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

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

Attorneys’ Fees

Tenth Circuit

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

Class Actions

Eleventh Circuit

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

Disability Benefit Claims

Fifth Circuit

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

ERISA Preemption

Fourth Circuit

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

Medical Benefit Claims

Second Circuit

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

Tenth Circuit

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

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

Pension Benefit Claims

Seventh Circuit

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

Pleading Issues & Procedure

Second Circuit

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

Fourth Circuit

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

Provider Claims

Eleventh Circuit

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

Severance Benefit Claims

Seventh Circuit

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

It has been a slow week here in ERISA World. Slow does not mean boring, however. Interestingly, in two of the cases we report on this week, courts refused to award attorneys’ fees to plaintiffs despite their partial or total success on the merits. In two other cases, courts rejected arguments that plaintiffs had failed to exhaust their plan administrative remedies prior to filing suit. And, in another decision, defendants prevailed after a nine-day bench trial in a case challenging the prudence and loyalty of fiduciaries in the selection of target date funds for a 401(k) plan. Plaintiffs, on the other hand, survived motions to dismiss in a case presenting numerous fiduciary and prohibited transaction challenges to a series of ESOP transactions. One plaintiff also won medical benefits after getting kicked by a bull calf. Finally, did you know that demolishing a structure and removing its asbestos counts as “building and construction” under ERISA? In short, there is something for everyone this week.

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

Arbitration

Seventh Circuit

Harris v. Paredes, No. 3:23-CV-50231, 2024 WL 774874 (N.D. Ill. Feb. 26, 2024) (Judge Iain D. Johnston). Plaintiff Nichole Harris brought this putative class action against various defendants engaged in administering the Suter Company Employee Stock Ownership Plan. She alleges that the plan vastly overpaid when it bought 100,000 shares of stock from the Suter family for a price exceeding $63 million, which resulted in breaches of fiduciary duties and prohibited transactions under ERISA. Defendants filed a motion to compel arbitration. Curiously, the plan had amended its arbitration clause in August of 2023, just after Harris filed suit. The court concluded that the amended arbitration clause was valid and binding, and that it covered Harris’ ERISA Section 502(a)(2) claim, noting that the Federal Arbitration Act “explicitly contemplates the enforceability of agreements to arbitrate ‘existing controvers[ies].’” The court further ruled that the “effective vindication” doctrine, which “forbids compulsory arbitration when the statute authorizing a claim allows a given remedy, but the arbitration agreement disallows it,” did not apply. This was so because the arbitration clause, which required that claims be brought “in an individual capacity and not on a class, collective, or group basis,” did not forbid Harris from pursuing her 502(a)(2) claim in arbitration. In so ruling, the court rejected defendants’ argument that Harris could only recover in arbitration for injuries to her individual account, because Section 502(a)(2) allows for plan-wide remedies. The court thus granted defendants’ motion to compel arbitration, but not on the terms they desired.

Attorneys’ Fees

Tenth Circuit

Ramos v. Schlumberger Grp. Welfare Ben. Plan, No. 22-CV-0061-CVE-JFJ, 2024 WL 729220 (N.D. Okla. Feb. 22, 2024) (Judge Claire V. Egan). Previously, the court remanded this action for ERISA-governed short-term disability benefits to Cigna Group Insurance, the defendant plan’s claim administrator, because Cigna “did not explain the rationale or reasoning for the denial of plaintiff’s claim” during his second voluntary appeal. Plaintiff Ramon Ramos moved for attorney’s fees, which the court ruled on in this order. The court agreed that “a remand order can qualify as ‘some degree of success on the merits’ in some cases,” which would meet the Supreme Court’s test for awarding fees, but here “the remand order in this case was strictly a procedural ruling that cannot support an award of attorney fees[.]” Ramos argued that the court’s remand order was a “substantive ruling that substantially increases his chances of receiving benefits,” and also allowed him to introduce additional information and evidence in support of his claim. The court rejected these arguments, however, stating that it “simply identified the plan administrator’s failure to provide a sufficient explanation…and remanded the case to supply the missing rationale and reasoning. The Court expressed no opinion on the merits of plaintiff’s ERISA claim and nothing in the Court’s ruling makes it more or less likely that the plan administrator will award plaintiff STD benefits on remand.” Furthermore, “the consideration of additional evidence was merely an incidental side-effect of the Court’s remand order, and it is unclear whether this evidence will have an impact on a judicial review of plaintiff’s ERISA claim.” The court also ruled that Ramos had not met the Tenth Circuit’s test for awarding fees because there was no bad faith, no deterrent effect because the plan had been amended to avoid a repeat occurrence (the right to a second voluntary appeal had been eliminated), and there was no ruling on the merits. Thus, the court denied Ramos’ motion. However, the court noted that Ramos was not forever foreclosed from seeking fees. If Ramos is ultimately successful on remand, “he may file a motion to recover all of the attorney fees he has incurred in this case.”

Breach of Fiduciary Duty

Fifth Circuit

Spence v. American Airlines, Inc., No. 4:23-CV-00552-O, 2024 WL 733640 (N.D. Tex. Feb. 21, 2024) (Judge Reed O’Connor). Plaintiff Bryan Spence is an American Airlines pilot and a participant in American’s 401(k) plan. He alleges that the defendants, fiduciaries of the plan, have violated ERISA by breaching their duties of loyalty and prudence, and their duty to monitor. Spence contends that defendants are investing plan assets in environmental, social, and governance (ESG) funds which “pursue non-financial and nonpecuniary ESG policy goals through proxy voting and shareholder activism[.]” These funds “focus[] on socio-political outcomes instead of exclusively on financial returns,” and thus defendants “violated their fiduciary duties to act in the Plan participants’ financial interests[.]” Defendants filed a motion to dismiss, which was decided in this order. The court ruled that Spence had plausibly alleged a claim for breach of the duties of prudence and monitoring because he had pleaded that ESG funds had underperformed other funds in the market yet were retained by defendants in the plan. Defendants contended that Spence had not provided a “meaningful benchmark” for comparison, but the court noted that the Fifth Circuit had not yet imposed a “performance-benchmark requirement,” and ruled that “requiring a benchmark for measuring performance is not required at this stage given the inherent fact questions such a comparison involves.” As for Spence’s duty of loyalty claim, defendants acknowledged that American was committed to ESG initiatives, but only under its “corporate hat” which was different from its “fiduciary hat.” Defendants further argued that there was “no plausible basis for suggesting that investment managers were motivated by anything but financial aims.” The court rejected this argument, however, ruling that this issue was “a fact question that is not appropriate to resolve at this stage.” Furthermore, according to the court, Spence had “articulate[d] a plausible story: Defendants’ public commitment to ESG initiatives motivated the disloyal decision to invest Plan assets with managers who pursue non-economic ESG objectives through select investments that underperform relative to non-ESG investments, all while failing to faithfully investigate the availability of other investment managers whose exclusive focus would maximize financial benefits for Plan participants.” Thus, the court denied defendants’ motion in its entirety.

