insurance Company and found it lacking.

The plaintiffs in the case were Ian C., a participant in an employee medical benefit plan, and his minor son, A.C., who was a beneficiary under the plan. The plan was administered by defendant United.

Unfortunately, A.C. has a history of mental health and substance abuse issues, which led to his admission to several facilities, including Catalyst Residential Treatment, which diagnosed and treated both his mental health and substance abuse issues.

Plaintiffs submitted a claim for benefits to United, which approved benefits for two weeks of treatment. After that period, however, United denied further benefits, determining that the treatment for A.C.’s anxiety disorder did “not appear to be consistent with generally accepted standards of medical practice.”

United referred this decision for further analysis by a medical reviewer, who upheld it, finding that A.C.’s treatment no longer met the plan definition of “medically necessary.” Specifically, United stated that “it seems that your child has made progress and that his condition no longer meets guidelines for coverage of treatment in this setting.” United further contended that A.C. did “not have serious withdrawal or post-acute withdrawal symptoms” that would justify continued coverage.

Plaintiffs appealed, arguing that A.C. still needed residential treatment, and contending that United did not apply the substance abuse guidelines along with the mental health guidelines. United upheld its decision on appeal, stating in its letter that A.C. had made progress and no longer met the criteria for coverage under its mental health guidelines. United did not mention his substance-abuse-related diagnoses.

Having exhausted their appeals with United, plaintiffs filed an action in the U.S. District Court for the District of Utah, seeking payment of benefits under ERISA, 29 U.S.C. § 1132(a)(1)(B). The parties filed cross-motions for summary judgment. After the district court granted United’s motion and denied plaintiffs’, this appeal followed.

The Tenth Circuit first addressed the standard of review. Plaintiffs agreed that the benefit plan granted United the authority to interpret the terms of the plan and make discretionary benefit decisions, which would ordinarily result in abuse of discretion review under the Supreme Court’s test in Firestone Tire & Rubber Co. v. Bruch. However, plaintiffs argued that United’s decision was not entitled to such deference and should be reviewed de novo because United did not “substantially comply” with ERISA’s procedural requirements.

The Tenth Circuit dismissed this argument for two reasons. First, it stated that it had “faced multiple opportunities to overturn or otherwise tweak Firestone deference; and in every instance, it has declined.” Furthermore, the Department of Labor’s regulations were not intended to affect the standard of review: “Congress intentionally left ERISA’s standard of review open to the judiciary’s interpretation, which the Supreme Court duly supplied in Firestone.”

Second, the Tenth Circuit stated that it would be “fruitless” to adopt plaintiff’s arguments because the standard of review did not dictate the outcome of the case. As the court proceeded to explain in the rest of its decision, United’s benefit denial could not even survive abuse of discretion review.

The Tenth Circuit began its abuse of discretion analysis by discussing its decision in D.K. v. United Behavioral Health from earlier this year. The court noted that it had held in that case that “the administrator must include its reasons for denying coverage in the four corners of the denial letter.” Thus, the court’s analysis was focused on United’s two denial letters, and “more critically the second,” final, denial letter.

The court found that these letters were inadequate. In their appeal, plaintiffs had specifically raised the issue that A.C. was “dual diagnosed,” i.e., that he required both mental health and substance abuse treatment. However, United’s letter in response “made no substantive mention of A.C.’s substance abuse, the Substance Abuse Guidelines, or the evidence Ian C. submitted with his appeal.” The court ruled that this violated ERISA because “the fiduciary must consider an independent ground for coverage that the claimant raises during the appeal.” United “was not justified in shutting its eyes to the possibility that A.C. was entitled to benefits based on his substance abuse.”

The court further explained why this result was consistent with ERISA’s rules. The court noted that ERISA requires a “full and fair review,” which includes a “meaningful dialogue” between the administrator and the beneficiary and “an ongoing, good faith exchange of information.” In order to provide this review, the court stated that United was required, at a minimum, to “address Ian C.’s arguments and evidence of A.C.’s substance abuse, the Substance Abuse Guidelines, and the relevant provisions of the plan[.]” Because United’s letters were “silent on A.C.’s substance abuse,” and focused “solely on his mental-health treatment,” United “rebuffed its fiduciary duties and denied Ian C. his right to a ‘full and fair review.’”

The court quickly dispensed with United’s remaining arguments, many of which the court noted were not made in United’s denial letters and thus it was not required to consider them. Among these arguments were contentions that (1) substance abuse was not the “primary driver” of A.C.’s treatment, (2) Catalyst was not “actively treating” A.C.’s substance abuse, (3) United was not required to perform a second substance abuse review because the guidelines for mental health treatment and substance abuse treatment are “nearly identical,” (4) plaintiffs did not meet their burden of proving that A.C. needed substance abuse treatment, and (5) its internal notes justified its denial, even if those notes were not cited in its denial letters.

In sum, the court concluded that United “arbitrarily and capriciously denied A.C. benefits for his treatment at Catalyst and deprived Ian C. of his right to receive a ‘full and fair review’ of his administrative appeal,” and reversed and remanded in yet another Tenth Circuit win for behavioral health patients.

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

Attorneys’ Fees

Ninth Circuit

Munger v. Intel Corp., No. 3:22-cv-00263-HZ, 2023 WL 8433191 (D. Or. Dec. 1, 2023) (Judge Marco A. Hernández). On October 23, 2023, the court entered a summary judgment order finding plaintiff Ruth Ann Munger, acting on behalf of the estate of decedent Philip Cloud, entitled to ERISA plan benefits. The court agreed with Ms. Munger that the named beneficiary, Mr. Cloud’s wife, Tracy Cloud, was not entitled to benefits under Oregon’s slayer statute as she has been convicted of the second-degree murder of Mr. Cloud. Now, the counter and cross claimants in interpleader – Intel Corporation, the Intel Retirement Plans Administrative Committee, and the Intel Benefits Administration Committee – have moved for an award of attorneys’ fees. Ms. Munger did not take any position on Intel’s fee motion. The court exercised its discretion in this decision to award the Intel parties their full amount of requested fees of $20,297.79. It held that the work of the attorneys was appropriate as they were “‘incurred in filing the action and pursuing the plan’s release from liability,’ rather than in ‘litigating the merits of the adverse claimants’ positions.’” The court also concluded that the hourly rates of the two attorneys – Sarah Ryan and Donald Sullivan – were reasonable. Ms. Ryan has more than 30 years of litigation experience and has been a member of the Oregon State Bar for more than 40 years. Under the 2022 Oregon State Bar Economic Survey, the court found that Ms. Ryan’s requested rate of $499.38 per hour was reasonable. As for Mr. Sullivan, the court concluded that his requested rate of $598.60 per hour was reasonable given his 26 years of experience practicing in the area of ERISA and employee benefits in California. Finally, the court was satisfied that the eight hours of work performed by Ms. Ryan and the 27.5 hours of work performed by Mr. Sullivan were reasonably expended. Thus, the court awarded counsel their requested lodestar fee and granted their motion.

Breach of Fiduciary Duty

Fourth Circuit

Stegemann v. Gannett Co., No. 1:18-cv-325 (AJT/JFA), 2023 WL 8436056 (E.D. Va. Dec. 5, 2023) (Judge Anthony J. Trenga). A class of participants of an ERISA-governed 401(k) savings plan consisting of mostly legacy company single-stock funds sued Gannett Co., Inc. and the plan’s retirement committee for breaching their duties of prudence and diversification by failing to timely liquidate one of the plan’s three single-stock funds, the TEGNA Stock Fund. A three-day bench trial took place last April. In early June of this year, the parties submitted their proposed findings of fact and law. Having reviewed the evidence, weighed the exhibits and experts’ testimony, and reflected on the standards under ERISA, the court issued this judgment. Its ultimate verdict? The fiduciaries acted “with procedural prudence in its approach to the divestiture of the TEGNA Stock Fund, and as a hypothetical prudent fiduciary would have, the divestiture was therefore timely and prudently made, and [defendants] did not breach [their] dut[ies].” The decision centered on what the fiduciaries did right, not what ultimately went wrong, the particulars of which were absent from its lengthy discussion. According to the court, a prudent hypothetical fiduciary under the circumstances would have considered and “weighed the risks of single stock fund holdings against the risks of forced and/or rapid divestiture.” To the court, the committee balanced those risks fairly and appropriately at the time, as they “solicited advice from independent experts in investment management,” and had “timely and regular meetings, both with and without advisors, to discuss the risks of maintaining the TEGNA Stock fund and the risks associated with divestiture, and thereby formulated a considered approach from divestiture.” Thus, it was the “sunsetting” and liquidating process alone, not its results, that counted in the end towards the court’s conclusions, and that process, it held, was entirely kosher. As a result, the court found in favor of defendants and against plaintiffs on all claims and judgment was entered accordingly.

Sixth Circuit

Johnson v. Parker-Hannifin Corp., No. 1:21-cv-00256, 2023 WL 8374525 (N.D. Ohio Dec. 4, 2023) (Judge Bridget Meehan Brennan). Former employees of the Ohio-based engineering company Parker-Hannifin Corporation who are participants in Parker’s defined contribution retirement savings plan brought this action against the plan’s fiduciaries for breaches of their duties under ERISA. Plaintiffs allege that defendants were imprudent in selecting and maintaining underperforming target-date funds in the plan. During the relevant period, they claim these funds had a concerning 90% turnover rate, consistently underperformed the S&P target-date fund benchmark, and “showed severe signs of distress before 2013” when they were added to the plan. In addition to the poorly performing investment options, plaintiffs also aver that defendants violated their standards of conduct under ERISA by including funds with excessive fees despite the plan’s $4.3 billion in net assets and over 32,000 participants. “Plaintiffs maintain that the decision to include the shares with higher fees was inconsistent with Defendants’ fiduciary obligations under the Plan,” and they argue that had defendants forced the investment companies to offer their lower-fee shares to the plan, they would have saved millions in plan assets. Finally, plaintiffs asserted a claim for breach of the duty to monitor, alleging defendants failed to ensure that the entities and individuals it appointed to oversee the plan and make decisions regarding its investments fulfilled their obligations to the participants as required under ERISA. The fiduciaries moved to dismiss. Stressing the “context sensitive” nature of ERISA breach of fiduciary duty pleading in the Sixth Circuit, the court granted the motion to dismiss in its entirety. The court differentiated plaintiffs’ chosen comparators to the challenged funds by agreeing with defendants that the challenged funds “had a uniquely conservative investment strategy and asset allocation compared to” plaintiffs’ chosen target-date funds comparisons, and that these funds therefore had distinct objectives, strategies, and goals, so they could not be used to demonstrate underperformance. The court also dismissed the class share claims, holding that it would not adopt a blanket policy finding plan participants state valid claims “any time a plaintiff alleges a large plan did not obtain the lowest-fee shares.” Instead, it viewed “Plaintiffs’ theory [a]s nothing more than a ‘naked assertion devoid of…factual enhancement.’” Finally, as the duty to monitor claim was contingent on the underlying claims of imprudence, the court granted the motion to dismiss this derivative claim as well. For these reasons, defendants’ motion to dismiss was granted and the case was dismissed.

