Mass. Laborers’ Health & Welfare Fund v. Blue Cross Blue Shield of Mass., No. 22-1317, __ F. 4th __, 2023 WL 3069637 (1st Cir. Apr. 25, 2023) (Before Circuit Judges Gelpi, Lynch, and Thompson)

The Massachusetts Health & Welfare Fund, a self-funded multiemployer group health plan, sued its former third-party administrator, Blue Cross & Blue Shield of Massachusetts, after an audit uncovered that Blue Cross had made overpayments of more than $1.4 million in over 5,000 medical claims. These overpayments were usually followed by recoupment efforts which, if successful, resulted in Blue Cross retaining a significant percentage of the recovered amounts as “savings” to the plan. The audit also revealed that, despite negotiated payment rates in its contracts, Blue Cross would “reprice” the amounts it would pay to the medical providers in its networks and pocket the difference.  

Surprisingly, the First Circuit concluded that ERISA’s fiduciary and prohibited transaction provisions did not govern these practices because Blue Cross was not acting as a fiduciary in enriching itself (at the expense of the plan and its participants) in this manner. Even more surprisingly, the court ended its discussion by proclaiming that this result was more in keeping with ERISA’s policies and goals than requiring Blue Cross to act in accordance with ERISA, because affording fiduciary status to Blue Cross would interfere with its cost-saving business model and come at a sharp price to plan participants (who already appear to be paying the price).

But back to the beginning. Following the audit conducted at the Fund’s direction in 2018, the Fund sued Blue Cross in the U.S. District Court for the District of Massachusetts in 2021 under both ERISA and state law. The complaint alleged that the audit uncovered a pattern of Blue Cross overpaying providers, including by repeatedly paying significantly more than the providers billed. The complaint also alleged that Blue Cross engaged in disloyal and self-dealing behavior at the expense of the Fund, principally by retaining wrongful and excessive recovery fees, including when Blue Cross itself caused the overpayments. Among other things, the Fund alleged that Blue Cross increased its recovery percentage fee from 20% to 30% and began imposing a 19% fee on certain purported savings, all without authorization.

Blue Cross moved to dismiss under Federal Rule of Civil Procedure 12(b)(6). The court granted the motion, concluding that Blue Cross was not a fiduciary because it did not exercise discretion in failing to correctly apply the negotiated rates. The district court also held that the working capital account from which Blue Cross paid claims did not constitute an asset of the plan and, in any event, Blue Cross did not exercise sufficient authority or control over this account to be a fiduciary for purposes of the lawsuit. The district court then declined to exercise supplemental jurisdiction over the state law claims and dismissed the entire suit.

The First Circuit agreed. First, the court noted that both the Fund’s administrative services agreement (ASA) with Blue Cross and the summary plan description (SPD) for the plan required Blue Cross to pay providers according to rates it had already negotiated with the providers. Moreover, under the ASA, the Fund retained the authority to review and approve the amounts before Blue Cross would pay the providers. According to the court, the allegations that Blue Cross did not pay its network providers according to these rates “may buttress a claim that [Blue Cross] breached its contractual obligation under the ASA and SPD to price claims according to its negotiated schedules, but they do not support an inference that [Blue Cross] had discretion on whether to do so.”

With respect to the Fund’s claims that Blue Cross exercised discretionary medical judgment in repricing the claims, the court reasoned that “[m]ost of the factual allegations presented by the Fund in its complaint, however, do not reflect an exercise of significant medical judgment” by Blue Cross. The court concluded that the Fund failed to allege fiduciary status because the complaint alleged that Blue Cross “failed to reach the ‘correct’ outcome when pricing claims, not that it had the discretion to reach different conclusions.” 

The court applied the same reasoning with respect to the Fund’s argument that Blue Cross acted as a fiduciary when recovering and settling overpayments. In other words, the court concluded that the Fund was alleging that Blue Cross was violating contractual obligations in taking these actions, not that it had discretionary authority to do so. The one exception to this was the Fund’s allegation that Blue Cross exercised discretion in deciding whether to apply one or two-day rates in some instances and whether and how to settle these claims. But the court concluded that the Fund failed to allege that these actions involved plan management by Blue Cross. Pointing to a Department of Labor interpretive bulletin explaining that a person who performs certain ministerial functions under a framework made by others is not acting as a fiduciary, the court concluded that the Fund itself created in the ASA the framework mandating that Blue Cross apply its provider rates and specifying in detail how Blue Cross should pursue recoveries and settlements.

The court likewise rejected the Fund’s argument that Blue Cross was acting as a fiduciary because the Fund sent working capital on a weekly basis to Blue Cross with which to pay claims, and this working capital constituted a plan asset over which Blue Cross had authority and control. The court declined to resolve the parties’ dispute as to whether the working capital constituted a plan asset. Furthermore, the court conceded that, under the plain terms of ERISA, “‘discretionary’ control or authority is not required with respect to the management or disposition of plan assets.” 

Nevertheless, the court held that mere physical control over plan assets does not equate to “exercis[ing]…authority or control respecting management or disposition of [plan] assets”  within the meaning of ERISA’s definition of fiduciary. The court then determined that the repricing of the claims was not itself an exercise of authority over plan assets because it was “was separate from and antecedent to the act of payment.” And with respect to the actual payment of claims to the providers, the court found that the Fund “failed to plausibly allege that [Blue Cross] exercised any authority or control over the payment process beyond the ‘mere exercise of physical control or the performance of mechanical administrative tasks.’”

Indeed, the court stressed that “[t]he fact that [Blue Cross] could make claim payments only with the Fund’s authorization, along with the fact that the Fund retained full control over the appeals process, weighs toward finding that [Blue Cross] lacked authority respecting the disposition of the working capital amount.” The court then stated that its holding that Blue Cross was not a fiduciary was a “limited one” tethered to the specific facts as alleged and arguments made by the Fund.

The court concluded by addressing the competing arguments of the two sides and their amici with respect to the “practical implications” of the court’s ruling. The court came out on the Blue Cross side of the equation, concluding that “[i]f [Blue Cross] were required here to adhere to strict fiduciary duties in the interests of individual plans, it arguably would need to restructure its networks and procedures based on the needs of each plan, undermining its ability to act in the overall interest of its book of business” to the likely detriment of plan participants. The court was unpersuaded by the arguments of the Fund and its amici (including the Department of Labor) that finding Blue Cross to be a nonfiduciary would lead to anticompetitive practices that concededly could harm plans and their participants, which it concluded were trumped by statutory language.

Thus, based on ERISA’s far from pellucid statutory definition of fiduciary, the First Circuit allowed Blue Cross to evade fiduciary responsibility to the tune of $1.4 million in plan losses caused by its questionable and unauthorized medical claims pricing and payment practices.

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

Breach of Fiduciary Duty

Ninth Circuit

Beldock v. Microsoft Corp., No. C22-1082JLR, 2023 WL 3058016 (W.D. Wash. Apr. 24, 2023) (Judge James L. Robart). Two plaintiffs on behalf of themselves, the Microsoft Corporation Savings Plus 401(k) Plan, and a proposed class sued Microsoft Corporation, the Board of Trustees of the 401(k) Plan, and its Committee for breaches of fiduciary duties. On February 7, 2023, the court granted defendants’ motion to dismiss the complaint for failure to state a claim. A summary of that decision was included in Your ERISA Watch’s February 15th edition. Since then, plaintiffs have amended their complaint, and defendants have renewed their motion to dismiss. Once again, the court granted the motion to dismiss, but this time with prejudice. The court reaffirmed its earlier conclusion that the underperformance of the challenged Black Rock LifePath Index Funds, the suite of target date funds at the center of this putative class action, is insufficient on its own to create an inference that defendants breached any duty under ERISA. The court stated that plaintiffs “alleged nothing that would ‘tend to exclude the possibility’ that Defendants had reasons consistent with their fiduciary duties to retain the BlackRock TDFs as an investment option in the Plan.” In an attempt to cure the deficiencies the court previously identified, plaintiffs added new metrics from which to compare the challenged suite’s performance. These included S&P Target Date Indices and the Sharpe ratio. Plaintiffs asserted that these new benchmarks provided “further plausible comparators and quantitative metrics that would have provided real-time signals to Defendants of the need to investigate and replace Plan investments.” The court, however, did not agree. Simply adding new measures of investment performance, the court held, was not enough “to raise Plaintiffs’ claim(s) above the level of speculation and into plausibility.” Accordingly, the court dismissed the claims of imprudence and disloyalty, and the derivative claims of failure to monitor, co-fiduciary breaches, and knowing breaches of trust.

Eleventh Circuit

Huang v. Trinet HR III, Inc., No. 8:20-cv-2293-VMC-TGW, 2023 WL 3092626 (M.D. Fla. Apr. 26, 2023) (Judge Virginia M. Hernandez Covington). A class of participants of the TriNet Select 401(k) Plan, a multiple employer plan with more than 1,200 participating employers, challenged the actions of the fiduciaries of the plan in this litigation. They argued that TriNet, Inc., its board of directors, and the plan’s investment committee breached their fiduciary duties under ERISA by selecting costly and poorly performing investment options and by causing the participants to pay excessive recordkeeping expenses. Defendants brought two motions before the court: a Daubert motion to exclude the testimony of plaintiffs’ expert and a motion for summary judgment. The court granted both motions in this decision. First, it agreed with defendants that the testimony of plaintiffs’ expert, Frances Vitagliano, an expert in the field of asset management and plan administration, did not satisfy either the qualification or the reliability requirements under Rule 702. First, regarding qualification, the court relied on Mr. Vitagliano’s replies during cross-examination to conclude that he was not qualified to testify competently on the topic of the plan’s process in soliciting requests for proposals for the plan’s recordkeeping services. Second, the court took issue with the methodology Mr. Vitagliano used to reach his conclusion that the plan’s fees were excessive. Mr. Vitagliano, the court found, did not compare the multiple employer plan to similar multiple employer plans of similar size, and instead provided inapt comparisons of plans with different sizes and structures to the plan at issue. Accordingly, the motion to exclude Mr. Vitagliano’s expert opinion was granted. The court then turned to defendants’ summary judgment motion. On the whole the court found that the uncontroverted evidence demonstrated that defendants’ process was consistent with best fiduciary practices and that the committee regularly engaged in competitive searches for recordkeepers during the class period. Moreover, defendants’ expert offered testimony suggesting that the challenged fees were not excessive and were to the contrary “some of the lowest recordkeeping fees of any (multiple employer plan) in the market.” Finally, regarding plaintiffs’ investment-related theories, the court held that substantial evidence demonstrated that “Defendants prudently monitored the Plan during the class period,” and that plaintiffs offered no compelling evidence to the contrary, effectively abandoning this topic. In fact, plaintiffs “acknowledged that they ‘never submitted an expert report to calculate damages with respect to its investment-related theories,’ and state that they are not seeking damages with respect to their investment-related theories.” For these reasons, defendants were granted summary judgment on all claims.