Ninth Circuit

Hormel Foods Corp. Hourly Employees’ Pension Plan v. Perez, No. 1:22-CV-00879-JLT-EPG, 2024 WL 773153 (E.D. Cal. Feb. 26, 2024) (Judge Jennifer L. Thurston). Hormel’s pension plan for hourly employees paid $20,000 in pension benefits to a woman named Marie E. Perez. Perez signed a form certifying her name, attesting that she was not currently employed by Hormel, and including the last four digits of her Social Security number. There was only one problem: it was the wrong Marie E. Perez. Hormel asked for the money back, and when Perez refused, it sued Perez under ERISA Sections 502(a)(2) and (a)(3). Hormel then moved for default judgment on its (a)(3) claim when Perez failed to answer. The magistrate judge recommended denying the motion, concluding that Perez was not a fiduciary under ERISA and thus could not be held liable. (Your ERISA Watch reported on this decision in its October 18, 2023 edition.) Hormel objected, but in this order the district court judge adopted the magistrate’s recommendation in full. Hormel argued that “the proper focus should be on whether the defendant knowingly accepted and retained plan money the defendant was not entitled to recover,” but the court did not accept this framing: “Defendant was not a Plan participant and had no reason to know of or understand the Plan’s benefits or restrictions, nor did she have any reason to believe or understand that she might be considered a fiduciary.” Thus, because she was not a fiduciary, she could not have breached any fiduciary duties under Section 502(a)(3). Hormel contended that if the magistrate’s recommendation was accepted, “a criminal could knowingly and intentionally hack into an ERISA pension plan’s bank account, steal billions, and face no ERISA liability,” but the court was unimpressed: “the determination that Perez is not subject to ERISA remedies, ignores the existence of non-ERISA remedies and criminal sanctions available under these circumstances.” The court thus denied Hormel’s motion and dismissed the action.

Lauderdale v. NFP Retirement, Inc., No. 8:21-CV-00301-JVS-KES, 2024 WL 751005 (C.D. Cal. Feb. 23, 2024) (Judge James V. Selna). This is a class action by participants of a multi-employer 401(k) retirement plan who allege that the plan sponsor, Wood Group U.S. Holdings, and its investment manager, flexPATH Strategies, LLC, breached their fiduciary duties under ERISA by imprudently investing in flexPATH’s “target-date funds” (TDFs). The court held a nine-day bench trial in March of 2023, and this lengthy ruling represents the court’s findings of fact and conclusions of law. The court first addressed the duty of loyalty, finding that flexPATH’s witnesses were credible, that they genuinely believed that their investment decisions were in the best interests of plan participants, and that flexPATH did not benefit financially from its TDF fund selection. While it was true that flexPATH viewed the Wood plan as a “$900 million opportunity,” the court stated that a “profit motive is not unlawful in and of itself…. There is nothing disloyal about an investment manager trying to obtain new business.” Second, the court addressed the duty of prudence. Plaintiffs complained that flexPATH implemented its funds without “conduct[ing] a quantitative and qualitative evaluation of available TDFs,” but the court ruled that flexPATH’s previous research and investigation was sufficient to demonstrate that the funds were appropriate for the Wood plan. flexPATH also “continually reviewed and analyzed the structure, design, and performance” of the TDFs. The court did not agree that the TDFs underperformed compared to other funds, but to the extent they did, the court ruled that this was because they were designed to be risk-averse, and in any event such underperformance only lasted a brief period, which was insufficient to warrant a change. As for Wood, the court found that its choice of flexPATH and its TDFs was reasonable because the funds “provided broad exposure to low-cost, BlackRock Index funds, their diversified holdings helped mitigate risk in fluctuating market conditions over a long period of time, and they had naming conventions that were easy for Plan participants to understand.” Third, the court ruled that no prohibited transactions had occurred. The court found that flexPATH did not choose its own TDFs for “marketability” or “seed money” purposes, as plaintiffs claimed, or that any increase in its assets after Wood selected it led to such self-dealing. Finally, the court ruled that Wood’s duty to monitor was derivative of its duty of prudence, and thus Wood prevailed on that claim as well. In any event, the court ruled that Wood acted reasonably because the TDFs “were performing as expected given the inflation period” and Wood “appropriately considered and evaluated the reasoning behind the underperformance.” The court thus found in favor of defendants on all of plaintiffs’ claims, and requested a proposed judgment from defendants.

Disability Benefit Claims

Fourth Circuit

Aisenberg v. Reliance Standard Life Ins. Co., No. 1:22cv125 (DJN), 2024 WL 711608 (E.D. Va. Feb. 22, 2024) (Judge David J. Novak). This decision awarding disability benefits to an attorney who underwent a double bypass to treat his heart disease demonstrates two things that likely will come as no surprise to our audience: (1) attorneys, particularly those who work in the cyber-security department of a defense contractor, have stressful jobs; and (2) it doesn’t take a brain surgeon (or even a cardiologist) to know that high stress is dangerous for those suffering from serious heart disease. This case was previously before another judge in the Eastern District of Virginia who determined that Reliance Standard Life Ins. Co. (“Reliance”) abused its discretion in not considering Mr. Aisenberg’s risk of future harm if he were to return to work in his high stress job at the defense contractor, MITRE Corp., but agreed with Reliance that his normal occupation was that of a general “attorney,” rather than a cyber-security counsel, as Mr. Aisenberg had argued. In light of these holdings, the prior judge remanded the case to Reliance to determine whether there were less stressful jobs as an attorney available in the economy and, if not, the risk of future harm if Mr. Aisenberg were to return to a high stress job. Strangely, on remand, Reliance arranged for a labor market study on the job demands not of a general attorney, the category it had previously and successfully fought for, but for a business and financial counsel. This study described such stressful things as “crisis management” protecting “classified information,” and giving advice about terrorism, as among the material job duties of such a position. Concluding that Reliance was bound by its own study, the court had no problem concluding that any such position would be at least as stressful as the job Mr. Aisenberg held at the time of his bypass surgery. The court likewise had no trouble concluding, as Mr. Aisenberg’s own doctors had, and as supported by four studies he submitted, that working in a high stress job would be risky for him, despite two medical opinions submitted by Reliance that seemed to suggest that the science was out on the effects of stress on those suffering from serious heart conditions. In light of these findings, the court concluded that Reliance abused its discretion by ignoring the medical opinions of Mr. Aisenberg’s three treating physicians, not engaging with multiple studies supporting the risk to plaintiff, and failing to consider the risk of future harm despite the prior judge’s remand for just that purpose. The court therefore awarded benefits. However, despite Mr. Aisenberg’s resounding victory on the merits, the court declined to award him attorneys’ fees, concluding that only the “ability to pay” factor had been met.          

Exhaustion of Administrative Remedies

Ninth Circuit

Ayres v. Life Ins. Co. of N. Am., No. 3:23-CV-05376-DGE, 2024 WL 707454 (W.D. Wash. Feb. 21, 2024) (Judge David G. Estudillo). This is an action for long-term disability benefits under an ERISA-governed benefit plan. Defendant LINA responded to Jesse Ayres’ complaint by filing a motion for judgment on the pleadings. LINA contended in its motion that Mr. Ayres had failed to exhaust his administrative remedies under the plan and thus was barred from bringing his action. However, the court, quoting the Ninth Circuit, noted that “a claimant need not exhaust [administrative remedies] when the plan does not require it.” Because LINA could “not identify any language in the LTD Plan requiring Plaintiff to exhaust administrative remedies prior to filing a lawsuit,” its motion on this ground was denied. LINA also raised a second argument, which was that Ayres “failed to cooperate in the claim process.” Ayres denied this, and further responded that LINA failed to timely issue a decision on his claim under ERISA’s claim procedures. The court examined the pleadings and documents incorporated by reference in the pleadings “in the light most favorable to plaintiff,” as required by the Federal Rules of Civil Procedure. Under this standard, the court stated, “Arguably, the pleadings indicate Plaintiff did provide medical records and continued to provide supplemental records over the course of his communications with Defendant.” Thus, because there were “factual disputes as to the information Plaintiff allegedly failed to provide,” the court denied LINA’s motion on this ground as well. The court ordered the parties to meet and confer and file a stipulated order regarding a briefing schedule for the case.