Seventh Circuit

Su v. Fensler, No. 22-cv-01030, 2023 WL 8446380 (N.D. Ill. Nov. 28, 2023) (Judge Nancy L. Maldonado). Acting Secretary of the Department of Labor, Julie A. Su, brought this action against trustees of the United Employee Benefit Fund alleging they breached their fiduciary duties and engaged in prohibited transactions. Fearing the Fund’s assets would be entirely depleted without intervention, Ms. Su moved for a preliminary injunction removing defendants as plan fiduciaries and installing an independent fiduciary to manage and control the plan during the pendency of the lawsuit. The court granted the Secretary’s motion on August 10, 2023. Defendants subsequently moved for the court to reconsider portions of that order. In this decision the court granted defendants’ motion to a limited extent. It amended its prior order by modifying the process for notice and objection if the independent acting plan fiduciary wishes to make any amendments to the plan documents or attempts to terminate the Fund. In addition, the court agreed with defendants that it was premature to order them to reimburse the Fund for expenses incurred by the appointed acting plan fiduciary. The court stated that it found “modification of the provisions of the PI Order that require Defendants to reimburse the Fund…appropriate because Defendants have not yet been found liable of any wrongdoing.” However, in all other respects, the court left its previous order unchanged. It highlighted that the Fund’s finances were in a dire and tumultuous state when it acted in August. “Indeed, since the time the Independent Fiduciary has taken control of the Fund, it has discovered that the Fund has substantially less cash on hand – almost $400,000 less – than was represented to the Court by Defendants in briefing the motion for preliminary injunction. Further, upon assuming control of the Fund, the Independent Fiduciary reported that the Fund documents were outdated to the point that it could not identify a reliable or accurate list of current plan participants with active life insurance policies, a key metric in determining the actual assets of the Fund.” The court expressed that the current state of the Fund was “particularly concerning given Defense counsel’s vehement arguments to this Court that their significant legal fees over the past several years were necessary and justified in light of the work they had done to get the Fund into shape after the alleged wrongdoing of the other defendants named in this suit.” The millions of dollars spent on defense counsel, the court held, don’t appear to have left the Fund any more secure. Given all of this, the court reaffirmed its broad position that appointing an independent fiduciary was necessary and appropriate, and the court thus left all other portions of its previous order undisturbed.

Discovery

Fifth Circuit

Edwards v. Guardian Life Ins. of Am., No. 1:22-cv-145-KHJ-MTP, 2023 WL 8376264 (S.D. Miss. Dec. 4, 2023) (Magistrate Judge Michael T. Parker). Widower James Edwards sued Guardian Life Insurance of America seeking life insurance benefits from a policy belonging to his late wife. The court previously determined that the policy at issue is an ERISA-governed plan. In this decision, the court granted in part and denied in part Mr. Edwards’ motion for discovery. Mr. Edwards moved to depose the beauty technicians who worked at his wife’s salon. He also moved to depose three Guardian Life employees. In addition, Mr. Edwards seeks to conduct discovery about whether a review of the records occurred prior to Mrs. Edwards’ death and whether a notice of cancellation was sent to the family prior to her death. The court considered the depositions first. Regarding the depositions of the beauty technicians, the court concluded that Mr. Edwards was attempting to reopen the issue of whether the policy is an employee benefit plan governed by ERISA. As this determination was already made in the court’s previous decision, the court concluded that discovery on this topic was unnecessary and therefore denied the request to depose the salon workers. As for the depositions of the Guardian Life employees, the court concluded that these depositions are not necessary and the information that Mr. Edwards seeks can be discovered instead through written interrogatories and document production. Because this is an ERISA action, the court wished to limit discovery. It felt that the depositions were not proportional to the needs of the present case. However, the court did agree with Mr. Edwards that some discovery was “needed to determine whether the subject policy was actually canceled prior to Mrs. Edwards’s death,” which “calls into question Defendant’s compliance with ERISA’s procedural regulations.” Accordingly, the non-deposition discovery requests were granted, and Mr. Edwards was granted leave to propound written discovery requests relating to the issues of whether the policy was reviewed and cancelled prior to Mrs. Edwards’ death, and whether the Edwards family was ever provided notice of any cancellation prior to Mrs. Edwards’ death. Thus, to this limited extent, Mr. Edwards’ discovery motion was granted.

Ninth Circuit

Franklin v. Hartford Life & Accident Ins. Co., No. CV-22-00168-TUC-JAS, 2023 WL 8481407 (D. Ariz. Dec. 7, 2023) (Judge James A. Soto). Plaintiff Sabrina Franklin brings this action against Hartford Life & Accident Insurance Company alleging that her long-term disability benefits were wrongfully denied. Ms. Franklin moved to compel discovery from Hartford. She seeks documents, depositions, and interrogatory responses from the insurer related to its structural conflict of interest in this case. As a threshold matter, the court agreed that Hartford has a conflict of interest, and that under Ninth Circuit precedent Ms. Franklin is entitled to discovery relating to that conflict – a conflict which the court must then weigh in determining whether Hartford abused its discretion when denying her claim for benefits. The court ordered Hartford to “produce 100 prior reports from MLS and from ECN for the 2020 and 2021; produce 100 prior reports from each of Dr. Parillo, Dr. Marwah, and Dr. Hoenig for the years 2020 and 2021; produce internal claim metrics and tracking documents; and produce the claim and appeal adjusters who decided Plaintiffs claim for depositions.” It concluded that the circumstances present and Ninth Circuit authority warrant this discovery and agreed with Ms. Franklin that Hartford was improperly designating this information as confidential and non-discoverable. Thus, somewhat unusually for an ERISA disability benefits action, the court granted Ms. Franklin’s discovery motions in their entirety and ordered Hartford to produce the requested documents, respond to the interrogatories, and schedule the depositions as outlined in this order.

ERISA Preemption

Eighth Circuit

Bentley v. Symetra Life Ins. Co., No. 23-CV-1008-CJW-KEM, 2023 WL 8455043 (N.D. Iowa Dec. 6, 2023) (Judge C.J. Williams). Plaintiff Nancy Lynn Bentley and decedent James Lavern Bentley married in 2020. Just over two years later, their marriage was not going well, and on November 8, 2022, Ms. Bentley filed for dissolution of the marriage. On that same day, the state court issued an injunction preventing both Mr. and Ms. Bentley from removing one another on any health or life insurance coverage then in effect until after adjudication of the dissolution. Perhaps unknown to Ms. Bentley, just five days earlier Mr. Bentley had already changed the beneficiary of his two ERISA-governed life insurance policies to his daughter, defendant Brittany Brainard. This change would not go into effect until January 1, 2023, after the court’s injunction. Before the dissolution of the marriage had been finalized, Mr. Bentley died. Based on the most current beneficiary designation, Symetra Life Insurance Company paid the $300,000 in proceeds to Ms. Brainard. Shortly thereafter, Ms. Bentley commenced this litigation, in state court, seeking to freeze the life insurance proceeds and have them paid to her instead. Symetra removed the action to federal court, and Ms. Bentley stipulated to the dismissal without prejudice of Symetra as a defendant. Now, Ms. Bentley moves to remand her action, solely against Ms. Brainard, back to state court. The court denied the motion to remand in this order. Relying on the Supreme Court’s precedent set in Harris Trust, the court held, “plaintiff’s claim for restitution… falls squarely within the embrace of ERISA’s preemptive remedial provisions – namely, Section 1132(a)(3)(B) – thus converting plaintiff’s state law claim against Brainard into a federal claim for restitution of ERISA plan assets.” As Ms. Bentley alleges that Ms. Brainard was not the rightful beneficiary under the plan, claims against Ms. Brainard, as an improper donee, are subject to liability under ERISA and the remedy Ms. Bentley seeks will be an appropriate form of equitable relief if she can prove she is the rightful beneficiary. Thus, under ERISA’s preemptive power, plaintiff’s claim for the benefits were converted from state law causes of action to federal claims, over which the federal court has jurisdiction, and her motion to remand was accordingly denied.

