D.K. v. United Behavioral Health, No. 21-4088, __ F. 4th __, 2023 WL 3443353 (10th Cir. May. 15, 2023) (Before Circuit Judges Carson, Lucero, and Rossman)

Good news this week for healthcare claimants in the Tenth Circuit. This case, in which a family successfully challenged a denial by United Behavioral Health of residential mental health treatment for a very young minor, engendered a surprising amount of controversy and competing amicus curiae briefs. Or perhaps the controversy here is not so surprising given the Ninth Circuit’s recent decisions, and the pending rehearing petition in Wit v. United Behavioral Health.

The history of this young person’s mental health struggles is heartbreaking. Suffice it to say that by the time A.K. was in middle school, she had a long history of anxiety, depression, and self-harm, including multiple suicide attempts.

The history of her parents’ attempts to get her treatment covered under her father’s healthcare plan is nearly as heartbreaking. According to the court, during a 20 month period in 2012 and 2013, “A.K. moved between emergency rooms, inpatient facilities, and day programs. …[and] United repeatedly scaled down A.K.’s treatment.” And, as the court saw it, “[b]ecause she was moved to lower-level care upon stabilization or slight improvement, she lacked the stability necessary to develop the skills to succeed outside of a 24-hour care setting.” Thus, in late 2013, on the advice of her doctors that she needed long-term residential treatment, A.K.’s parents applied for a “case exception” for approval of 12 months of residential treatment. Despite the “strong recommendations” of her physicians and other treatment providers, United issued five denials of the family’s claim with five different explanations.

The family filed suit, asserting that United acted arbitrarily and capriciously in denying A.K.’s benefit claim and breached its fiduciary duty by failing to provide full and fair review. The district court agreed, finding that United abused its discretion in numerous ways, including by failing to engage with the opinions of her doctors, failing to include reasoned analysis or specific citations to the medical records, and offering inconsistent and shifting rationales for its denial. Bucking the trend in many recent decisions, the district court simply ordered United to pay for this treatment rather than remanding for further review.

United appealed. Joined by the ERISA Industry Committee as amicus curiae, United first argued that, in reviewing A.K.’s claims, it was not required to engage with the opinions of  her doctors because the claims regulation applicable to healthcare claims does not expressly include this requirement. The Tenth Circuit sensibly rejected this argument, holding, as A.K. and the Department of Labor (DOL) urged, that United could not simply “shut its eyes” to the opinions of four of A.K.’s treating physicians by failing to provide any explanation for its rejection of these opinions. The court agreed with DOL that the newer regulations applicable to disability claims were merely clarifying and making explicit a requirement already in ERISA and could not be read to preclude such a requirement for healthcare claims. Indeed, the court concluded that the regulations were merely minimum guidelines or baseline requirements, and that higher fiduciary standards were applicable to administrators reviewing claims.         

The Tenth Circuit likewise rejected United’s argument that its notes proved that it did engage with the medical opinions of A.K.’s doctors and that it was not required to do so in its denial letters. The court pointed out that “ERISA denial letters play a particular role in ensuring full and fair review,” and thus required United to engage in a “meaningful dialogue” by addressing the opinions of A.K.’s physicians in its denials.  

The appellate court next agreed with the district court that United’s failure to cite any facts in the medical record demonstrated conclusory reasoning, thus rendering United’s actions arbitrary and capricious. To the extent that the denials contained four references to A.K.’s specific condition, these references were unsupported by citation and, in the court’s view, could have just as easily supported a finding that A.K. needed further residential treatment. And again, the court stressed that any reasoning supporting denial must be contained in the denial letters themselves.

Finally, the Tenth Circuit concluded that the district court was justified and acted within its discretion in awarding benefits outright rather than remanding to United to take a “second bite at the apple” (or in this case, a sixth). The Tenth Circuit sided with courts that have found that a remand is inappropriate where a plan administrator has not acted consistently with its fiduciary role. The court concluded that in light of “the administrator’s clear and repeated procedural errors in denying this claim, it would be contrary to ERISA fiduciary principles to mandate a remand.”

It is hard to imagine how an ERISA fiduciary could expect to win an argument that it need not engage with the opinions of numerous treating physicians that unambiguously supported a young girl’s claim for lifesaving mental health treatment, that it need not put its reasoning in its denial letters, and that a district court lacked the authority to award benefits in these circumstances. It is gratifying that the Tenth Circuit soundly rejected these arguments.

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

Breach of Fiduciary Duty

Seventh Circuit

Tolomeo v. R.R. Donnelley & Sons, Inc., No. 20-cv-7158, 2023 WL 3455301 (N.D. Ill. May. 15, 2023) (Judge Mary M. Rowland). Two former employees of R.R. Donnelley & Sons Company and participants of its “mega” 401(k) plan, the R.R. Donnelley Savings Plan, sued their former employer, its board of directors, and its benefits committee, individually and on behalf of a putative class, for breaches of fiduciary duties under ERISA. Plaintiffs alleged that defendants breached their duty of prudence by allowing the plan to pay excessive recordkeeping fees to the plan’s recordkeeper, Great-West Life & Annuity Insurance, LLC. They also maintained that R.R. Donnelley and the board of directors breached their duty to monitor the benefits committee and ensure the plan was in compliance with ERISA. Defendants moved to dismiss the action. The court denied their motion in this decision. The court concluded that it could reasonably infer fiduciary breaches from the allegations set forth in plaintiffs’ complaint. In particular, the court disagreed with defendants’ statement that Hughes v. Northwestern Univ., 63 F.4th 615 (7th Cir. 2023), “did not announce a ‘new pleading standard.’” To the contrary, the court held that Hughes “itself described its ‘newly formed pleading standard.’” The Hughes standard states that “where alternative inferences are in equipoise…the plaintiff is to prevail on a motion to dismiss. This is because, at the pleadings stage, we must accept all well-pleaded facts as true and draw reasonable inferences in the plaintiff’s favor. A court’s role in evaluating pleadings is to decide whether plaintiff’s allegations are plausible – not which side’s version is more probable.” Under the new standard outlined in Hughes, the court found that plaintiffs plausibly alleged that the fees paid by the plan were excessive, as they were nearly three times as high as what other plans of similar sizes were paying for a standard package of services offered by all other comparable recordkeepers of “nearly identical level and quality.” Thus, accepting plaintiffs’ allegations as true and relying on their provided benchmarks, the court agreed that the fees could suggest an imprudent decision-making process. Finally, because the court declined to dismiss the breach of fiduciary duty claim it also denied the motion to dismiss the derivative failure to monitor claim. Accordingly, the court allowed plaintiffs’ complaint to proceed and denied the motion to dismiss for failure to state a claim.

Mazza v. Pactiv Evergreen Servs., No. 22 C 5052, 2023 WL 3558156 (N.D. Ill. May. 18, 2023) (Judge Sara L. Ellis). For the second time this week, the Seventh Circuit’s decision in Hughes v. Northwestern Univ. had a material impact on a putative breach of fiduciary duty class action. Here, plaintiff Michael Mazza, a former participant in the Pactiv Evergreen Services Inc. Employee Savings Plan, sued Pactiv Evergreen Services Inc. and its board of directors for breaching their duties of prudence and monitoring in connection with allegedly high recordkeeping and administrative fees paid per participant of the plan. Much like the Tolomeo lawsuit and its decision denying a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) (summarized above), the court here found that Mr. Mazza had pled enough facts to infer that the fees paid were excessive when compared to the bundled recordkeeping and administrative services offered to all mega defined contribution plans and that defendants failed to monitor the reasonableness of the fees or regularly solicit bids for cheaper service providers. Therefore, drawing inferences in favor of plaintiff, the court denied defendants’ motion to dismiss the complaint. The court wrote, “Mazza’s allegations align more closely with those the Seventh Circuit allowed to proceed in Hughes than those it rejected in Albert.” Finally, with regard to the alternative explanations that defendants offered to explain the reasonableness of the fees paid for the services rendered, the court stated that defendants’ accounts “warrant exploration during discovery, [but] they are not so obvious that they require dismissal of Mazza’s claim at the pleading stage, particularly given Mazza’s allegations that [recordkeeping and administrative] services are commoditized and that recordkeepers quote fees on a per participant basis without regard for individual differences in the services requested.” As a result, in a post-Hughes world plaintiffs are having a much easier time surviving in these types of actions in the Seventh Circuit. The court concluded that Mr. Mazza’s complaint sufficiently alleged breaches of the duty of prudence and monitoring and therefore allowed the entirety of the complaint to carry on to further stages of litigation.