Witt v. Intel Corp. Long-Term Disability Plan, No. 3:23-CV-01087-AN, 2024 WL 687928 (D. Or. Feb. 16, 2024) (Judge Adrienne Nelson). Plaintiff Randy Witt submitted a claim for benefits under Intel Corporation’s long-term disability employee benefit plan. Intel approved the claim for about three months and then terminated it on the ground that he no longer met the plan definition of disability. The Intel LTD plan has two mandatory appeals after a benefit denial. Witt submitted his first-level appeal to Intel through his attorney. Intel informed Witt that it needed an extension of time because it had referred his claim for independent physician review. Witt challenged this assertion, contending that this was not an “special circumstance” warranting an extension, and further contended that Intel had requested the extension too late and blown its deadline to respond under ERISA’s claim regulations. Intel responded by informing Witt that it had received the medical review reports, but they “had to be corrected based on the Plan provisions for medical evidence.” Intel provided the reports to Witt for a review and response, but Witt chose to file this action instead. Intel responded by filing a motion to stay the action and compel Witt to complete the appeal process under the plan. The court found that because Witt had submitted his appeal on May 25, 2023, Intel’s deadline was 45 days later, or July 9, 2023. Because Intel did not request an extension until July 12, 2023, its request was late and thus, under ERISA regulations, Witt’s appeal was “deemed denied” and he was not required to exhaust all the appeals ordinarily required by the plan. Intel contended that its extension was timely because Witt’s appeal was not actually complete until May 31, 2023, when Intel received additional materials from Witt. However, the court ruled that this did not toll the deadline because Intel did not request the additional information from Witt, nor did it indicate that it needed an extension because of Witt’s failure to provide necessary information. The court further ruled that Intel’s extension was not justified by “special circumstances” because it was dilatory; it failed to initiate its review process for almost a month after receiving Witt’s appeal. The court also addressed a second argument by Witt, which was that Intel could not enforce its appeal requirements because it “committed a procedural violation by failing to obtain medical reviews from appropriate medical professionals.” The court disagreed with this argument, finding that Intel “relied on reviews by medical professionals with appropriate training and experience in the field of medicine related to plaintiff’s claim.” As for the appropriate remedy, the court concluded that Intel’s failure to respond in a timely fashion to Witt’s appeal was not a “de minimis” violation, and thus the appropriate ruling was to deny Intel’s motion to compel Witt to exhaust his appeals.

Medical Benefit Claims

Sixth Circuit

Stover v. CareFactor, No. 2:22-CV-1789, 2024 WL 770071 (S.D. Ohio Feb. 26, 2024) (Judge Sarah D. Morrison). This is an action for medical benefits by plaintiff Richard Stover, who was covered under an employee benefit plan as an HVAC Division Manager. Stover “lived on a working cattle farm and sold freezer beef under the trade name Buckeye Country Angus.” In March of 2021 Stover was kicked in the leg by a bull calf, which required medical treatment, including a hospital stay. The claim administrator for the plan, defendant CareFactor, denied Stover’s claim for benefits relating to the incident under the plan’s occupational exclusion. Stover filed suit and CareFactor moved for judgment. The court first ruled that the proper standard of review was de novo because, while the plan contained a grant of discretionary authority, that grant was to the plan administrator and not to CareFactor. Under this standard of review, the court ruled that defendants “failed to shoulder the burden of proving that a coverage exclusion applied.” The court noted that Stover “has consistently asserted that he was kicked by a bull calf being raised for personal consumption,” not as part of any business operations, and that he provided statements and documents in support of this assertion. The court found that defendants ignored this evidence and “failed to develop any evidence to the contrary” by not following up on the information Stover had provided. As a result, the court denied defendants’ motion and directed that judgment be entered in Stover’s favor.

Pension Benefit Claims

Eighth Circuit

Randall v. GreatBanc Tr. Co., No. 22-cv-2354 (ECT/DJF), 2024 WL 713997 (D. Minn. Feb. 21, 2024) (Judge Eric C. Tostrud). Participants in a 401(k) plan with an employer stock ownership plan (ESOP) component sponsored by their employer, Well Fargo, survived motions to dismiss under both Federal Rule of Civil Procedure 12(b)(1) and Rule 12(b)(6) in this decision. Wells Fargo used the ESOP to meet its mandatory matching and discretionary profit sharing contributions under the 401(k) plan. As alleged, and as is typical with ESOPs, Wells Fargo lent money to the ESOP which the ESOP use to purchase shares of stock from the company, in this case preferred stock. This preferred stock is held in a reserve account until principal payments are made on the loan, at which point the preferred stock is, according to plan terms, required to be converted to $1,000 of common stock at the prevailing market rate and allocated to individual participants’ accounts. Plaintiffs filed a putative class action against Wells Fargo, its former CEO Timothy Sloan, and GreatBanc Trust Company, a fiduciary for the plan, alleging that this did not happen because the ESOP overpaid for preferred stock by calculating its value at more than $1,000. They asserted claims against all three defendants for breach of fiduciary and co-fiduciary duties, and prohibited transactions. Defendants moved to dismiss under Rule 12(b)(1), asserting that plaintiffs had suffered no cognizable injury sufficient to establish Article III standing, and under 12(b)(6) asserting that plaintiffs had failed to state plausible claims for relief. Addressing the Article III issue first, the court agreed with defendants that the overpayment for the preferred stock, without more, did not establish an injury because the preferred stock was never allocated to the accounts of the plaintiffs. Nevertheless, the court concluded that plaintiffs had alleged a “second injury theory” by contending that “‘if Wells Fargo had not misappropriated the ESOP’s preferred stock dividends and used them to subsidize its employer matching contributions,’ Wells Fargo ‘would have contributed additional shares of common stock to meet its employer matching contribution obligation, and the preferred dividends would have been used to make additional payments on the ESOP loans, converting more preferred stock to common stock for allocation to Plan participants.’” This was sufficient at the pleading stage to establish jurisdiction, despite what the court saw as Wells Fargo’s essentially merits-based arguments to the contrary. On the 12(b)(6) motions, the court turned first to the prohibited transaction claims, noting that the exemptions in 29 U.S.C. § 1108 are defenses and that to establish a party-in-interest prohibited transaction under Section 1106(a), plaintiffs were required only to plead that a fiduciary caused the specified (prohibited) transaction to occur between a plan and a party-in-interest. Concluding that they had done so, the court denied the motions to dismiss these claims. Likewise, with respect to the asserted Section 1106(b)(1) violations, the court concluded that plaintiffs plausibly alleged that Wells Fargo, acting in a fiduciary capacity, used preferred stock dividends in its own interest to meet its contribution obligations and that Sloan and GreatBanc knowingly participated in these actions. Similar factual allegations led the court to conclude that plaintiffs had plausibly alleged violations of ERISA’s loyalty provisions. While the court was not convinced that the imprudence claims were stated in a sufficiently non-conclusory manner, the court ultimately concluded that the allegations related to disloyalty were enough to allow the prudence claims to also survive at the pleading stage. The court’s denial of the motions to dismiss the remaining claims – for breach of the duty to follow plan documents, violations of ERISA anti-inurement provisions, and failure to monitor and for co-fiduciary breaches – flowed from these prior conclusions. All in all, a great decision for the plaintiffs, represented by my colleagues and friends (and loyal Your ERISA Watch readers) Dan Feinberg, Nina Wasow, and Todd Jackson at Feinberg, Jackson, Worthman & Wasow.