Exhaustion of Administrative Remedies

Tenth Circuit

Ellefson v. General Elec. Co., No. 23-cv-1145-JAR-TJJ, 2023 WL 8434403 (D. Kan. Dec. 5, 2023) (Judge Julie A. Robinson). Plaintiffs Russell Ellefson and Joshua Zongker sued General Electric Company (“GE”) and its ERISA-governed severance plan claiming they are owned benefits under the plan. In 2022, Mr. Ellefson and Mr. Zongker were told by GE that their positions were being eliminated. The notice GE provided them explained that they were eligible for lump-sum severance benefits in exchange for executing “Full Benefits Release agreements.” Mr. Ellefson and Mr. Zongker did so, and understood this action to be the equivalent of filing a claim for benefits. However, shortly before their last scheduled day of employment, GE renewed its contract at the windfarm where they worked and informed them that because of this change the planned layoffs would not occur. GE did not, however, formally rescind the offer of severance benefits. Instead, it adopted the view that “severance entitlement [w]as always… conditioned on an actual termination of employment due to layoff,” and therefore declined to honor the terms of the severance agreements or pay the benefits. And, rather than notify plaintiffs of “any applicable internal appeal procedure and its applicable timelines,” GE’s counsel told them “to go ahead and file a lawsuit.” They did so through this action. Plaintiffs maintain that in reliance upon their severance offers and in exchange for the executed release agreements their employment was terminated and they are entitled to benefits. Plaintiffs argue that they could not exhaust administrative remedies prior to filing their action because the plan failed to establish or follow claims procedures consistent with ERISA’s requirements as defendants’ notice and disclosure deficiencies denied them a reasonable review procedure, making exhaustion impossible and futile. Defendants disagreed with this view, and moved for dismissal on the grounds that plaintiffs failed to administratively exhaust. Defendants’ motion to dismiss was denied in this order. The court agreed with plaintiffs that their complaint stated exceptions to ERISA’s exhaustion requirement. “Viewing the allegations of the Complaint in Plaintiffs’ favor – as it must – Plaintiffs have alleged facts that are capable of supporting a finding or inference that Defendants prevented them from seeking timely review.” Thus, pursuant to the liberal pleading standards of Rule 8, the court concluded that plaintiffs did enough to plead an exception to the exhaustion rule and therefore survived a Rule 12(b)(6) dismissal.

Life Insurance & AD&D Benefit Claims

Fourth Circuit

K.K. v. CDK Glob., No. 3:22-cv-562-MOC, 2023 WL 8459850 (W.D.N.C. Dec. 6, 2023) (Judge Max O. Cogburn Jr.). The circumstances of Samir Pradeep Kulkarni’s death are disputed among the parties in this accidental death and dismemberment benefit action. Mr. Kulkarni died while traveling on company business when he shot himself in the head with a co-worker’s gun. Mr. Kulkarni and his co-worker drank heavily that night and Mr. Kulkarni had consumed methamphetamine. According to the co-worker, Mr. Kulkarni, seemingly out of nowhere and without warning, picked up the loaded handgun present in the room “pressed the muzzle to the side of his head, and fired.” Importantly for the court, “there is simply no evidence Samir knew the gun was loaded when he pulled the trigger.” Mr. Kulkarni died a few days later from his injury. Benefits are payable to Mr. Kulkarni’s niece and nephew, the policy’s named beneficiaries and the plaintiffs in this action, if their uncle’s death was “a direct result of an accident” that was not “intentionally self-inflicted.” The parties cross-moved for summary judgment. The court denied both motions. It stated that genuine disputes of material fact about Mr. Kulkarni’s death preclude granting summary judgment to either party at this moment. In particular, the court stressed that Mr. Kulkarni’s mental state when he put the gun to his head is a material fact that will affect the outcome of this lawsuit. If he intended to kill himself, or knew that the injury was likely when he pulled the trigger, benefits are not payable. However, if Mr. Kulkarni did not think the gun would go off, “Plaintiffs have a claim.” Whether the death was an accident is therefore still entirely unclear, and “the parties offer conflicting evidence.” Resolving this conflicting evidence would require making credibility determinations, inappropriate at the summary judgment stage. As a result, the court concluded that a reasonable fact-finder could rule for either party, and a bench trial is necessary to resolve the matter.

Medical Benefit Claims

Fourth Circuit

LaVallee v. Medcost Benefits Servs., No. 1:21-cv-00265-MR, 2023 WL 8459852 (W.D.N.C. Dec. 6, 2023) (Judge Martin Reidinger). Mother and daughter Lisa LaVallee and Erica Ray initiated this lawsuit seeking medical benefits under ERISA after their healthcare plan denied the family’s claim for reimbursement of Ms. Ray’s stay at a residential treatment facility for the care of her mental health. Defendant MedCost Benefits Services moved to be dismissed as a defendant in this action for lack of subject matter jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(1). A few months after this lawsuit was filed, MedCost ceased operating as the third-party claim administrator of the healthcare plan. It is undisputed that MedCost no longer has any involvement with the plan and presently has no discretion over the plan or its funds. However, at the relevant time of the benefits denial, up until the first four months of this lawsuit, MedCost was the claim administrator with fiduciary duties to plaintiffs and discretionary authority over their benefit claim. Because of that critical fact, plaintiffs argued against dismissing MedCost as a defendant. However, they were unable to persuade the court, and in this decision it granted MedCost’s motion to dismiss. It held, “because MedCost is no longer the claims administrator for the Plan, it has no control over the administration of benefits under the Plan. Therefore, a claim against MedCost cannot provide redress to the Plaintiffs’ injuries, and the Plaintiffs lack standing to bring such a claim. As such, this Court does not have jurisdiction over the Plaintiffs’ claim against MedCost, and the claim accordingly must be dismissed.”

Tenth Circuit

Denney v. Humana Ins. Co., No. CIV-23-120-D, 2023 WL 8358564 (W.D. Okla. Dec. 1, 2023) (Judge Timothy D. Degiusti). The Denney family sued Humana Insurance Company after the daughter, Jacqueline Denney, underwent medically necessary jaw surgery. Plaintiffs allege that Humana violated ERISA by improperly denying and underpaying the benefit claims they submitted for Jacqueline’s care. In this action they seek reimbursement of benefits, and allege that Humana breached its fiduciary duties under ERISA. The complaint asserts three claims; a claim for unpaid benefits under Section 502(a)(1)(B), an alternative claim for relief under Section 502(a)(3), and a claim under Section 1132(c)(1) for failure to provide requested plan information. Humana moved to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(6). The court granted in part and denied in part the motion to dismiss. Beginning with the benefits claim, the court held that plaintiffs satisfied notice pleading and sufficiently stated a claim for unpaid ERISA benefits. It also determined that plaintiffs alleged enough in their complaint to potentially excuse a failure to exhaust administrative remedies because they included details about their inability to comply with the appeals process provided by the plan and alleged that further efforts to attempt to exhaust prior to litigation would have been futile. As a result, the court denied the motion to dismiss the Section 502(a)(1)(B) claim. However, the court did dismiss, without prejudice, plaintiffs’ Section 502(a)(3) fiduciary breach claim, which they pled in the alternative to their benefits claim. It found that plaintiffs had an adequate remedy under Section 502(a)(1)(B), as their theory of fiduciary breach was essentially that Humana wrongfully denied the family’s claims for benefits. “Plaintiffs do not identify any other fiduciary acts underlying their claim for equitable relief. Plaintiffs have not demonstrated…any possibility that § 1132(a)(1) cannot provide an adequate remedy for Defendant’s denial of benefits, meaning there is no plausible claim for equitable relief.” Thus, under the facts and circumstances of the allegations in their complaint, the court held that plaintiffs stated a claim under (a)(1)(B), but could not bring an alternative claim under (a)(3), and therefore held that dismissal of their “catchall” equitable relief claim was appropriate. Finally, the court dismissed the statutory claim under § 1132(c)(1)(B) with prejudice because Humana is not the plan administrator, but is instead the claims administrator of the plan, and is therefore not a proper party for the purposes of § 1132(c)(1).

M.P. v. Bluecross Blueshield of Ill., No. 2:23-cv-216-TC, 2023 WL 8481410 (D. Utah Dec. 7, 2023) (Judge Tena Campbell). Plaintiff M.P. sued BlueCross and BlueShield of Illinois, Arthur J. Gallagher & Co., and the Arthur J. Gallagher Benefits Plan alleging three causes of action under ERISA; a claim for recovery of benefits, an equitable relief claim for violating the Mental Health Parity and Addiction Equity Act, and a claim for statutory damages for failure to produce documents upon request. This action stems from the plan’s denial of M.P.’s claim for minor child C.P.’s stay at a residential treatment facility. Under the plan language, residential treatment centers for mental healthcare are covered if and only if the facility offers 24-hour onsite nursing services. The facility that C.P. stayed at did not offer such services. Defendants moved to dismiss the complaint. They argued that the plan properly denied the benefit claim as it unambiguously excludes coverage for residential treatment centers that do not meet the 24-hour nursing requirement. In addition, defendants maintained that the plan is not in violation of the Parity Act because this same requirement is also applied to skilled nursing facilities and all other analogous levels of intermediate medical/surgical care. Finally, defendants argued in favor of dismissing the statutory penalties claim because M.P. sent the request to the wrong address, and Blue Cross, the claims administrator, is not a proper party to a Section 1132(c)(1) claim. The court agreed with defendants on almost all of their arguments, and largely granted the motion to dismiss. To begin, the court concurred with the plan and its administrators that C.P.’s treatment was not covered under the terms of the plan because the facility C.P. received care from does not provide 24-hour onsite nursing as required for all residential treatment centers under the plan. “Because Cascade did not satisfy the Plan’s unambiguous requirement… coverage for C.P.’s treatment at Cascade was not available under the Plan and [defendants] appropriately (under the Plan and ERISA) denied the Plaintiffs’ claim.” Thus, the court found the Section 502(a)(1)(B) claim meritless and dismissed this cause of action. Next, the court once again agreed with defendants that the complaint could not state a Parity Act violation. It held that the plan’s 24-hour onsite nursing requirement was not more restrictive for mental healthcare than for comparable medical or surgical care. M.P.’s subtle argument, that the plan violates the Parity Act because 24-hour nursing care is part of generally accepted standards of care for skilled nursing facilities, but not for residential treatment centers providing mental healthcare, did not sway the court. It held that these “conclusory allegations” were insufficient to plead a Parity Act violation, and accordingly dismissed the second cause of action too. However, the court denied the motion to dismiss the statutory penalties claim as asserted against defendant Arthur J. Gallagher & Co., the plan administrator. It found that the complaint sufficiently alleged that M.P. requested plan documents and did not receive them in a timely manner as required under the statute. The court was not persuaded by defendants’ “argument that the Plaintiffs’ claim is foreclosed because the Plaintiffs sent their document request to the wrong address.” Thus, this cause of action alone was allowed to proceed past the pleadings, and in all other respects, defendants’ motion to dismiss was granted.

