Cloud v. The Bert Bell/Pete Rozelle NFL Player Ret. Plan, No. 22-10710, __ F. 4th __, 2023 WL 6533182 (5th Cir. Oct. 6, 2023) (Before Circuit Judges Willett, Engelhardt, and Oldham)

In a stunning upset, the Bert Bell/Pete Rozelle NFL Player Retirement Plan obtained a last-minute victory in this longstanding disability lawsuit by former NFL running back Michael Cloud, who suffers from a debilitating neurological impairment.

After retiring from an seven-year NFL career during which he suffered numerous concussions, Mr. Cloud was awarded the lowest level of disability benefits under the NFL Plan in 2010. Following an award of Social Security disability benefits, he sought and was awarded a higher level of total and permanent disability benefits in 2014. Two years later, he sought but was denied the highest level of benefits under the Plan, which requires a claimant to show that he either became disabled within a year of retiring from the NFL or as a result of one or more concussions during his NFL career. Only 30 former players have ever been awarded these benefits, despite the well-documented prevalence of traumatic brain injuries stemming from concussions suffered by football players.  

In the June 29, 2022 edition of Your ERISA Watch, we reported on the scathing opinion of Judge Karen Gren Scholer faulting the Board of Trustees and other fiduciaries of the NFL Plan for how they handle the disability claims of former players such as Mr. Cloud. After allowing significant discovery and conducting a multi-day bench trial, both of which are extremely rare in ERISA benefit suits, the judge awarded Mr. Cloud the highest level of benefits, concluding that he had not been afforded a full and fair review of his claim for these benefits, and had proved that he was entitled to them. The district court faulted the Board, among other things, for failing to clearly identify the reasons for the denial, failing to consider all the evidence submitted with Mr. Cloud’s claim, giving deference to the denial by the original decisionmakers, deciding Mr. Cloud’s appeal along with one hundred others during a ten-minute pre-meeting, without review of hundreds or thousands of pages of documents in each claim file, and failing to refer Mr. Cloud for an examination by a neutral physician, which the district court determined was required by the Plan. 

None of this mattered much to the Fifth Circuit, which reversed the district court and ordered the court to enter judgment in favor of the Plan. The court of appeals began with the standard of review applicable to the Board’s denial. Because the Plan granted discretion to the Board, the Fifth Circuit applied abuse of discretion review to the Board’s decision, as had the district court. But unlike the district court, the appeals court found that the Board’s denial was reasonable and thus had to be affirmed under this standard because Mr. Cloud “could not and did not demonstrate changed circumstances” as required under the Plan to obtain a higher level of benefits.

The court of appeals noted that Mr. Cloud did not attempt to make a showing of changed circumstances when he appealed the initial denial of these benefits to the Board, but instead simply argued for a waiver of that requirement. Although Mr. Cloud pointed to evidence of changed circumstances – including a newly submitted doctor’s report from 2012, new or at least worsening symptoms or disabilities, and testimony about worsening behavioral problems from Mr. Cloud’s ex-wife – the court of appeals concluded that he waived these arguments by failing to raise them with the Board and because the evidence supporting them was not in the claims record and so could not be a basis for concluding that the Board abused its discretion in denying benefits.

The court of appeals likewise rejected Mr. Cloud’s argument that the Board was precluded from relying on the lack of proof with regard to changed circumstances because the Board “has never adhered to a defined or uniform interpretation of ‘changed circumstances.’” Although the Fifth Circuit found “some superficial merit to this argument,” it nevertheless concluded that the Board’s varying interpretations were “not significant, and Cloud does not show how he can meet the standard for ‘changed circumstances’ under any of those definitions anyway.” Moreover, despite the “bleak picture” in the record of how the Board conducts appeals, the Fifth Circuit found that the definition the Board ultimately settled on in the litigation was reasonable and fair given what it termed the ”absolute discretion” granted to the Board under the terms of the Plan. Thus, although the court of appeals “shar[ed] the district court’s unease with a daunting system that seems stacked against ex-NFLers,” it nevertheless concluded that the Board “did not abuse its discretion in denying reclassification due to Cloud’s failure to show ‘changed circumstances.’”

The Fifth Circuit then turned to whether remand to the plan administrator for full and fair review was the appropriate remedy. The court concluded that it was not because a remand would be a “useless formality” given the lack of any “clear and convincing evidence” of changed circumstances.

The court of appeals thus ended where it began, concluding that “[a]lthough the NFL Plan’s review board may well have denied Cloud a full and fair review, and although Cloud is probably entitled to the highest level of disability pay,” he was not entitled to receive those benefits because he had failed to show changed circumstances between his 2014 claim and his 2016 claim. Twice, the Fifth Circuit “commend[ed]” the district court for “expos[ing] the disturbing lack of safeguards to ensure fair and meaningful review of disability claims brought by former players who suffered incapacitating on-the-field injuries, including severe head trauma” and for “chronicling a lopsided system aggressively stacked against disabled players.” But instead of holding the Plan accountable for these shocking shortcomings by its fiduciaries, only the disabled player was made to pay the price of his surely less blameworthy failures. Indeed, given this unfair system, the Fifth Circuit was undoubtedly right that a remand would be a useless formality. What was not a useless exercise was the district court’s decision giving Mr. Cloud the full and fair review he had been denied by the Plan and granting him the benefits to which it was obvious he was entitled when given a level playing field and a fair shot.            

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

Arbitration

Second Circuit

Duke v. Luxottica U.S. Holdings Corp., No. 21-CV-06072 (JMA) (AYS), 2023 WL 6385389 (E.D.N.Y. Sep. 30, 2023) (Judge Joan M. Azrack). Plaintiff Janet Duke, on behalf of a putative class of participants and beneficiaries of the Luxottica Group Pension Plan, commenced this action against the plan’s fiduciaries for breaches of their duties under ERISA. She alleged that defendants have relied on outdated and unreasonable mortality assumptions in calculating benefits which has led to reduced pension payments under the plan. Defendants responded to the complaint by moving to compel arbitration, or in the alternative, to dismiss the complaint for lack of subject matter jurisdiction and for failure to state a claim. The court began its decision with defendants’ motion to dismiss for lack of Article III standing. Defendants’ subject matter jurisdiction challenge was split into two parts. First, defendants raised a facial challenge to Ms. Duke’s standing to pursue claims for losses to the Plan under ERISA Sections 409 and 502(a)(2). They argued that Ms. Duke cannot maintain these claims thanks to the Supreme Court’s precedent in Thole v. U.S. Bank N.A., 140 S. Ct. 1615 (2020). The court agreed with defendants “that Thole controls and mandates dismissal of her claims brought under §§ 409(a) and 502(a)(2),” given that this case also involves a defined benefit plan. It went on to explain that the benefits Ms. Duke receives in her joint and survivor annuity are “not tied to the value of the plan” meaning she cannot show recovery to the plan, which is the only form of recovery available under these subsections of ERISA. Thus, like the plaintiffs in Thole, the court found that Ms. Duke lacks Article III standing to assert these claims, and therefore granted the motion to dismiss them. The court then turned to defendants’ second challenge to Ms. Duke’s subject matter jurisdiction wherein they argued that Ms. Duke lacks Article III standing to pursue the rest of her claims because, they contended, her monthly benefit would actually be lower if the plan used the longevity charts and actuarial assumptions she argues should be employed. This argument, the court found, was premised on a question of fact, not properly resolved when considering a motion to dismiss. As a result, this aspect of defendants’ motion to dismiss was denied. The court then moved on to consider defendants’ motion to compel arbitration. It concluded that the arbitration provision was valid, enforceable, and that Ms. Duke’s ERISA claims fall within its scope. The court rejected Ms. Duke’s argument that the provision could not be enforced due to the agreement’s class action waiver provision. Here, the court found that because it “dismissed Plaintiff’s claims under § 502(a)(2) for lack of standing,” concerns around the fact the arbitration agreement takes away a statutory right to plan wide relief do not apply or need to be considered in this instance. Consequently, the court granted the motion to compel arbitration on all remaining claims and stayed the case pending arbitration. The decision did not address defendants’ motion to dismiss pursuant to Rule 12(b)(6).