Disability Benefit Claims

Sixth Circuit

Walker v. Reliance Standard Life Ins. Co., No. 2:22-cv-109, 2023 WL 3066708 (E.D. Tenn. Apr. 24, 2023) (Judge Travis R. McDonough). Plaintiff Kevin Walker brought this action against Reliance Standard Life Insurance Company seeking judicial review of Reliance’s calculation of his long-term disability benefits. The parties agreed that Mr. Walker is disabled under the plan due to symptoms he experiences from post-concussive syndrome. However, Mr. Walker maintains that Reliance miscalculated his benefits by improperly interpreting the plan’s “lump sum payments” provision, a subsection of its “other income benefits” provision, to prorate his benefit payment and offset the amount by a lump sum payment he received from his employer sponsored pension plan over a 60-month period. “Walker contends that Reliance incorrectly interpreted the Plan’s Lump Sum Payments provision-specifically the phrase ‘period of time’…[and] argues that, under the unambiguous terms of the Plan, the offset for other income received as a lump sum should be applied to the time period from his retirement until his death.” The parties cross-moved for summary judgment on this issue. The court granted judgment to Reliance. It concluded that “Walker’s interpretation is contrary to the unambiguous language of the Plan…[which] provides for a fixed, definite length of time – sixty months – if no period of time is given. Any contrary interpretation would render the provision’s application impossible. Prorating requires dividing an amount proportionally over a set number of periods. Reliance could not prorate Walker’s pension payment form the time of his retirement until his death because this time is an unknown length.” Because of this unknown variable, the court concluded that it would be impossible for Reliance to prorate the lump-sum payment, and that it was therefore correct to prorate the pension payment for sixty months, as outlined in the plan. Additionally, the court determined that Mr. Walker’s interpretation was inappropriate because he is only eligible for disability benefits until his retirement age, meaning the lump sum payment could not be prorated after his retirement without making the plan’s offset provisions on retirement benefits and lump sum payments a surplusage. Accordingly, the court affirmed Reliance’s interpretation of the plan and its accompanying calculation of Mr. Walker’s benefits.

Seventh Circuit

Murch v. Sun Life Assurance Co. of Can., No. 20-cv-3900, 2023 WL 3058780 (N.D. Ill. Apr. 24, 2023) (Judge Sharon Johnson Coleman). Plaintiff Trent Murch sued defendant Sun Life Assurance Company of Canada seeking a court order overturning its denial of his application for long-term disability benefits under his ERISA-governed plan. The parties filed cross-motions for summary judgment. The court granted in part Mr. Murch’s motion and denied Sun Life’s motion entirely. Mr. Murch maintained that his physical and cognitive symptoms left him unable to perform the material duties of his work as an attorney. In support of his position, Mr. Murch provided documents from his treating physicians, including his neurologist, family doctor, psychiatrist, neuropsychologist, and sleep medicine specialist. Under the deferential review standard, the court concluded that although the factual record “clearly demonstrates that Murch faces several health issues and the Court recognizes that his ailments have had great impact on his livelihood and wellbeing,” it held that it was ultimately not the role of the court to decide whether Mr. Murch qualifies for disability benefits. Instead, its job was “restricted to determining whether Sun Life’s decision to deny his disability insurance benefits was arbitrary and capricious.” Furthermore, the court stated that it would not consider extraneous materials beyond the administrative record to make this determination. First, the court concluded that Sun Life did not deny the claim because Mr. Murch does not have a definitive diagnosis for his symptoms. The court also disagreed with Mr. Murch that Sun Life disregarded the policy’s “own occupation” disability standard. Nor was it the court’s opinion that Sun Life abused its discretion by failing to undertake a holistic review of Mr. Murch’s claims file. However, these findings favorable to Sun Life were undercut by the court’s conclusion that the insurer had acted arbitrarily and capriciously by disregarding and refusing to credit evidence of Mr. Murch’s psychiatric and cognitive disabilities. The court found that Sun Life failed to fully consider the medical record regarding these impairments, and that its failure to do so deprived Mr. Murch of a full and fair review of his claim. Additionally, the court held that it was unreasonable for Sun Life not to inform Mr. Murch “that it would no longer investigate certain portions of his claim.” Lastly, the court decided that Sun Life’s conflict of interest “justifies a finding that Sun Life’s disregard of Murch’s psychiatric and cognitive complaints was arbitrary and capricious.” Because of this flaw in the claims and review process, the court refused to “uphold Sun Life’s disability determination.” Instead, the court determined that the proper course of action was to remand to Sun Life for reconsideration consistent with this order. Finally, the court declined to award either party summary judgment on the question regarding Mr. Murch’s waiver of premium benefit for life insurance because a genuine issue of material fact on this topic still exists.

Ninth Circuit

Waldrip v. Reliance Standard Life Ins. Co., No. 3:21-cv-05602-JHC, 2023 WL 3090837 (W.D. Wash. Apr. 26, 2023) (Judge John H. Chun). In its findings of fact and conclusions of law and decision on cross-motions under Rule 52 under de novo review, the court concluded that plaintiff Christa Waldrip met her burden to prove that her relapsing/remitting multiple sclerosis and its effects “preclude her from reliability working in a full-time capacity.” The court agreed with Ms. Waldrip that her medical records demonstrate that she was unable to sit for at least four hours a day, that her physical symptoms including gastrointestinal problems, chronic pain, and falling which prevent her from performing even sedentary work, and that her policy does not require “objective” medical evidence rather than “subjective” complaints. Under Ninth Circuit precedent governing ERISA disability benefit cases, such symptoms and findings entitle a claimant to benefits under “any occupation” disability definitions. Therefore, the court concluded that Ms. Waldrip is entitled to continued long-term disability benefits, and judgment was granted in her favor.

Discovery

Sixth Circuit

Sweeney v. Nationwide Mut. Ins. Co., No. 2:20-cv-1569, 2023 WL 3051229 (S.D. Ohio Apr. 24, 2023) (Magistrate Judge Chelsey M. Vascura). In this putative class action, two participants of the Nationwide Mutual Insurance Company defined contribution pension plan seek to represent a class of similarly situated participants and beneficiaries who invested in the Plan’s Guaranteed Investment Fund, its most popular investment vehicle, from 2014 through the date of final judgment in this action. Plaintiffs have sued Nationwide Mutual and its subsidiary Nationwide Life Insurance Company for breaches of fiduciary duties, prohibited transactions, self-dealing, and inurement of plan benefits to the employer. The parties are engaged in a discovery dispute, which led to an informal conference with the court to discuss the disagreement between the parties. Following that conference, plaintiffs subsequently filed a motion to compel discovery. In this order, the court mostly granted plaintiffs’ discovery requests. In their motion, plaintiffs sought further production of documents and interrogatory answers related to (1) compensation received by Nationwide Life in connection with the Guaranteed Investment Fund, including information about the expenses it charges through both direct and indirect avenues; (2) the assets in Nationwide Life’s general account where the Fund assets become pooled together with unrelated assets; and (3) documents and information about defendants’ group annuity contracts with other institutions and retirement plans from which to compare. Defendants opposed the motion to compel. They argued that the requested discovery is not relevant to either plaintiffs’ claims or their defenses in this action. Moreover, defendants argued the production requests were not proportional to the needs of the case. The court broadly disagreed. It wrote that defendants “put the cart before the horse,” regarding their overarching position that “they are not liable, and therefore should not be forced to participate in discovery.” In fact, the court concluded that defendants’ affirmative defenses not only do “not foreclose otherwise permissible discovery,” but actively underscored the relevance of plaintiff’s requested information, including on the topics of the prices paid to defendants and the process by which those amounts were determined. A fee by any other name – here a “consideration” – remains discoverable and relevant, the court found. Thus, the court agreed with plaintiffs that their requests were pertinent to the issues and disputes at hand in this action, and therefore granted their document and interrogatory requests, albeit in narrowed forms, both in terms of timeframe and scope. Defendants were then ordered to supplement their responses to plaintiffs’ discovery requests in the manner outlined by the court under the terms it crafted in this decision.