Disability Benefit Claims

Sixth Circuit

Tranbarger v. Lincoln Life & Annuity Co. of N.Y., No. 22-3369, __ F. 4th __, 2023 WL 3527418 (6th Cir. May. 18, 2023) (Before Circuit Judges Cole, Nalbandian, and Readler). After an operation to remove her gallbladder, plaintiff-appellant Vickie Tranbarger became increasingly unwell and started suffering from chronic pain and fatigue. Although she attempted to continue working in her position as an accounts receivable manager, her physical condition eventually worsened to the point where she felt she could no longer work. She subsequently resigned from her job and applied for long-term disability benefits under her ERISA-governed insurance policy with Lincoln Life & Annuity Company of New York. Her claim for benefits was denied by Lincoln, which concluded that Ms. Tranbarger was not continuously disabled during the six-month elimination period following her resignation and therefore not entitled to benefits under the terms of her policy. In response, Ms. Tranbarger commenced this lawsuit seeking judicial review of the adverse decision. The district court granted judgment on the administrative record to Lincoln under the de novo review standard, concluding that Ms. Tranbarger failed to prove that she was in fact continuously disabled during the relevant timeframe. Left once again with an adverse decision regarding her disability benefits, Ms. Tranbarger appealed the district court’s decision to the Sixth Circuit Court of Appeals. In this order the Sixth Circuit found that under either clear error review or de novo review of the district court’s decision and factfinding its conclusion would be the same – that Ms. Tranbarger could not meet her burden of demonstrating that she was continuously unable to perform the duties of her occupation during the half-year period immediately after her resignation. “The bar set by the plan’s requirement of ‘continuous’ disability, it bears mentioning, is a high one. Even one day of partial work ability during the Elimination Period is enough to defeat Tranbarger’s claim.” Unfortunately for Ms. Tranbarger, the Sixth Circuit concluded that the evidence in her medical record could not overcome such a high bar, as her pain and fatigue levels fluctuated as did her work capabilities on any given day during the timeframe at issue. Although there was plenty of evidence that Ms. Tranbarger was not in good health at the time, the court of appeals ultimately concluded that “[a]mple evidence suggests [Ms. Tranbarger] could perform some work in some instances.” Accordingly, the Sixth Circuit affirmed the district court’s decision. Despite the court’s decision to sidestep the question of what standard of review to apply to the district court’s factfinding in this decision, Circuit Judge Nalbandian took the opportunity on his own to address the topic in his concurring opinion. It was Judge Nalbandian’s view that relevant case law in the circuit requires de novo review not only of the district court’s legal opinions but also of its factfinding. Nevertheless, Judge Nalbandian expressed in his opinion that if given a clean slate he would do things differently and would adopt clear error review to a district court’s factfinding in ERISA cases, “even when the district court is not taking new evidence but instead simply review the administrative record that was before the plan administrator,” because the district court is the trier of the facts, not the appeals court. Moreover, in his concurrence, Judge Nalbandian argued that the approach established to review ERISA benefits claims, including all of its unique carve-outs, like those for abuse of discretion review, seem to be in direct conflict with both the Federal Rules of Civil Procedure and Supreme Court precedent established in United States v. Tsarnaev, 142 S. Ct. 1024 (2022). He stated that if the Federal Rules of Civil Procedure were applied under their plain language to ERISA cases as they are to all other civil actions, “we would allow parties to build up a record with discovery under Rule 26, move for summary judgment under Rule 56, and conduct a bench trial under Rule 52.” Judge Nalbandian maintained that the way ERISA cases are currently handled do not follow the contours of the Federal Rules of Civil Procedure, and because of this, he contended that ERISA cases are potentially in conflict with the Supreme Court’s decision Tsarnaev which “prevents lower courts from creating prophylactic rules that contradict federal statutes or rules – like the Federal Rules of Civil Procedure.” Nevertheless, at the end of the day Judge Nalbandian’s concurrence, regardless of the interesting the points he made in it, did not alter the outcome in this matter, as he agreed with his fellow judges that the right outcome was reached in Ms. Tranbarger’s case.

Laake v. Benefits Comm., No. 21-4178, __ F. 4th __, 2023 WL 3559602 (6th Cir. May. 19, 2023) (Before Circuit Judges Siler, Nalbandian, and Readler). Plaintiff Sherry Laake brought an ERISA Section 502(a)(1)(B) action against the Western & Southern (“W&S”) Financial Group Flexible Benefits Plan and its benefits committee, hoping for a court order in her favor on her long-term disability benefit claim. After many years of litigation and a remand in 2019, Ms. Laake got just that in a 2022 district court judgment in favor, wherein she was awarded benefits, statutory penalties, attorneys’ fees, and costs. Defendants appealed the decision. The Sixth Circuit affirmed in this order. It began with defendants’ challenge to the district court’s 2019 remand decision. The court of appeals concluded that the district court had not erred in finding that Ms. Laake was denied a full and fair review, and that W&S acted arbitrarily and capriciously in determining that Ms. Laake was disabled for a mental health condition, namely chronic pain syndrome. The Sixth Circuit agreed with the lower court that nothing in Ms. Laake’s medical record supported defendants’ conclusion that she was disabled for a mental illness. Rather, both the district court and the appeals court agreed that Ms. Laake’s medical records established she suffered from chronic pain, arthritis, osteoporosis, sinus conditions, gastrointestinal problems, and chronic fatigue syndrome. Having addressed the district court’s 2019 remand order, the Sixth Circuit proceeded to analyze the district court’s 2022 judgment in favor of Ms. Laake. Here too it agreed with the conclusions of the district court. To begin, the Sixth Circuit stated that the district court appropriately altered the standard of review from abuse of discretion to de novo following the denial on remand because the benefits department rather than the benefits committee improperly adjudicated the claim, and the benefits department did not have the same grant of discretionary authority in the plan. Furthermore, under de novo review, the Sixth Circuit agreed that Ms. Laake sufficiently met her burden of proof through both subjective and objective evidence that she was disabled as defined by her plan, as all of her treating physicians agreed that her symptoms were disabling. In addition, the appeals court agreed with the lower court that Ms. Laake was disabled under the Department of Labor guidelines for “sedentary work.” “We are also mindful of the district court’s finding that W&S engaged in particularly ‘egregious conduct throughout the course of this litigation’ and its ‘potential’ conflict of interest in this matter, which may have impacted Laake’s benefits determination.” Thus, given the weight of the evidence in favor of a finding that Ms. Laake was disabled, the Sixth Circuit affirmed the district court’s conclusion that she satisfied her plan’s definition and was therefore entitled to benefits. This left the Sixth Circuit with only a few more matters to address: the awards of penalties, fees, and costs. First, regarding the district court’s imposition of statutory penalties under § 1132(c), the court of appeals found that the district court had not abused its discretion by awarding the maximum $110 per day penalty for W&S’s failure to provide Ms. Laake with plan documents upon written request. It agreed that the evidence established Ms. Laake requested these documents, including the plan, the summary plan documents, and the trust agreement, but was not provided them for the period covered by the district court’s imposed penalties. The Sixth Circuit also agreed with the district court that W&S’s delay in producing these documents prejudiced Ms. Laake. Finally, under ERISA Section 502(g)(1), the court of appeals disagreed with defendants that the Hardt factors did not justify an award of attorneys’ fees and costs. “Based on our review of the record and given the district court’s careful application of each pertinent factor, the court did not abuse its discretion in awarding Laake attorneys’ fees and costs.” For these reasons, the district court’s judgment was affirmed. However, Circuit Judge Readler dissented in part from his colleagues. It was Judge Readler’s opinion that defendants should have retained their abuse of discretion review standard following the 2019 remand as the benefits department and the benefits committee were essentially the same group of people. In addition, under abuse of discretion review, Judge Readler stated that W&S’s decision on remand should have been affirmed, as it was reasonable and supported by substantial evidence.

Ninth Circuit

Walker v. AT&T Benefit Plan No. 3, No. 22-55450, __ F. App’x __, 2023 WL 3451684 (9th Cir. May. 15, 2023) (Before Circuit Judges Murguia, Friedland, and Bennett). Plaintiff Kevin Walker appealed a summary judgment award from the District Court for the Central District of California in favor of the AT&T Umbrella Benefit Plan No. 3 and AT&T Services, Inc. in this ERISA long-term disability benefit action. Under the terms of the plan a participant is eligible to receive long-term disability benefits if an illness, injury, or other medical condition renders them unable to perform the duties of “any occupation or employment for which [they] are qualified or may reasonably become qualified, based on training, education or experience.” Although Mr. Walker was awarded Social Security Disability benefits, the district court concluded that the plan and the Social Security Act had different disability requirements. Specifically, only the plan’s definition of disability included work that Mr. Walker could become qualified for given reasonable training, whereas Social Security Disability benefits only require that a claimant is precluded from work that he or she is already qualified to perform. On appeal, the Ninth Circuit affirmed the denial of long-term disability benefits. First, the appellate court agreed with the district court that de novo standard of review applied given AT&T’s failure to provide Mr. Walker with a full and fair review thanks to the actions it took which violated several of ERISA’s procedural claims handling requirements. However, even under the less rigorous review standard, the Ninth Circuit and the district court agreed that Mr. Walker could not prove his entitlement to benefits under the terms of the plan as none of his treating doctors opined that his chronic pain left him unable to perform any work. Rather, “the record shows that Walker could work with some restrictions.” The Ninth Circuit also found that AT&T appropriately provided a list of jobs available in the market that Mr. Walker could have become qualified to perform even with his physical limitations and work restrictions. Accordingly, the court of appeals concluded that the district court had made no clear error and therefore affirmed its decision. Finally, the Ninth Circuit rejected Mr. Walker’s assertion that the district court had erred by concluding that he lacked standing to bring a claim for injunctive relief to prevent AT&T from placing an equitable lien on certain funds received as an offset to any long-term disability benefits that may have been overpaid. The Ninth Circuit again agreed with the lower court and found that any injury was entirely hypothetical and therefore insufficient to state a claim.