Attorneys’ Fees

Second Circuit

Maddaloni v. Pension Tr. Fund of the Pension, No. 19-cv-3146 (RPK) (ST), 2023 WL 6457756 (E.D.N.Y. Oct. 4, 2023) (Judge Rachel P. Kovner). Plaintiff Mark Maddaloni sued the Pension Trust Fund of the Pension, Hospitalization and Benefit Plan of the Electrical Industry and its board of trustees, seeking judicial review of defendants’ denial of his application for disability pension benefits. On January 3, 2023, the court granted summary judgment in favor of Mr. Maddaloni. Mr. Maddaloni then moved for an award of attorneys’ fees. In a report and recommendation issued on September 1, 2023, Magistrate Judge Tiscione recommended that the court award Mr. Maddaloni attorneys’ fees in the amount of $153,661.15. The parties each filed objections to the Magistrate’s report. In this order, the court adopted the report in part and awarded Mr. Maddaloni attorneys’ fees totaling $120,560.47. The court reduced the hourly rates set by Magistrate Tiscione, which ranged from $250 per hour to $600 per hour, and altered these amounts to a range of $250 per hour to $420 per hour instead. It found these slightly lower hourly rates were more appropriate for similar work in the Eastern District of New York. However, the court did not alter the report’s recommendation that the hours be reduced overall by 33% as neither party objected to this aspect of the Magistrate’s report. The court did diverge from the report by determining that the attorneys should be compensated for the hours they spent on their fee application, and therefore added these hours to its lodestar calculation. Applying these new metrics, the court was left with its total fee award of $120,560.47, which it then ordered defendants to pay.

Seventh Circuit

Zall v. Standard Ins. Co., No. 21-cv-19-slc, 2023 WL 6388781 (W.D. Wis. Sep. 29, 2023) (Magistrate Judge Stephen L. Crocker). After finding success on appeal to the Seventh Circuit, plaintiff Eric Zall ultimately won his action against Standard Life Insurance Company seeking reinstatement of his long-term disability benefits. Now, Mr. Zall seeks an award of attorneys’ fees and costs under Section 502(g)(1). He requested an award of $69,907.50 in attorneys’ fees and $3,402.22 in costs. The court awarded Mr. Zall fees and costs, agreeing that he was entitled to a fee award under ERISA given his success on the merits, but reduced the requested amounts. To begin, the court rejected Standard’s argument that Mr. Zall was not eligible for fees because his victory in the Seventh Circuit was “procedural.” To the contrary, the court found “Zall’s success in establishing that Standard failed to afford him a full and fair review by violating an ERISA rule was as much as ‘merits issue’ as his ultimate right to benefits under the plan.” This was all the more true, the court pointed out, because Standard reversed its decision and reinstated Mr. Zall’s long-term disability benefits. Not only was the court satisfied that Mr. Zall met the threshold requirement of success on the merits, but it also found that an award of fees and costs was appropriate here under the Seventh Circuit’s five-factor test, especially given that a fee award here “may deter Standard from similar errors in the future, which will confer a benefit on plan participants.” Nevertheless, when determining the appropriate amount of fees the court altered the lodestar by exercising its discretion to apply an overall 40% reduction to the fees sought. The court did not disturb the rates sought by the attorneys, ranging from $550 per hour for the most senior attorney on the case to $100 an hour for a law school clerk, nor the number of hours for the work expended during litigation. The rates requested, the court found, were in line with or even “lower than the rates they command in the Wisconsin market from paying clients for similar work.” The court also found that the hours counsel submitted “were reasonably expended on this case,” and properly documented. However, because Mr. Zall ultimately succeeded on appeal based on “his regulatory argument,” which was not the primary focus of his arguments and legal theory presented in the district court, the court held that “it is accurate and fair to describe Zall’s success, as measured against the time spent, as partial, such that a reduction in the lodestar is warranted.” Therefore, the court applied the 40% reduction and awarded Mr. Zall’s attorneys a fee award of $41,944.50. Finally, the court reduced the requested costs from $3,402.22 to $907. The remaining $2,495.22 in costs requested were determined to be unrecoverable under 28 U.S.C. § 1920.

Tenth Circuit

D.K. v. United Behavioral Health & Alcatel-Lucent Med. Expense Plan for Active Mgmt. Emps., No. 2:17-CV-01328-DAK, 2023 WL 6444258 (D. Utah Oct. 3, 2023) (Judge Dale A. Kimball). On June 22, 2021, the court entered judgment in favor of the plaintiffs of this mental healthcare benefits action and subsequently awarded them prejudgment interest, attorneys’ fees, and costs. United Behavioral Health, along with the other defendants of this action, appealed both the court’s summary judgment and fee decisions. On appeal, the Tenth Circuit affirmed both the district court’s grant of plaintiffs’ motion for judgment and its order of benefits, interest, costs, and fees. Your ERISA Watch summarized the Tenth Circuit’s decision and featured it as our case of the week in our May 24, 2023 edition. And, as we’ve been covering here, the impact of the D.K. ruling has been felt reverberating throughout district courts in the Tenth Circuit, leading to many more favorable outcomes for ERISA healthcare plaintiffs thanks to the circuit court’s holding that fiduciaries are required to engage in meaningful dialogues with ERISA claimants and their healthcare providers. Now plaintiffs have moved for an award of appellate attorney fees pursuant to ERISA Section 502(g)(1). Plaintiffs requested a fee award totaling $85,950. The court granted in part plaintiffs’ motion, ordering defendants to pay attorneys’ fees totaling $67,475. As a preliminary matter, the court rejected defendants’ notion that the court lacks jurisdiction to issue an award of appeal-related attorneys’ fees. To the contrary, the court stated that under Section 502(g) it has “broad discretion in awarding attorney’s fees in connection with trial court litigation and appellate litigation.” Furthermore, the court was once again satisfied that factors weighed in favor of awarding attorneys’ fees to plaintiffs because defendants abused their discretion in denying D.K.’s claim, they have the ability to satisfy a fee award, awarding fees could deter defendants and other ERISA fiduciaries from acting in a similar manner in the future, and an award of fees here “will have a beneficial effect in this area of the law and benefit plan participants and beneficiaries.” Moreover, the court emphasized that plaintiffs prevailed in their defense of the appeal and ultimately succeeded in reversing the healthcare claims denials. However, despite holding that plaintiffs are entitled to a fee award, the court did exercise its discretion to reduce the amount requested. As far as the hours billed, the court only reduced 3.2 of the 232.3 hours billed. These 3.2 hours were for time attorney Brian King spent discussing plaintiffs’ severance agreement, which is not subject to this lawsuit. The remaining 229.1 billed hours were found to be reasonable and therefore were not disturbed by the court. But the court did reduce the hourly rates requested. Attorney Brian King sought an hourly rate of $600 per hour and associate attorney Tara Peterson sought an hourly rate of $300 per hour. The court lowered these amounts to those it had previously determined to be reasonable in its first fee decision. Those rates were $450 per hour for Mr. King and $250 per hour for Ms. Peterson. Multiplying these hourly rates by the hours spent, the court was left with its ultimate lodestar of $67,475, which it then awarded to plaintiffs and ordered defendants to pay.