Iannone v. AutoZone Inc., No. 19-cv-2779-MSN-tmp, 2023 WL 3083436 (W.D. Tenn. Apr. 25, 2023) (Magistrate Judge Tu M. Pham). Participants in the AutoZone 401(k) Plan allege in this action that defendants AutoZone, Inc., members of the AutoZone investment committee, and the investment fiduciaries of the plan breached their duties under ERISA by failing to monitor and control the plan’s fees and to maintain a lineup of adequately performing investment options in the plan’s investment portfolio. Defendants, along with non-parties Willis Towers Watson U.S. LLC, a former investment advisor for the plan, and Prudential Retirement Insurance and Annuity Company, the insurance company receiving the administrative and services fees from the plan, jointly moved to maintain confidentiality of challenged documents. Their motion was granted in part and denied in part in this order. Defendants’ general position was that public disclosure of these documents would put them at a competitive disadvantage. Plaintiffs, on the other hand, maintained that defendants did not meet their burden to overcome the strong presumption in favor of public judicial records, particularly because the documents at issue do not involve trade secrets. The court aligned itself more with defendants’ viewpoint. It agreed that internal communications between defendants and the non-parties, their contracts, invoices, and other reports reflected “proprietary methodology” closely analogous to trade secrets. Should this information be made available to the public, the court agreed that it would increase the risk of competitive harm. This, the court concluded, justified keeping the reports, invoices, contracts, and internal communications sealed. Moreover, the public’s interest in accessing the information, the court stressed, did not outweigh the movants’ potential commercial harm. This was particularly true for the non-parties, according to the court, because they “could not have anticipated that their confidential documents ‘would eventually become matter of public record.’” However, 408b-2 disclosures were not allowed to be sealed because these documents are “subject to mandatory disclosure under ERISA.” Additionally, the court declined to seal the reports of three expert witnesses. The court found that, unlike the documents, the expert reports “do not contain proprietary methodology that resembles a trade secret,” and that no harm to movants’ competitive standing would come from their public availability. Thus, the court sided with the plaintiffs and unsealed the expert reports.

Mercer v. Unum Life Ins. Co. of Am., No. 3:22-CV-00337, 2023 WL 3131989 (M.D. Tenn. Apr. 27, 2023) (Magistrate Judge Alistair E. Newbern). Nurse practitioner Nicole Mercer commenced this action against Unum Life Insurance Company of America and Unum Group to challenge its decision to terminate the long-term disability benefits she was receiving for her autoimmune-related disorders. In her action, Ms. Mercer contends that Unum operated under a conflict of interest which tainted its decision. She argued that Unum “incentivizes its claim handlers to terminate a specified number of claims every month” through the use of “claim-closure targets.” Thus, Ms. Mercer maintains that Unum’s adverse benefit decision of her claim was arbitrary and capricious. In order to support this position, Ms. Mercer filed a motion requesting the court compel Unum to produce discovery. Specifically, Ms. Mercer sought statistical data on the three claim reviewers pertinent to her case and all of the claims those individuals evaluated for the health conditions she suffers from. Through this information, Ms. Mercer wishes to compile averages and percentages of the claim reviewers in order to demonstrate that Unum was indeed operating under a conflict of interest and that the review process was not neutral. The Unum defendants opposed. They argued that the court should reject the discovery request and limit the action to the administrative record considered during the internal appeals process only. In its decision, the court acknowledged that fellow “courts are split as to whether such information is discoverable in an ERISA action,” and the “Sixth Circuit has not yet weighed in on the propriety of ‘batting average’ discovery.” However, the court stated that it would deny Ms. Mercer’s motion because her request was too broad. Rather than purely statistical data, Ms. Mercer wanted Unum to produce “each evaluative file or ‘written review’ for claims reviewed by the identified doctors during the relevant time period.” This, the court held, would be “unduly burdensome and the information minimally relevant.” Thus, the court was not persuaded that the information Ms. Mercer requested was “appropriate or proportional” and so declined to order Unum to produce these documents.

Seventh Circuit

Cutrone v. The Allstate Corp., No. 20 C 6463, 2023 WL 3074677 (N.D. Ill. Apr. 25, 2023) (Magistrate Judge M. David Weisman). In this putative class action, former participants of the Allstate 401(k) Savings Plan have sued the Allstate Corporation and the other plan fiduciaries for breaches of their duties and prohibited transactions under ERISA. Plaintiffs filed a motion to take more than ten depositions pursuant to Rule 23(b)(1) and (2). In particular, plaintiffs argued in favor of 26 depositions. They contend that this number of depositions is necessary and proportionate considering the complexities of the topics at issue and the broad scope of the case. Defendants, however, argued that the request was unreasonable, premature, overly burdensome, and would result in duplicative testimony. The court took a compromise position, permitting plaintiffs a total of 20 initial depositions. “Indeed, the sprawling nature of this case weighs greatly in favor of allowing more than ten depositions…[T]here is agreement that the stakes are high in this litigation: the alleged breach of fiduciary duty caused the loss of millions of dollars in Plaintiffs’ retirement savings. Further, the benefit of additional depositions outweighs the burden on Defendants in light of the case’s scale and importance.” However, the court reduced the requested number from 26 down to 20 in order to balance the position of the defendants and help alleviate some of their burden. Nevertheless, after the completion of these initial 20 depositions, the court left the door open for plaintiffs to seek leave to conduct further depositions if necessary.

Life Insurance & AD&D Benefit Claims

Second Circuit

Maxwell v. Lynch, No. 1:21-CV-00346 (LEK/ATB), 2023 WL 3055542 (N.D.N.Y. Apr. 24, 2023) (Judge Lawrence E. Kahn). Plaintiff New York Life Group Insurance Company of New York commenced this interpleader action requesting that the court determine the proper beneficiary of the life insurance coverage issued to decedent Dreena Verhagen. The court previously discharged New York Life from this action. In this order, it denied motions for judgment on the pleadings pursuant to Rule 12(c) filed by seven of the nine interpleader defendants, the potential claimants to the plan’s proceeds. As an initial matter, the court declined to take judicial notice of documents and other materials outside the pleadings. The court wrote that, “[t]he Moving Defendants’ representation that NY Life already determined ‘that Decedent’s siblings are the only eligible recipients of the life insurance benefits’ is…plainly incorrect.” Rather than an action where an insurance company has made an adverse benefits determination, this action is an interpleader action where no determination has yet been reached. Instead, the court held that the central issue in this action is whether the decedent’s signature on the beneficiary designation form was forged, and relying on materials outside the pleadings would therefore be improper in this instance. Moreover, the court held that because this issue cannot be resolved without considering the extrinsic materials offered by the moving defendants, their motion could not be granted. Finally, the court declined to convert their motion for judgment on the pleadings into a summary judgment motion, as there has yet to be discovery in this action.

Medical Benefit Claims

Fourth Circuit

Albert S. v. Blue Cross & Blue Shield of N.C., No. 1:22-cv-235-MOC-WCM, 2023 WL 3111768 (W.D.N.C. Apr. 26, 2023) (Judge Max O. Cogburn Jr.). Albert S. and his daughter S.S. sued their ERISA healthcare plan administrator and plan sponsor, defendants Blue Cross and Blue Shield of North Carolina and North Carolina Bar Association Health Benefit Trust, seeking payment of claims from S.S.’s stay at a residential mental healthcare treatment facility. Specifically, plaintiffs asserted two causes of action in their complaint, a claim for benefits and a claim for violating the Mental Health Parity and Addiction Equity Act. Defendants moved to dismiss the Parity Act claim. The court granted their motion here. It agreed with defendants that plaintiffs failed to state a claim under the Parity Act because it found their allegations of unequal limitations for mental health care as compared to medical or surgical care to be lacking in sufficient facts or details. The court concluded that plaintiffs’ complaint did not include details about what acute criteria were imposed on mental health care coverage that were not imposed on analogous medical coverage or even what the allegedly violative criteria was. Therefore, plaintiffs’ broad assertions about the Magellan Care Guidelines criteria and its treatment limitations for mental healthcare were found by the court to not meet the pleading standards of Rule 8. Thus, plaintiffs’ claim for relief under the Parity Act was dismissed, and they will proceed going forward with their benefits claim only.

Pension Benefit Claims

Federal Circuit

King v. United States, No. 18-1115, 2023 WL 3141796 (Fed. Cl. Apr. 28, 2023) (Judge Richard A. Hertling). Vested participants in a Taft-Hartley pension plan, the New York State Teamsters Conference Pension and Retirement Fund, sued the United States in this certified class action arguing that the Department of Treasury, the Labor Department, and the Pension Benefit Guaranty Corporation (“PBGC”) violated the takings clause of the Fifth Amendment by authorizing a 29% cut to their pension benefits under the Multiemployer Pension Reform Act of 2014 (“MPRA”). The plaintiff class members who were still alive last December “saw their pension benefits restored under the American Rescue Plan Act of 2021 (“ARPA”) and received lump-sum make-up payments without interest in the amount that had been withheld from them. The plaintiffs maintained their suit for interest on the amounts withheld while the benefit cuts were in effect, and payment to the estates of the participants who died prior to December 2022, as those individuals received no money from ARPA. The parties cross-moved for summary judgment under Rule 56. To resolve the cross-motions, the court stated that it needed to address two issues. First, it needed to decide whether plaintiffs’ claims were “more appropriately resolved as classic physical taking or under the more flexible regulatory-takings test provided in Penn Central Transportation Co. v. City of New York, 438 U.S. 104, 98 S. Ct. 2646, 57 L.Ed.2d 631 (1978).” The court concluded that the physical takings test was not applicable here because the federal government had neither appropriated plaintiffs’ property nor occupied it. It stated that although contractual rights are recognized as property interests under the takings clause, “the modification of those contract rights and the accompanying financial loss do not automatically justify the application of the physical-takings test.” The “crucial element in determining whether the physical-takings test applies” is whether the government seized, confiscated, appropriated, or occupied the property of the plaintiffs, and because the plaintiffs here did not meet their burden of demonstrating the government had done so, the court concluded that the regulatory-takings test was the measure it would use for plaintiffs’ claims. This brought the court to the second half of its decision, in which it analyzed the Penn Central factors. Those three key factors are the economic impact of the regulation, the extent of the regulation’s impact and interference with “distinct investment-backed expectations,” and the nature or character of the action the government took. The court acknowledged that this case would have “important implications for the constitutional limits on the ability of Congress and regulators to address the problem of multiemployer-pension-plan insolvency.” The court also considered the financial situations of the plaintiffs, both those still living and estates of those who died following ARPA and the issuance of the make-up payments. The court then looked at the economic impact of the regulation on the plaintiffs. It concluded that the impact of the MPRA suspension and ARPA preclude a finding of regulatory taking because the 29% reduction over the six-year period was mostly negated by the eventual make-up lump-sum payments for the withheld amounts. Under the second factor – the interference with investment-backed expectations – the court held that plaintiffs had reasonable investment-backed expectations to receive their unreduced, vested pension benefits, and that they could not have foreseen they would bear the financial cost of keeping the Teamsters Fund afloat during a period when the plan approached insolvency. Nevertheless, when factoring in the degree of interference with those expectations, the court found that plaintiffs did not present compelling evidence that the government unduly interfered with those reasonable expectations to give rise to a regulatory taking. Finally, the court weighed the character of the government’s action and concluded that “Congress was acting within its constitutional authority to amend ERISA and adjust reasonably the benefits and burdens of the regulatory scheme in an attempt to preserved funds’ financial stability.” On balance, although the suspension of benefits under the MPRA was a drastic step, the court concluded that it was an appropriate tool in the government’s tool-box to be used in a “a last-ditch effort to maintain the solvency of pension plans.” As a result, the court found the Penn Central factors did not tilt in plaintiffs’ favor and instead leaned toward a finding that the federal government had not violated the takings clause of the Fifth Amendment. Accordingly, the court denied plaintiffs’ summary judgment motion, and granted defendant’s motion for summary judgment.