Medical Benefit Claims

Sixth Circuit

Davita Inc. v. Marietta Mem’l Hosp. Emp. Health Benefit Plan, No. 2:18-cv-1739, 2023 WL 3452353 (S.D. Ohio May. 15, 2023) (Judge Sarah D. Morrison). A dialysis care provider, DaVita, Inc., sued Marietta Memorial Hospital, its employee benefits plan, and the plan’s medical benefits manager alleging that the plan’s terms which dictate the reimbursement scheme for dialysis treatments are unlawful. This case was originally brought in December of 2018. Initially, DaVita asserted claims for a violation of the Medicare Secondary Payer Act, benefits under ERISA Section 502(a)(1)(B), several breach of fiduciary duty claims under ERISA, a co-fiduciary liability claim, a claim for knowing participation in a fiduciary breach, and a claim for violation of 29 U.S.C. § 1182(a)(1) for discriminating against plan participants and beneficiaries who need dialysis treatment. Defendants moved to dismiss the action. Their motion was granted in its entirety on September 20, 2019. DaVita then appealed. On appeal, the Sixth Circuit reversed in part and remanded to the district court for further proceedings on the ERISA benefits claim, the Section 1182 claim, and the Medicare Secondary Payer Act claim. Defendants then filed a petition for writ of certiorari with the Supreme Court. The Supreme Court granted cert, heard the case, and entered a decision in defendants’ favor. Now, with this case back in front of the district court, defendants have moved for judgment on the pleadings of the amended complaint based on the Supreme Court’s decision. Their motion was granted in part and denied in part in this order. First, the court granted the motion with regard to the Medicare Secondary Payer Act claim. It concluded that the Supreme Court’s decision clearly entitled defendants to judgment on this claim. The Supreme Court expressly held that the plan terms did not violate the Act as they were applied uniformly to all enrollees and because the plan did not “differentiate in the benefits it provides” to individuals requiring dialysis or take into account whether any individual participant or beneficiary was entitled to or eligible for Medicare. Further, to the extent the ERISA benefits claims were based on a violation of the Medicare Secondary Payer Act, defendants were also granted judgment on that claim as well. But the court specifically stated that the claims for benefits may proceed because they were also premised on the § 1182 claim and the assertion that “Defendants’ conduct constitutes a breach of the ERISA plans at issue.” Lastly, with regard to the claim for violation of 29 U.S.C. § 1182(a)(1), the court denied defendants’ motion. It concluded that the Supreme Court “neither discussed nor disturbed” the Sixth Circuit’s finding that DaVita stated a claim under § 1182, and that the Supreme Court’s finding with regard to the Medicare Secondary Payer Act did not foreclose the § 1182 claim. In fact, the court stated that the Supreme Court’s decision underscored the difference between the two statutes because it held that the Medicare Secondary Payer Act is a coordination of benefits statute and not an antidiscrimination statute like Section 1182. Accordingly, defendants were not granted judgment on this claim, and it was also allowed to proceed.

Eleventh Circuit

L.R. v. Cigna Health & Life Ins. Co., No. 6:22-cv-1819-RBD-DCI, 2023 WL 3479064 (M.D. Fla. May. 16, 2023) (Magistrate Judge Daniel C. Irick). Plaintiff L.R. sued Cigna Health & Life Insurance Company under ERISA Section 502(a)(1)(B) seeking judicial review of a healthcare claim. In this order the court denied L.R.’s motion to request judicial notice of a ProPublica article published this year titled How Cigna Saves Millions by Having Its Doctors Reject Claims Without Reading Them written by Patrick Rucker, Maya Miller, and David Armstrong. This fascinating investigative piece outlines the ways in which Cigna designed and utilized an algorithm and review process known as “PXDX” to automatically deny thousands of healthcare claims “on medical grounds without opening the patient file.” As one of the eighteen million people insured by Cigna, L.R. believed that the information in this article was “relevant to the facts and issues which are the subject of this proceeding.” The court, however, did not agree. In its strongly worded denial of L.R.’s motion, the court disagreed with plaintiff that the article established facts, or that it was relevant to the matters at hand. The court went so far as to imply that the ProPublica article was not a well-researched piece of journalism but rather a matter of opinion from a “business website,” the type of source whose accuracy had to be reasonably questioned. Finally, the court stated that Eleventh Circuit precedent does not allow courts to take judicial notice of newspaper articles “to determine the truth of the matters asserted in the article.”

For these reasons, the court was unwilling to take notice of the ProPublica piece and found that L.R. was not entitled to the requested relief.

Plan Status

Fifth Circuit

Anderson v. HMO La., Inc., No. 23-971, 2023 WL 3477325 (E.D. La. May. 16, 2023) (Judge Carl J. Barbier). Plaintiffs Charles Anderson and Tania Nicole Anderson, a husband and wife, sued their health insurance provider, defendant HMO Louisiana, Inc., in state court alleging that it wrongly declined to pay for and failed to justify its denial of benefits for gastric surgeries that Ms. Anderson required. Defendant removed the action to the federal court system. It argued that the healthcare plan at issue is a group benefit plan governed by ERISA. Thus, HMO Louisiana maintained that the court has federal question jurisdiction over the matter. The Andersons moved to remand their lawsuit. They argued that the insurance policy, which covers only the two co-owners of an LLC and not any employees, is not an ERISA plan. Defendant responded that the LLC is actually a partnership, and that Mr. Anderson is a bona fide partner making him an employee and the plan an ERISA plan under the relevant statutes. Applying the relevant ERISA regulation and Fifth Circuit precedent on the topic, the court sided with HMO Louisiana in this decision and denied the motion to remand. It found that the company, regardless of its title as an LLC, is a 50/50 joint partnership among the two co-owners, meaning that Mr. Anderson and his business partners are employees as defined under ERISA. In addition, the court concluded that because the two owners perform services on behalf of the company, they qualify as bona fide partners. “Therefore, the HMO Louisiana benefit arrangement in this case qualifies as an ERISA plan that provided medical care for the bona fide partners and their dependents, and this case was properly removed to this court.” Accordingly, the court maintained jurisdiction over the action and denied the motion to remand.

Carlson v. Northrop Grumman Severance Plan, No. 22-1764, __ F. 4th __, 2023 WL 3299703 (7th Cir. May. 8, 2023) (Before Circuit Judges Easterbrook, Hamilton, and Lee)

In this certified class action, former Northrop Grumman employees filed suit against the Northrop Grumman Severance Plan, contending that its refusal to pay severance benefits to them after their termination in a 2012 layoff violated ERISA.

Northrop contended that the plaintiffs were not entitled to severance benefits because the plan provided that a laid-off employee regularly scheduled to work at least 20 hours a week would only receive severance benefits if that employee “received a cover memo, signed by a Vice President of Human Resources (or his/her designee), with this document addressed to you individually by name.” According to Northrop, the plaintiffs did not receive the “HR Memo,” and thus they were not entitled to benefits.

Plaintiffs responded that this document was not a prerequisite for eligibility to receive benefits, but rather a ministerial document, the purpose of which was to verify eligibility for all employees who were scheduled to work at least 20 hours per week. In addition, they maintained that it had always been Northrop’s policy to provide an HR Memo to every laid-off employee who met the work hour requirements. This change, plaintiffs argued, interfered with their rights to receive benefits to which they were otherwise entitled. Accordingly, in this class action plaintiffs asserted three causes of action, under ERISA Sections 502(a)(1)(B), 510, and 502(a)(3), for benefits, retaliation, and breach of fiduciary duty.

When this suit was originally filed, the parties mutually agreed to have a magistrate judge preside over it and resolve the case. However, after the magistrate certified the class, Northrop had a change of heart. “[O]nce the suit was certified as a class action (on behalf of all laid-off employees who did not receive a HR Memo), and the stakes multiplied, Northrop Grumman asked the district judge to resume control. The judge obliged.”