Breach of Fiduciary Duty

Second Circuit

Antoine v. Marsh & McLennan Cos., No. 22 Civ. 6637 (JPC), 2023 WL 6386005 (S.D.N.Y. Sep. 30, 2023) (Judge John P. Cronan). Participants of the Marsh & McLennan Companies Savings and Investment 401(k) Plan, individually and on behalf of the plan, have sued Marsh & McLennan Companies, Inc., its board of trustees, and its benefit, investment, and administrative committees and individual board and committee members for breaches of fiduciary duties. Plaintiffs allege that defendants selected and retained an imprudent suit of ten BlackRock LifePath Index Funds which resulted in low investment returns. In addition, plaintiffs also challenge the selection and retention of another fund, the Mercer Emerging Markets Fund, which they claim also underperformed comparators. They allege this Fund was selected by defendants because of its affiliation with Marsh & McLennan. Defendants moved to dismiss the complaint pursuant to Federal Rules of Civil Procedures 12(b)(1) and 12(b)(6). The court granted defendants’ motion in this decision. It held that the plaintiffs lacked standing to bring claims regarding the Mercer Fund because they did not personally invest in it. Accordingly, the court found that it lacked jurisdiction over plaintiffs’ claims to the extent they were premised on the selection and retention of the Mercer Fund. As for the BlackRock target date funds, the court found that “Plaintiffs’ claims of underperformance miss the mark.” Given the fact that prudent fiduciaries need to be focused on long-term outcomes of investments, the court found that plaintiffs’ short-term indications of underperformance were insufficient to infer a breach, particularly as snapshots of other periods of time indicated that the challenged suite of funds was performing at or above the levels of comparators. Thus, “the underperformance alleged here, in the absence of additional indicia of imprudent decision-making, does not demonstrate dramatic enough underperformance to justify an inference of imprudence.” And, as the court found the underlying imprudence claim insufficient, it also dismissed the derivative failure to monitor and knowing breach of trust claims. Therefore, the entirety of plaintiffs’ complaint was dismissed. The decision ended with the court granting plaintiffs leave to amend their complaint to resolve the pleading deficiencies identified in this order.

Third Circuit

Volz v. General Motors, LLC, No. 22-cv-3471, 2023 WL 6521002 (E.D. Pa. Oct. 5, 2023) (Judge Chad F. Kenney). Plaintiff Wade Volz began working for General Motors, LLC in 1999. At that time, he enrolled himself and his then wife, decedent Tina Volz, in GM’s ERISA-governed benefit plans, including its life insurance plan. From 1999 until Ms. Volz’s death in late 2020, GM automatically deducted premium payments from Mr. Volz’s paycheck for Ms. Volz’s life insurance coverage. Under the terms of the plan, however, only spouses are considered dependents eligible to retain coverage. The plan states that coverage needs to be converted to an individual policy within 31 days of a divorce. Mr. and Ms. Volz divorced in 2013. Mr. Volz maintains that he notified GM’s HR representative, and by extension the company, of his divorce in 2013. He was informed at the time that he could maintain insurance benefits for Ms. Volz. He elected to terminate her health and dental insurance, but to continue her life insurance coverage. He says that at no point in time did GM advise him that he needed to convert the life insurance policy. Instead, he continued to make the required premium payments up until Ms. Volz’s death. In this breach of fiduciary duty action, Mr. Volz asserts that he would have submitted the required conversion or portability application on the life insurance policy had he been properly informed at the time of his divorce. He did not learn that Ms. Volz’s eligibility for coverage had ended until after he applied for benefits under the plan following her death in January 2021. Following an unsuccessful administrative appeal of the denied claim Mr. Volz commenced this action against GM alleging a claim for breach of fiduciary duty under Section 502(a)(3). The parties filed cross-motions for summary judgment. The court entered judgment in favor of GM, siding with it on three key issues: (1) Mr. Volz could not establish the required elements for a breach of fiduciary duty claim under ERISA; (2) his claim was barred by ERISA’s six-year statute of limitations; and (3) Mr. Volz knowingly and voluntarily signed a separation and release agreement and thus waived his ERISA claims against GM. Starting with the elements of a breach of fiduciary duty claim, the court found that Mr. Volz “cannot show that Defendants breached a fiduciary duty or that any alleged misrepresentation was material.” It held that GM administered the claim according to the terms of the plan and that it was unreasonable for Mr. Volz to rely on the 2013 misrepresentation and continued premium deductions because he was in possession of the plan document and it was his “duty to inform himself of the details of the plan, including coverage, and he failed to do so.” Next, the court agreed with GM that the claim was untimely as the “date of the last action” occurred in 2013 when the misrepresentation was made to Mr. Volz. Thus, the court found that Mr. Volz was required “to have filed his Complaint in 2019,” notably before Ms. Volz’s death. Because he filed his complaint in 2022, the court held that the claim was barred by the statute of limitations, despite acknowledging that Mr. Volz did not have actual knowledge of the breach “until his claim was rejected in January 2021.” Finally, the court brushed aside Mr. Volz’s arguments why the separation and release waiver he signed with GM was not valid. Instead, the court concluded that the language of the waiver was clear and specific, Mr. Volz had a 45-day window to review the document, the agreement instructs signees to seek counsel prior to agreeing to its terms, and Mr. Volz received a lump sum payment and health benefits in exchange for the release. The court was satisfied that the totality of these circumstances supported the proposition that Mr. Volz knew or should have known that he was waiving all claims, including his breach of fiduciary duty ERISA claim here. Accordingly, the court sided with GM on all three matters and thus granted its motion for summary judgment and denied Mr. Volz’s cross-motion for summary judgment.

Sixth Circuit

Principal Life Ins. Co. v. Howard-Kembitzky, No. 2:22-cv-3421, 2023 WL 6392446 (S.D. Ohio Oct. 2, 2023) (Magistrate Judge Chelsey M. Vascura). Principal Life Insurance Company commenced this interpleader action to determine the proper beneficiary of ERISA-governed life insurance proceeds for decedent Francis Joseph Kembitzky, III. One of the two potential beneficiaries, defendant Denise Howard-Kembitzky, Mr. Kembitzky’s surviving spouse, filed a counterclaim against Principal Life for breach of fiduciary duty under ERISA. In her counterclaim, Ms. Howard-Kembitzky contends that Principal breached its fiduciary duties by incorrectly advising her and her late husband “that no updated beneficiary form would be necessary for Denise to receive Francis’s life insurance proceeds.” Principal Life moved to dismiss the counterclaim for failure to state a claim pursuant to Rule 12(b)(6). In this decision the court denied Principal’s motion to dismiss the counterclaim. Holding that Ms. Howard-Kembitzky sufficiently alleged that Principal Life acted in a fiduciary capacity by answering the couple’s questions regarding the beneficiary designation and that Ms. Howard-Kembitzky and Mr. Kembitzky reasonably relied on Principal Life’s misrepresentations, the court concluded that Ms. Howard-Kembitzky adequately stated a claim for relief. Finally, the court held that Ms. Howard-Kembitzky was not bringing a repackaged benefits claim. Rather, the court agreed with Ms. Howard-Kembitzky that Principal Life’s alleged misrepresentations prevented her from becoming entitled to benefits, meaning this claim is appropriately brought as a fiduciary breach claim under Section 502(a)(3). For these reasons, the court denied Principal Life’s motion to dismiss the counterclaim.