Statutory Penalties

Fifth Circuit

Jones v. AT&T, Inc., No. CV 20-2337, 2024 WL 772496 (E.D. La. Feb. 26, 2024) (Judge Greg Gerard Guidry). Plaintiff William Jones, serving as the executor and administrator of an estate, brought this action against AT&T alleging that AT&T failed to produce plan documents in violation of ERISA. The court entered judgment in AT&T’s favor, and Jones brought a motion for reconsideration. Jones contended that the court erred by (1) only addressing two of the three documents he claimed should have been produced, and (2) crediting testimony from AT&T that it had “produced everything they had in their possession to Plaintiff.” The court denied Jones’ motion. The court admitted that it had not expressly named one of the plan documents in its order, but ruled that its order encompassed that document by reference, so there was no error. As for AT&T’s testimony, the court stated that Jones “presented no evidence at trial to controvert that testimony,” and had not demonstrated that there were other relevant unproduced documents. Thus, the court denied Jones’ motion.

Withdrawal Liability & Unpaid Contributions

Ninth Circuit

Walker Specialty Constr., Inc. v. Board of Trs. of the Constr. Indus. & Laborers Joint Pension Tr. for S. Nev., No. 2:23-CV-00281-APG-MDC, 2024 WL 756078 (D. Nev. Feb. 22, 2024) (Judge Andrew P. Gordon). The Multiemployer Pension Plan Amendments Act of 1980 (MPPAA) amended ERISA to create “withdrawal liability.” Under the MPPAA, if an employer withdraws from a multiemployer pension plan, it is liable for its share of the fund’s unfunded vested benefits. However, there is an important exception: no withdrawal liability is owed for “building and construction industry” employees. In this case the plaintiff, Walker, performed asbestos removal, lead removal, and demolition work. It ceased operating in Nevada but contended that it did not owe $2.8 million in withdrawal liability because its employees fit this exception. It took the pension trust to arbitration, and lost, and then challenged the arbitrator’s decision in this action. The parties filed cross-motions for summary judgment which were decided in this order. The court reviewed the arbitration decision de novo because there were “no factual disputes about the work Walker’s employees performed” and “[t]he proper interpretation of the statutory term ‘building and construction industry’ is a question of law.” The court noted that the term is undefined in the MPPAA and the Ninth Circuit had not interpreted its meaning. The trust argued that Walker did not fit the building and construction exception because its employees only removed or demolished structures, and did not make or build anything. However, the court relied on the National Labor Relations Board (NLRB) and its interpretations of the 1947 Taft-Hartley Act, which uses the same language, and ruled that the exception was not “confine[d]…to literal erecting of structures.” Specifically, the NLRB had ruled in a post-MPPAA decision that asbestos removal met the Taft-Hartley Act’s definition. Furthermore, “courts have understood the definition…to encompass more than just work that forms, makes, or builds a structure in the literal sense.” Thus, the court ruled, “By encapsulating and removing component parts of fixtures attached to buildings, and by demolishing buildings for future repair, remodeling, or construction, Walker engaged in work in the building and construction industry,” thereby satisfying the MPPAA’s withdrawal liability exception. The court thus granted Walker’s summary judgment motion and denied the trust’s.

Parmenter v. The Prudential Ins. Co. of Am., No. 22-1614, __ F. 4th __, 2024 WL 613959 (1st Cir. Feb. 14, 2024) (Before Circuit Judges Montecalvo and Thompson, and District Judge Silvia Carreño-Coll)

With a rapidly aging population in the United States, coupled with increasing numbers of people suffering from chronic and debilitating illness, long-term care is in the spotlight like never before. Because very few people can afford to pay for the cost of such care themselves, more and more employers are now offering long-term care insurance through ERISA plans as a benefit to their employees and their families. Given these trends, it should not be surprising that we are beginning to see an uptick in litigation about long-term care benefits, as this week’s case of the week exemplifies.

The case originated when Barbara Parmenter, an employee of Tufts University, sued Tufts and Prudential Insurance Company in a putative class action after Prudential twice raised its premium rates for her long-term care coverage. She alleges that she was informed during an in-person presentation she attended before enrolling that any increase in premiums would have to be approved by the Massachusetts Commissioner of Insurance before becoming effective, and the group contract covering the policy likewise made such increases “subject to” approval by the Commissioner. Ms. Parmenter further alleges, and neither Prudential nor Tufts disputes, that Prudential did not obtain approval from the Commissioner before raising her premiums (and those of others in the class). Nevertheless, Prudential asserts that it was not in fact possible to get approval from the Commissioner because, as it turns out, the Commissioner has never exercised its regulatory authority over group contracts and thus has not set up a rate approval mechanism with respect to policies issued under such contracts.

The district court agreed with the defendants that Ms. Parmenter had not plausibly stated a claim for breach of fiduciary duty because the court interpreted that group contract’s “subject to” language to only apply in the event that the Commissioner exercised its regulatory authority with respect to such contracts. The court of appeals in this decision disagreed that this was the only way to read the contractual language, concluding instead that the language was ambiguous and could not be resolved on the current record.

To get there, the court first addressed whether Prudential was a fiduciary with respect to raising the premiums. Noting that “[i]n the plan documents, Prudential held itself out to the plan participants as owing them a fiduciary duty of prudence,” the court rejected Prudential’s assertion that raising premiums rates was a business decision falling outside the ambit of any of its duties as an admitted plan fiduciary. On this basis, the court held that “at the very least Prudential owed Parmenter a fiduciary duty of prudence to manage the plan in accordance with the documents governing the plan…however it is ultimately interpreted.”

This brought the court to the crux of the issue: “the plausibility of the breach allegations against Prudential.” Applying federal common law principles of contract interpretation – which the court saw as incorporating common-sense principles and canons drawn from state law – the court concluded that the term “subject to” as used in the group contract was ambiguous. The court thus disagreed with both sides of the dispute, who each asserted that the phrase had a different plain and unambiguous meaning.

The court started with dictionary definitions of the phrase “subject to,” which varied from an absolute to a possibility, and thus could support both the plaintiff’s and the defendants’ proposed interpretations. Nor did consideration of the policy as a whole, which elsewhere simply stated that Prudential reserves the right to increase premiums, clear up the matter. Instead, these and other contract interpretation principles led the court “to conclude that ‘subject to’ is ‘reasonably susceptible of’ different interpretations,” and thus ambiguous.

The court of appeals then determined, as is usually the case with respect to contractual ambiguities, that it was not possible to resolve the ambiguity in the contract language on the pleadings, with only the contract before it. The court thus reversed the judgment as to Prudential and remanded for further proceedings.