Northrop’s strategy paid off. The district judge granted summary judgment in favor of Northrop, holding that the plan language granted the HR Department the discretion to selectively pick which employees, if any, would receive severance benefits upon termination. Moreover, the court agreed with Northrop that the plan language required participants to be designated as eligible for the plan by the HR Department and that receipt of the HR Memo was required to be eligible for benefits. Finally, the court found that ERISA does not prevent any welfare benefit plan from selectively determining recipients.

The plaintiffs appealed to the Seventh Circuit, which in this published decision affirmed the district court’s rulings in their entirety.

As an initial matter, the Seventh Circuit disagreed with plaintiffs that the district court’s decision to take over the case from the magistrate was an abuse of discretion. The Seventh Circuit agreed that class certification qualified as “good cause” to rescind the previously agreed-upon assignment. “We do not see any abuse of discretion. Class certification complicated and prolonged the litigation…Withdrawing a reference in order to make a simple legal decision that ends the suit has much to be said for it.” The Seventh Circuit stated that it made no difference who resolved the suit at the district court level because the “meaning of the Plan – like the meaning of ERISA – is a question of law.”

With that preliminary matter settled, the court proceeded to the merits of plaintiffs’ claims, “which do not require extended discussion.” The court held simply that plaintiffs’ claims failed because the plan made the receipt of severance benefits contingent on receipt of the HR Memo. Because plaintiffs and the other members of the class did not get an HR Memo, they were not eligible for benefits. And even assuming Northrop’s actions were self-serving, the Seventh Circuit stated that “the terms of welfare-benefit plans are entirely in the control of the entities that establish them. When making design decisions, employers may act in their own interests.” Given the discretionary authority spelled out in the plan, the Seventh Circuit found Northrop was acting well within its powers to pick and choose who received severance benefits.

The Seventh Circuit further ruled that Northrop’s alleged past actions in which it sent automatic HR Memos to all laid-off employees were irrelevant. “A person possessing discretion may change the way that discretion is exercised. So even if Northrop Grumman had announced the universal-severance-benefits norm that plaintiffs believe it had until October 2011, this would not prevent it from changing that approach.” Along these same lines, the Seventh Circuit concluded that past behavior did not create legal entitlement to the benefits and that “[r]ights under ERISA are not subject to estoppel[.]”

In sum, the appeals court concluded that the plaintiffs never qualified for benefits under the severance plan and thus they could not prevail on any of their ERISA claims. For these reasons the judgment of the district court was affirmed.

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

Arbitration

Eighth Circuit

Hursh et al. v. DST Sys., No. 4:21-9184-NKL, 2023 WL 3331799 (W.D. Mo. May. 8, 2023) (Judge Nanette K. Laughrey). Longtime readers of Your ERISA Watch may remember a series of decisions we summarized in 2021 and 2022 in which this court confirmed arbitration awards won by participants of DST Systems, Inc.’s 401(k) profit sharing plan arising from DST’s failure to monitor or rebalance the plan’s overly concentrated investments in a single stock. DST attempted to thwart confirmation of these awards at every step of the way. First, it attempted to transfer these cases to the Southern District of New York, arguing that the plaintiffs should be part of a mandatory class certified in New York. The court denied the motion to transfer, and, as stated above, approved the arbitration awards under the Federal Arbitration Act. DST then appealed these decisions to the Eighth Circuit. There, DST found some success. The arbitration awards were vacated. The Circuit Court concluded that the district court lacked federal question subject matter jurisdiction because the plaintiffs were seeking relief under an arbitration agreement, meaning their motions to confirm these awards did not implicate ERISA without a “look-through” approach, which is considered impermissible in the Eighth Circuit. The appeals court then remanded to the district court with instructions to determine whether it had diversity jurisdiction over each arbitration award by applying a case-by-case analysis. On remand from the Eighth Circuit this court entered a judgment confirming arbitration awards in favor of 55 plaintiffs over which it found it had diversity jurisdiction. These awards included attorneys’ fees, costs, and expenses. Now, the New York class action has reared its head once again. This time DST is attempting a workaround to this court’s judgments by settling the class action in New York under terms which would deprive the plaintiffs here of their judgments. Specifically, if approved, the settlement would eliminate the award of fees and costs, which is substantial, as the court pointed out, “the attorneys’ fees awards in the 55 judgments combined are almost twice as high as the damages awards combined.” In response, the court issued a preliminary injunction against DST to protect its judgments and enjoined DST or the attorneys acting on its behalf from entering into an agreement “that settles, disposes of, interferes with, invalidates…or otherwise compromises each such judgment, without the express written consent of each Confirmation Plaintiff in whose favor judgment was entered by this Court.” DST subsequently filed a motion to stay the injunction. An oral argument was held on the topic, after which the court issued this order denying DST’s motion. It concluded that DST failed to demonstrate any irreparable harm absent a stay, while the confirmation plaintiffs would be substantially injured if the injunction were to be stayed. The court held that DST’s intent was to deprive the court of jurisdiction over the cases despite its previous decision denying DST’s motion to transfer the cases. “Indeed, DST’s position that a lawyer, appointed by a court to represent a class, can give away a class member’s judgment to achieve class-wide settlement is both novel, and frankly, shocking to this Court.” Finally, it was the court’s position that allowing DST to strip a substantial portion of the value of plaintiff’s judgment in this way “would undermine public confidence in the predictability and reliability of the judicial system. Further…to allow DST to ignore orders of this Court would bless forum-shopping and undermine the Federal Arbitration Act and the judiciary’s role in enforcing arbitration agreements and awards.” Accordingly, the court would not sign off on DST’s proposed course of action and thus left its injunction in place.

Breach of Fiduciary Duty

Seventh Circuit

Su v. Johnson, No. 22-2204, __ F. 4th __, 2023 WL 3335733 (7th Cir. May. 10, 2023) (Before Circuit Judges Hamilton, Brennan, and Kirsch). The Secretary of Labor commenced this civil enforcement lawsuit against two ERISA fiduciaries, Shirley T. Sherrod and Leroy Johnson, for breaches of their fiduciary duties. In essence the Secretary argued that through a series of self-dealing transactions “Sherrod gave herself the keys to the bank vault, and Johnson let her use them,” including by paying a quarter of a million dollar bond from plan assets in a state lawsuit and through 123 individual transactions in which Ms. Sherrod withdrew $825,000 in plan assets over a five-year period. The district court granted judgment in favor of the Secretary and entered a permanent injunction against the defendants to remove them as fiduciaries. Additionally, the district court appointed an independent fiduciary to terminate the plan, evaluate all previous distributions and transactions, and to issue distributions to the eligible participants and beneficiaries. Defendants appealed. In this order the Seventh Circuit affirmed. Simply put, the court of appeals concluded that the undisputed facts proved that the defendants were plan fiduciaries, that they breached their duties of care, loyalty, prudence, and to act in accordance with plan documents, and that these breaches caused harm to the plan. Moreover, the Seventh Circuit stated that the district court was well within its powers in awarding the injunctive relief it did, stating that defendants “are fortunate that the relief against them has thus far been relatively modest.” Finally, the Circuit Court concluded that the district court’s denial of defendants’ motion for leave to amend to bring a statute of limitations argument was not a reversible error. It held that the Secretary did not have actual knowledge of the breaches at issue that would have triggered the three-year statute of limitations and that defendants’ documents in support of their position did not prove otherwise. Accordingly, the district court’s grant of summary judgment and the equitable relief it awarded were affirmed.

ERISA Preemption

Sixth Circuit

Lawrence E. Moon Funeral Home v. Metropolitan Life Ins. Co., No. 22-13116, 2023 WL 3431226 (E.D. Mich. May. 12, 2023) (Judge Judith E. Levy). The Lawrence E. Moon Funeral Home sued Metropolitan Life Insurance Company (“MetLife”) in state court seeking payment for funeral services it provided out of proceeds from an ERISA-governed life insurance plan. MetLife removed the action to federal court. It argued that the state law claims were preempted by ERISA. On March 27, 2023, the court ordered MetLife to show cause why this case should not be remanded back to state court for lack of subject matter jurisdiction. MetLife filed its response in opposition to remand, voicing its preemption arguments. However, the court was not persuaded by MetLife’s arguments, concluded in this order that it lacks subject matter jurisdiction, and remanded the case. First, regarding express preemption, the court stated that under Sixth Circuit precedent “preemption under § 1144(a) cannot provide a basis for removal to federal court,” and that MetLife did not meet its burden to overcome the well-pleaded complaint rule. The court stated that preemption was not evident on the face of the complaint itself. “Defendant’s own brief makes clear that § 1144(a) provides the basis for its defense, not the basis of Plaintiffs’ complaint.” Next, the court found that the complaint was not completely preempted by ERISA because the funeral home is not a beneficiary with a colorable claim and therefore would have been unable to assert a cause of action under Section 502(a)(1)(B).  “Moreover, Plaintiffs’ complaint requests that the Court prevent distribution of any proceeds directly to the beneficiaries.” Thus, the court concluded that it lacked jurisdiction over the lawsuit and found that remanding to state court for further proceedings was therefore the appropriate course of action.