Seventh Circuit

Baumeister v. Exelon Corp., No. 21-cv-6505, 2023 WL 6388064 (N.D. Ill. Sep. 29, 2023) (Judge Robert Blakey). Participants of The Exelon Corporation Employee Savings 401(k) Plan on behalf of themselves and a putative class of similarly situated individuals have sued Exelon, its oversight and investment committees, and its board of directors for violations of ERISA including breaches of fiduciary duties and prohibited transactions in connection with a suite of underperforming proprietary target date, U.S. equity, international equity, and fixed income funds, as well as high-cost administrative and recordkeeping services. According to the complaint, the proprietary funds were costly, in terms of fees, and underperformed funds with similar investment goals and strategies. Plaintiffs allege that these funds served the interests of Exelon at their expense. In addition, plaintiffs challenged defendants’ choice of recordkeeper and service provider and alleged that the plan’s arrangements with its recordkeepers were overly costly and that the true costs were not disclosed to the participants. Defendants moved to dismiss the complaint for failure to state a claim. The court granted the motion to dismiss in this decision. It agreed with defendants that plaintiffs failed to offer sound comparators for the fees and funds and that it could not infer from the complaint that their actions were breaches of fiduciary duties or prohibited transactions. It went on to express that the underperformance data plaintiffs provided did not in and of itself give rise to a reasonable inference of imprudence for many of the funds, as the court noted that these funds were mostly in “the middle of the pack.” Regarding the recordkeeping and administrative expenses of the plan, the court wrote “Plaintiffs have failed to allege that their proposed comparators offered the same services as the Plan at a lower price per participant.” Finally, the court concluded that plaintiffs’ duty of loyalty claims “merely recast their duty of prudence claims,” and that plaintiffs’ views of what constitute prohibited transactions under ERISA was “nonsensical,” because these were essential services for the plan. Based on the foregoing, the court entirely granted the motion to dismiss, but did so without prejudice, allowing plaintiffs the opportunity to amend.

Eleventh Circuit

Gamache v. Hogue, No. 1:19-CV-21 (LAG), 2023 WL 6444275 (M.D. Ga. Sep. 29, 2023) (Judge Leslie A. Gardner). Former employees of Technical Associates of Georgia, Inc. (“TAG”) and participants of the TAG Employee Stock Ownership Plan (“ESOP”) have sued a series of company executives, administrative committee members, and other plan fiduciaries for engaging in prohibited transactions and for breaching fiduciary duties under ERISA. Specifically, plaintiffs allege that a series of loan refinancing, stock transactions, and asset transfers that took place in 2011 changed the stock ownership share in the plan, caused losses to the plan, and were fraudulently concealed from the non-fiduciary participants of the plan. In this action they seek various forms of relief, including voiding the prohibited transactions, disgorgement of profits from the transactions, removal of defendants as plan fiduciaries, and a constructive trust over the proceeds from the transactions at issue. Defendants moved for summary judgment. In response, plaintiffs moved for partial summary judgment. The court began its discussion by addressing defendants’ summary judgment motion. Defendants presented three grounds for summary judgment. First, they argued that plaintiffs’ claims are time-barred. Second, they argued that the executives who received stock shares through the transactions were not acting in fiduciary capacities at the time. Third, they argued that ERISA does not govern plaintiffs’ claims, and that even if it did govern their claims those claims fail on their merits because the transactions at issue do not constitute prohibited transactions under ERISA. To begin, the court agreed with plaintiffs that there is a genuine issue of material fact about whether their claims are timely given the evidence they presented indicating that defendants actively sought to conceal their actions and hide pertinent details about the 2011 transactions from plan participants. Thus, the court denied defendants’ summary judgment motion based on the timeliness of the claims. Next, the court held that there are genuine issues of material fact about whether the defendants were acting in their fiduciary capacities in relation to the challenged transactions. The court also identified genuine issues of material fact as to whether the loan primarily benefited the participants and beneficiaries of the ESOP and whether defendants caused the ESOP to engage in transactions which constituted improper transfers of plan assets to parties in interest. Last, the court stated that “each of the Defendants was a party to the transaction and was extensively involved,” and that it was therefore likely that defendants had the requisite knowledge to establish the breaches alleged. Accordingly, the court entirely denied defendants’ motion for summary judgment, and so moved on to plaintiffs’ partial motion for summary judgment. Plaintiffs sought summary judgment in their favor that defendants engaged in a prohibited transaction in violation of ERISA Section 406(b)(3). They also moved for judgment holding that defendants’ Section 408(b)(3) exemption defense fails as a matter of law as to their 406(b)(3) claim. Finally, plaintiffs sought a declaration from the court that “all Defendants’ ‘affirmative defenses’ other than their exemption and statute of repose defenses fail as a matter of law because they are not affirmative defenses.” First, the court once again held that there exist genuine issues of material fact as to the fiduciary element of the 406(b)(3) claim which preclude awarding summary judgment. Second, the court granted plaintiffs’ motion for judgment “solely to the extent that Defendants seek to assert the ERISA § 408(b)(3) exemption defense to a prohibited transaction pursuant to ERISA § 406(b)(3), [as] such defense fails as a matter of law.” Last, the court declined to enter summary judgment on defendants’ mislabeled defenses. Thus, other than its grant of summary judgment to plaintiffs on the one narrow issue pertaining to defendants’ prohibited transaction exemption defense, the court denied plaintiffs’ partial motion for summary judgment too.

Disability Benefit Claims

Second Circuit

Quigley v. Unum Life Ins. Co. of Am., No. 22-CV-5906 (JPO), 2023 WL 6387021 (S.D.N.Y. Sep. 29, 2023) (Judge J. Paul Oetken). Plaintiff James Quigley commenced this ERISA action against Unum Life Insurance Company of America for wrongful denial of long-term disability and waiver of life insurance premium benefits. The parties filed cross-motions for summary judgment with the court. In this order the court denied both motions, concluding that genuine issues of material facts exist which preclude awarding summary judgment to either party. Instead, the court decided that it will conduct a bench trial on the papers to resolve all material factual disputes. As an initial matter, the court agreed with Mr. Quigley that the appropriate review standard in this case is de novo. The court based this decision both on the plan language and on Unum’s own position up until now that it “does not dispute application of de novo review in this case.” Adopting a more deferential review standard now, the court held, would prejudice Mr. Quigley as he had proceeded under the assumption that the review standard was a settled matter and thus was not given the opportunity to conduct discovery into any potential conflicts of interest. However, even under de novo review, the court ultimately concluded that neither party is entitled to summary judgment because there are genuine issues of material fact over Mr. Quigley’s occupation and what duties are properly considered part of his occupation, as well as “dueling facts and medical opinions on whether Quigley’s conditions rise to the level of disability under Unum’s plans.” Given that a reasonable fact finder could reasonably adopt either party’s position on these issues, the court found that at this stage these disputes between the parties are over material facts making resolution on cross-motions for summary judgment inappropriate.