Ms. Parmenter did not fare so well with respect to her ancillary claim for co-fiduciary breach under 29 U.S.C. § 1105(a) against Tufts. Ms. Parmenter based this claim on Tufts’ failure to prevent Prudential from raising premiums and its alleged failure to monitor Prudential. The court read the text of Section 1105(a) to “contemplate[] active steps in furtherance of the breach whereas Parmenter alleges Tufts stood by and did nothing.” Because the complaint does not allege that “Tufts knowingly participated in, concealed, enabled, or failed to intercede in any way to influence Prudential’s decision to increase the premium rates which affected Parmenter’s premium payments,” the court of appeals affirmed the district court’s judgment dismissing the complaint as to Tufts.         

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

Attorneys’ Fees

Tenth Circuit

Huff v. BP Corp. N. Am., No. 22-CV-00044-GKF-JFJ, 2024 WL 551886 (N.D. Okla. Feb. 12, 2024) (Judge Gregory Y. Frizzell). In this case, Ronald Huff, a former employee of BP Corporation of North America, repeatedly and, according to the court, erroneously, filed complaints and motions asserting state-law claims insisting that a group life insurance policy was not an ERISA-governed plan. After the Tenth Circuit affirmed the district court’s decision concluding that the policy was governed by ERISA and dismissing the complaint, BP sought an award of attorney’s fees against Mr. Huff under ERISA’s fee-shifting provision, 29 U.S.C. § 1132(g)(1), as well as an award against Mr. Huff’s attorney under 28 U.S.C. § 1927 for vexatious litigation. Despite the unusual circumstances of the case, the court refused to assess an attorney fee award against Mr. Huff under ERISA’s fee provision. Applying the Tenth Circuit’s five-factor test, the district court concluded that only the fifth factor, which looks to the relative merits of the parties’ positions, weighed in favor of a fee award because Mr. Huff repeatedly ignored court orders and consistently failed to assert an ERISA claim despite being given the opportunity to do so. With regard to the other four factors, the court held that: (1) there was no evidence that Mr. Huff asserted his claims in bad faith or to confuse or mislead the court; (2) Mr. Huff, as a retiree in his eighties, did not have the ability to satisfy an award; (3) an award would not serve a deterrent purpose because any fault with regard to the claims lay with Mr. Huff’s attorney; and (4) the fourth factor, which considers whether the plaintiff sought to benefit other plan participants, is only relevant when a plaintiff seeks a fee award. Thus, the court concluded that “although Mr. Huff’s claims lacked merit, on balance, the relevant factors weigh against imposing attorney’s fees against Mr. Huff under” ERISA’s fee provision. The court’s calculus was different, however, regarding a fee award against Mr. Huff’s attorney under 28 U.S.C. § 1927. In rather quaint language, this statutory provision allows a court to assess fees against an attorney who “so multiplies the proceedings in any case unreasonably and vexatiously.” The court concluded that Mr. Huff’s attorney did so by acting in an objectively unreasonable manner in continuing to press the state-law claims after being told by two different courts that ERISA governed the matter and preempted these claims. The court found that although the attorney did not act in bad faith, sanctioning the attorney under Section 1927 was warranted because he “continu[ed] to pursue claims after a reasonable attorney would realize they lacked merit.” The court therefore ordered BP to submit itemized bills so that the court could award “the excess costs incurred by BP as a result of the sanctionable conduct – that is, Mr. Martin’s response in opposition to BP’s January 31, 2022 motion to dismiss and the two motions to reconsider directed to ERISA’s applicability.”       

Breach of Fiduciary Duty

Second Circuit

Falberg v. The Goldman Sachs Grp., Inc., No. 22-2689-CV, __ F. App’x __, 2024 WL 619297 (2d Cir. Feb. 14, 2024) (Before Circuit Judges Lynch, Nardini, and Merriam). In Your ERISA Watch’s September 21, 2022 edition, our case of the week was the district court’s ruling in this matter. The plaintiffs, participants in Goldman Sachs’ 401(k) retirement plan, brought a putative class action alleging that Goldman and other defendants involved in managing the plan breached their fiduciary duties under ERISA by belatedly removing underperforming Goldman investment funds as plan investment options, failing to consider lower-cost alternatives, and failing to claim “fee rebates” that were allegedly available. The district court disagreed and granted defendants’ motion for summary judgment on all of plaintiffs’ claims. Plaintiffs appealed to the Second Circuit, who weighed in with this unpublished decision. First, the court agreed with the district court that defendants did not breach their fiduciary duty of loyalty. Plaintiffs “failed to introduce evidence that Defendants retained the Challenged Funds in the Plan for the purpose of advancing their interests; indeed, the evidence in the record suggests otherwise.” Defendants “employed a robust process to manage potential conflicts of interest,” “required [Committee] members to participate in fiduciary training sessions,” and “retained an investment consultant to act as an independent advisor and provide unbiased advice[.]” Plaintiffs contended that defendants removed the funds at issue too late, but the court ruled that “a fiduciary does not breach its duty of loyalty by choosing to retain an investment that, in the fiduciary’s reasonable assessment, may perform well in the long term despite short-term underperformance.” As for the duty of prudence, the court agreed with the district court that defendants’ decision not to adopt a formal investment policy statement, by itself, was insufficient to demonstrate a breach. Furthermore, the record showed that “the Committee followed a deliberative and rigorous process when selecting and monitoring investments.” The Committee’s independent advisor “continually monitored and evaluated the Plan’s investment options, and provided the Committee members with detailed information,” which they reviewed before attending meetings. Next, the Second Circuit rejected plaintiffs’ prohibited transactions claim involving the alleged failure to collect fee rebates. The court agreed with the district court that the Goldman plan “was treated no less favorably than other retirement plans” because it was subject to the same fee rebate eligibility requirements as other plans that used the plan’s recordkeeper. Finally, the court ruled that plaintiffs could not maintain their claim for breach of the duty to monitor because it hinged on their breach of fiduciary duty claim, which the court had already rejected. The Second Circuit thus affirmed the district court’s summary judgment ruling in defendants’ favor in all respects.

Disability Benefit Claims

Sixth Circuit

Smith v. Reliance Standard Ins. Co., No. 4:21-CV-128-RGJ, 2024 WL 647395 (W.D. Ky. Feb. 15, 2024) (Judge Rebecca Grady Jennings). Plaintiff Jessica Smith was a retail center manager for Old National Bank and a participant in Old National’s employee long-term disability benefit plan, insured by defendant Reliance Standard. She stopped working in 2020 due to symptoms from several medical conditions, including breast cancer treatment, chronic pain, and fibromyalgia, and applied to Reliance for benefits. Reliance approved Smith’s claim for a short period, but then terminated it, contending that Smith did not meet the plan definition of disability. Smith brought this action and the parties filed cross-motions for judgment. The court first addressed the standard of review. The plan gave Reliance discretionary authority to determine benefit eligibility, but the denial decision was made by Reliance’s sister company, Matrix Absence Management, Inc. Thus, because Reliance did not actually exercise its discretion, the court determined that the default de novo standard of review applied. Under this standard, the court agreed that the medical records “consistently demonstrated Smith was experiencing frequent, debilitating pain in multiple areas.” The court noted that Reliance had previously approved benefits but did not cite any information supporting its change of heart. Reliance complained that there was no objective evidence to support Smith’s claim, such as a functional capacity evaluation, but the court observed that the plan gave Reliance the right to request such an examination at any time, and noted that “pain is inherently subjective.” As a result, the court granted Smith’s motion for summary judgment and ordered Reliance to reinstate her benefits. The court also remanded Smith’s claim for waiver of life insurance premium benefits because Reliance had not made a decision on that benefit and the disability definition was different. Finally, the court denied Smith’s claim for prejudgment interest at the state law rate, ruling that interest should be awarded pursuant to 28 U.S.C. § 1961, and gave her leave to file a motion for attorney’s fees.