Pleading Issues & Procedure

Second Circuit

Fitzsimons v. N.Y.C. Dist. Council of Carpenters & Joiners of Am., No. 21 Civ. 11151 (AT), 2023 WL 3061852 (S.D.N.Y. Apr. 24, 2023) (Judge Analisa Torres). Plaintiff Peter Fitzsimons and his family members sued the New York City District Council of Carpenters Pension Fund, the New York City District Council of Carpenters Welfare Fund, and the plan’s trustees and fiduciaries, including the New York District Council of Carpenters and Joiners of America union. The Fitzsimons asserted causes of action under the Labor-Management Reporting and Disclosure Act (“LMRDA”) and ERISA for breaches of fiduciary duties and claims for benefits. In essence, plaintiffs allege in their complaint that defendants improperly concluded that Mr. Fitzsimons was working as a carpenter for a non-union company, and ceased payments of all future pension benefits and stripped the family of their health insurance benefits. Defendants moved to dismiss the complaint for failure to state a claim pursuant to Rule 12(b)(6). The Court granted the motion in this decision. It held that the complaint did not contain sufficient factual allegations to state a claim for breach of fiduciary duty under ERISA and that it was based only on “conclusory allegations” insufficient to meet Rule 8 pleading standards. In addition, the court found plaintiffs’ claims for benefits under Section 502(a)(1)(B) time-barred because the relevant plans set a limitations period of one year and the action was not brought until after that time had run. The court disagreed with plaintiffs that a one-year contractual statute of limitation was unreasonably short. Furthermore, the court agreed with defendants that plaintiffs could not assert their claims for benefits under the welfare plan because they failed to exhaust internal appeals procedures prior to commencing their lawsuit. In addition, the court stated that even putting the issues of exhaustion and untimeliness aside the benefit claims would have failed under arbitrary and capricious review because the allegations themselves do not “establish that the Fund Defendants’ actions were arbitrary and capricious.” Finally, the court dismissed the LMRDA claim because it found the complaint itself contradicted plaintiffs’ arguments that Mr. Fitzsimons was not afforded a full and fair hearing under LMRDA § 101(a)(5)(C). For these reasons the complaint was dismissed in its entirety with prejudice.

Provider Claims

Third Circuit

Lipani v. Aetna Life Ins. Co., No. 22-2634 (ZNQ) (DEA), 2023 WL 3092197 (D.N.J. Apr. 26, 2023) (Judge Zahid N. Quraishi). Brain and spinal surgeon Dr. John Lipani, M.D., sued Aetna Life Insurance Company in a one-count complaint seeking reimbursement for surgery he performed on an ERISA plan beneficiary, patient A.T., pursuant to ERISA Section 502(a)(1)(B). A.T. assigned her rights to bring this action to Dr. Lipani, and granted him a limited power of attorney for the same purpose. Aetna moved to dismiss the complaint for failure to state a claim. Specifically, Aetna argued that the plan includes an unambiguous anti-assignment provision, meaning that Dr. Lipani does not have standing to bring his action. The court agreed and granted the motion to dismiss the complaint. Dr. Lipani’s power of attorney did not alter the consideration either, as the court wrote that the healthcare provider “cannot circumvent [an] anti-assignment clause by claiming he is A.T.’s attorney-in-fact.” Accordingly, the court found that Dr. Lipani could not bring his ERISA claim.

Standard of Review

Second Circuit

Rhodes v. First Reliance Standard Life Ins. Co., No. 22 Civ. 5264 (AKH), 2023 WL 3099294 (S.D.N.Y. Apr. 26, 2023) (Judge Alvin K. Hellerstein). Plaintiff William Rhodes sued First Reliance Standard Life Insurance Company under ERISA to challenge its termination of his long-term disability benefits which he was receiving after a traumatic brain injury. Mr. Rhodes moved the court to apply the de novo standard of review. He argued that Frist Reliance violated ERISA claims procedure regulations in three ways, and that this failure to adhere to the regulations should trigger the less stringent review standard. First, Mr. Rhodes argued that the claims administrator failed to consult with an appropriately qualified healthcare professional on appeal in violation of 29 C.F.R. § 2560.503-1(h)(3)(iii) and (4). Second, he claimed that First Reliance failed to give him the opportunity to respond to the reviewer’s addendum report in violation of 29 C.F.R. § 2560.503-1(h)(4)(i). Lastly, Mr. Rhodes argued that First Reliance was untimely in reaching its final determination during the appeals process in violation of 29 C.F.R. § 2560.503-1(i)(1)(i), (i)(3)(i). The court agreed with Mr. Rhodes on all three points and granted his motion. To begin, the court held that a psychologist was not a sufficiently qualified medical professional to opine on Mr. Rhodes’ neurological conditions or to review and analyze his medical records. “First Reliance offers no precedent that would support a finding that a neuropsychologist or any other individual who is not a medical doctor would be sufficiently qualified to satisfy the full and fair review requirement.” Next, the court agreed with Mr. Rhodes that First Reliance failed to comply with the claims procedure regulations by not providing Mr. Rhodes with a copy of the psychologist’s addendum report. The court stated that the report at issue “was a medical opinion regarding new medical evidence, and it was ‘considered’ and ‘generated’ by First Reliance” during the appeals process. Thus, the court concluded that defendants’ failure to give Mr. Rhodes the report and by extension an opportunity to respond to it prior to the final benefits determination, constituted a violation of the claims procedure regulations. Finally, the court found that First Reliance violated its obligation to render a final determination on appeal within 45 days of Mr. Rhodes’ submission. It was the court’s view that “neither awaiting receipt of the IME report nor awaiting the ‘additional information from Plaintiff’ provided a valid basis for First Reliance to stay their review.” These events, the court concluded, were not “special circumstances” warranting an extension. Moreover, the court held that First Reliance had not adequately advised Mr. Rhodes that it intended to invoke the extension, nor did it provide him with a date by which it would render its final decision. Accordingly, here too defendant was found to have violated the claims regulations. For these reasons, the court concluded that the de novo review standard should apply to its review of First Reliance’s denial of Mr. Rhodes’ claim.

Phillips v. Boilermaker-Blacksmith Nat’l Pension Tr., No. 19-cv-02402-TC-KGG, 2023 WL 3020193 (D. Kan. Apr. 20, 2023) (Judge Toby Crouse)

Four union retirees who are participants of the Boilermaker-Blacksmith National Pension Trust (“Pension Trust”), a collectively-bargained multiemployer pension plan, brought this putative class action in which they allege that their early retirement benefits were improperly terminated under a “manufactured” and erroneous definition of retirement. In this decision, the district court largely agreed with the plaintiffs that defendants were not entitled to judgment on the pleadings on claims that defendants violated ERISA through “the guise of an interpretation” designed to eliminate plaintiffs’ right to receive early retirement benefits while they continued to work and to recoup the benefits already paid to them.

If the allegations sound familiar, it may be because the board members and trustees of the Boilermaker-Blacksmith plan reinterpreted the meaning of “retire” and used their new view of retirement in order to cease benefit payments, recoup previous payments, and create new annuity starting dates for the retirees with less favorable terms in a similar manner as the fiduciaries of the U.A. Plumbers & Steamfitters Local No. 22 Pension Fund in Metzgar v. U.A. Plumbers & Steamfitters Loc. No. 22 Pension Fund, No. 20-3791, 2022 WL 610340 (2d Cir. Mar. 2, 2022), cert. denied, 143 S. Ct. 1002 (2023). Apparently using the same playbook as the defendants in Metzgar, the defendants here justified their new standards by arguing that their previous interpretations and accompanying decades-long actions were erroneous because they failed to comport with IRS rules.

In this lawsuit the plaintiffs challenged the denial and recoupment decisions. They maintain that the fiduciaries of the Pension Trust created and began to utilize an unwritten “90-Day Rule,” under which the fiduciaries determined that a plan participant did not have the actual intent to retire and therefore did not qualify for benefits if that participant began any new employment within 90 days of retiring. Additionally, plaintiffs alleged that certain plan amendments were not properly disclosed to them. In one category of these amendments, the plan took steps to expand its ability to recoup overpayments. “These changes allowed the Plan to seek overpayments from participants regardless of whether their benefits were suspended or terminated. They also allowed the Plan to recoup overpayments, even after a participant’s death. They further allowed the Plan to recoup overpayments in any amount, whereas the Plan previously could deduct only 25 percent of monthly benefits.”