Third Circuit

Breen v. Reliance Standard Life Ins. Co., No. 22-3688, 2023 WL 6396051 (E.D. Pa. Oct. 2, 2023) (Judge Chad F. Kenney). Plaintiff Lisa Breen commenced this ERISA action seeking judicial review of defendant Reliance Standard Life Insurance Company’s decision to terminate her long-term disability benefits which she was receiving for focal epilepsy, seizures, and resulting cognitive impairments. The parties filed cross-motions for summary judgment. Before the court could rule on the benefits claim, it needed to settle the appropriate review standard. The parties agreed that the policy grants Reliance Standard discretion. However, Ms. Breen argued that Reliance Standard committed procedural violations by failing to explain its disagreements with her treating health care and vocational professionals and the differing conclusion of the Social Security Administration. While the court agreed that defendant’s explanations of disagreement were “vague” it did not find this flaw to constitute a “severe procedural violation” necessary to alter the standard of review to de novo. Accordingly, the court stuck with the deferential arbitrary and capricious review standard, and proceeded to its analysis of the benefit termination decision. In the end, the court concluded that a reasonable person could agree with Reliance Standard’s conclusion that Ms. Breen could perform certain sedentary jobs and that she therefore no longer qualified for disability benefits under the “any occupation” standard. The court did not fault Reliance Standard for favoring the opinions of its reviewing doctors over those of Ms. Breen’s treating doctors. Nor did it take issue with Reliance’s disregard of Ms. Breen’s self-reported symptoms, including her seizure log. Furthermore, the court stressed that Reliance Standard was not required to order Ms. Breen to undergo an independent medical examination, and that its decision not to was not an abuse of discretion. As for defendant’s “boilerplate reasoning for disagreeing with the Social Security Administration’s determination,” the court stated that nearly identical language had been upheld in the Third Circuit, meaning it does not in and of itself establish that the decision was arbitrary and capricious. Finally, the court found that Reliance was allowed to not give weight to a vocational assessment that Ms. Breen provided as part of her appeal. Based on the foregoing, the court found that defendant had not abused its discretion in terminating Ms. Breen’s long-term disability benefits, and that to “hold otherwise would require this Court to substitute its judgment for that of the Defendant, which is impermissible.” Thus, summary judgment was granted in favor of Reliance Standard.

Eleventh Circuit

Johnson v. Reliance Standard Life Ins. Co., No. 1:21-cv-02900-SDG, 2023 WL 6379609 (N.D. Ga. Sep. 29, 2023) (Judge Steven D. Grimberg). Plaintiff Cheriese D. Johnson sued Reliance Standard Life Insurance Company seeking judicial review of its denial of her claim for long-term disability benefits. The parties cross-moved for judgment under the arbitrary and capricious review standard. There was no dispute among the parties that Ms. Johnson is totally disabled from a rare autoimmune disorder called scleroderma. Their dispute instead centered on whether Ms. Johnson’s claim was properly denied under the plan’s pre-existing conditions exclusion. Ms. Johnson argued that she was not diagnosed with scleroderma until after the look-back period had ended. On the other hand, Reliance Standard maintained that Ms. Johnson, despite not yet being diagnosed, was receiving treatments and seeing doctors during the look-back period covered by the exclusion and that this treatment was for symptoms attributable to her yet to be diagnosed autoimmune disease. Under deferential review, the court was left with “the inescapable conclusion that Reliance Standard’s benefits determination was supported by reasonable grounds.” It held that the exclusion does not require a diagnosis to have been made in order to apply, but instead requires that a claimant be treated during the look-back period for the illness that caused the total disability. The court was satisfied that these circumstances applied here, and that the exclusion was appropriately relied upon to deny benefits. Despite voicing sympathy for Ms. Johnson and her situation, the court found that Reliance’s denial was neither arbitrary nor capricious and that “it was entirely consistent with an Eleventh Circuit case interpreting the exact same policy language.” Accordingly, the court granted Reliance Standard’s summary judgment motion and denied Ms. Johnson’s motion for judgment.

Discovery

Fourth Circuit

Taekman v. Unum Life Ins. Co. of Am., No. 1:22cv605, 2023 WL 6460377 (M.D.N.C. Oct. 4, 2023) (Magistrate Judge L. Patrick Auld). In this disability benefits action, plaintiff Dr. Jeffrey Taekman seeks to recover long-term disability benefits under his ERISA-governed plan offered by his former employer, Duke University Medical Center, and insured by Unum Life Insurance Company of America. Dr. Taekman moved to compel discovery and also moved for an extension of the discovery period. The court denied both motions in this decision. It emphasized that it has “limited ability to consider material outside the administrative record in adjudicating Plaintiff’s claim,” particularly because the de novo standard of review applied. Holding that there was no exceptional circumstance present in this instance where additional evidence outside the record will be necessary in order to conduct an adequate de novo review of the denial, the court concluded that it would only look at the evidence that was before defendants during the administrative claims process. Moreover, the court stressed, “Plaintiff has produced no evidence, despite multiple opportunities to do so, that the administrative record Defendant filed does not contain all materials Plaintiffs submitted and/or Defendant considered in its claim adjudication.” Based on the foregoing, the court denied Dr. Taekman’s motions.

Fifth Circuit

Pedersen v. Kinder Morgan, Inc., No. 4:21-CV-3590, 2023 WL 6441948 (S.D. Tex. Sep. 29, 2023) (Magistrate Judge Dena Hanovice Palermo). Plaintiffs in this pension benefits dispute have sued Kinder Morgan, Inc. and other plan fiduciaries over their interpretation of the retirement plan’s language regarding unreduced early retirement benefits. In a previous discovery order, the court directed defendants to produce documents drafted by Kinder Morgan’s benefits director which defendants claimed were protected under attorney-client privilege. Defendants sought reconsideration of that order, again maintaining that these documents are privileged and thus non-discoverable. This time, defendants’ arguments proved successful, leading the court to change its earlier position and grant the motion to reconsider pursuant to Rule 54(b). The court “previously found that the Memoranda were not protected by attorney-client privilege because the Memoranda were prepared by a non-lawyer, contained facts known to him and his proposed solutions under the Plan, were not addressed to anyone, and did not indicate on their face that they sought legal advice, incorporated legal advice, or provided legal advice.” Now, however, based on supplemental evidence submitted by defendants, the court concluded that the challenged documents were in fact protected by attorney-client privilege, as the benefits director has clarified that “he prepared the Memoranda at the sole direction of legal counsel for the sole purpose of securing legal advice or providing legal advice.” The court disagreed with plaintiffs that this assertion of privilege was conclusory and unconvincing. Thus, defendants’ motion was granted. Nevertheless, the court clarified to defendants that “the privilege does not protect disclosure of facts,” and directed counsel to ensure that plaintiffs have access to the underlying facts described in the Memoranda.