Ninth Circuit

Burris v. First Reliance Standard Life Ins. Co., 2:20-CV-00999-CDS-BNW, 2024 WL 551937 (D. Nev. Feb. 9, 2024) (Judge Cristina D. Silva). Plaintiff John Scott Burris, formerly an attorney and non-equity partner with Wilson Elser Moskowitz Edelman & Dicker LLP, filed this action against defendant First Reliance. He alleged that First Reliance unlawfully denied his claim for long-term disability benefits under Wilson Elser’s employee disability benefit plan. First Reliance filed a motion for judgment on the record, which the court decided in this order. The court first ruled that its standard review was deferential because the plan granted First Reliance discretionary authority to interpret the plan and determine benefit eligibility. Under this standard, the court ruled that Burris had not met his burden of proof. The court found that there was “nothing in the record indicating that he could no longer perform the material duties of his regular occupation as a result of his chronic fatigue syndrome diagnosis, other than his own subjective self-assessment and support letters from his wife and mother.” Furthermore, his doctor’s diagnosis was “entirely based on Burris’ self-reported symptoms.” Thus, First Reliance’s denial was not “illogical, implausible, or without support in inferences that may be drawn from the facts in the record.” The court further ruled that First Reliance had “engage[d] in meaningful dialogue” with Burris in its denial letter by outlining the eligibility requirements and providing a six-page explanation of how it had arrived at its determination. Because “the denial letter clearly informed Burris in plain language of the reason for the denial,” First Reliance “met its duty to engage in meaningful dialogue.” Thus, the court granted First Reliance’s motion for judgment, making this the unusual case where an attorney plaintiff was not able to prevail on a disability claim.

Tenth Circuit

Joseph K. v. Foley Indus. Emp. Benefit Plan – Plan No. 501, No. 2:23-CV-2054-EFM-ADM, 2024 WL 624005 (D. Kan. Feb. 14, 2024) (Judge Eric F. Melgren). Plaintiff Joseph K. was a network services manager for Foley Industries who was terminated on January 17, 2022. At the time Joseph was suffering from several medical issues, including ankylosing spondylitis, chronic iridocyclitis, arthropathic psoriasis, and memory issues. He submitted claims for short-term and long-term disability benefits to Prudential Insurance Company of America, the insurer of Foley’s employee disability benefit plan, informing Prudential that his medical conditions predated his termination and that he had been terminated because of them. However, Prudential denied both claims. Prudential contended that Joseph’s disability began on January 18, 2022, and he was not covered under the plan at that time because he had been terminated the previous day and did not have an “earnings loss” as required by the plan prior to that date. Joseph filed suit, alleging a number of causes of action, including under ERISA. The parties agreed to file cross-motions for summary judgment on Joseph’s ERISA claims, which were decided in this order. The court, to put it mildly, was not pleased with Prudential: “Defendants’ argument borders on the frivolous… Such an unreasonably narrow interpretation, resulting in a Catch 22 situation, is the epitome of arbitrary and capricious decision-making.” The court noted that similar arguments “advocating that employees cannot be eligible for benefits or considered disabled while working, have been soundly rejected by the circuits to have considered them.” The court further found that the plan “clearly contemplates situations where an employee loses his job because of a disability,” and that Prudential’s argument to the contrary was “legally indefensible.” Prudential argued in the alternative that the court should remand the case for a determination regarding whether Joseph met the plan definition of disability because Prudential had not yet decided that issue. The court rejected this as well, ruling that Prudential’s letters conceded that Joseph had a disability, and that because Prudential did not raise the disability definition as a rationale for denying Joseph’s claims, it would not be permitted to do so on remand. The court further determined that Joseph was entitled to attorney’s fees, costs, and prejudgment interest and directed him to file a motion regarding those issues.

Discovery

Sixth Circuit

Dotson v. Metropolitan Life Ins. Co., No. CR 5:23-178-DCR, 2024 WL 532301 (E.D. Ky. Feb. 9, 2024) (Judge Danny C. Reeves). Plaintiff Gary Dotson filed this action challenging defendant MetLife’s denial of his claim for long-term disability benefits under a benefit plan sponsored by his employer, CTI Food Holdings, Co. Dotson served interrogatories and requests for production of documents on MetLife, but MetLife objected, contending that Dotson was not entitled to any discovery. Dotson filed a motion to compel, which the court decided in this order. The court acknowledged that “it is well established that plaintiffs in ERISA cases generally are not entitled to obtain discovery outside of the administrative record.” However, “limited discovery is available if a claimant makes a satisfactory allegation of a violation of due process or bias by the plan administrator.” The court noted that several decisions in the Eastern and Western Districts of Kentucky had “routinely permitted limited discovery” when an “inherent conflict of interest” was present, and that such a conflict “is, in and of itself, some evidence of bias.” It was undisputed that MetLife had a conflict in this case because “there is a per se conflict of interest when a plan administrator is responsible for both evaluating and paying benefits on a claim.” The court concluded by noting that there was “no practical way to determine the extent of the administrator’s conflict of interest without looking beyond the administrative record.” Thus, it allowed Dotson’s discovery to proceed and granted his motion to compel.

ERISA Preemption

Fifth Circuit

Smith v. The Lincoln Nat’l Life Ins. Co., No. 4:23-CV-01036-P, 2024 WL 583488 (N.D. Tex. Feb. 13, 2024) (Judge Mark T. Pittman). Plaintiff Danielle Smith brought this action against defendant Lincoln, alleging that Lincoln wrongfully denied her claim for accidental death benefits after her father passed away. Lincoln filed a motion to dismiss, contending that Smith’s state law claim for breach of contract is preempted by ERISA. Smith did not file a response. In this brief order, the court agreed with Lincoln: “Here, it is clear from Plaintiff’s Amended Complaint and from the insurance plan itself that the insurance plan in question is an ERISA plan…the only conduct at issue is Defendant’s denial of the plan…Plaintiff’s claim is thus preempted by ERISA.” The court also struck from Smith’s complaint her requests for compensatory damages and a jury trial, as neither is available under ERISA.