Seventh Circuit

King v. King, No. 3:23-CV-355-NJR, 2023 WL 3346974 (S.D. Ill. May. 10, 2023) (Judge Nancy J. Rosenstengel). Following the death of Shaun King, Lincoln National Life Insurance Company distributed benefits from his ERISA group life insurance policy to the named beneficiary, Mr. King’s ex-wife, Angela King. Mr. King’s daughter and the administrator of his estate, Shaunice King, sued both Angela and Lincoln in state court believing the benefit distribution was in direct conflict with the terms of Shaun and Angela’s divorce decree. Shaunice King asserted two causes of action: a claim of unjust enrichment and a claim under Illinois’ Marriage and Dissolution of Marriage Act. Angela and Lincoln removed the action to federal court, arguing the claims against them, which in effect challenge the distribution of life insurance proceeds under an ERISA plan, are preempted by ERISA. In response, Shaunice moved to remand her action back to state court. Defendants then moved to dismiss the action. Both motions were denied in this decision. First, the court agreed with defendants that Shaunice’s claims were preempted under the two-step Davila test. It held that Shaunice was an ERISA beneficiary with a colorable claim for benefits who therefore could have brought her claims under ERISA Section 502(a)(1)(B). Furthermore, it found that both state law claims were premised on the existence of the group life insurance policy and sought proceeds under the policy. Thus, the court stated that no independent legal duty was implicated by Shaunice’s complaint. Nor did the court find that the probate exception applied here as the insurance benefits are not now and never were in the custody of state probate court. For these reasons, the court concluded that ERISA completely preempts Shaunice’s claims and therefore stated that it has jurisdiction over the lawsuit. Accordingly, the court denied the motion to remand. Finally, the court found defendants’ arguments in favor of dismissal to be premature and “better presented and resolved at summary judgment.” Therefore, the court also denied the motion to dismiss.

Medical Benefit Claims

Second Circuit

Tindel v. Excellus Blue Cross & Blue Shield, No. 5:22-cv-971 (BKS/ATB), 2023 WL 3318489 (N.D.N.Y. May. 9, 2023) (Judge Brenda K. Sannes). An ERISA plan beneficiary, Kevin Heffernan, and the two out-of-network orthopedic and neurosurgeons who performed emergency spinal surgery on him, sued Excellus BlueCross & BlueShield asserting claims under ERISA and state law seeking payment of the outstanding 99% of the billed charges which were not paid by the insurance company following the procedure. Defendant moved to dismiss the ERISA causes of action brought by the healthcare provider plaintiffs, and the state law claims brought by all three plaintiffs. First, regarding the healthcare providers, Blue Cross argued that the surgeons lacked standing to bring their claims because the plan contains an anti-assignment provision. To bolster this assertion, Blue Cross attempted to include a document which it claimed was the summary plan description whose terms were incorporated into the ERISA plan. However, the plaintiffs argued that the summary plan descriptions are not themselves the terms of the plan, and they therefore challenged the authenticity and applicability of the document and by extension its anti-assignment clause. In light of this dispute regarding the plan terms, the court declined to consider the document and because it would not consider the outside document and as the complaint itself did not allege the plan contains a provision banning assignments of benefits, the court held that Blue Cross did not meet its burden of demonstrating that the provider’s ERISA claims had to be dismissed for lack of standing. According, the court denied this aspect of Blue Cross’s motion. Nevertheless, the court agreed with Blue Cross that some of plaintiffs’ state law claims were preempted by ERISA as they related to the plan. These causes of action were plaintiffs’ unjust enrichment, breach of contract as intended beneficiaries, and tortious interference claims, all of which were dismissed. However, Plaintiffs were successful in their argument that their claim of breach of implied-in-fact contract involved a “rate of payment” dispute rather than a “right to payment” and that they detrimentally relied on a promise from Blue Cross’s representative that they would be paid for the procedures at the “local usual and customary rates.” Thus, the court found that this claim was not expressly preempted and allowed it to proceed. For these reasons, the motion to dismiss was granted in part and denied in part as described above.

Seventh Circuit

Midthun-Hensen v. Group Health Coop. of S. Cent. Wis., No. 21-cv-608-slc, 2023 WL 3303865 (W.D. Wis. May. 8, 2023) (Magistrate Judge Stephen L. Crocker). Two parents representing their minor daughter who has been diagnosed with Autism Spectrum Disorder filed this putative class action against Group Health Cooperative of South Central Wisconsin, Inc. to challenge its denial of coverage for speech and sensory integration occupation therapies as unproven/experimental treatments. Plaintiffs brought claims for benefits under Section 502(a)(1)(B), a claim under the Mental Health Parity and Addiction Equity Act, and a claim for violation of a Wisconsin state law mandating health insurance providers provide coverage for evidence-based Autism treatments. Group Health moved for summary judgment on all claims. Its motion was granted in this decision. Beginning with the benefits claims, the court held that the denials were not an abuse of discretion and were supported by substantial evidence. Specifically, although the guidelines Group Health relied on at the time of the denial have all since been modified and updated to hold that the treatments at issue are evidenced-based and generally accepted standards of care, the court wrote that “plaintiffs fail[ed] to show that GHC abused its discretion or acted downright unreasonably in determining that the line between experimental and generally accepted had not yet been crossed at the time of the challenged denials in this case.” Thus, under deferential review, the court granted summary judgment to Group Health on all of plaintiffs’ claims asserted under § 1132(a)(1)(B). Having made this determination, the court then moved on to its discussion of the Parity Act claim. Plaintiffs claimed that Group Health applied more stringent limitations regarding non-experimental treatments in the context of Autism treatments than it did for physical chiropractic care. Although the court acknowledged that there was a disparity in coverage for some of the mental health treatments as opposed to the chiropractic treatments, it found that they “arose not from GHC applying a more restrictive strategy or process to mental health benefits, but from a difference in the status of acceptance of those treatments by the medical community at large.” Accordingly, the court held that Group Health had not violated the Mental Health Parity and Addiction Equity Act. Finally, plaintiffs’ state law claim failed for the same reasons as their denials for benefits, i.e., that at the time of the denials there was not a medical consensus that the treatments at issue were considered evidence-based services. For these reasons, Group Health’s summary judgment motion was fully granted.

Pension Benefit Claims

D.C. Circuit

Ljubicic v. Int’l Bhd. of Elec. Workers, No. 22-7124, __ F. App’x __, 2023 WL 3295539 (D.C. Cir. May. 8, 2023) (Before Circuit Judges Millett, Wilkins, and Katsas). An ERISA claimant, Ante Ljubicic, sued the International Brotherhood of Electrical Workers after his claim for pension benefits was denied when the plan trustees determined that Mr. Ljubicic was engaged in disqualifying employment that precluded him from receiving retirement benefits. The district court granted judgment to the union. It concluded that the denial of the application for pension benefits was supported by substantial evidence and that Mr. Ljubicic was afforded a full and fair review process as required under ERISA’s provisions. Mr. Ljubicic appealed the district court’s adverse decision. In this order the D.C. Circuit Court affirmed the district court’s order granting summary judgment to the union. First, the appeals court stated that Mr. Ljubicic forfeited his ability to raise any argument regarding his fraudulent misrepresentation claim because he had failed to do so in his briefs. Second, the court of appeals agreed with the lower court that Mr. Ljubicic could not succeed on his claim for benefits, as well as with its conclusion “that the denial of his application for pension benefits was the result of deliberate and reasoned process and supported by substantial evidence.” Finally, the Circuit Court rejected Mr. Ljubicic’s position that the district court erred by declining to consider materials beyond those presented to the plan administrators at the time they conducted their review. 

Pleading Issues & Procedure

Eleventh Circuit

Schramm v. Metropolitan Life Ins. Co., No. 5:23-cv-163-JSM-PRL, 2023 WL 3320086 (M.D. Fla. May. 9, 2023) (Magistrate Judge Philip R. Lammens). Plaintiff Charles Schramm brought this long-term disability benefit action against Metropolitan Life Insurance Company on March 9, 2023. Less than two months later, he moved to seal his complaint, arguing that he is not comfortable with his private health information being made public in this lawsuit. The court denied the motion to seal in this decision. It found that Mr. Schramm’s wish for medical privacy was not a compelling justification to grant the motion. “By filing this action seeking an award of long-term disability benefits, Plaintiff has placed his own medical condition squarely at issue. ‘Courts have routinely held that, by putting one’s medical condition at issue in a lawsuit, a plaintiff waives any privilege to which he may have otherwise been entitled as to his privacy interests in his medical records.’”