In the second category of amendments, the plan changed the name of the section defining retirement from “Retirement” to “Disqualifying Employment.” Plaintiffs argued that, despite this change, the plan’s definition of retirement in the plan remained “explicit and unambiguous” and that it therefore did not permit the fiduciaries to reinterpret its meaning, especially in ways that directly conflict with the plan language.

In addition to these actions with respect to the Pension Trust, plaintiffs also focused on the actions of the Union’s Health Fund with regard to one of the named plaintiffs. The Health Fund acted in concert with the Pension Trust to terminate retiree insurance coverage of this plaintiff, who had been paying premiums through automatic deductions from his monthly pension benefits. After the Pension Trust ceased making payments to the plaintiff, the fiduciaries of the Health Fund determined that he was also ineligible for retiree health insurance and so his health insurance coverage was terminated. When that happened, the Health Fund reimbursed the plaintiff his unused premium payments, but rather than pay almost $50,000 to the plaintiff directly, the Health Fund transferred that money to the Pension Trust, which then used it to offset the amount the Pension Trust claimed that the plaintiff owed it in overpayments due to his failure to retire. Accordingly, this plaintiff also sued the Health Fund and its trustees.

In total, plaintiffs asserted nine claims: (1) erroneous failure to pay benefits; (2) breaches of fiduciary duties (including a prohibited transaction); (3) violations of ERISA’s anti-cutback provision, Section 204(g); (4) failure to provide notice of plan amendments in violation of Section 204(h); (5) failure to maintain a written plan and provide accurate summary plan descriptions; (6) failure to provide a full and fair review; (7) violation of ERISA’s non-forfeitability provision, Section 203(a); (8) unlawful transfer and improper assignment of pension benefits in violation of Section 206(d); and (9) equitable estoppel. All defendants jointly moved for judgment on the pleadings under Federal Rule of Civil Procedure 12(c).

In this lengthy decision, the court mostly denied judgment to the Pension Trust defendants but granted entirely the Health Fund defendants’ motion for judgment on the pleadings.

With respect to the Health Fund claims, the court agreed that the Health Fund defendants did not make any benefit determinations, did not breach any fiduciary duty, and concluded that the transfer between the Health Fund and pension plan could not be viewed as “an alienation or improper assignment within the meaning of Section 206(d).” Finally, because the court granted the Health Fund defendants judgment with regard to the underlying ERISA violations, it also granted it judgment on the derivative equitable estoppel claim against this set of defendants. Essentially, the court viewed the allegations in the complaint as truly centering around the actions of the fiduciaries of the Pension Trust and as not directly implicating the Health Fund.

The court took a much dimmer view of the Pension Trust defendants’ actions. The court denied most of the Pension Trust defendants’ motion, concluding that their arguments largely depended “on a factual predicate – that Plaintiffs applied for retirement but subjectively intended to continue their work – that is contrary to what Plaintiffs alleged in their Amended Complaint.” The court was unwilling to adopt defendants’ position that the reinterpretations by these defendants did not constitute actual amendments, and that the reinterpretation could therefore not be an impermissible cutback under Section 204(g). To the contrary, the court stated that it was “not clear that Pension Defendants’ earlier interpretations were plainly erroneous.” The court found it both persuasive and plausible, as plaintiffs alleged, that defendants never violated IRS regulations by allowing plaintiffs to receive their early pension benefits, and instead were receiving favorable IRS determination letters for decades while they had previously allowed participants to perform certain non-union work. “Moreover, IRS rules and regulations do not override ERISA – a plan can violate ERISA even if its goal is tax compliance.”

The court distinguished the facts of this case from Metzgar because “the Plan here did define retire in Section 8.08.” The court also pointed out that, in this case, participants alleged that they relied on that definition and that the actual terms of the plan’s definition were changed by way of amendment.

The court was also willing to accept as plausible plaintiffs’ allegations that the Pension Trust fiduciaries violated ERISA’s non-forfeitability provision by requiring the retirees to re-apply for benefits, thereby imposing new conditions on eligibility and triggering new annuity start dates.

The court likewise denied the Pension Trust defendants’ judgment on the claims for benefits, the violation of Section 204(h) claim, the full and fair review claim, the non-forfeitability claim, and the equitable estoppel claim.

However, on two claims – the fiduciary breach claim and the anti-cutback provision claim – the court granted judgment in part and denied judgment in part to the Pension Trust defendants.

First, the court granted judgment to the Pension Trust defendants on the prohibited transaction claim asserted under Section 406(a)(1)(B), which alleged that “paying funds…constituted an extension of credit by the Health Plan to the Pension Plan.” The court’s reasoned that the Pension Trust defendants were not the party that extended credit; instead, they received funds they alleged had been improperly released, and as a result, the court held that plaintiffs had not stated a claim under this provision.

Nevertheless, the court allowed other aspects of the breach of fiduciary duty claim to proceed. These included allegations regarding defendants’ failure to provide notice of plan provisions, failure to give notice of plan amendments that restricted eligibility for retirement benefits, retroactive applications of the amendments to decrease accrued benefits, and failure to provide full and fair reviews of the denials by withholding material information. The court held these claims were sufficiently pled under Rule 8 standards.

As for the anti-cutback claim, the court granted judgment to the Pension Trust defendants on the aspects of the claim which were based on the overpayment amendments to the plan. The court held that the overpayment amendments could not violate Section 204(g) because “[b]efore and after the overpayment amendments, the value of Plaintiffs’ pension rights remained unchanged.” However, as noted above, the court found that plaintiffs stated plausible anti-cutback claims regarding the amendment to Section 8.08 of the plan and the application of the 90-Day Rule, as both changes may have led to reductions in accrued benefits.

Finally, much like the Health Fund defendants, the court granted the Pension Trust defendants judgment on the pleadings with respect to the alleged Section 206(d) violation. Once again the court concluded that no unlawful transfer, alienation, or assignment of pension benefits took place when the Health Fund Defendants refused to refund one of the plaintiffs his pension plan payments directly and instead transferred those payments back to the Pension Trust.

Thus, defendants’ motion for judgment on the pleadings ended with a mixed result. However, this decision is notable because the court chose not to follow the Second Circuit’s decision in Metzgar and specifically distinguished it. Thus, the decision demonstrates that it remains an open question as to what it means to “retire” for purposes of receiving a pension under multiemployer retirement plans, and it is still unclear whether and the extent to which the trustees of such plans may eliminate early retirement benefits for some retirees by redefining that term. Although this case is still far from reaching its conclusion, the plaintiffs have cleared their first hurdle and may be able to persuade the court at the end of the day that they had in fact “retired” when they first stopped working in covered employment and began receiving their pensions.

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

Breach of Fiduciary Duty

Second Circuit

Jacobs v. Verizon Commc’ns, No. 16 Civ. 1082 (PGG) (RWL), 2023 WL 3027311 (S.D.N.Y. Apr. 20, 2023) (Judge Paul G. Gardephe). Plaintiff Melina N. Jacobs initiated this class action against Verizon Communications, Inc., Verizon Investment Management Corporation, the Verizon Employee Benefits Committee, and individual committee members for breaches of fiduciary duty. Ms. Jacobs avers that the fiduciaries of the Verizon Savings Plan for Management Employees failed to monitor and remove the plan’s imprudent investment options. The class consists of the participants of the plan who had their retirement savings invested in the Global Opportunity Fund, the challenged investment option at the center of this class action, either directly or indirectly. Notably, one of Ms. Jacobs’ experts analyzed the annual returns for the Global Opportunity Fund and concluded that it underperformed benchmarks by 78.4% in the relevant ten-year timeframe from 2007 to 2017. The Benefits Committee did eventually eliminate the Global Opportunity Fund as a stand-alone investment option in the savings plan, but not until February 2017, one year after the complaint was filed. Defendants brought several motions before the court. First, defendants moved to exclude the opinions of two of Ms. Jacobs’ expert witnesses. This motion was denied. The court held that the expert testimony was admissible under the Federal Rule of Evidence 702 and that defendants’ challenges to the opinions offered by the experts should be addressed during the trial. Next, defendants moved for summary judgment. The court denied the summary judgment motion. It held that the question of whether defendants breached their duty of prudence regarding the Global Opportunity Fund is a genuine issue of material fact making summary judgment improper. The court wrote, “Defendants provide no explanation as to why they preserved the Global Opportunity Fund as an investment option, and there is no evidence that, during the time period between the Global Opportunity Fund’s inception on January 1, 2007, and April 1, 2010, the Benefits Committee or the Executive Committee discussed or considered what to do about the Fund’s poor performance.” Not only did the court state that it was unclear that defendants’ review process functioned properly with regard to the Global Opportunity Fund, but the court also stated that defendants were not entitled to judgment based on the Fund’s performance, as plaintiff and her experts provided substantial evidence that the Fund performed poorly during the time periods. Finally, defendants moved to strike plaintiff’s jury demand, which Ms. Jacobs did not oppose. Accordingly, the court granted the motion to strike the jury demand.

Third Circuit

Krutchen v. Ricoh U.S., Inc., No. 22-678, 2023 WL 3026705 (E.D. Pa. Apr. 20, 2023) (Judge Juan R. Sanchez). Participants of the Ricoh Retirement Savings Plan brought this putative class action against the plan’s administrative committee, its board of directors, and Ricoh USA, Inc. for breaches of fiduciary duties. Plaintiffs allege that the fiduciaries breached their duty of prudence by failing to control the plan’s costs and fees and that they breached their duty to monitor co-fiduciaries. In a previous motion, defendants moved to dismiss the complaint for failure to state a claim. That motion was granted on November 15, 2022, and the complaint was dismissed with leave to amend. “Plaintiffs have now had three chances to correctly plead their claims. Because the Second Amended Complaint fails to cure the defects identified in this Court’s previous Order, Defendants’ Motion to Dismiss will be granted with prejudice.” Once again, the court stated that it could not infer breaches of fiduciary duties based on the allegations in the complaint. It held that plaintiffs’ comparators were inapt and not meaningful because they did not provide equivalent quality and types of services provided for the amounts charged. The court was not persuaded by plaintiffs’ position that “all large plans require the same type of services, of which all recordkeepers are able to provide the same quality.” It further disagreed that plan recordkeeping and administrative services are “fungible” and that “they are only distinguished by price,” making higher fees per se unreasonable. “Within the ‘care, context-sensitive scrutiny’ the Supreme Court mandates in evaluating ERISA claims, vaguely alleging recordkeeping services are fungible does not plausibly allege a breach.” It therefore remained unclear to the court whether a prudent fiduciary would have necessarily taken different actions from the defendants. Thus, the court concluded that plaintiffs could not state a plausible claim of imprudence, and without an underlying fiduciary breach violation could also not state a derivative failure to monitor claim. 