Pension Benefit Claims

D.C. Circuit

Deville v. Pension Benefit Guar. Corp., No. 1:23-cv-1343 (DLF), 2023 WL 8449238 (D.D.C. Dec. 6, 2023) (Judge Dabney L. Friedrich). Pro se plaintiff Frank Deville worked for nearly three decades as a full-time employee of Exide Holdings, Inc. and has been a member of the Exide Technologies Retirement Plan since 1987. Mr. Deville stopped working in 2015 and applied for disability benefits with the Social Security Administration. His claim for Social Security disability benefits was approved but the Social Security Administration determined that Mr. Deville became disabled on June 1, 2016. It found that because he had been able to work in 2015, he was not disabled that year. A few years later, in 2020, Exide filed for bankruptcy and its plan was terminated as insolvent. As a result, the Pension Benefit Guaranty Corporation (“PBGC”) became the trustee of the Exide retirement plan. Shortly after, Mr. Deville applied for pension benefits under the plan. The PBGC provided Mr. Deville with a pension benefit estimate. He objected to the calculations and requested that his benefits be processed under the plan’s disability pension provisions. The PBGC responded by determining that Mr. Deville did not qualify for the plan’s disability benefits. It interpreted the plan language as requiring disabilities to have incurred while participants were active employees of Exide in order for claimants to qualify for disability pension benefits. It held that because the Social Security Administration found Mr. Deville’s disability start date to be in 2016, after he had stopped working for Exide, he was not entitled to benefits under the plan. This determination was affirmed on appeal to the appeals board, which then prompted Mr. Deville to challenge the appeals board’s decision in federal court under ERISA and the Administrative Procedure Act. The parties filed cross-motions for summary judgment. The court granted summary judgment in favor of PBGC in this decision. It concluded that the appeals board did not misapply the Exide Plan to deny Mr. Deville benefits, and that its decision was therefore not “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law.” The language of the Exide retirement plan states, “To qualify as Disability, the events causing the physical and mental disability and the manifestation of the physical and mental disability must be incurred while a Participant is an active employee.” The court agreed with PBGC and the appeals board that the critical issue under the plan is whether the employee “incurred” the disability “before or after he stopped working.” Given the Social Security Administration’s conclusion that Mr. Deville’s disability began in 2016, after he had stopped working at Exide, the court concluded that PBGC lawfully and appropriately determined that Mr. Deville was not entitled to disability benefits under the plan. Accordingly, PBGC’s benefit determination was upheld and summary judgment was granted in its favor.

Eleventh Circuit

Shanklin v. United Mine Workers of Am. Combined Benefit Fund, No. 6:22-cv-01056-LSC, 2023 WL 8459930 (N.D. Ala. Dec. 6, 2023) (Judge L. Scott Coogler). Plaintiff Clayton Shanklin brought this action against the United Mine Workers of America 1974 Pension Trust seeking a court order overturning the plan’s denial of his claim for disability pension benefits. Mr. Shanklin spent most of his adult life working in the coal mine industry. This work has taken its toll physically on Mr. Shanklin. Since at least 2015, Mr. Shanklin has suffered from back problems, in addition to heart problems, high blood pressure, and other health conditions. However, it was in early 2017 when things went from bad to worse for Mr. Shanklin. First, on January 5, 2017, and then on February 21, 2017, Mr. Shanklin ended up in emergency rooms after being injured in two different workplace accidents. The first accident involved a mine cart crash, and the second involved an accident that took place while Mr. Shanklin was unloading 100 pounds of rock dust. These two incidents left Mr. Shanklin, already in a fragile state, completely disabled, which was the conclusion of the administrative law judge at the Social Security Administration who approved his claim for disability benefits. The United Mine Workers plan provides a disability pension to participants with at least 10 years of service prior to retirement who became totally disabled as a result of an on-the-job mine accident. Having established his disability by his award of Social Security disability benefits, Mr. Shanklin applied for disability pension benefits from the plan. After his claim was denied and that denial was administratively affirmed during the internal appeals process, Mr. Shanklin commenced this ERISA action. He brought two claims against the plan: a claim for benefits and a claim for statutory penalties for failure to provide documents upon request. In this decision the court entered its final judgment, granting judgment to Mr. Shanklin on his Section 502(a)(1)(B) benefit claim and judgment in favor of the plan on the statutory penalties claim. “As a threshold issue,” the court found that the plan’s “determination that the January 5, 2017, accident was not a ‘mine accident’ was patently erroneous.” Not only did the court view both accidents as “mine accidents” as defined by the plan, but it also agreed with Mr. Shanklin and the SSA administrative law judge “that the mine accidents aggravated or combined with his impairments to cause [the] disabling pain; and therefore, he is entitled to disability benefits under the Plan.” The plan’s holding to the contrary was found by the court to be de novo wrong. Moreover, the court concluded that the plan did not provide Mr. Shanklin with a “full and fair review” of his claim for benefits because it did not provide him with reasonable access to the information relevant to his claim for benefits. Due to this failure, the court treated the plan as having made its benefit determination without discretion, and therefore held that Mr. Shanklin was entitled to benefits under the plan. Furthermore, for the sake of completeness, the court emphasized that it also viewed the denial as arbitrary and capricious. However, the plan was granted judgment in its favor on Mr. Shanklin’s statutory penalties claim, as it is the plan, not the plan administrator, and therefore not a proper party to a claim for statutory penalties under Section 1132(c). Accordingly, judgment was granted in part and denied in part for each party as described above.

Pleading Issues & Procedure

Sixth Circuit

Moyer v. Gov’t Emps. Ins. Co., No. 2:23-cv-578, 2023 WL 8358381 (S.D. Ohio Dec. 1, 2023) (Judge Michael H. Watson). A group of insurance agents employed by GEICO Insurance Agency, LLC brought this civil action under the theory that GEICO is in violation of ERISA by allowing them to participate in health and life insurance plans but not in other employee benefit plans, including the company’s retirement and pension plans. Plaintiffs assert several claims under ERISA for benefits, retaliation, and equitable relief. The GEICO defendants maintain that plaintiffs are not plan participants in the relevant plans and that they therefore lack statutory standing to sue under ERISA. Based on this conviction, defendants moved to dismiss the complaint. Their motion was granted in this order. As a preliminary matter, the court decided whether it could consider the documents defendants submitted with their motion which they represent are the relevant plan documents. Plaintiffs questioned the authenticity and completeness of these documents. They maintained that they are entitled to discovery to verify that the documents provided by the defendants are those that were in effect during the relevant period, that they are all of the relevant plan documents, and that they are accurate. Nevertheless, as defendants “represented to the Court, in response to a Court order, that these are the relevant Plan documents, and have submitted a declaration in support of the same,” the court was satisfied that it may rely on them to review the motion to dismiss. The decision then considered the merits of plaintiffs’ claims and concluded that the complaint failed to state a claim for relief. First, the court held that the claims for declaratory judgment and injunctive relief were duplicative of other claims in the complaint and accordingly dismissed these two causes of action with prejudice. Regarding statutory standing, the court entirely agreed with defendants. It rejected plaintiffs’ argument that they either are or may be plan participants and therefore have standing to sue under ERISA. “Here, Plaintiffs’ claims fail because they cannot show they are eligible for benefits under the language of the Plans. When a plan’s plain language expressly excludes a person from eligibility, that person is not a plan participant.” Plaintiffs stressed that the statutory definition of participant provides that a participant is any employee “who is or may become eligible to receive a benefit of any type of an employee benefit plan.” But the court did not understand the language of the statute to mean that “once someone is eligible for a benefit, they are eligible for all benefits.” Instead, the court determined that under ERISA an employee may only bring claims “under the plan in which he is a participant, not a different plan in which he is not a participant.” Thus, the court was not persuaded by plaintiffs’ theory of their action, and therefore granted the motion to dismiss. Plaintiffs were granted a limited ability to amend their complaint to state claims, but were cautioned against relitigating their position that “they are participants in any other plans.”

Eighth Circuit

Radle v. Unum Life Ins. Co. of Am., No. 4:21CV1039 HEA, 2023 WL 8449084 (E.D. Mo. Dec. 6, 2023) (Judge Henry Edward Autrey). Plaintiff Michael Radle commenced this disability benefits action against Unum Life Insurance Company of America to challenge its termination of his long-term disability benefits after 24 months. Unum subsequently moved for leave to file a counterclaim against Mr. Radle to recover as overpayment the amount it paid to him while he was receiving disability benefits from the Social Security Administration. Mr. Radle moved to dismiss the counterclaim for failure to state a cause of action pursuant to Rule 12(b)(6). The court denied the motion in this decision. Mr. Radle argued that the counterclaim should be dismissed because Unum did not allege that the overpayment funds were separately identifiable or that the court could identify the funds independent of his other assets. The court agreed with Unum that “these grounds for dismissal are not proper at this stage of the litigation.” It held that Unum was seeking appropriate equitable relief to recover for the overpayment while Mr. Radle was concurrently receiving Social Security benefits and assuming the truth of its allegations, Unum did enough to plead a claim for equitable relief under Section 502(a)(3). Thus, the court concluded, “Plaintiff’s concerns regarding whether the funds can be identified may be raised after discovery,” and his motion to dismiss was denied.

No atmospheric river of ERISA cases this week, just a slow trickle as the year winds to an end. But keep reading for a number of interesting ERISA decisions, mostly concerning medical benefits, including the latest discovery decision in the Chippewa Tribe’s longstanding dispute with Blue Cross Blue Shield of Michigan.