Salim v. Louisiana Health Serv. & Indem. Co., No. 22-30573, __ F. App’x __, 2023 WL 3222804 (5th Cir. May. 3, 2023) (Before Circuit Judges Higginbotham, Southwick, and Willett)

The three words no patient ever wants to hear from his or her health insurer are “not medically necessary.” These words can turn a lifesaving medical procedure into a financial nightmare, especially when the treatment at issue involves specialists and equipment costing thousands of dollars.

This is what happened to plaintiff Robert Salim, who was diagnosed with advanced throat cancer in September of 2018. Mr. Salim’s physicians at the M.D. Anderson Cancer Center in Houston advised him that he should undergo proton beam radiation therapy, and they submitted a preauthorization request for this treatment to defendant Louisiana Health Service & Indemnity Company, better known as Blue Cross & Blue Shield of Louisiana.

A third-party administrator for Blue Cross, AIM Specialty Health, denied the treatment as “not medically necessary.” AIM “reasoned that Salim had no history of cancer, and that proton therapy is used only ‘when the same area has been radiated before.’” AIM then denied Salim’s request for reconsideration as well, citing only one source: the “clinical appropriateness guideline titled Radiation Oncology: Proton Beam Therapy.”

Salim appealed to Blue Cross without success. Blue Cross, relying on the same guideline, stated, “proton beam radiation therapy is not considered medically necessary in adult patients with head and neck cancer.”

Salim submitted a second-level appeal, and in support of that appeal Dr. Clifton Fuller, Salim’s oncologist, pointed out three problems in the guideline on which AIM and Blue Cross had relied.

First, Dr. Fuller noted that the guideline used an “outdated and superseded policy issued by the American Society for Radiation Oncology.” Dr. Fuller informed Blue Cross that the ASTRO policy had actually been updated “to specifically include proton beam therapy as both appropriate and medically necessary for exactly Mr. Salim’s diagnosis, advanced head and neck cancer.”

Second, Dr. Fuller noted that the guideline “glaringly omitted” reference to another source, the National Comprehensive Cancer Network Head and Neck Guidelines. Dr. Fuller pointed out that Blue Cross relied on NCCN recommendations for other diseases and thus questioned why they did not rely on them in this case.

Finally, Dr. Fuller observed that “the Guideline cited only three articles related to head and neck cancer, and that all three ‘specifically endorse the use of proton therapy’ for head and neck cancer.”

Dr. Fuller then went on to explain why proton beam therapy was appropriate and medically necessary for Mr. Salim. In doing so he cited over a dozen evidence-based publications and explained that the ASTRO and NCCN policies “consider proton beam therapy the standard of care.”

Blue Cross referred Mr. Salim’s appeal to a third-party reviewer, which was not impressed by Dr. Fuller’s arguments. It denied Mr. Salim’s second-level appeal, arguing that “most investigators recommend additional study…before adopting [proton therapy] as a standard treatment option for patients with head and neck cancer.” The reviewer also stated that the ASTRO and NCCN policies only support proton therapy for head and neck cancer when the patient has “a lesion with significant involvement of structures at the skull base,” which Mr. Salim did not have.

Despite these denials, Salim proceeded with the recommended proton beam therapy and then sued Blue Cross for failure to pay plan benefits under ERISA.

Even though Mr. Salim’s benefit plan gave Blue Cross full discretionary authority to make benefit determinations, which obligated the court to review Blue Cross’ denial of coverage under the lenient abuse of discretion standard of review, the district court still ruled for Mr. Salim. The district court found that “substantial evidence does not support [Blue Cross]’ finding that [proton therapy] was not medically necessary for treatment of Salim’s cancer.” Thus, Blue Cross “abused its discretion in denying coverage.”

Blue Cross appealed to the Fifth Circuit, raising two issues. First, Blue Cross argued that the district court improperly treated the medical necessity of proton beam therapy as a factual question rather than a legal one. Second, Blue Cross contended that substantial evidence supported its decision.

The Fifth Circuit made short work of both arguments. First, the court distinguished between disputes over a plan’s meaning and those over a plan’s application. Here, the parties agreed about what the plan said, and thus their only dispute involved the application of those plan terms. The only question before the court was “whether proton therapy was medically necessary to treat Salim’s cancer,” which “involves a review of the facts.” Thus, the district court correctly treated the medical necessity decision as a factual question, not a legal one.

On the second issue, the Fifth Circuit upheld the district court’s decision that substantial evidence did not support Blue Cross’ adverse benefit decision. The court noted that Blue Cross had relied on only one guideline for denying coverage, which cited the ASTRO policy. However, as Dr. Fuller pointed out, the ASTRO policy had been specifically updated to include cancers such as the one afflicting Mr. Salim. The court explained that Blue Cross might have the “discretion to ignore ASTRO altogether. But it does not have discretion to deny Salim’s claim by attributing to ASTRO a view that ASTRO does not hold.”

The court was also unimpressed by the third-party review of Mr. Salim’s second-level appeal. According to the court, that review made generic arguments that did not address Dr. Fuller’s points or the specific needs of Mr. Salim. Furthermore, the review misinterpreted the ASTRO and NCCN policies and failed to “address the full range of diagnoses” discussed in them.

In short, “The district court used the correct standard of review, and it correctly held that Blue Cross abused its discretion by denying coverage even when substantial evidence did not support that decision.” Thus, the ruling in Mr. Salim’s favor was affirmed in its entirety, proving that there are some medical necessity denials so unreasonable that they cannot even survive deferential review in the insurer-friendly Fifth Circuit.

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

Class Actions

Ninth Circuit

Gotta v. Stantec Consulting Servs., No. CV-20-01865-PHX-GMS, 2023 WL 3205526 (D. Ariz. May. 2, 2023) (Judge G. Murray Snow). Two former employees of Stantec Consulting Services and participants of the Stantec 401(k) Plan moved to certify a class of similarly situated participants and beneficiaries in this breach of fiduciary duty class action lawsuit. Meanwhile, defendants moved for partial summary judgment on plaintiffs’ request for prospective injunctive relief. They argued that plaintiffs lacked standing to pursue this claim because they are no longer plan participants. It appeared that neither party opposed the other’s motion, and thus the court granted both. To begin, the court concluded that the putative class satisfied all of the requirements of Rule 23. The class contains 10,639 members, which the court stated easily satisfies the numerosity requirement of Rule 23(a). Additionally, the court found “Plaintiff’s claims are virtually the same for every member of the class as the allegations of fiduciary mismanagement would apply in roughly the same way to every class member.” Furthermore, the focus of the case centers on the conduct of the defendants, rather than any individual actions taken by plan members, meaning the court also concluded that typicality was satisfied. The last requirement of Rule 23(a), adequacy, was met too, with the court finding that plaintiffs and their counsel were competent to act on behalf of the class members and had no conflicts of interest. Moreover, for these same reasons the court held that the two named plaintiffs would fairly and adequately protect the interests of the class and appointed them as class representatives. Turning to Rule 23(b), the court found that plaintiffs met their burden of demonstrating that ERISA breach of fiduciary duty claims like theirs are properly certified in the Ninth Circuit under Rule 23(b)(1)(A). Finally, the court appointed Edelson Lechtzin LLP and McKay Law LLC as class counsel, satisfied they met Rule 23(g)’s requirements as they are experienced ERISA practitioners and because both firms have each “secured million-dollar settlements on ERISA claims.” Accordingly, plaintiffs’ motion was granted. The court then transitioned to assessing defendants’ motion for partial summary judgment. As stated earlier, plaintiffs did not oppose the motion and voiced that they did “not intend to seek prospective injunctive relief on behalf of the Stantec 401(k) Plan.” As a result, the court granted the motion.