Ninth Circuit

Davis v. United Health Grp., No. C21-01220RSM, 2023 WL 2955277 (W.D. Wash. Apr. 14, 2023) (Judge Ricardo S. Martinez). Three plan beneficiaries of ERISA-governed health and welfare benefit plans administered by UnitedHealth Group Inc. and its subsidiaries (together “United”) who received care from out-of-network healthcare providers initiated this putative class action lawsuit against United to challenge its alleged underpayment of out-of-network reimbursement rates determined through the use of methodology created by third-party vendors including Multiplan Inc. Plaintiffs allege United violated plan terms by reimbursing the out-of-network healthcare providers “at rates that were lower than the negotiated rates agreed upon by the…providers and third-party vendors.” According to the complaint, United’s behavior was motivated by self-serving economic interests and that was therefore a breach of fiduciary duties, including the duty of loyalty. Plaintiffs asserted claims for denial of benefits, breach of fiduciary duty, and equitable relief under Section 502(a)(3). United moved to dismiss plaintiffs’ first amended complaint. Their motion was denied in this order. The court held that plaintiffs had Article III standing to pursue their claims, including those for injunctive relief, as they alleged injuries in fact traceable to United’s alleged actions, and because they remain plan beneficiaries and therefore may face the same harm in the future. In addition, the court declined to dismiss the equitable relief claim as duplicative of the potential remedies under Section 502(a)(1)(B) at this stage of the proceedings. Finally, the court was satisfied that plaintiffs had stated their claims. It held that the complaint satisfied Rule 8 pleading requirements, and that it alleged facts from which the court could infer the alleged wrongdoing, including that United unreasonably interpreted the plan and underpaid claims for out-of-network providers. Regarding the benefit claim specifically, the court agreed with plaintiffs “that the discretionary phrase in the Plans does not allow United to dispose of a negotiated rate if the parties have agreed to a rate. Instead, the Court finds that United’s discretion applies to who the negotiating party is on behalf of United… As such, the phrase ‘at UnitedHealthcare’s discretion’ does not allow United to elect which methodology it will use to pay benefits, where, as here, rates have been negotiated.” Along these same lines, the court also found that plaintiffs plausibly alleged that United failed to comply with its fiduciary duties under ERISA when it decided to use rates other than those negotiated with the providers, and that this decision could plausibly have been “influenced by its own economic self-interest.” Accordingly, the court denied the motion to dismiss, and plaintiffs’ action will carry on.

Class Actions

Second Circuit

Browe v. CTC Corp., No. 2:15-cv-267, 2023 WL 2965983 (D. Vt. Apr. 17, 2023) (Judge Christina Reiss). On December 16, 2022, the court issued an order in this breach of fiduciary duty class action related to wrongdoing and mismanagement of the CTC Corporation deferred compensation top-hat plan. In that order, summarized in Your ERISA Watch’s December 21, 2022 edition, the court entered judgment in favor of the plan participants on their breach of fiduciary duty claim, drafted the restoration award, outlined how the award was to be paid to the participants, and ordered the plan’s termination following the issuance of those payments. Now plaintiffs and defendants have each moved for reconsideration of certain aspects of that decision, and each moved for attorneys’ fees and expenses. In this decision the court granted in part plaintiffs’ reconsideration motion, denied defendants’ reconsideration motion, and denied without prejudice both parties’ fee motions until it is determined whether there will be an appeal. The court first addressed plaintiff’s reconsideration motion. Plaintiffs requested two things in their motion. First, they requested that the court order defendants to pay the Plan as opposed to the plan participants and name either an interim administrator, escrow agent, special master, or receiver. The court responded that it wished for an immediate payment of the amounts due to plan participants. Such immediate distribution, it said, “is the best means of ensuring that Plan benefits are distributed to Plan participants, many of whom are elderly, as soon as possible.” However, the court acknowledged that this desire for quick disbursement may not in reality be possible, especially if there is an appeal. Accordingly, the court directed the parties to meet and confer to discuss a possible person or entity to serve as the funds’ interim fiduciary and to then advise the court of their proposed selection. Second, plaintiffs requested reconsideration regarding the calculation of the account balance of one of the plan participants over withdrawals she took from her account which affected the balance. The court expressed that to the extent this calculation error exists, it was, at least in part, the result of the parties’ actions. Nevertheless, the court did not want to prejudice the plan participant and therefore amended the order to address the error. The court ordered that the benefits be calculated in the same manner as those of another plan participant who similarly took withdrawals and altered the judgment to reflect this change. The court then moved on to addressing defendants’ reconsideration motion. Defendants sought reconsideration based on a statute of limitations defense as to two of the plan participants’ claims to recover benefits under the plan. The court held that defendants had “not satisfied the exacting standard for reconsideration,” and “[t]o the extent Defendants claim that the statute of limitations has no import if the court fails to reconsider its ruling, that argument is without merit.” Thus, defendants’ motion for reconsideration was denied. Regarding the fee motions, the court not only felt that deferring any fee award and denying the motion without prejudice pending a resolution of a Circuit Court appeal would serve judicial interests and conserve resources, but it also advised the parties that if they renew their attorneys’ fee motions they must include more information, currently lacking, regarding hours and costs spent.

ERISA Preemption

Fourth Circuit

Mallory v. Terminal Inv. Corp., No. 9:22-cv-04538-DCN, 2023 WL 3017963 (D.S.C. Apr. 20, 2023) (Judge David C. Norton). Plaintiff Douglas R. Mallory filed a state court complaint against his former employer, Terminal Investment Corporation, and his former supervisor, Greg Marcum, alleging that he was wrongfully discharged in retaliation for seeking workers’ compensation benefits. Mr. Mallory asserted two state law causes of action, a claim of retaliatory discharge brought against the employer, and a negligence claim against both defendants. Defendants removed the action to federal court because Mr. Mallory referenced COBRA as part of his negligence cause of action. Specifically, Mr. Mallory alleged that defendants “fail[ed] to offer [him] an opportunity to continue his health coverage; following his termination,” and “fail[ed] to provide [him] with notices required under COBRA.” Accordingly, defendants argued that the negligence claim was preempted by ERISA. In response, Mr. Mallory moved to amend his complaint to remove the portions of his complaint that referenced COBRA and therefore implicated ERISA preemption. In addition, Mr. Mallory moved to remand his amended complaint back to state court. The court granted both motions. First, it agreed with defendants that removal was proper, and that the original complaint was preempted by ERISA as the allegations of negligence premised on COBRA violations affect the administration of the plan and therefore fall under ERISA’s administrative civil enforcement scheme. However, because defendants provided written consent in response to Mr. Mallory’s request to amend his complaint, the court granted the motion to amend. With the ERISA issues removed from the amended complaint the court considered whether the amendment weighed in favor of remand. It found that it did, as diversity jurisdiction does not exist in this action, and because the court did not find the amendment or remand request to be “manipulative tactics.” Thus, the court stated that factors weighed strongly in favor of remand and against exercising supplemental jurisdiction. The court therefore granted the motion to send the lawsuit back to state court.

Ninth Circuit

Forman v. John Hancock Life Ins. Co., No. 2:22-cv-01944-KJM-AC, 2023 WL 3025226 (E.D. Cal. Apr. 19, 2023) (Judge Kimberly J. Mueller). Plaintiff Leslie Dean Forman commenced this action against John Hancock Life Insurance Company in state court alleging claims of negligence, fraudulent misrepresentation, and breach of fiduciary duty. Mr. Forman claims that John Hancock wrongfully transferred the funds in his ERISA-governed 401(k) plan into the stock market without his consent and then delayed transferring the funds into a different account servicer against his explicit directions, causing him losses of hundreds of thousands of dollars. John Hancock serves as the recordkeeper and administrator of the plan. Mr. Forman is both a trustee of the plan and a participant in it. Prior to opening his account, Mr. Forman signed a recordkeeping agreement with John Hancock in his role as trustee of the plan. In that agreement, John Hancock is a “limited fiduciary,” and the agreement outlines that John Hancock will only act “in accordance with directions from trustees [with the] authority and responsibilities for reviewing the Plan documents, ensuring compliance with ERISA… and instructing John Hancock accordingly.” Mr. Forman maintains that he is suing in his individual capacity, and not as a trustee of the plan. John Hancock removed the action to the Eastern District of California under federal question jurisdiction. After removing the lawsuit, John Hancock moved for dismissal under Federal Rule of Civil Procedure 12(b)(6). It argued that all three causes of action are preempted by ERISA. The court disagreed. First, the court held that complete preemption does not apply. “The court finds Forman’s claims are not within the scope of ERISA § 502(a)(2) because [John Hancock] is not an ERISA fiduciary. Defendant itself argues it did not act as an ERISA fiduciary. The relationship between Forman and [John Hancock] is defined by the recordkeeping agreement the parties entered into…. Moreover, any fiduciary duties [John Hancock] owed Forman arose out of its obligation under the Recordkeeping Agreement and not from the terms of the Plan.” Thus, the court concluded that the allegations in the complaint are not based on a violation of the terms of the plan. Next, the court held the state law claims were not preempted by conflict preemption, concluding “the connections between the Plan and the state law causes of action are too tenuous.” The court expressed that the claims do not relate to denials of benefits, administration of plan benefits, or breach of the ERISA plan. Thus, it stated that resolution of the claims will not interfere with ERISA’s goal of uniform administrative practices. However, despite finding that the state law claims were not preempted by ERISA, the court nevertheless dismissed the fraudulent misrepresentation claim without prejudice. It held that claim did not meet the heightened pleading standards for fraud-based claims. Mr. Forman’s breach of fiduciary duty and negligence claims meanwhile were not dismissed.