Sixth Circuit

Sweeney v. Nationwide Mut. Ins. Co., No. 2:20-cv-1569, 2023 WL 6383453 (S.D. Ohio Sep. 29, 2023) (Judge James L. Graham). A group of current and former Nationwide Mutual Insurance Company employees who participate in its retirement savings plan have sued a series of related Nationwide defendants for breaches of fiduciary duties, prohibited transactions, and violations of ERISA’s anti-inurement provision in connection with their actions administering the retirement savings program. Defendants moved for summary judgment “five months before the close of discovery and nine months before the dispositive motion deadline.” In response to defendants’ motion, plaintiffs requested relief under Rule 56(d) to allow them to conduct further discovery prior to responding to the summary judgment motion. In this decision the court granted plaintiffs’ 56(d) motion and denied, without prejudice, defendants’ summary judgment motion. The court stated that plaintiffs did not delay discovery and have been diligent in their seeking of discovery. Conversely, it held that “Defendants have not timely complied with discovery requests.” As for whether the discovery plaintiffs are seeking is relevant and would have an impact on the court’s ruling on defendants’ summary judgment motion, the court concluded that it was because the information “is material evidence that the Plaintiffs can use to prove their claims against Defendants.” The court agreed with plaintiffs that the discovery they have requested is necessary to rebut defendants’ defenses, allegations, and assertions, and that the information plaintiffs may unearth through discovery “could be used as evidence and impact the ruling on the summary judgment motion.” In sum, the court was satisfied that plaintiffs met their burden to show that discovery is still needed for them to be able to properly respond to defendants’ summary judgment motion and that they are entitled to further time to conduct this discovery. For these reasons the court granted plaintiffs’ motion for relief under Rule 56(d).

ERISA Preemption

Second Circuit

Rosen v. UBS Fin. Servs., No. 22-cv-03880 (JLR), 2023 WL 6386919 (S.D.N.Y. Sep. 29, 2023) (Judge Jennifer L. Rochon). Plaintiff Emily Rosen brought this state law action to recover damages related to an ERISA-governed life insurance policy, an ERISA-governed 401(k) plan, and a nonqualified deferred compensation plan belonging to her late domestic partner, decedent Erich Frank. Mr. Frank was diagnosed with colon cancer. His diagnosis prompted him to take steps to change his beneficiary designations on his life insurance and 401(k) plans and to name a beneficiary on his deferred compensation plan. He intended for Ms. Rosen to be the beneficiary of all three plans, and sent emails and made phone calls indicating this intent. His employer, UBS Financial Services Inc., and the administrator of the plans, Alight Solutions LLC, sent emails regarding Mr. Frank’s beneficiary designation desires. They then sent Mr. Frank beneficiary certification forms for him to complete in order to finalize the process and formalize his selection of Ms. Rosen as his beneficiary. There is no dispute that these forms were never completed or returned in the three days between when they were sent and Mr. Frank’s death. Following his death, probate court proceedings and three consolidated interpleader actions commenced. In the interpleader actions, the court granted in part and denied in part cross-motions for summary judgment, ruling that Mr. Frank’s mother remained the named beneficiary of the ERISA life insurance and 401(k) policies and was therefore entitled to the benefits, but that Ms. Rosen was entitled to benefits under a UBS resource management account. Shortly after the interpleader actions wrapped up, Ms. Rosen commenced this lawsuit in state court asserting claims of negligence, breach of fiduciary duty, and breach of good faith and fair dealing against UBS, Alight, and two individual fiduciary defendants. Defendants removed the action to federal court, and have since moved for summary judgment. They argued they are entitled to summary judgment on the state law claims seeking damages related to the 401(k) and life insurance plan because these claims are expressly preempted by ERISA. They additionally argued that they are entitled to summary judgment on the remaining claims related to the deferred compensation plan because Ms. Rosen lacks standing to sue for damages resulting in diminished inheritance under a will. The court agreed on both counts. With regard to Section 514(a) preemption, the court held that the state law claims relate to the ERISA-governed plans, expressly rely on their terms, seek damages equal to the amounts under the plans, and implicate core ERISA entities and functions. Accordingly, these state law claims, the court concluded, seek to rectify wrongful denial of benefits under ERISA-regulated plans, are not based on any independent legal duty, and are therefore expressly preempted by ERISA. In sum, the court found that this case represents a classic example of an attempt to side-step ERISA’s statutory mechanisms to challenge denial of benefits through state law causes of action, which is the exact thing Congress was cognizant of and wished to prevent when it designed ERISA’s preemption provisions. Defendants’ motion for summary judgment was thus granted.

Fifth Circuit

Springman v. Diamondback E&P LLC, No. PE:23-CV-00014-DC-DF, 2023 WL 6461246 (W.D. Tex. Oct. 4, 2023) (Magistrate Judge David B. Fannin). On October 10, 2019, while on the job working as a crude oil transport driver for defendant Pilot Travel Centers, LLC, plaintiff Jeff Springman became engulfed in toxic vapors and lost consciousness on top of an oil tank. This accident left Mr. Springman with “terminal physical injuries.” Mr. Springman commenced this action against his employer for negligence in connection with its lack of work safety procedures, including his exposure to hazardous and toxic chemicals without the appropriate safety equipment. He also claimed that Pilot failed to adequately train him about the dangers of exposure to these gases and chemicals. As relevant here, Mr. Springman also brought a negligence claim based on an allegation that the company has policies and procedures in place to prevent and discourage employees from receiving necessary medical care or treatment in the event of an injury stemming from such an exposure in the workplace. Stemming from this claim, Pilot removed the action to federal court. It maintained that “the inclusion of the claim for negligence in ‘having policies or procedures that prevented or discouraged employees from receiving reasonably necessary medical care and treatment’ relates to Pilot’s Work Injury Benefit Program,” which is an ERISA-governed plan. Thus, the employer alleged that this cause of action directly related to its ERISA-regulated benefits plan and is therefore preempted, creating federal jurisdiction. Mr. Springman moved to remand his action. The court denied the motion to remand. It held that Pilot timely removed the case to federal court and that the claim is preempted by ERISA as the “policies and procedures” the claim is challenging are terms of the ERISA-governed plan meaning the claim cannot be resolved without relying on and consulting the terms of the ERISA policy. Accordingly, the court concluded that both prongs of the Davila preemption test were satisfied, as Mr. Springman has standing and could have brought his claim under ERISA, and as the cause of action at issue does not implicate any independent legal duty. This was true, the court found, because “Plaintiff challenges the administration of the program, ‘inextricably linking’ his denied attempts to seek medical treatment to the terms of the Benefit Program.” The court therefore concluded that it has subject matter jurisdiction over this action and so denied the motion to transfer the case back to state court.

Eighth Circuit

Dames v. Mercy Health, No. 4:22-cv-01360-SEP, 2023 WL 6460299 (E.D. Mo. Sep. 30, 2023) (Judge Sarah E. Pitlyk). Plaintiffs are residents of the state of Missouri who were involved in car accidents and then sought and received emergency medical treatment in defendant Mercy Health hospitals. They allege in their state law action that defendants were required to submit medical bills to their health insurance providers, but rather than do this the hospitals sought payment directly from either the plaintiffs or their auto insurance providers. Plaintiffs allege that the hospitals engaged in this practice because the amounts they would have received from the health insurance plans would have been lower than the rates they charge patients directly. “That practice allowed Defendants to avoid receiving lower payments under the Provider Agreements and deprived Plaintiffs of the benefit of the bargain they were entitled to under their health insurance plans.” Basing their complaint on this alleged scheme, plaintiffs brought both individual and class claims against Mercy Health in Missouri state court. Defendants removed the action to the federal judicial system. Now plaintiffs have moved for remand. In this order the court granted the motion to remand the action back to state court. It found that remand was required because ERISA does not completely preempt their state law claims because the claims implicate independent legal duties and resolution of the claims is not dependent on the terms of the ERISA healthcare plans. Accordingly, the court held that defendants failed to meet their burden of establishing federal jurisdiction and remanded the action back to state court.