Disability Benefit Claims

Ninth Circuit

Goodman v. First Unum Life Ins. Co., No. 2:21-cv-00902-BJR, 2023 WL 3224481 (W.D. Wash. May. 3, 2023) (Judge Barbara Jacobs Rothstein). Plaintiff Tanya Goodman brought this ERISA action against First Unum Life Insurance Company seeking a court order requiring the insurer to reinstate her long-term disability benefits which she was receiving for physical, cognitive, and visual impairment symptoms caused by post-concussion syndrome trigged by a car accident. Ms. Goodman asserted two causes of action against Unum, a claim for benefits under Section 502(a)(1)(B) and a claim for equitable relief under Section 502(a)(3) for violation of plan terms and claims-handling practices which she alleged were a breach of Unum’s fiduciary duties. The parties cross-moved for judgment on the record under Federal Rule of Civil Procedure 52. Ms. Goodman additionally moved to supplement the record to include a decision by an administrative law judge at the Social Security Administration granting her Social Security disability benefits. First, the court granted Ms. Goodman’s motion to expand the record with her SSA benefit award. The decision was not issued until after the administrative record was already filed, so it could not have been included in it. Nevertheless, the court stated that it was relevant to its analysis of Unum’s adverse benefit decision as it speaks to issues “of complex medical questions regarding the credibility of medical experts.” Accordingly, the court included the document in the record. Second, the court conducted its de novo review of the medical record, and held that Ms. Goodman was disabled from performing the material duties of her executive leadership role as the Vice President Group Account Director for Aegis Media Americas, Inc. The totality of Ms. Goodman’s symptoms including her cognitive and visual impairments convinced the court that she would not be able to perform the prolonged visual tasks of reading, writing, and computer use, and that she currently lacks the cognitive concentration skills required for her high-level position. Furthermore, the court rejected Unum’s conclusion that Ms. Goodman was disabled from a mental illness, finding the evidence in the record did not establish or support this position. Therefore, the court concluded that Ms. Goodman met her burden to establish by a preponderance of evidence that she was disabled under the plan terms at the time of the termination and granted summary judgment to her on her benefit claim. However, Unum’s denial only considered whether Ms. Goodman was disabled from her own occupation, and thus Unum has never made a determination under the now-applicable “any occupation” standard. Therefore, the court remanded the issue back to Unum to decide whether to extend benefits to Ms. Goodman beyond the regular occupation period into the any occupation period. Finally, the court denied summary judgment to Ms. Goodman on her claim asserted under Section 502(a)(3), ERISA’s “catchall” provision, holding that under Ninth Circuit precedent “a claimant may not bring a claim for denial of benefits under § 1132(a)(3) when a claim under § 1132(a)(1)(B) will afford adequate relief.” As a result, the court was unwilling to award duplicative relief. It also held that to the extent the breach of fiduciary duty claim was independent of the benefit claim, Ms. Goodman did not meet her burden to prove that Unum’s procedures or the actions it took handling her claim were unsuitable under ERISA.

ERISA Preemption

Fourth Circuit

Riley v. Am. Elec. Power Serv. Corp., No. Civil Action 2:22-cv-00577, 2023 WL 3184318 (S.D. W. Va. May. 1, 2023) (Judge Thomas E. Johnston). Plaintiff Sherry Ray Riley sued American Electric Power Service Corporation, Empower Retirement, LLC, the estate of her late ex-husband Roger Allen Riley, and Roger’s daughter, Miranda Riley, in state court asserting state law causes of action seeking payment of benefits under the decedent’s two ERISA-governed retirement plans, to which she claims to be the named beneficiary. Defendants removed the action to the federal judicial system, and subsequently moved to dismiss the complaint for failure to state a claim. Specifically, they argued that the state law claims are preempted by ERISA. The court agreed and granted the motion to dismiss in this decision. The court stated that plaintiff’s complaint was undoubtedly seeking payment of benefits under ERISA plans, making this a clear-cut case of state law claims falling under the umbrella of ERISA preemption. This was true as Ms. Riley’s claims could not be resolved without relying on the terms of the plan and are naturally premised on the existence of the plans. Therefore, the court decided that the complaint as currently pled falls within the scope of ERISA preemption. However, the court dismissed the complaint without prejudice leaving the door open for Ms. Riley to reassert her lawsuit as ERISA action.

Life Insurance & AD&D Benefit Claims

Fifth Circuit

Rozier v. Prudential Ins. Co. of Am., No. 1:19-CV-00577, 2023 WL 3214645 (W.D. La. May. 2, 2023) (Judge Robert R. Summerhays). Plaintiff Judith Ann Huthnance Rozier sued her late husband’s former corporate partner, Malcolm Dale Harrington, and the insurance company of the decedent’s group life insurance policy, Prudential Insurance Company of America, after she was denied benefits under his ERISA plan. Prudential had identified Mr. Harrington as the beneficiary of the policy on a copy of a 1984 enrollment card, apparently executed and signed by Mr. Rozier. Ms. Rozier maintained that her husband did not designate his business partner as his beneficiary and that the signature on the card was not her husband’s signature. This action proceeded to a bench trial on November 7, 2022. In this decision, the court concluded that a preponderance of evidence, including expert handwriting testimony during the bench trial, proved that the beneficiary designation was valid and authentic. Additionally, the court found that the record did not reflect any credible evidence that the beneficiary designation was a mistake on the part of Mr. Rozier. “There is no evidence of any agreement between Rozier and Harrington as to the beneficiary designation; nor is there evidence that the parties contemplated how a partner’s withdrawal from the partnership would affect a beneficiary designation.” Accordingly, the court followed ERISA’s principle of enforcing the plain language of the plan beneficiary designation form. Thus, Ms. Rozier’s action ultimately fell “by the terms of the plan,” which named someone else as the designated beneficiary. As a result, the court ruled that Ms. Rozier failed to prove her claims and therefore entered judgment against her.

Metropolitan Life Ins. Co. v. Muecke, No. 22-01029, 2023 WL 3261599 (W.D. La. May. 4, 2023) (Judge Donald E. Walter). Joe Nickle died on August 14, 2021. After Mr. Nickle’s death, his life insurance benefits under an ERISA-governed life insurance plan became payable. Two claimants came forward: the named beneficiary, Mr. Nickle’s girlfriend, Deanne Muecke, and Mr. Nickle’s son, Cameron Nickle, who argued that the beneficiary designation was the product of fraud or coercion. Faced with these competing claims, Metropolitan Life Insurance Company commenced this interpleader action to determine the proper beneficiary. Defendant Nickle moved for summary judgment, which defendant Muecke opposed. Mr. Nickle argued that Ms. Muecke failed to present evidence that she is a valid beneficiary under the plan because the letter she presented showing her as the named beneficiary was not a designation form and was not signed or dated by the decedent. The court denied the summary judgment motion in this order. It found that Mr. Nickle’s motion was not only untimely, but also that he did not attach the document he relied on to his motion or direct the court to it in the record. Therefore, while the court stated that Mr. Nickle may ultimately be correct that the document designating Ms. Muecke is insufficient to show that she is the beneficiary of the plan, “the Court is in no position to make that determination without the benefit of the document.” Thus, the court found this to be a genuine issue of material fact precluding an award of summary judgment to Mr. Nickle.

Pension Benefit Claims

Second Circuit

Purcell v. Scient Fed. Credit Union Split Dollar Agreement Plan, No. 3:22-CV-961 (SVN), 2023 WL 3259985 (D. Conn. May. 4, 2023) (Judge Sarala V. Nagala). Plaintiff David Purcell was fired as the Chief Executive Officer of Scient Federal Credit Union (“SFCU”) on March 16, 2020, when he was informed that his employer was “going in a different direction.” Mr. Purcell believed that the reason that SFCU provided for his termination was a pretext and that he was in fact being terminated due to his disability from Parkinson’s Disease, which his employer knew about. Accordingly, Mr. Purcell submitted a claim for 100% vested benefits in the Annual Borrowing Cap of the Scient Federal Credit Union Split Dollar Agreement Plan, to which he claimed he was entitled if terminated due to a disability. In his notice of claim, Mr. Purcell asserted that SFCU had breached its fiduciary duties to him by denying him full benefits under the plan and failing to implement the loan interest rate deduction that had been previously approved by the compensation committee, which he claims would have protected his benefits under the plan. Defendants, the plan and its administrator, refused to provide Mr. Purcell with the benefits he sought. Mr. Purcell maintains that defendants never sent him an official denial letter as required under ERISA regulations. Mr. Purcell then commenced this action alleging defendants violated ERISA Sections 502(a)(1)(B) and (a)(3). In response, defendants asserted two counterclaims against Mr. Purcell on behalf of SFCU. The first counterclaim alleged that Mr. Purcell breached the implied covenant of good faith and fair dealing in relation to his employment agreement with the company because he failed to disclose that he was unable to perform his job prior to termination. The second counterclaim alleged that Mr. Purcell’s failure to disclose this information similarly breached the fiduciary duties he owed to SFCU as its CEO. Defendants then moved to expand discovery beyond the administrative record, and Mr. Purcell moved to dismiss the two counterclaims asserted against him. The court first addressed Mr. Purcell’s motion to dismiss. It granted the motion, finding that SFCU’s counterclaims violated Federal Rule of Civil Procedure 13 because they were brought in the company’s capacity as Mr. Purcell’s former employer, even though it was only sued in its capacity as plan administrator. Accordingly, the court concluded that the counterclaims violated the opposing party requirement of Rule 13, and that they did not fall under any exceptions to the rule. Specifically, the court held that recovery based on the counterclaims would benefit SFCU only in its role as employer and not in its capacity as fiduciary of the ERISA plan. The court also concluded that the topics discussed in the complaint and the counterclaims were predominantly distinct meaning that equity and judicial economy did not mandate the counterclaims be tried in this lawsuit. For these reasons, the counterclaims were dismissed. The court then addressed defendants’ motion to expand discovery beyond the administrative record. They argued that Mr. Purcell raised allegations in his complaint on topics pertaining to his symptoms from his illness and his job performance that were not addressed in the administrative record. The court acknowledged that this presented a novel situation in which a plan and its administrator were seeking to expand the record rather than a claimant moving to do so. However, operating under the assumption that the standard for permitting additional discovery remains the same regardless of which party requests it, the court concluded that defendants could not demonstrate good cause to expand the record. To the contrary, the court pointed out that defendants had ample opportunity to develop the record. Nor could they claim, the court found, that the issues relating to Mr. Purcell’s illness were only brought into focus once the lawsuit was filed. The court stated that Mr. Purcell made abundantly clear when filing his claim for benefits that he believed his termination was a pretext to deny him additional benefits due to his disability. Therefore, defendants were not allowed to expand the record they were responsible for creating, and their motion to do so was denied.