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

Discovery

Sixth Circuit

Saginaw Chippewa Indian Tribe of Mich. v. Blue Cross Blue Shield of Mich., No. 1:16-cv-10317, 2023 WL 8313270 (E.D. Mich. Dec. 1, 2023) (Judge Thomas L. Ludington). Fatigue has set in for the court in this action brought by the Saginaw Chippewa Indian Tribe of Michigan challenging Blue Cross’s hidden fee system in which the insurer has been found to inflate the fees it charged to its clients through undisclosed markups for hospital charges. “And, as the Sixth Circuit has explained in this case, had the Tribe only alleged that BCBSM inflated the Tribe’s medical bills with undisclosed administrative fees, ‘this would be a relatively simple case.’ But this case has become anything but,” according to the court. A year and a half since the Sixth Circuit’s most recent ruling and remand in this action – its second – and over seven years since this litigation began, things have ground to a standstill. The parties have been engaged in an ongoing discovery dispute over whether the Tribe’s contract health service program, funded at least in part by the Indian Health Service and Congressional appropriations, entitles the Tribe to pay only Medicare-like rates. On remand, the parties are trying to parse out who is entitled to Medicare-like rates under the Tribe’s ERISA plan because although the employee plan is actionable under ERISA, only Tribal members within the plan may be eligible for Medicare-like rates. “Resolution has proved tedious,” and “this parsing out has proved difficult.” The Tribe moved for default judgment arguing that Blue Cross failed to produce all claims data it is required to under the court’s previous discovery orders. This motion was nearly identical to a default judgment motion the Tribe filed four months ago which was denied by the court. Once again, the Tribe’s renewed motion for default judgment was denied without prejudice. Much like its previous decision four months ago, the court highlighted that the Tribe had a duty to identify its members in the ERISA plan in order to allow Blue Cross to produce the claims data for these individuals and “at the core of the discovery dispute were birthdates needed to conduct the most accurate searches for the claims data.” Without the Tribe providing this information, Blue Cross was not able to accurately search its database for the pertinent claims, the court found. The court still feels that the parties have exchanged most of the information necessary pertaining to liability, rather than damages. More to the point, the court felt that the Tribe’s renewed motion failed to show that Blue Cross’s failure to comply with discovery was motivated by willfulness, fault, or bad faith, and it stated that the renewed motion raised most of the same arguments already addressed and rejected by the court in the first. Thus, the court denied the Tribe’s motion.

ERISA Preemption

Seventh Circuit

Hanson v. Mid Cent. Operating Eng’rs Health & Welfare Fund, No. 3:23-CV-2343-MAB, 2023 WL 8252229 (S.D. Ill. Nov. 29, 2023) (Magistrate Judge Mark A. Beatty). In April of 2022, plaintiffs Deborah and Timothy Hanson and their attorney, John Womick, sued Mid Central Operating Engineers Health & Welfare Fund in state court in Illinois asking the court to adjudicate a lien of an at-fault driver settlement under the Illinois common fund doctrine. The parties then stayed the proceedings and explored settlement. Settlement negotiations ultimately faltered the following April when plaintiffs rejected the Fund’s settlement offer. Plaintiffs subsequently amended their complaint to include new allegations of breaches of fiduciary duties. The amended complaint challenged the amount of benefits paid by the Fund to the healthcare providers as unreasonable and excessive. In response to these new allegations the Fund removed the lawsuit to federal court, arguing that the new claims were preempted by ERISA. Plaintiffs moved to remand their action back to Illinois state court. In this order their motion for remand was denied. The court held that the removal was timely as the case was not removable until the new claims were added. The original complaint, it said, “essentially asked the court to apportion the settlement between Womick and the Fund,” and “claims for lien adjudication are not completely preempted by ERISA and therefore not removeable.” The court concluded that the nature of plaintiffs’ complaint changed between the original complaint and the amended complaint. It held that the new allegations and causes of action in the amended complaint, which challenge the amount the Fund paid in benefits and its compliance with payment provisions in the healthcare plan, altered the complaint in such a way as to transform it from one not falling within the scope of ERISA Section 502(a) to a complaint which is completely preempted. “Plaintiffs are thus seeking to enforce their rights under an ERISA plan, if not complaining about a breach of fiduciary duty, both of which fall within the scope of § 502(a). Accordingly, the claims are completely preempted and properly removable to federal court.”

Exhaustion of Administrative Remedies

Second Circuit

Cheeks v. Montefiore Med. Ctr., No. 23-CV-2170 (JMF), 2023 WL 8235755 (S.D.N.Y. Nov. 27, 2023) (Judge Jesse M. Furman). Pro se plaintiff Leslie Cheeks sued her former employer, Montefiore Medical Center, her healthcare workers union, and the fund that administered her ERISA-governed welfare benefit plan after she was fired in 2021 for failing to comply with a state-mandated COVID-19 vaccine requirement for healthcare workers following her employer’s denial of her requests for a religious exemption to the mandate. Construing Ms. Cheeks’ complaint liberally, the court understood her lawsuit as alleging claims under the First Amendment’s Free Exercise of Religion Clause, Title VII of the Civil Rights Act for religious discrimination, a claim against the fund for ERISA benefits, and a claim against the union for breach of fair representation under the National Labor Relations Act. Defendants filed motions to dismiss for failure to state a claim. Their motions were granted in this decision. The court held that Ms. Cheeks could not state a First Amendment claim because defendants are not state actors, that she failed to allege exhaustion of her Title VII and ERISA claims, and that her duty of fair representation claim against the union was untimely. Regarding ERISA specifically, the court held that the complaint did not allege that Ms. Cheeks submitted a claim for benefits and then pursued the appeals process of any adverse claims decision under her plan before filing a civil suit. Accordingly, the court concluded that the ERISA claim should be dismissed for failure to exhaust administrative remedies. Finally, to the extent Ms. Cheeks alleged any state law cause of action, the court declined to exercise supplemental jurisdiction over such claims. Dismissal of the federal causes of action was with prejudice.

Life Insurance & AD&D Benefit Claims

Third Circuit

Anderson v. Reliance Standard Life Ins. Co., No. 22-4654 (RK) (DEA), 2023 WL 8271931 (D.N.J. Nov. 30, 2023) (Judge Robert Kirsch). Plaintiff Cathy Anderson alleges that Reliance Standard Life Insurance Company, Matrix Absence Management, Inc., and K. Hovnanian Companies, LLC never advised her late husband of the lapse of, or any issues regarding, his group life insurance policies, and that their failure to do so during his battle with bladder cancer resulted in the termination of the policies and a subsequent denial of benefits she would otherwise have been entitled to as the policies’ named beneficiary. On December 7, 2022, the court granted Reliance and Matrix’s motion to dismiss count one of Ms. Anderson’s complaint, a claim of breach of fiduciary duty under Sections 502(a)(2) and 502(a)(3) of ERISA. In that order, the court found that Ms. Anderson could not state a claim under Section 502(a)(2) because she was not bringing any claims on behalf of the Plan but was instead bringing an individual claim. In addition, the court dismissed count one under Section 502(a)(3). It concluded that Section 502 provided an appropriate remedy elsewhere, and that Ms. Anderson was not seeking any available equitable form of relief. Thus, the court held that the relief Ms. Anderson was seeking fell outside the category of recoverable equitable restitution and therefore dismissed the claim against Matrix and Reliance. In response to that order, defendant K. Hovnanian moved for dismissal of count one of Ms. Anderson’s complaint as asserted against it. In addition, defendant K. Hovnanian also moved to amend its answer to assert a crossclaim of negligence against Reliance. Beginning with the partial motion to dismiss, the court held that the analysis of count one was exactly the same for K. Hovnanian as it was for Matrix and Reliance last December, and as a result, “the law of case doctrine applies with respect to the Court’s prior decision finding that Plaintiffs’ claims fail under Sections 502(a)(2) and 502(a)(3).” The court therefore dismissed count one against K. Hovnanian. Dismissal of count one was without prejudice. The decision then addressed the motion to assert a crossclaim against Reliance Standard Life Insurance Company. There, it held that the claim was completely preempted by ERISA as its resolution depends on the existence and interpretation of the ERISA plan. Specifically, K. Hovnanian’s claim alleged that Reliance misrepresented the life insurance policy to Ms. Anderson, and the court determined that in order to decide whether decedent was in fact eligible for and entitled to benefits under the life insurance plans would require analyzing and scrutinizing the terms of the policy. As a result, the court agreed with Reliance that ERISA preempted the proposed state-law negligence claim, and amendment would be futile. The court therefore denied K. Hovnanian’s request to amend its answer.

Ninth Circuit

Brock v. Wells Fargo & Co., No. EDCV 21-0532JGB (SHKx), 2023 WL 8275970 (C.D. Cal. Nov. 29, 2023) (Judge Jesus G. Bernal). Plaintiff Isalliah Brock filed this civil action to challenge MetLife’s denial of her claim for Accidental Death and Dismemberment benefits under her deceased fiancée’s ERISA-governed plan. Decedent Ronnie R. Allmond Jr. died on June 22, 2019, of blunt force trauma from injuries sustained during a car crash. Blood taken from Mr. Allmond at the time was tested to determine his blood alcohol levels. Those results showed that Mr. Allmond’s blood alcohol level was 0.083%, which is above the legal limit for operating a vehicle in the state of Nevada of 0.08%. Upon evaluating Ms. Brock’s benefit claim, MetLife concluded that because Mr. Allmond was intoxicated while driving at the time of the crash, the plan’s intoxication exclusion provision applied, meaning benefits were not payable to Ms. Brock. During the internal appeals process and throughout this litigation, Ms. Brock has challenged the integrity of the blood sample analyzed, including its chain of custody. She maintained that the results were unreliable and insufficient and that they could not be used as evidence to support the denial or to conclude Mr. Allmond’s blood alcohol level was over the legal limit. In this decision the court issued its findings of fact and conclusions of law under the de novo review standard. It ultimately rejected Ms. Brock’s arguments about the veracity of the blood results and concluded that MetLife met its burden of proving that Mr. Allmond’s injuries were sustained while driving his car under the influence of alcohol. Further, the court held that MetLife’s reliance on the “toxicology report was justified and appropriate based on the facts of this claim and that MetLife correctly applied the Exclusion Provision.” Thus, based on its review of all the available evidence, the court was convinced that the denial was proper. As a result, the denial was affirmed.