Medical Benefit Claims

Sixth Circuit

Churches v. Administration Sys. Research Corp., Int’l, No. CV 22-13041, 2024 WL 643139 (E.D. Mich. Feb. 15, 2024) (Magistrate Judge David R. Grand). Plaintiff Levi Churches crashed a Honda CRF 450R motorcycle on private property and sustained serious injuries. He submitted a claim for benefits under an employee medical benefit plan sponsored by his employer, The CSM Group, Inc. CSM denied his claim, citing an exclusion in the plan for accidents involving motorcycles. Churches brought this action and the parties filed cross-motions for summary judgment. In his briefing, Churches acknowledged the motorcycle exclusion but relied on an exception to the exclusion which stated, “A vehicle that is commonly recognized as an ‘off-road vehicle’ (ORV) or ‘all-terrain vehicle’ (ATV) shall not be deemed to be a Motorcycle, nor will the off-road operation of a Motorcycle cause it to be deemed instead an ORV or ATV.” The court first addressed the standard of review, and gave up the game by stating that the issue “is not critical…because CSM’s decision to deny benefits fails to pass muster even under the more deferential arbitrary and capricious standard.” The court criticized the plan for not even addressing the ORV exception in its denial letter, even though Churches had raised the issue in his appeal. Instead, CSM focused solely on whether the vehicle Churches was riding was a “motorcycle,” using a “flawed interpretation that the Motorcycle Definition trumps the ORV Exception.” The court further found that the Honda vehicle at issue was a motocross motorcycle designed for off-road riding, and thus was an ORV under the plan’s exception. The court thus overturned CSM’s decision, granted Churches’ motion, and awarded him benefits. The court also invited him to file a motion for attorney’s fees.

Ninth Circuit

Arnold v. United Healthcare Ins. Co., No. CV 23-3974 PA (AGRx), 2024 WL 549032 (C.D. Cal. Feb. 12, 2024) (Judge Percy Anderson). Plaintiff Linda Arnold brought suit after United Healthcare denied her claim for coverage under her health care plan for an endoscopy done in preparation for bariatric weight loss surgery and a hiatal hernia repair performed during the surgery. As many plans do, Ms. Arnold’s plan excluded bariatric surgery, so United denied her claims. As an initial matter, the court held that de novo review applied. But even under this ostensibly more plaintiff-friendly standard, based on the administrative claim record and trial briefs and arguments submitted by counsel, the district court held that “United’s decision to deny reimbursement for the endoscopy and the hiatal hernia repair was consistent with the terms of the Plan.” With respect to the endoscopy, the court agreed with United that Ms. Arnold failed to provide complete medical records to support this claim. With respect to the hernia repair surgery, the court noted that “both surgeons used the same incision point for the two procedures, suggesting that the surgeries were related, and that the hernia surgery was ‘incidental’ to the gastric sleeve procedure.” The court also noted that both the surgeon who performed the gastric sleeve procedure and the assistant surgeon who performed the hiatal hernia repair charged the same amount, “suggesting that the two surgeons ‘double billed’ for the hernia repair in an attempt to circumvent the policy exclusion.”

Mejia v. United Healthcare Ins. Co., No. 2:23-CV-02032-SVW-E, 2024 WL 637261 (C.D. Cal. Feb. 14, 2024) (Judge Stephen V. Wilson). Plaintiff Oscar Mejia brought this action in California state court against defendant United, the insurer of his employer’s health benefit plan, alleging that United underpaid for his out-of-network surgery. Mr. Mejia’s primary argument was that “United failed to fulfill its obligation under the plan to either ‘engage in a negotiation or at least attempt a negotiation to reduce the amount Mr. Mejia is responsible for paying Medical Providers.’” United removed the case to federal court based on ERISA preemption and the parties filed cross-motions for judgment. The court noted that Mr. Mejia’s claim was unusual because he was not arguing that United miscalculated his benefits under the terms of the plan, that it miscategorized the treatment he received, or that it did not apply negotiated rates. Instead, he argued that ERISA required United, as a fiduciary, “to at least attempt a negotiation of Medical Providers’ bills for services provided by Medical Providers to Mr. Mejia[.]” Because the plan provided United with discretionary authority to determine benefits, the court employed the abuse of discretion standard of review. Under this standard, the court ruled that United had acted reasonably. The court agreed with United that it had followed the plan, which requires it to use negotiated rates if they exist, and if not, to use Medicare rates. The court observed that “there is no obligation for United to negotiate with out-of-network providers under the terms of the plan,” and that Mejia’s argument to the contrary “overstretches United’s obligation as a fiduciary… [A]s a fiduciary, United must enforce the language of the plan with the fair-mindedness of the fiduciary of a trust; United is not required (nor would it be permitted) to rewrite the plan language to secure Plaintiff a better outcome.” The court thus granted United’s motion for judgment and denied Mejia’s. The court also denied Mejia’s motion for leave to conduct limited discovery.

Tenth Circuit

K.Z. v. United Healthcare Ins. Co., No. 2:21-CV-00206-DBB, 2024 WL 664801 (D. Utah Feb. 16, 2024) (Judge David Barlow). Plaintiff K.Z. is a participant in an ERISA-governed medical benefit plan whose son, E.Z., received behavioral health treatment at a residential treatment facility. Defendant United approved benefits for some of E.Z.’s treatment, but ultimately denied further coverage on the ground that his treatment was no longer medically necessary. Plaintiffs brought this action and the parties filed cross-motions for summary judgment. The court first determined that the appropriate standard of review was deferential because the plan gave United discretionary authority to determine benefit eligibility. However, United failed to meet this standard. The court determined that United failed to engage with the recommendations of E.Z.’s providers and the facts that could have confirmed his coverage, including alarming episodes of violence, suicidality, and inappropriate sexual behavior. United’s reviewers also “failed to explain how they arrived at [their] conclusions and how each conclusion applied to their guidelines.” The court thus overturned United’s decisions. The court then reviewed the four time periods of treatment at issue, and determined that benefits should be paid for two of those periods because the record “clearly showed” that plaintiffs were entitled to benefits. For the third time period, the court remanded to United for further review because the record was inconclusive and United had failed to make adequate factual findings. For the fourth time period, the court determined there was an incomplete record due to United’s confusing correspondence, so it remanded to United for this period as well.

Pension Benefit Claims

First Circuit

Bowers v. Russell, No. 22-10457, 2024 WL 637442 (D. Mass. Feb. 15, 2024) (Judge Patti B. Saris). This suit brought by participants in an employee stock ownership plan (“ESOP”) alleges that plan fiduciaries committed numerous prohibited transaction and fiduciary breaches when shares of the company that had not yet been allocated to the ESOP reverted to the company after the founder died, and the ESOP was later terminated. The factual background is complicated and involves maneuvering by the heirs and spouse of the deceased founder and a succession at the company worthy of the television show of the same name. Suffice it to say that plaintiffs alleged that the unallocated shares of the company were deliberately and significantly undervalued at the time of the termination and that the company owners therefore got a windfall at the expense of the participants. The defendants moved to dismiss under Federal Rule of Civil Procedure 12(b)(1), arguing that “Plaintiffs lack standing because they only had an interest in the allocated shares,” and that they failed to plead sufficient facts to show that the unallocated shares were undervalued. The court disagreed. Because the plan stated that the unallocated shares were to be used upon termination to repay the note that secured the ESOP and that “any amount remaining after the ESOP Note ha[d] been paid in full [would] be allocated to the participants of the Plan,” plaintiffs “had an interest in the value of the unallocated shares less the remaining debt owed by the ESOP to the Company.” Nor was the court convinced that dismissal was warranted based on waivers and releases signed by the plaintiffs. The court noted that waiver and release is an affirmative defense on which the defendants bear the burden of proof, and plaintiffs plausibly asserted that the waivers were not signed knowingly and voluntarily. Next, rejecting defendants’ argument that the prohibited transaction claims were precluded on the basis of ERISA’s three-year statute of limitations, the court concluded that the complaint plausibly alleges that plaintiffs lacked actual knowledge of the prohibited transaction more than three years prior to filing suit. Finally, the court concluded that the complaint plausibly alleges that the Board defendants committed fiduciary breaches both in orchestrating the prohibited transaction and in failing to monitor the conduct of the trust company which the Board appointed.