Medical Benefit Claims

Second Circuit

J.M. v. United Healthcare Ins., No. 21 Civ. 6958 (LGS), 2023 WL 6386900 (S.D.N.Y. Sep. 29, 2023) (Judge Lorna G. Schofield). A father and his adolescent son, plaintiffs J.M. and M.M., sued United Healthcare Insurance Company and United Behavioral Health to challenge their denials of claims for M.M.’s stays at two residential treatment facilities for the treatment of mental health disorders. Plaintiffs asserted two claims: a claim for recovery of benefits, and a claim for violation of the Mental Health Parity and Addiction Equity Act. The parties filed competing motions for summary judgment. The court granted the United defendants’ motion for judgment and denied J.M. and M.M.’s summary judgment motion. Under the arbitrary and capricious review standard, which the court would not alter to de novo review after holding that “Defendants were not required to engage with the opinions of M.M.’s treating professionals,” the court concluded that substantial evidence supported defendants’ decision to deny the claims. Remarkably, the court downplayed M.M.’s suicidal ideation and the detailed descriptions he gave to his psychiatrist about “the actions he would proceed with” to follow through with his plans. Instead, the court wrote, “[w]hile some reports noted passive suicidal ideation, they did not indicate intent, plan or serious selfharm urges.” The court focused on the fact that M.M. took trips home during his two stays to see his family and even “took a two-week trip to Hawaii with his family” as indications that “M.M. could have managed his symptoms at a lower level of care with the support of his family.” Crediting the views of United’s reviewers, the court concluded that it was not arbitrary and capricious for United to deny the claims for M.M.’s treatments for failing to meet the plan’s definition of medical necessity. Accordingly, the court affirmed the denials. As for the Parity Act violation claim, the court found that plaintiffs lacked constitutional standing because defendants switched their reliance on the allegedly violative Optum Guidelines and ultimately affirmed the denial of benefits under a new tool called CASII, which plaintiffs did not allege violated the Parity Act. As a result, the court held, “[e]ven if the Optum Guidelines violated the Parity Act…that violation did not injure Plaintiffs because the ultimate denial of benefits was based on the CASII guidelines, which are not challenged.” For these reasons, plaintiffs were unsuccessful on both causes of action and United was granted judgment in its favor.

Pension Benefit Claims

First Circuit

Field v. Sheet Metal Workers’ Nat’l Pension Fund, No. 22-1824, __ F. 4th __, 2023 WL 6418639 (1st Cir. Oct. 3, 2023) (Before Circuit Judges Barron, Lynch, and Howard). Plaintiff-appellant David A. Fields appealed a district court decision granting summary judgment in favor of the Sheet Metal Workers’ National Pension Fund in his suit seeking reinstatement of terminated disability pension benefits under Section 502(a)(1)(B). The district court concluded that the fund had not abused its discretion in terminating the benefits based on its finding that Mr. Field had engaged in disqualifying “covered employment” as defined by the plan. On appeal, Mr. Field argued that the fund had not meaningfully engaged with evidence he submitted to the contrary and that this constituted an abuse of discretion. The First Circuit disagreed with Mr. Field in this decision and affirmed the district court’s entry of summary judgment for the fund. The court of appeals stressed that the fund was entitled to exercise its discretion when weighing conflicting evidence and interpreting the plan document, and that its conclusion that Mr. Field no longer qualified for benefits in this case was therefore not arbitrary and capricious. Accordingly, the First Circuit held that the defendants acted reasonably and that their decision to terminate benefits based on a conclusion that Mr. Field failed to maintain eligibility to receive the disability pension benefit was supported by substantial evidence.

Pleading Issues & Procedure

Ninth Circuit

Cevasco v. Allegiant Travel Co., No. 2:22-cv-01741-JAD-DJA, 2023 WL 6464867 (D. Nev. Oct. 4, 2023) (Judge Jennifer A. Dorsey). On behalf of himself and a proposed class of participants of the Allegiant 401(k) Retirement Plan, plaintiff Robert Cevasco has sued Allegiant Travel Company for violating its fiduciary duties under ERISA. In his complaint Mr. Cevasco challenges Allegiant’s choice of actively managed default investment funds for the plan, its failure to select lower share class versions of these funds, and its use of two simultaneous recordkeepers for the plan, each of whom charged participants allegedly exorbitant fees, both directly and via revenue sharing. Allegiant moved to dismiss the fund-based claims pursuant to Federal Rule of Civil Procedure 12(b)(1), arguing that Mr. Cevasco lacks Article III standing to pursue these claims as he never personally invested in the funds at issue. The court denied the partial motion to dismiss in this decision. It held that because Mr. Cevasco has standing to pursue his fee-based claims, he also has standing to challenge the funds he did not invest in on behalf of absent class members. The court was clear that in the Ninth Circuit, the “class standing” approach Allegiant advocated has been explicitly rejected in favor of a “class certification” approach which “holds that once the named plaintiff demonstrates her individual standing to bring a claim, the standing inquiry is concluded and the court proceeds to consider whether Rule 23(a) prerequisites for class certification have been met.” Therefore, based on this precedent, the court held that the appropriate time for “comparative analysis between the theories of liability or claims applicable to” Mr. Cevasco, who did not personally invest in the challenged funds, and other unnamed participants who did, will be when it comes time to evaluating the adequacy and typicality requirements of Rule 23(a) as part of a future class certification motion. Thus, Mr. Cevasco’s breach of fiduciary duty claims based on theories of liability stemming from the funds were not dismissed by the court for lack of standing.

Dedicato Treatment Ctr. v. Salt River Pima-Maricopa Indian Cmty., No. 2:22-cv-04045-CAS-Ex, 2023 WL 6528735 (C.D. Cal. Oct. 2, 2023) (Judge Christina A. Snyder). A treatment center specializing in the treatment of substance abuse, plaintiff Dedicato Treatment Center, Inc. sued the sovereign nation of the Salt River Pima-Maricopa Indian Community under state law to challenge the payments the Community made to it for care it provided to a patient insured under the Community’s self-funded healthcare plan, which the treatment facility claims were only a small fraction of the cost of care. The Community moved to dismiss the complaint pursuant to Rule 12(b)(1), and further moved for sanctions under Rule 11. The decision began with the motion to dismiss for lack of subject matter jurisdiction. The court agreed with the community that the treatment center failed to establish diversity and federal question jurisdiction. With regard to diversity jurisdiction the court held that Indian tribes are not a “citizen” of a state that may be sued in diversity. As for federal question jurisdiction, the court wrote that “[r]egardless of whether or not Congress has authorized ERISA suits against tribes, plaintiff has made it clear that its ‘claims are contract claims, not ERISA claims.’ State law claims do not provide a basis for federal question jurisdiction.” Therefore, the court granted the Community’s motion to dismiss for lack of subject matter jurisdiction. Nevertheless, the court did not sanction plaintiff under Rule 11, stating that it was “not convinced that the filing of this suit was so clearly improper or unreasonable as to justify an award of sanctions.”