Medical Benefit Claims

Second Circuit

M.R. v. United Healthcare Ins. Co., No. 23 Civ. 04748 (GHW) (GS), 2023 WL 8178646 (S.D.N.Y. Nov. 20, 2023) (Magistrate Judge Gary Stein). After his ERISA-governed healthcare plan denied his claim for health insurance benefits for his minor stepdaughter’s stay at a wilderness therapy program in 2020, plaintiff M.R. commenced this action against United Healthcare Insurance Company, United Behavioral Health, and Pfizer Inc. In his complaint M.R. brings claims for benefits, breach of fiduciary duty, violation of the Mental Health Parity and Addiction Equity Act, and for statutory penalties for failure to provide documents upon request. Defendants moved to dismiss the complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). They argued that M.R.’s lawsuit was untimely under the plan’s one-year contractual limitations period to bring legal actions. In the alternative, defendants argued that M.R. failed to state his claims. In this report and recommendation Magistrate Judge Gary Stein recommended the court deny the motion to dismiss, except insofar as the statutory penalties claim was asserted against any defendant other than the plan administrator, Pfizer Inc. To begin, the court addressed whether the action was timely brought. M.R. contended that the one-year statute of limitations in the governing plan document did not apply because United failed to provide written notice of it in its claim denial letters as required under the Department of Labor’s governing regulation, 29 C.F.R. § 2560.503-1(g)(1)(iv). Plaintiff argued that the appropriate remedy for defendants’ violation of this regulation is to find the contractual limitations period was waived. The Magistrate Judge agreed. Judge Stein stated that the “overwhelming weight of authority” supports a reading of the regulation holding that it requires plan administrators to inform claimants of plan-imposed time limits for bringing ERISA civil suits in any adverse benefit determination letter. Not only does the DOL maintain that this was its intent in implementing the regulation, but reading the statute in this manner also promotes the underlying statutory purpose of the regulation “to provide ‘adequate notice in writing’ of claim denials and afford claimants the opportunity for a ‘full and fair review’ of their claim.’” On the other hand, allowing plan administrators to bury limitations periods in plan documents would strongly disadvantage plan participants and “obstruct access to the courts.” Moreover, the Magistrate agreed with M.R. that the appropriate remedy for defendants’ failure to comply with the regulation is to find the plan-imposed time limit unenforceable. Finally, under the analogous state law statutes of limitations for breach of contract claims, Magistrate Stein concluded that M.R.’s action was timely brought. The report then turned to whether plaintiff’s complaint stated claims upon which relief could be granted. It began its analysis with the Parity Act violation. The Magistrate found that the complaint’s allegation of a categorial exclusion of coverage for wilderness therapy programs under the plan’s experimental or investigational exclusion, which does not exist for analogous forms of sub-acute inpatient medical and surgical settings, taken as true, plausibly states a claim for equitable relief under ERISA. He found that at the pleading stage, when ERISA claimants do not have easy access to the process their insurer “uses to evaluate analogous medical claims’ absent an opportunity for discovery,” such an allegation is sufficient to establish a Parity Act violation. Additionally, the report stated that the complaint plausibly alleges Pfizer did not comply with document requests that M.R. sent to it, and that M.R. therefore stated a statutory penalty claim against Pfizer. However, because statutory penalty claims under Section 1132(c) claims may only be imposed against a plan administrator, Magistrate Judge Stein clarified that M.R. could only bring this cause of action against Pfizer and not against the United defendants. All other claims were found to satisfy Rule 8’s pleading requirements, and left undisturbed. As a result, the report recommended defendants’ motion to dismiss be denied, and plaintiff’s complaint be allowed to proceed past the pleading stage.

Pension Benefit Claims

Third Circuit

Carr v. Abington Mem’l Hosp., No. 23-1822, 2023 WL 8237253 (E.D. Pa. Nov. 28, 2023) (Judge Harvey Bartle III). Plaintiff Alice M. Carr commenced this ERISA action against her former employer, Abington Memorial Hospital, the Pension Plan of Abington Memorial Hospital, the Jefferson Defined Benefit Plan, which merged with the Abington pension plan, and Thomas Jefferson University seeking denied pension benefits. In her complaint Ms. Carr alleges that her claim for benefits was denied after defendants concluded that she did not have five years of vested service and therefore did not qualify for pension benefits. According to defendants’ calculations, Ms. Carr was a mere 50 hours short of her pension vesting. Their records allegedly show that while Ms. Carr worked more than the 1,000 hours required per year for four service years, she only worked 950 hours in 1997. Ms. Carr disagrees with this calculation and alleges she worked 1,009 hours in 1997, qualifying that year as a service year and making her fully vested in the merged Jefferson Plan. During the administrative appeals process, defendants did not produce documentation about Ms. Carr’s payroll records and hours worked to support their calculations, despite requests from Ms. Carr for them to do so. Moreover, she claims that defendants breached their fiduciary obligations by misrepresenting her vesting status over the years. In her action, Ms. Carr asserted a claim to recover benefits, enforce her rights under the plan, and clarify her rights to future benefits pursuant to Section 502(a)(1)(B). Additionally, she brought claims for statutory penalties for failure to produce plan documents upon request, and an equitable relief claim for breach of fiduciary duty. Defendants moved to dismiss the complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). Their motion was granted in part. First, the court dismissed the benefit claim against Abington Memorial Hospital and the Abington pension plan. It held that Ms. Carr did not allege that her previous employer “had any discretion to deny her benefits or determine her eligibility,” and that the old plan “which no longer exists as a separate entity, had no role in the denial of benefits.” However, count I was not dismissed against either Thomas Jefferson University or its pension plan. Next, the court noted that Section 105(a)(1)(B)(ii) statutory penalty claims apply only to benefit plan administrators, in this case, Thomas Jefferson University. The court concluded that “Ms. Carr sufficiently alleges she made a specific request for an accounting from Jefferson, the plan administrator. Therefore, she has successfully alleged a violation of Section 105 against Jefferson.” However, the court dismissed this claim as to the other three defendants. Finally, the court entirely dismissed Ms. Carr’s equitable relief claim pursuant to Section 502t(a)(3) against all defendants. It found that her claim for injunctive relief was truly a claim for benefits “dressed in the cloak of equity,” as the “requested relief simply focuses on resolving Ms. Carr’s adverse benefits determination.” Accordingly, the court concluded that the Section 502(a)(3) claim was not distinct from the Section 502(a)(1)(B) claim and the complaint thus failed to plead an equitable relief claim upon which relief could be granted.

Provider Claims

Third Circuit

Minisohn Chiropractic & Acupuncture Ctr. v. Horizon Blue Cross Blue Shield of N.J., No. 23-01341 (GC) (TJB), 2023 WL 8253088 (D.N.J. Nov. 29, 2023) (Judge Georgette Castner). A chiropractic and acupuncture center and the estate of the late doctor who ran the practice have sued Horizon Blue Cross Blue Shield of New Jersey under ERISA and state law for systematically denying claims for health benefits stemming from their services. Plaintiffs asserted claims for reimbursement of benefits and breach of fiduciary duty under ERISA, and a state law breach of contract claim. They allege that they are owed over $250,000 plus interest in claims that were wrongfully denied for care they provided between 2019 and 2022. Blue Cross moved to dismiss the complaint for failure to state a claim. Defendant argued that the healthcare providers lacked derivative standing to bring their claims under ERISA. The court agreed. Following precedent in the circuit, the court concluded that the complaint’s single sentence asserting that the practice “has entered written assignment of benefit agreement[s] with… [Horizon] subscribers of their contractual rights under the policy of group health insurance issued by [Horizon],” was conclusory and insufficient to establish standing. Instead, to establish derivative standing, the court expressed that plaintiffs need to identify specific patients who assigned their claims to them and include “factual detail as to the terms, limitations, or specifics of alleged assignments.” Without these particular details, or the actual benefit assignments attached to the complaint, the court was clear that plaintiffs could not plausibly demonstrate standing to sue under ERISA. And although the court dismissed the ERISA causes of action for lack of standing, the decision also addressed further shortcomings with the ERISA claims as currently pled. It held that the benefit claims asserted under Section 502(a)(1)(B) failed to identify the plan provisions that were violated which entitle plaintiffs to the payments they seek. Additionally, the court expressed skepticism about whether the breach of fiduciary duty Section 502(a)(3) claim, pled in the alternative to the claim for benefits, truly differed from the Section 502(a)(1)(B) claim. The court also expressed “concern about Plaintiff’s failure to specify what alleged conduct breached Horizon’s fiduciary duties.” Because the court’s dismissal was without prejudice, plaintiffs were instructed to consider and remedy these pleading defects in their amended complaint. Finally, because the federal causes of action were dismissed, the court declined to exercise supplemental jurisdiction over the state law breach of contract claim.

Retaliation Claims

Tenth Circuit

Chappell v. SkyWest Airlines, Inc., No. 4:21-cv-00083-DN-PK, 2023 WL 8261667 (D. Utah Nov. 29, 2023) (Judge David Nuffer). Plaintiff Randy T. Chappell brought this lawsuit against his former employer, defendant SkyWest Airlines, Inc., after his employment as a SkyWest pilot was terminated in 2020. In his action Mr. Chappell asserts six counts; (1) a claim for discrimination in violation of the Americans with Disabilities Act; (2) a claim for discrimination in violation of the Age Discrimination in Employment Act; (3) a claim for retaliation under ERISA Section 510; (4) a claim for violation of the Rehabilitation Act; (5) a state law breach of contract claim; and (6) a state law negligence claim. SkyWest moved for summary judgment on all claims arguing that Mr. Chappell cannot establish a prima facie case for any of his causes of action because the reasons for his termination were legitimate and non-discriminatory. According to SkyWest, Mr. Chappell’s termination stemmed from a serious safety incident in which he was involved while flying a plane on March 24, 2020. Mr. Chappell drove the airplane off the tarmac into the dirt. Later, when questioned about what had occurred, Mr. Chappell was found to be dishonest, as his testimony did not match that of his co-pilot or the other contemporaneous pieces of evidence. SkyWest maintains that Mr. Chappell’s safety failures and his lies about them violated company policies and that immediate termination was therefore the proper course of action. The court agreed with SkyWest in this decision and granted its summary judgment motion. It wrote, “even if Mr. Chappell had established a prima facie case, the undisputed material facts demonstrate that SkyWest had a legitimate, non-discriminatory reason for terminating Mr. Chappell’s employment and Mr. Chappell cannot establish pretext.” With regard to Mr. Chappell’s ERISA Section 510 claim, the court disagreed with his speculation that his firing was in any way connected to his family’s high healthcare costs. For one, the court noted that the costs of Mr. Chappell’s wife’s heart surgery were paid by SkyWest even though the surgery took place after the termination. Furthermore, SkyWest paid for Mr. Chappell’s son’s diabetes treatments for fourteen years without incident and there was no evidence produced that anyone involved in the termination decision had any access to information about Mr. Chappell’s benefit use. In sum, the court held, “Mr. Chappell cannot identify anything that changed around the time of the Occurrence such that SkyWest would no longer be willing to pay for his insurance, and he admits that it is just his assumption… Mr. Chappell’s bald assumptions are insufficient to establish SkyWest’s intent.”