Eighth Circuit

Hankins v. Crain Auto. Holdings, LLC, No. 4:23-CV-01040-BSM, 2024 WL 664815 (E.D. Ark. Feb. 16, 2024) (Judge Brian S. Miller). Plaintiff Barton Hankins is the former Chief Operating Officer of Crain Automotive Holdings and a participant in Crain’s deferred compensation benefit plan. He resigned in January of 2023 and requested that Crain pay him the vested portion of his benefit under the plan, which totaled a whopping $4,977,209.02. Crain refused to pay, contending that the plan was “unenforceable because it contemplates separately signed employment and confidentiality agreements that were never entered,” and further arguing that Hankins had defrauded Crain. In this brief order the court rejected both arguments. The court ruled that the two agreements Crain cited were not necessary in order for the plan to be enforced; Hankins’ separation from service triggered the payment regardless of the existence of any other agreements. The court noted that Crain failed to procure these agreements for four years after Hankins joined the plan, and only raised the issue when Crain resigned, thus indicating that “Crain is simply looking for a way to avoid its obligation to Hankins.” As for Crain’s fraud accusations, the court deemed them “unsubstantiated” because “Crain has failed to disclose the facts and documents upon which these allegations rest.” The court thus ruled that Crain’s decision was an abuse of discretion and ordered it to pay Hankins the requested benefits plus prejudgment interest.

Pleading Issues & Procedure

Ninth Circuit

LeBarron v. Interstate Grp., LLC, No. 22-16332, __ F. App’x __, 2024 WL 575223 (9th Cir. Feb. 13, 2024) (Before Circuit Judges Rawlinson and Owens and District Judge Dean D. Pregerson). Plaintiff Russell LeBarron brought this action against his employer, alleging violation of the ADA and unlawful retaliation under ERISA Section 510, among other claims. Defendant Interstate counterclaimed against LeBarron for conversion and civil theft, and filed a motion to dismiss LeBarron’s claims. The district court granted Interstate’s motion (as chronicled in Your ERISA Watch’s April 7, 2021 edition), after which Interstate made an offer of judgment to LeBarron in the amount of $10,000 pursuant to Federal Rule of Civil Procedure 68. LeBarron accepted and the district court entered judgment against Interstate in that amount, plus costs. However, LeBarron was not satisfied. He then appealed the district court’s dismissal of his ERISA claim to the Ninth Circuit. In this brief memorandum disposition, the appellate court rebuffed LeBarron, ruling that it had no jurisdiction to hear his appeal: “Here, the Rule 68 offer did not carve out Appellant’s ERISA claim, nor did Appellant’s Notice of Acceptance of that offer reserve any right to appeal. Accordingly, any interlocutory order regarding the ERISA claim merged into the final judgment, to which Appellant consented. Having so consented, Appellant has waived any right to bring the instant appeal, and we lack jurisdiction to hear it.”

Provider Claims

Second Circuit

Bianco v. ADP TotalSource, Inc., No. 23-CV-01054 (HG), 2024 WL 524378 (E.D.N.Y. Feb. 9, 2024) (Judge Hector Gonzalez). This suit involves approximately $160,000 in unreimbursed medical expenses for the cost of emergency brain surgery performed on Michael Bianco, a plan participant, by Dr. Miguel Litao. However, as the court notes, Mr. Bianco did not file suit. Instead, Dr. Farkas, the owner of the medical practice where Dr. Litao works, brought suit for plan benefits after the plan paid only $28,217.58 on a $190,000 claim. Dr. Farkas claimed he was Mr. Bianco’s attorney-in-fact pursuant to a power of attorney, despite the fact that the governing plan contained an anti-assignment clause. Under a line of cases in the Second Circuit, the court noted that “a physician who seeks to stand in the shoes of a patient of his practice is not a participant nor a beneficiary under the patient’s plan, and therefore has no cause of action under ERISA Section 502(a)(1)(B).” The court concluded that the reasoning of these cases was fully applicable in the circumstances presented. Therefore, the court held that because Dr. Farkas was using a power of attorney “to circumvent the plan’s unambiguous anti-assignment provision,” he lacked standing to bring suit for benefits. The court therefore granted defendants’ motion to dismiss.

Statute of Limitations

Second Circuit

Perlman v. General Elec., No. 22 CIV. 9823 (PAE), 2024 WL 664968  (S.D.N.Y. Feb. 16, 2024) (Judge Paul A. Engelmayer). Plaintiff Carol Perlman, a former employee of defendant GE, sued GE under New York state law and ERISA for wrongfully denying her claim for pension benefits and failing to produce documents regarding those benefits. The court granted GE’s first motion to dismiss and gave Perlman leave to amend. After she filed her amended complaint, GE moved to dismiss again. In this order the court granted GE’s motion and dismissed the case with prejudice. The court reiterated its ruling from the first motion that Perlman’s claim for benefits accrued in 2003-2004, when she was terminated by GE, and thus her suit was time-barred. Furthermore, Perlman’s amended allegations did not show that she was entitled to equitable tolling because GE did not make any misrepresentations to her about her benefits and her “inaction for well more than a decade is the antithesis of reasonable diligence.” As for Perlman’s statutory penalty claim, the court ruled that because Perlman did not personally request the documents (she alleged that a former colleague had done so), and because the documents at issue – her personnel file – were not covered by the statute, her claim lacked merit.

Venue

Ninth Circuit

Plan Adm’r of the Chevron Corp. Ret. Restoration Plan v. Minvielle, No. 20-CV-07063-TSH, 2024 WL 536277 (N.D. Cal. Feb. 9, 2024) (Magistrate Judge Thomas S. Hixson). Chevron initiated this interpleader action in the Northern District of California in order to determine the proper beneficiary under two Chevron employee benefit plans for one of its deceased employees. On one side are Anne Minvielle, the decedent’s sister, and her husband, who live in Louisiana. On the other is Martin Byrnes, who lives in France and contends that he is the surviving spouse of the decedent. The Minvielles filed a motion to transfer venue to the Western District of Louisiana, which was opposed by Byrnes. In this order, the court discussed the various factors involved. It noted that “neither party has any affiliation with California,” which “slightly favors transfer.” The convenience of witnesses (“often the most important factor”), however, weighed against transfer because Byrnes had identified ten witnesses in California. Furthermore, Chevron is headquartered in California, and even though it had been dismissed, “it may still be required to produce documentary evidence and provide testimony.” As for ease of access to evidence, the court noted that “relevant evidence is likely found in at least this District, London, and Louisiana,” and thus, this factor was neutral. Finally, the court noted that Byrnes had filed another action pending before it regarding the Chevron plans, and that the litigation had been pending for some time because of a stay related to the probate case in Louisiana. As a result, the court was more familiar with, and better situated to handle, the case than a new judge in Louisiana. The court conceded that granting the Minvielles’ motion would be more convenient for them, but “the possible inconvenience the Minvielles may suffer by continuing to litigate this case in California is not sufficiently strong to overcome the interests of justice that weigh against transferring this case.”