Exhaustion of Administrative Remedies

Eighth Circuit

Saucedo v. United Healthcare Ins. Co. of the River Valley, No. 5:23-CV-5008, 2023 WL 3034115 (W.D. Ark. Apr. 19, 2023) (Judge Timothy L. Brooks). Plaintiff Sergio Saucedo sued United Healthcare Insurance Company of the River Valley under ERISA seeking health care benefits under his plan. In addition to his claim for benefits, Mr. Saucedo brought a claim for penalties under § 1024(b)(4) for failure to provide plan documents upon request. Mr. Saucedo contends that United refused to provide him a copy of the plan or a summary plan description despite his written requests, and because of United’s refusal he was unable to pursue an internal administrative appeal prior to bringing suit. United moved to dismiss the complaint for failure to exhaust administrative remedies. The court granted the motion in this decision and dismissed the action without prejudice. The court agreed with United that the documents Mr. Saucedo relied upon were “plainly not written requests for plan documents or appeal information,” and were in fact “Authorizations for Release of Health Information,” the purpose of which is to allow United to release Mr. Saucedo’s health information to his counsel. Accordingly, the court disagreed with Mr. Saucedo that he was unable to pursue the internal appeal process, and because his plan requires exhaustion prior to bringing ERISA actions, the court granted the motion to dismiss the ERISA claims as premature.

Ninth Circuit

Jackson v. The Guardian Life Ins. Co. of Am., No. 22-cv-03142-JSC, 2023 WL 2960290 (N.D. Cal. Apr. 13, 2023) (Judge Jacqueline Scott Corley). Plaintiff Charles Jackson, Sr. filed a claim for long-term disability benefits under his ERISA plan from his employer Pacific States Petroleum. The administrator of the plan, The Guardian Life Insurance Company of America, stated that Mr. Jackson was not submitting a viable claim and was not insured at all because he never submitted an “evidence of insurability” form. Mr. Jackson responded that Pacific States Petroleum had accepted his coverage because they had sent him an evidence of insurability form and confirmed that coverage premiums were being deducted from his paycheck. Mr. Jackson’s attorneys, who were in communication with Guardian Life, requested that it waive the evidence of insurability form requirement. After Guardian Life declined to do so, Mr. Jackson commenced this civil lawsuit against the insurance company and his employer, asserting claims pled in the alternative for benefits and fiduciary breach. Defendants moved for summary judgment based on Plaintiff’s failure, in their view, to exhaust administrative remedies under Pacific States’ employee benefit plan prior to filing suit. In this decision, the court denied the summary judgment motion. Under binding precedent in the Ninth Circuit, exhaustion is “a question of contract.” Thus, the court stated that its role was to read the plain language of the plan and determine whether the plan language could be reasonably read as making exhaustion optional prior to bringing an ERISA suit. Here, the court found that it was, and that Mr. Jackson therefore had no obligation to do so. “[N]othing in (the plan) language would alert a reasonable claimant that waiving the claimant’s right to an administrative appeal will preclude the clamant from bringing a civil action under Section 502(a) of ERISA.” The plan did not do more, the court held, than inform claimants about the right to appeal. But that, the court concluded, is not the same as making it clear that failing to internally appeal would result in the inability to challenge an adverse decision in court. Although the court stated that precedent dictates that any ambiguity in the plan needs to be interpreted against the drafters of the plan, the court highlighted certain language in the plan which it did not find ambiguous and which it expressed would lead a reasonable reader to “understand an ERISA suit as an ‘in addition to’ or ‘alternative’ to the appeal process, rather than prerequisite.” Finally, the court found that the conflicting information within letters the defendants said they sent to Mr. Jackson did not modify the plan terms and was therefore irrelevant. Thus, defendants’ summary judgment motion failed “because pre-suit exhaustion was optional under the Pacific States plan.”

Pleading Issues & Procedure

Eighth Circuit

Dida v. Ascension Providence Hosp., No. 4:22-CV-00508-AGF, 2023 WL 3002403 (E.D. Mo. Apr. 19, 2023) (Judge Audrey G. Fleissig). On January 4, 2017, ex-employee Dawit Dida filed a charge of discrimination with the D.C. Office of Human Rights (“OHR”) against his former employer Ascension Providence Hospital. Although the parties participated in mediated settlement negotiations facilities by the OHR, the process was ultimately unsuccessful. Mr. Dida withdrew his OHR complaint on August 24, 2021. Shortly after the withdrawal request was granted, Mr. Dida filed this present civil action in D.C. Superior Court. Ascension Providence removed the action to federal court, and then filed a motion to transfer the case to the Eastern District of Missouri pursuant to a forum selection clause. The motion to transfer was granted, and Ascension Providence moved to dismiss the complaint for failure to state a claim. The court previously denied the motion to dismiss Mr. Dida’s Family Medical Leave Act (“FMLA”), Americans with Disabilities Act (“ADA”), and ERISA claims, but granted the motion and dismissed Mr. Dida’s state law breach of contract claim. Mr. Dida subsequently amended his complaint, and Ascension Providence renewed its motion to dismiss. This time, the court granted the motion to dismiss in its entirety and dismissed the complaint with prejudice. Specifically, the court dismissed the FMLA claim as untimely because it was filed two years after the statute of limitations had run and the complaint did not allege any facts to plausibly support equitable tolling or equitable estoppel. Regarding the ADA claim, the court agreed with Ascension Providence Hospital that Mr. Dida was bound by the allegations in his OHR charge. In that complaint, Mr. Dida alleged discrimination based on age, but did not check the box for discrimination based on disability. As a result, the court stated that Mr. Dida could not bring a lawsuit that included new allegations that were not made in the original charge and dismissed the ADA claim for failure to exhaust administrative remedies. Finally, with regard to the ERISA claim, the court stated that it was unclear what particular section or sections of ERISA Mr. Dida was basing his claim or claims under. The court therefore evaluated Mr. Dida’s claim under what it identified as the two potentially relevant ERISA sections, 510 and 502(a)(1)(B), and concluded that he could not state a claim under either. First, the court held that to “the extent that Plaintiff is alleging he was terminated because he requested benefits, the Court agrees that any Section 510 claim would fail because Dida has not alleged the required elements of a Section 510 claim… Indeed, it appears that Dida was terminated before any request for disability benefits.” Next, the court concluded that Mr. Dida could not bring a claim for benefits under Section 502(a)(1)(B) against his former employer, defendant Ascension Providence Hospital, because it was not the plan administrator. Rather, the plan identifies “Ascension Health Alliance d/b/a Ascension” as the plan administrator, which the court viewed as entirely separate from the defendant. Accordingly, Mr. Dida’s ERISA cause of action was also dismissed.

Retaliation Claims

Fifth Circuit

A.S.C.I.B., L.P. v. Carpenter, No. 1:20-CV-1125-RP, 2023 WL 2993397 (W.D. Tex. Apr. 18, 2023) (Judge Robert Pitman). An employer, Sheshunoff & Co. Investment Banking, and a former employee, Curtis Carpenter, dispute what took place during Mr. Carpenter’s last days and weeks working for the company as Head of Investment Banking. In one version of events, Mr. Carpenter announced his resignation, and then was denied benefits under a deferred compensation ERISA plan and a severance release agreement and was subsequently sued in state court by his former employer under false charges as a pretext not to pay him benefits owed. In another version of the story, Mr. Carpenter took trade secrets from Sheshunoff, failed to promptly return his phone and computer to the company, and because of these actions he did not retire but was terminated for cause prior to the date he was set to leave. To date, Mr. Curtis has not been paid either benefits under the ERISA deferred compensation plan, or severance payments under the non-ERISA release. After exhausting an internal appeals process for the denied ERISA benefit claim, Mr. Carpenter removed Sheshunoff’s state law action to the Western District of Texas and asserted counterclaims against Sheshunoff. The parties then reached an agreement on Sheshunoff’s affirmative claims, and as a result those claims were dismissed. Now, Sheshunoff moves for summary judgment on the counterclaims asserted against it. Its motion was mostly granted in this decision. Before doing anything else, the court analyzed what the proper standard of review would be for the ERISA benefits claim. It resolved the dispute in Sheshunoff’s favor, understanding the language of the plan which grants the Administrative Committee the authority to make final and conclusive determinations as granting discretionary authority adequate under Fifth Circuit precedent to confer deferential review. With the standard of review settled, the court concluded that the Committee did not abuse its discretion by denying benefits because it was “rational” to conclude that Mr. Carpenter was terminated for taking trade secrets and that decision to deny benefits therefore fell “somewhere on a continuum of reasonableness – even if on the low end.” Sheshunoff was thus granted summary judgment on the Section 502(a)(1)(B) claim. It was also granted judgment on the claim for violation of ERISA procedural requirements. Under the “lenient” substantial compliance standard applied to violations of ERISA procedural requirements, the court held that Mr. Carpenter “has not shown a genuine issue of material fact regarding any alleged irregularities and, to the extent Carpenter has, those technicalities are permissible as a matter of law.” Thus, Sheshunoff was granted judgment on the ERISA violations claim as well. And Mr. Carpenter’s final ERISA cause of action, an interference claim under Section 510, fared no better. The court stated that the complaint “failed to offer any evidence” that the lawsuit Sheshunoff filed was a pretext not to pay benefits. For these reasons, Sheshunoff was granted summary judgment on all the ERISA claims. However, its motion for summary judgment was denied with regard to Mr. Carpenter’s breach of contract claim seeking benefits under the release agreement he signed. There, the court identified a genuine issue of material fact precluding an award of judgment.