Cunningham v. Cornell Univ., Nos. 21-88-cv, 21-96-cv, 21-114-cv, __ F. 4th __, 2023 WL 7504142 (2d Cir. Nov. 14, 2023) (Before Circuit Judges Livingston, Kearse, and Park)

The case law governing excessive fee cases continues to develop in unpredictable ways, as this decision from the Second Circuit demonstrates.

A class of participants and beneficiaries of two 403(b) retirement plans administered by Cornell University sued the college and its appointed fiduciaries under ERISA alleging that defendants breached their duties of prudence, loyalty, and monitoring and engaged in prohibited transactions by failing to adequately oversee the plans to ensure they were not retaining underperforming and costly investment options and that the fees paid to service providers were not excessive for the services rendered.

The complaint alleged that defendants violated these duties by (1) offering investment products that had high fees and poor performance histories; (2) not selecting available institutional share classes of mutual funds; (3) failing to control recordkeeping and investment management fees; and (4) hiring party-in-interest service providers to furnish recordkeeping and administrative services to the plan in a manner not exempted under ERISA’s prohibited transaction statute.

The plaintiffs have faced significant hurdles throughout the course of their litigation. First, on September 29, 2017, the district court granted a large portion of defendants’ motion to dismiss. It dismissed all but plaintiffs’ imprudence and monitoring claims predicated on defendants’ failure to monitor recordkeeping fees and those premised on the retention of certain investments in underperforming funds and in retail share-classes. The duty of loyalty claims, the prohibited transaction claims, and the remainder of the imprudence allegations were all dismissed.

Two years later, in September of 2019, the district court granted summary judgment in favor of the fiduciaries on nearly all of the remaining claims. It held then that plaintiffs failed to present evidence of loss resulting from the allegedly high recordkeeping fees. Regarding the claims based on the retention of the remaining investment options, the district court concluded that no reasonable trier of fact could determine that defendants’ monitoring process was so flawed that it violated its duty of prudence. Finally, with regard to the retail share classes, the district court awarded judgment in favor of defendants for all but one of the mutual funds.

All that remained after the district court’s summary judgment decision was the duty of prudence and derivative monitoring claim related to the failure to adopt a lower cost share class of one target date fund. That claim settled. This appeal followed, and plaintiffs’ difficulties have continued.

The appellant class of participants challenged the district court’s rulings on summary judgment and at the pleadings. The Second Circuit in this order affirmed, while at the same time setting out a new pleading standard for prohibited transaction claims.

The court of appeals held that to state a prohibited transaction claim an ERISA plaintiff needs to include allegations that the transaction with a service provider was either unnecessary or involved unreasonable compensation. Differentiating itself from some of its sister circuits, the Second Circuit did not find that a prohibited transaction claim requires explicit allegations of self-dealing or disloyal conduct, as these elements are not part of the statute and would require a more expansive reading of the text. Nevertheless, the appeals court disagreed with plaintiffs that exceptions to prohibited transactions are an affirmative defense to be raised by the plan sponsor, even though a number of other courts, including the Eighth Circuit, have found that the text of ERISA supports treating the Section 408 exemptions as such. Rather, the Second Circuit understood the exceptions spelled out in Section 408 as necessary elements of a prohibited transaction claim under ERISA Section 406, stating that “the exception should be understood as part of the definition of the prohibited conducted – and thus its inapplicability must be pled.” Moreover, the court of appeals agreed with the lower court that plaintiffs had not met this standard when pleading their prohibited transaction claim, and thus affirmed its dismissal.

The court also affirmed the remainder of the dismissal decision. The appellate court agreed with the district court that defendants’ alleged wrongdoing and disloyalty could not be inferred from the allegations of the complaint and that they therefore did not give rise to a cause of action for fiduciary breach.

Having upheld the claims eliminated at the motion to dismiss stage, the decision moved on to scrutinizing the summary judgment decision. In this portion, the court held that plaintiffs’ fee claims failed because they did not establish or provide evidence of a suitable benchmark “against which loss could be measured.” In the court’s estimation, the testimony of plaintiffs’ experts did not satisfy this requirement, and neither did their numerical pricing data because this evidence was insufficient to “lead a reasonable juror to conclude that Cornell could have achieved lower fees,” and thus did not establish a “‘prudent alternative’ fee…or otherwise establish loss.” Thus, the Second Circuit affirmed the summary judgment decision regarding the administrative fee claims.

With regard to the investment option claims, the court of appeals agreed with the district court that defendants’ monitoring process was not flawed given the context of the relevant time period, although by today’s standards it would likely fall below expectations for ERISA fiduciaries. Finally, the Second Circuit took a look at the share class claims, pointing to evidence in the record which demonstrated that defendants had tried to lobby TIAA to allow the plan to transition to the cheaper share classes but were rebuffed by TIAA. “Given this evidence, a reasonable finder of fact could not conclude that Cornell could have forced, or should have tried harder to force, TIAA to offer the Plans the lower-cost share funds at an earlier date.” Thus, the grant of summary judgment for defendants on this claim too was affirmed. Accordingly, the court of appeals found no basis for reversal of any of the district court’s decisions, and therefore affirmed its judgment entirely.

The plaintiffs have filed a petition for panel or en banc rehearing. They argue that the panel’s holding that the plaintiff bears the burden of pleading that a prohibited transaction exemption does not apply conflicts with the Eighth Circuit’s decision in Braden v. Wal-Mart. In this regard, the plaintiffs contend that the Second Circuit improperly imported the self-dealing standard set forth in the Investment Company Act, rather than applying the reasonableness standard expressly set forth in ERISA Section 408. They also argue that the panel’s conclusion that the plaintiff failed to adequately allege unreasonable compensation conflicts with decisions from the Third and Seventh Circuit reversing dismissals of fiduciary breach claims alleging substantively identical facts. We will of course keep our readers apprised of any developments. 

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

Arbitration

Second Circuit

Shafer v. Stanley, No. 20 Civ. 11047 (PGG), 2023 WL 8100717 (S.D.N.Y. Nov. 21, 2023) (Judge Paul G. Gardephe). Twelve former financial advisors at Morgan Stanley bring this putative class action against Morgan Stanley Smith Barney LLC and the fiduciaries of the company’s two deferred compensation programs for violations of ERISA by allegedly illegally forfeiting deferred compensation benefits. Plaintiffs assert claims for equitable relief under Section 502(a)(3), reformation of the plan under Sections 502(a)(1) and (3), and breach of fiduciary duty under Sections 502(a)(2) and (3). Defendants moved to compel individual arbitration of the benefit disputes and to stay these proceedings. Their motion was granted in this decision. Although the court agreed with plaintiffs that the plans at issue are ERISA-governed retirement plans, it nevertheless disagreed with their basic assertion that their claims are not arbitrable because the arbitration provisions’ class action waivers eliminate their right under ERISA “to remediate the plans as a whole via a representative action.” The court held that defendants presented clear evidence that the plaintiffs agreed to arbitrate and that the arbitration provisions were valid. As to their enforceability and applicability to the claims at issue, the court adopted defendants’ position that the plaintiffs were not actually bringing their claims in a representative capacity to restore any losses to the plan, but were instead using artful pleading to seek to recover benefits allegedly not paid to them. The court found that plaintiffs’ claims truly fall within the scope of Section 502(a)(1)(B) and that they could therefore be resolved individually through arbitration. “Having failed to allege a true § 502(a)(2) claim, Plaintiffs will not be heard to complain that claims under § 502(a)(2) are non-arbitrable.” The court went on to state that “case law indicates that plaintiffs who bring putative class actions alleging 502(a)(3) claims may nevertheless be required to arbitrate their claims individually…Plaintiffs cite no case demonstrating that 502(a)(3) claims are non-arbitrable.” Finally, the court disagreed with plaintiffs that arbitration would void statutory rights under the prospective waiver doctrine. It wrote, “[p]rohibiting class treatment does not inherently limit statutory remedies, however, because class treatment is a procedural matter, and not a substantive right.” For these reasons, the court held that plaintiffs’ claims were within the scope of the arbitration provisions they agreed to and thus granted the motion to compel arbitration. The case will be stayed pending the arbitration proceedings. 

Breach of Fiduciary Duty

Fifth Circuit

Harmon v. Shell Oil Co., No. 3:20-cv-00021, 2023 WL 8014235 (S.D. Tex. Nov. 9, 2023) (Magistrate Judge Andrew M. Edison). Plaintiffs are current and former employees of Shell Oil Co. and participants of its 401(k) retirement plan. In this class action they allege that that the plan’s fiduciaries breached their duties to the participants and beneficiaries by failing to control the plan’s recordkeeping and managed account fees, maintaining more than 300 investment options in the plan, “contrary to prudent investment practices,” leading to ballooning costs for the participants, and by engaging in prohibited transactions. Plaintiffs moved for partial summary judgment on their fiduciary breach claims related to the 300-plus investment options. Defendants meanwhile moved for summary judgment on all counts. In his report and recommendation Magistrate Judge Andrew M. Edison recommended that both motions be denied. Beginning with plaintiffs’ partial summary judgment motion, Magistrate Judge Edison expressed that he believed it was the most prudent course of action to deny the partial summary judgment motion as its resolution would not simplify the trial or “ultimately advance the…resolution of the case.” In Magistrate Edison’s view the best approach is to allow the parties to present their positions at trial and let the presiding district court judge hear the testimony, consider the evidence and exhibits, and “enter a well-reasoned decision – both on the merits of the claims and, if necessary, the appropriate damages to be awarded.” Therefore, Magistrate Edison felt it was unnecessary to even consider whether genuine issues of material fact concerning the investments exist. Instead, he recommended that the court exercise its discretion to deny plaintiffs’ motion for partial summary judgment and leave the questions around the investments for resolution by the judge in the context of the trial. The report then addressed defendants’ summary judgment motion. There, the judge found that genuine issues of material fact were present which preclude summary judgment. Magistrate Judge Edison wrote that he could not conclude as a matter of law that defendants’ actions and process for overseeing the plan were prudent nor that the prohibited transactions were necessary for the operation of the plan and qualified as reasonable compensation for the services rendered. For these reasons, it was Magistrate Edison’s opinion that the district court should deny both summary judgment motions and resolve their disputes and all factual and legal issues following the trial.