ABC Servs. Grp. v. Aetna Health & Life Ins. Co., No. 22-55631, __ F. App’x __, 2023 WL 6532648 (9th Cir. Oct. 6, 2023) (Before Circuit Judges Graber, Mendoza, and Desai). In a succinct unpublished decision, the Ninth Circuit affirmed a district court’s dismissal with prejudice of plaintiff ABC Services Group, Inc.’s ERISA healthcare benefit action. The Ninth Circuit agreed with the lower court that as a non-provider third party “second assignee” ABC Services lacked derivative standing to bring claims for benefits under ERISA. Although the court of appeals recognized the right of plan participants and beneficiaries to assign their claims to healthcare providers, it explained that healthcare providers cannot then reassign their patient’s claims to non-providers with “no relationship to the patients,” and that if they do so, that entity cannot then file those claims on behalf of patients. This is true, the Ninth Circuit clarified, “[b]ecause allowing this type of transaction ‘would be tantamount to transforming health benefit claims into a freely tradable commodity.’” Even setting aside ABC Services’ inability to sue, the court of appeals added that its complaint would fail, as it could not state its claims. “After years of litigation and multiple amended complaints, Plaintiff asserts near-identical, generalized allegations on information and belief against all Defendants. But the allegations do not identify any Defendant’s particular plan terms conferring a benefit on patients, nor do they specify any Defendant’s particular conduct in denying such a benefit.” For these reasons, the district court’s dismissal without leave to amend was affirmed in its entirety on appeal.

Tenth Circuit

T.C. v. Aetna Life Ins. Co., No. 4:22-cv-00042, 2023 WL 6377552 (D. Utah Sep. 29, 2023) (Judge David Nuffer). This lawsuit was originally filed by plaintiffs L.C., a plan beneficiary who was denied mental healthcare treatments, and her father, V.C., the plan participant. L.C. and V.C. asserted claims for recovery of benefits under Section 502(a)(1)(B) and violation of the Mental Health Parity and Addiction Equity Act under Section 502(a)(3) against the Emergent Biosolutions Inc. Benefit Plan and its insurer Aetna Life Insurance Company. After this lawsuit was filed, V.C. sadly died. A new amended complaint was subsequently filed which again named L.C. as a plaintiff, and added two new plaintiffs, her mother, T.C., and her uncle, G.C., who is V.C.’s legal representative and trustee of her late father’s estate. Defendants moved to dismiss pursuant to Federal Rule of Civil 12(b)(1), arguing that none of the three plaintiffs have constitutional standing to bring their claims and that plaintiffs T.C. and G.C. also lack statutory standing under ERISA. The court disagreed with defendants regarding plaintiffs G.C. and L.C., but agreed about plaintiff T.C. First, the court found that G.C. plausibly alleged that he has both Article III and statutory standing given the complaint’s assertions that he represents V.C.’s estate. Taking these factual allegations as true, the court was satisfied that G.C. is the appropriate substitute in this action for his late brother, and as there was no dispute that V.C. had standing to bring this lawsuit “dismissal of G.C.’s claims is not appropriate.” The court also held that L.C., as the beneficiary who was denied coverage, has standing to bring her ERISA action. Moreover, the court wrote, “Defendants have not cited any authority for the proposition that an ERISA beneficiary whose treatment coverage was denied lacks constitutional standing, and this court is not aware of any such authority.” However, the same was not true for T.C. Although T.C. is L.C.’s mother, the court stated that the complaint does not include any allegations to support an inference that L.C. was a plan participant or beneficiary, nor that she is in any way financially responsible for the costs of L.C.’s care. Accordingly, the court found the complaint lacking in required details about T.C.’s status under the plan or any plausible injury-in-fact, meaning that T.C. lacks both statutory and constitutional standing and therefore cannot bring her claims. Thus, T.C. was dismissed as a plaintiff in this action, leaving L.C. and G.C. as the two remaining plaintiffs.

Provider Claims

Third Circuit

Hudson Hosp. OpCo. v. Cigna Health & Life Ins. Co., No. 22-4964 (ES)(JBC), 2023 WL 6439893 (D.N.J. Oct. 3, 2023) (Judge Esther Salas). Three affiliated hospitals in New Jersey have sued Cigna Health and Life Insurance Company and related corporate entities under ERISA and state law seeking reimbursement of over $135 million in benefit claims as assignees of thousands of beneficiaries of Cigna-administered healthcare plans, including ERISA-governed plans. The Cigna defendants moved to dismiss the complaint. Their motion was granted by the court in this decision without prejudice. First, the court dismissed plaintiffs’ Section 502(a)(1)(B) claims for benefits, finding that “Plaintiffs do not point to, describe, or quote any language from the actual Cigna Plans that, they claim, entitle them to reimbursement for elective services on thousands of allegedly underpaid claims.” It agreed with Cigna that plaintiffs needed to sufficiently tie their claims for greater payments to specific plan terms and provisions, and that the hospitals failed to do so here. In order to state claims under Section 502(a)(1)(B), the court instructed plaintiffs that they will need to identify specific provisions of the plan that provide for the right to the benefits they seek. Second, the court dismissed plaintiff’s breach of fiduciary duty claims asserted under Section 502(a)(3). It held that all of the Section 502(a)(3) claims “derive from the allegation that Defendants underpaid them in violation of the relevant Plans – an allegation that…Plaintiffs have failed to properly plead. All of Plaintiffs’ claims for breach of fiduciary duty involve the Defendant not following Plan provisions or procedures, improperly making benefit determinations under the Plans, refusing to settle the benefit claims, violating the laws in their application of the Plan’s payment provisions, and misusing fund which allegedly should have been used to pay Plaintiffs’ benefits. But, as described above, Plaintiffs have not adequately alleged that Defendants violated any provision of the Plans or underpaid Plaintiffs under any specifically identified provision of the Plans. Thus, Plaintiffs’ § 502(a)(3) claims fail as well.” Finally, because the court dismissed the ERISA claims, it declined to exercise supplemental jurisdiction over the remaining state law causes of action.

Statute of Limitations

Sixth Circuit

Marshall v. Metropolitan Life Ins. Co., No. 22-cv-12218, 2023 WL 6388630 (E.D. Mich. Sep. 22, 2023) (Judge Shalina D. Kumar). Plaintiff David Marshall brought suit against Metropolitan Life Insurance Company (“MetLife”) for breach of contract stemming from its denial of his claims for long-term disability benefits and continuation of life insurance benefits under two ERISA-governed plans. MetLife moved to dismiss Mr. Marshall’s suit as time-barred. It argued that Mr. Marshall was required to file suit within the plan’s three-year statute of limitations, and because he did not do so his action is untimely. Mr. Marshall responded that Michigan’s six-year limitations period for breach of contract actions applies and that his suit was timely filed. In addition, he argued that an insurance regulating state law, referred to as the “Michigan Rule,” renders the plan’s three-year statute of limitations period unenforceable because the Michigan Rule prohibits insurance contracts from contractually shortening limitations periods and voids any insurance contract clause, provision, or terms that do so. The court agreed with Mr. Marshall. It wrote that because “the Plan contractually shortened the limitations period by about three years, the Rule would render the Plan’s limitations periods unenforceable.” Moreover, the court held that the Michigan Rule is not preempted by ERISA because ERISA’s savings clause exempts the Michigan Rule as it is designed to regulate insurance. Thus, the court was satisfied that Mr. Marshall timely brought his suit within the application limitations period and therefore denied MetLife’s motion to dismiss.