Ninth Circuit

Munger v. Intel Corp., No. 3:22-cv-00263-HZ, 2023 WL 3260034 (D. Or. May. 3, 2023) (Judge Marco A. Hernandez). Plaintiff Ruth Ann Munger, acting on behalf of the Estate of Philip Cloud, brought this action seeking Philip Cloud’s ERISA plan benefits under five retirement plans offered by his former employer, the Intel Corporation, on the grounds that Oregon and federal law prohibit slayers from profiting from their crimes. Mr. Cloud’s named beneficiary, his wife Tracy Cloud, was convicted by a Washington County jury of second degree murder for killing Mr. Cloud. Ms. Cloud is currently appealing her conviction and her appeal remains pending before the Oregon Court of Appeals. This lawsuit was stayed until the completion of either Ms. Cloud’s criminal appeal or the conclusion of the state court wrongful-death proceedings also brought by Ms. Munger, which sought an order finding Ms. Cloud a slayer. On January 20, 2023, the state court adjudicated Cloud a slayer and found her liable for the wrongful death of Philip Cloud. This court then lifted its stay. Ms. Munger reinstated two motions she had filed with the court prior to the stay, a motion for summary judgment and a motion to strike Ms. Cloud’s declaration and surresponse to the summary judgment motion. The court granted both motions in this decision. First, the court stated that under Ninth Circuit precedent Ms. Cloud could not use the protections of the Fifth Amendment against self-incrimination to avoid a deposition under oath or selectively waive privilege in various declarations and discovery documents. “The Court finds Cloud may not invoke the Fifth Amendment privilege as a shield to oppose depositions while discarding it for the limited purpose of making statements to oppose summary judgment. The Court, therefore, grants Plaintiff’s requests to strike.” Next, the court found that the jury’s unanimous finding of Ms. Cloud’s guilt was a fully litigated issue during a full and fair proceeding under a heavier burden of proof than in this civil action. Therefore, the court applied collateral estoppel to bar Ms. Cloud from relitigating in this action whether she murdered her husband. Accordingly, the court concluded that Ms. Cloud was precluded from receiving the benefits under the five ERISA plans. Ms. Munger’s summary judgment motion was thus granted.

Provider Claims

Third Circuit

Abramson v. Aetna Life Ins. Co., No. 2:22-cv-05092 (BRM) (CLW), 2023 WL 3199198 (D.N.J. May. 2, 2023) (Judge Brian R. Martinotti). An out-of-network surgeon, Dr. David L. Abramson, M.D., sued a claims administrator and fiduciary of an ERISA plan, Aetna Life Insurance Company, under ERISA Section 502(a)(1)(B), after Aetna denied a claim for reimbursement of emergency surgery Mr. Abramson performed on a plan beneficiary. Specifically, the claim was denied for failure to obtain pre-certification. Dr. Abramson and his patient appealed the denial, arguing that pre-authorization was not possible given the emergency circumstances, and that the claim should have been approved under the plan’s emergency exception for out-of-network care. As an assignee, authorized representative, and an attorney-in-fact, Dr. Abramson seeks payment on the patient’s behalf for the unpaid bill of $80,200 for the surgery. Aetna moved to dismiss the complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). Aetna argued that Dr. Abramson lacked standing to bring his claim for benefits because the plan contains a valid anti-assignment provision. In addition, Aetna argued that Dr. Abramson and the plan beneficiary failed to administratively exhaust the appeals process prior to commencing legal action. Finally, Aetna maintained that the complaint failed to state a claim by not plausibly tying the demand for benefits to any specific plan term. In response, Dr. Abramson conceded that the plan contains a provision banning assignments of benefits. However, he nevertheless maintained that he could pursue his claim on behalf of his patient given his status as an attorney-in-fact under Third Circuit precedent. Dr. Abramson also averred that his complaint details that he exhausted administrative remedies prior to bringing his action. Lastly, Dr. Abramson argued that the plan terms requiring payment of claims for emergency out-of-network healthcare require Aetna to pay the claim for benefits. The court addressed standing first. It sided with Dr. Abramson, concluding that Third Circuit case law makes clear that a healthcare provider can function as an attorney-in-fact for a plan beneficiary even in the face of an anti-assignment provision. “The anti-assignment clause in B.H.’s Plan has no more power ‘to strip [Dr. Abramson] of [his] ability to act as [B.H.’s] agent than it does to strip [B.H.] of his interest in his claim.’ This is particularly true in the healthcare context. The Complaint sufficiently alleges that Dr. Abramson is asserting the claim for benefits on B.H.’s behalf; attaches a valid rule-complaint power of attorney; and states the amount B.H. remains responsible for after the alleged emergency services.” In addition, the court agreed with Dr. Abramson that his complaint sufficiently alleged exhaustion of administrative remedies. However, the complaint was found by the court to be flawed on the merits. It was the court’s opinion that the complaint failed to sufficiently identify a plan term supporting the exact amount of damages claimed. While the complaint did cite plan provisions that support the allegations regarding emergency services, the court ultimately found that it did not specify how Aetna was required to pay the amount owed and billed. “Such an allegation is required for Dr. Abramson’s cause of action to be sustained.” Therefore, the court granted the motion to dismiss, but dismissed the complaint without prejudice, granting Dr. Abramson the ability to amend his complaint to address this problem.

Seventh Circuit

OSF Healthcare Sys. v. SEIU Healthcare II Pers. Assistants Health Plan, No. 3:21-cv-50029, 2023 WL 3200256 (N.D. Ill. May. 2, 2023) (Judge Iain D. Johnston). An out-of-network healthcare provider, OSF Healthcare Saint Anthony Medical Center, sued an ERISA healthcare plan, the SEIU Healthcare IL Personal Assistants Health Plan, and its board of trustees, as an authorized representative of a patient and plan participant seeking payment of benefits due for medical services it rendered. Defendants moved to dismiss the complaint. They argued that OSF Healthcare does not have standing to pursue its claims under ERISA because the plan contains a valid anti-assignment clause preventing any third party from bringing ERISA lawsuits. OSF Healthcare responded that it was not acting as an assignee but rather as an authorized representative and that the plan is ambiguous on whether it permits representatives acting on behalf of participants or beneficiaries to bring actions under ERISA. The court turned to Seventh Circuit precedent on the topic. The Seventh Circuit has ruled that because Congress did not expressly include language in ERISA allowing authorized representatives to bring suit under ERISA, courts must read this to mean that Congress did not intend to allow this course of action. Moreover, the court agreed with defendants that the plan’s anti-assignment clause forbids healthcare providers or any other third party from bringing ERISA actions. And although the court admitted that the plan language was less clear regarding the authority of authorized representatives and what actions they may or may not take, it nevertheless concluded that a reading permitting an authorized representative to bring a lawsuit would essentially nullify the terms of the anti-assignment provision. Accordingly, the court would not sanction such a work-around and therefore concluded that OSF Healthcare lacked Article III standing to pursue its claims. Finally, because OSF has already been given three opportunities to replead its claims, the court granted the motion to dismiss with prejudice.

Venue

Ninth Circuit

Protingent, Inc. v. Gustafson-Feis, No. 2:20-cv-01551-TL, 2023 WL 3204598 (W.D. Wash. May. 2, 2023) (Judge Tana Lin). A Washington corporation that self-funds and administers an ERISA health benefits plan, Protingent, Inc., sued one of its plan beneficiaries, Lisa Gustafson-Feis, seeking subrogation and reimbursement of paid medical benefits from money Ms. Gustafson-Feis received from a personal injury claims settlement following a car accident. Ms. Gustafson-Feis moved to transfer the action from the Western District of Washington, where both she and Protingent are located, to the Northern District of New York, the location of the car accident. Protingent opposed transfer and argued that venue is not proper in the Northern District of New York. The court agreed and denied the motion. The court held that there would not be a basis for jurisdiction over Ms. Gustafson-Feis in this action in the district court in New York because both parties and the healthcare plan governing this action are located in Washington. In addition, the court stressed that even if venue were proper in the Northern District of New York, “the convenience of the Parties and the interest of justice weigh against a change of venue.” Thus, this “contractual dispute between the Parties as to whether the terms of the Plan entitle Plaintiff to equitable relief under ERISA to recover a portion of the settlement funds,” will remain in the Western District of Washington.