Medical Benefit Claims

Third Circuit

Doe v. Indep. Blue Cross, No. 23-1530, 2023 WL 8050471 (E.D. Pa. Nov. 21, 2023) (Judge Timothy J. Savage). Plaintiff Jane Doe, a transgender woman, sued her health insurance provider, defendant Independence Blue Cross, under the Affordable Care Act (“ACA”), the Americans with Disabilities Act (“ADA”), ERISA, and Pennsylvania’s insurance bad faith statute after she was denied coverage for facial feminization surgeries as a treatment for her gender dysphoria. Blue Cross maintains that the surgeries were cosmetic rather than medically necessary and therefore not covered under her ERISA-governed healthcare plan. Ms. Doe believes that the benefit denial was both factually inaccurate and discriminatory. Blue Cross moved to dismiss the complaint for failure to state a claim. It argued that Ms. Doe failed to plead intentional acts of discrimination based on sex or disability to support her ACA and ADA claims, that her ERISA breach of fiduciary duty claim was a repackaged benefits claim, and that her state law bad faith insurance claim was preempted by ERISA. The court granted in part the motion to dismiss. It concluded that Ms. Doe plausibly alleged a violation of Title IX to state a claim of sex discrimination under the ACA. The court agreed with Ms. Doe that for the purposes of pleading she alleged facts demonstrating intentional discrimination and that the denial “depended on ‘whether or not [Ms. Doe] conforms to society’s expected standard for a cisgender female.’” The guidelines in the policy and the claim determination, the court held, considered gender stereotypes and based coverage on the extent to which a claimant conforms to those norms. It wrote that the plan “does not categorically exclude facial reconstructive surgeries… On the contrary, the policy covers these procedures for insureds who establish ‘medical necessity demonstrating a functional impairment.’ There is no question that this language is gender-neutral on its face. But, as alleged in this case, [Blue Cross’s] application of the policy depended on subjective determinations based on gender stereotypes and Ms. Doe’s conformity to them.” If these allegations prove true, the court stated that these considerations of stereotypes are prohibited under anti-sex discrimination laws and that Ms. Doe therefore stated a claim under the ACA for discrimination on the basis of sex. However, it found that she had not stated a disability discrimination claim to support either an ACA or ADA claim on the basis of disability discrimination. In addition, the court agreed with Blue Cross that Ms. Doe’s breach of fiduciary duty ERISA claim was impermissibly duplicative of her claim for benefit reimbursement. It held that Ms. Doe’s Section 502(a)(1)(B) benefit claim can provide the remedy for her injuries and that she therefore cannot proceed with an independent Section 502(a)(3) claim. Finally, the court found that the state law bad faith claim arising from an ERISA-governed plan was indeed preempted by ERISA under both conflict and express preemption. As a result, following this decision Ms. Doe was left with her ERISA benefits claim and her ACA claim. The remainder of her causes of action were dismissed.

Tenth Circuit

E.W. v. Health Net Life Ins. Co., No. 21-4110, __ F. 4th __, 2023 WL 8042746 (10th Cir. Nov. 21, 2023) (Before Circuit Judges Holmes, McHugh, and Eid). Plaintiff-appellant E.W. is a participant in an ERISA-governed healthcare plan. He sued the plan’s insurance providers, Health Net Insurance Company and Health Net of Arizona, Inc., after the plan denied his daughter’s coverage for sub-acute residential treatment of her mental health conditions, including eating disorders which developed when the girl was just eleven years old. The denials at issue were based on the McKesson InterQual Behavioral Health Child and Adolescent Psychiatry Criteria. Under these criteria, continued care at inpatient residential treatment facilities is considered medically necessary only if the insured has displayed certain acute symptoms of an eating disorder or a “serious emotional disturbance” within the past week. Health Net denied the claim for benefits after it determined that E.W.’s daughter did not experience suicidal or homicidal ideation, psychotic symptoms, or severe agitation within the past seven days. However, the denial letters did not address the InterQual criteria pertaining to an eating disorder, which had its own set of acute symptoms, including pronounced body image distortion, restrictive eating, and other behaviors to prevent prescribed weight gain including failing to consume prescribed calories and gaining “less than two pounds per week.” In his complaint, E.W. alleged that Health Net violated ERISA by failing to comply with its fiduciary obligations, failing to conduct a full and fair review, and improperly denying medically necessary healthcare benefits. Additionally, plaintiff alleged that Health Net violated the Mental Health Parity and Addiction Equity Act by imposing limitations on the coverage of mental health treatment that it did not apply to analogous medical or surgical treatments. The district court dismissed E.W.’s Parity Act claim on the pleadings. Later, the court granted summary judgment to Health Net on the remaining ERISA claims. E.W. appealed both decisions in the Tenth Circuit. In this order the court of appeals affirmed the granting of summary judgment on the ERISA claims, but reversed and remanded the district court’s finding that plaintiff failed to state a claim under the Parity Act. Starting there, the Tenth Circuit wrote that E.W. had “plausibly alleged that the InterQual Criteria capture acute conditions while residential treatment centers…provide subacute care.” Moreover, the appellate court found plaintiff plausibly alleged that inpatient skilled nursing facilities and mental health residential treatment centers are analogues for the purposes of Mental Health Parity claims. Finally, the Tenth Circuit stated that plaintiff plausibly alleged a disparity between the limitations placed on benefits for mental health and substance abuse treatments compared to those for medical and surgical care, which under the plan are not dependent on week by week symptoms. It also stressed, “[t]he allegation that Health Net applied subacute criteria to analogous medical or surgical care…is a factual allegation that we must accept as true on Health Net’s motion to dismiss.” Based on the foregoing, the appeals court concluded that E.W. plausibly stated a claim under the Mental Health Parity and Addition Equity Act and therefore reversed the lower court’s dismissal of this claim at the pleadings. However, as mentioned above, the Tenth Circuit did not disturb the district court’s summary judgment holdings. It found that Health Net did not fail to conduct a full and fair review by denying coverage of the stay at the treatment facility. As for the denial itself, the Tenth Circuit agreed with the district court that Health Net had not acted arbitrarily and capriciously in denying the claim. On appeal, E.W. argued that the district court erroneously failed to address his argument that Health Net had abused its discretion by not considering the InterQual Criteria pertaining to an eating disorder. The district court found that E.W. could not raise this argument during litigation because he had failed to raise it with Health Net during the internal administrative appeals process. The Tenth Circuit concurred with the lower court. It agreed that because the family had specifically requested the claims reviewer not utilize the InterQual Criteria, they could not argue throughout litigation that it was an abuse of discretion to have ignored this criteria pertaining to eating disorders. Next, the court of appeals found, contrary to plaintiff’s position, Health Net had provided a reasoned explanation for its denials, and appropriately engaged with the medical record. The Tenth Circuit held, “it is clear to us that the reviewers summarized rather than cherrypicked from the InterQual criteria associated with a serious emotional disturbance,” and “Health Net’s denial letters demonstrate that it did in fact consider all criteria relevant to a serious emotional disturbance even if it did not recite each criterion verbatim.” Having so found, the court of appeals held that Health Net did not abuse its discretion when denying the claim for benefits and that the district court did not err in granting summary judgment to Health Net on the ERISA claims.

Pension Benefit Claims

Second Circuit

Guzman v. Bldg. Serv. 32BJ Pension Fund, No. 22 CIVIL 1916 (LJL), 2023 WL 8039261 (S.D.N.Y. Nov. 20, 2023) (Judge Lewis J. Liman). The Building Service 32BJ Pension Fund, its executive director, its employer trustees, and its union trustees (“collectively defendants”) moved to dismiss the amended complaint of pro se plaintiff Carlos J. Guzman. Defendants’ motion was granted in this order. Mr. Guzman sued the plan and its trustees under ERISA alleging that they underpaid his retirement benefits by denying him an actuarial increase in his benefits, denied him a full and fair review, failed to send out a suspension notice, and breached their fiduciary duties. The court agreed with defendants that Mr. Guzman could not state his claims for relief. It held that it was clear from the face of the complaint that Mr. Guzman’s benefits were calculated properly under the terms of the governing plan documents. “The language of the 2018 SPD is clear and unambiguous. A plan participant is entitled to an actuarial increase for each month after reaching the normal retirement age of sixty-five during which the employee does not receive a pension except for those months in which the employee is engaged for more than forty hours in Disqualifying Employment. Plaintiff was engaged in Covered Employment which is a subset of Disqualifying Employment. The Plan properly denied him the actuarial increase.” The court further concluded that amending the SPD did not give rise to a claim for fiduciary breach because the amendment didn’t change Mr. Guzman’s entitlement to an actuarial increase “and there was therefore no need to notify him of the non-change.” In addition, the court stressed that the essence of Mr. Guzman’s Section 502(a)(3) fiduciary breach claim was an alleged underpayment of benefits, which made his (a)(3) claim duplicative of his Section 502(a)(1)(B) claim. Finally, it found that defendants’ technical noncompliance through its failure to mail a suspension notice to Mr. Guzman did not give rise to a substantive claim for withheld benefits. Accordingly, defendants’ motion to dismiss was granted and Mr. Guzman’s amended complaint was dismissed with prejudice.