Nothing exceptional caught your editors’ eye this week, but there were several interesting decisions nonetheless. Read on to learn about a nearly $1 million award in a termination gone wrong (Beryl v Navient), a deep dive into what constitutes a top hat plan (Kramer v. AEP), and a Third Circuit decision informing us that yes, New Jersey Transit is a governmental entity, and thus not subject to the whims and caprices of ERISA (Pue v. New Jersey Transit), among others.

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

Breach of Fiduciary Duty

Third Circuit

Board of Trs. of the UAW Grp. Health & Welfare Plan v. Acosta, No. 14-6247 (JXN) (CLW), 2023 WL 2945896 (D.N.J. Apr. 14, 2023) (Judge Julien Xavier Neals). The UAW Group Health & Welfare Plan, its board of trustees, and several participating unions brought this lawsuit for breaches of fiduciary duties in connection with the allegedly fraudulent administration of health insurance benefits to ineligible participants under the Plan. As relevant here, the plaintiffs sued two individuals, Lawrence Ackerman and Sergio Acosta, who allegedly conspired to embezzle plan funds. While this case was ongoing, there was a parallel criminal case underway arising out of the same facts as the civil litigation. The criminal case “ultimately resulted in the indictment of Defendants Acosta and Ackerman on January 9, 2017.” Mr. Acosta pled guilty to embezzlement from the plan and admitted to withholding the premiums the Union owed to the UAW healthcare plan for the union enrollees. In response to the claims brought against him for breach of fiduciary duties and breach of trust agreement, Mr. Acosta filed a counterclaim seeking indemnification and contribution from the plaintiff trustees with respect to any damage award the court might grant. Additionally, Mr. Acosta brought a third-party complaint asserting a claim against the Union, again seeking “to recover contribution, indemnification, or both, in the event the Court determines that he is in any way liable to the Plan.” The court previously dismissed both Mr. Acosta’s counterclaim against the plaintiffs and his third-party complaint against the Union. The court agreed with plaintiffs that ERISA contains no implied right of contribution or indemnification and that there was no evidence they knew of or engaged in any of the wrongdoing alleged. Mr. Acosta responded by filing a motion to reconsider. In this decision the court mostly denied the motion, granting it only to the extent that it altered its order of dismissal from one with prejudice to one without prejudice as to Acosta’s third-party complaint against the Union, allowing Mr. Acosta the opportunity to amend his complaint. First, the court affirmed its earlier position regarding the trustee plaintiffs, once again finding that they had no involvement in the scheme and that this is therefore not an appropriate case in which to engraft upon ERISA the remedies of contribution and/or indemnification. Regarding the Union, though, the court found that Mr. Acosta should be given the opportunity to amend his pleading to include allegations regarding any facts to support his position that the Union participated in the illegal scheme. “To deny Acosta this right would be prejudicial.” Therefore, the court granted the motion to reconsider in this regard.

Ninth Circuit

Baker v. Save Mart Supermarkets, No. 22-cv-04645-WHO, 2023 WL 2838109 (N.D. Cal. Apr. 7, 2023) (Judge William H. Orrick). Four non-union retirees of the grocery store chain Save Mart Supermarkets filed a putative class action asserting breaches of fiduciary duties under ERISA. The plaintiffs alleged that Save Mart misrepresented to them that the non-union medical benefits provided upon retirement to them and their spouses would be as good as those of their union co-workers. They also maintained that defendants led them to believe that if they retired before December 31, 2017, they would retain part of their healthcare benefits, those regarding their health reimbursement accounts, for life. According to the complaint, Save Mart made these statements to them in order to convince its employees not to join the union. Save Mart moved to dismiss, arguing that plaintiffs’ claims were untimely, and that regardless of the statute of limitations, they had failed to adequately state their claims. The court wrote, “the statute of limitations poses no issue, as the plaintiffs filed their claim within three years of receiving actual notice of the alleged breach when Save Mart announced it would terminate the benefits at issue in April 2022.” Moreover, the court found that the complaint presented a short and plain statement of the facts to sufficiently put Save Mart on notice, as the complaint detailed with specificity the who, when, and where of the misrepresentation. It thus concluded that plaintiffs had alleged affirmative misrepresentations made to them that they had relied upon to their detriment, thereby plausibly stating a claim for breach of loyalty. Not only did the court find that plaintiffs “plausibly alleged the remediable wrong that Save Mart breached its fiduciary” duties in the manner alleged, but it also concluded that plaintiffs “showed that they may be entitled to appropriate equitable relief in the form of reformation and surcharge.” Accordingly, the court denied the motion to dismiss. Thus, the retirees, who worked for the company for many decades, were allowed to proceed with their putative class action past the pleadings.

Class Actions

Seventh Circuit

Placht v. Argent Tr. Co., No. 21 C 5783, 2023 WL 2895738 (N.D. Ill. Apr. 11, 2023) (Judge Ronald A. Guzmán). In this order the court granted plaintiff Carolyn Placht’s unopposed motion for class certification and appointment of class counsel in an action involving allegations of fiduciary breaches and prohibited transactions in connection with an October 31, 2015, transaction in which the Symbria Inc. Employee Stock Ownership Plan purchased all outstanding shares of Symbria stock from the former shareholders at an allegedly inflated price. The court found the proposed class of plan participants, about 1,200 individuals, sufficiently numerous to satisfy the numerosity prong of Rule 23(a). In addition, the court stated that common questions “as to whether and how Argent breached its fiduciary duties to the Plan through the ESOP Transaction, whether Argent’s indemnification agreement with Symbria was void, and whether the Plan participants were thereby damaged” united the class members. Further, the court held that Ms. Placht’s claim arose under the same legal theories and stemmed from the same events as the claims of all other class members. Thus, the typicality requirement was satisfied. Finally, under Rule 23(a)’s analysis, the court established that Ms. Placht and her counsel were adequate representatives of the class, and that there was no conflict between Ms. Placht and her fellow plan participants. With the requirements of Rule 23(a) met, the court proceeded to analyze the proposed class under Rule 23(b). The court certified the class under Rule 23(b)(1). It concluded that individual lawsuits would run the risk of creating incompatible and inconsistent adjudications, and that “adjudications with respect to individual class members…would be dispositive of the interests of the other members not parties to the individual adjudications.” Finally, under Rule 23(g), the court appointed Ms. Placht’s counsel as class counsel. It found the attorneys “possess the necessary experience, competence, drive, and resources to effectively litigate on behalf of a class, and they have collectively litigated on behalf of classes in complex litigation, including ERISA claims.” For these reasons, plaintiffs’ motions were granted, and the proposed class was certified.

Disability Benefit Claims

First Circuit

Abi-Aad v. Unum Grp., No. 21-CV-11862-AK, 2023 WL 2838357 (D. Mass. Apr. 7, 2023) (Judge Angel Kelley). In this disability benefit claim, plaintiff Daniel Abi-Aad filed suit to challenge Unum’s termination of his long-term disability benefits under his policy’s 24-month cap for disabilities caused by mental illnesses. Mr. Abi-Aad argued that he was entitled to continued benefits because he was disabled from performing the essential duties of his occupation both because of mental illnesses and concurrent chronic physical pain, possibly resulting from arthritis or radiculopathy. Mr. Abi-Aad’s treating physicians offered opinions supporting his position. Mr. Abi-Aad and Unum cross-moved for summary judgment on the administrative record under de novo review. The court granted judgment to Unum. Although the court stated that it did not doubt that Mr. Abi-Aad has chronic physical pain, it nevertheless noted that under the terms of the policy, “Abi-Aad is not only required to provide objective medical evidence of the existence of his chronic pain, Abi-Aad must also show that chronic pain rendered him unable to perform a job for which he was reasonably fitted by education, training, or experience.” The court concluded that Mr. Abi-Aad had not done so here. The court agreed with Unum that he therefore was unable to demonstrate his entitlement to continued benefits. Furthermore, the court was persuaded by the opinions of Unum’s reviewing physicians and the evidence they offered to sow doubt and discredit the contrary conclusions held by Mr. Abi-Aad’s doctors and the physical residual functional capacity assessment that Mr. Abi-Aad underwent as a part of his administrative appeal. The court further held that “Abi-Aad’s treating physicians did not provide sufficient explanations to prove that Abi-Aad is not able to perform a gainful occupation.” Finally, the court was satisfied that Unum’s reviewing doctors “were health care professionals that had the appropriate experience and training to provide a recommendation for Abi-Aad’s LTD claim.”

Discovery

Sixth Circuit

Kramer v. American Elec. Power Exec. Severance Plan, No. 2:21-cv-5501, 2023 WL 2925117 (S.D. Ohio Apr. 13, 2023) (Magistrate Judge Kimberly A. Jolson). Plaintiff Derek Kramer is the former Chief Digital Officer of the American Electric Power Service Corporation. In this role, Mr. Kramer became a participant in the company’s Executive Severance Plan. Mr. Kramer was later terminated and then denied severance benefits under the plan. In this action, Mr. Kramer seeks those benefits. He asserted two causes of action against his former employer, a claim for severance benefits under Section 502 and a claim for interference with protected rights under Section 510. The court previously allowed limited discovery beyond the administrative record, persuaded that discovery was warranted because the facts alleged in Mr. Kramer’s complaint suggested the possibility that the company’s conflict of interest affected Mr. Kramer’s adverse benefits decision. As part of their response to the discovery order, defendants produced a privilege log made up of 340 documents they were withholding on the basis of attorney-client privilege and work product doctrine. Mr. Kramer challenged the privilege claims and argued that the fiduciary exception to attorney-client privilege under ERISA entitled him to those documents which related to the administration of the plan. The defendants disagreed. They argued that the severance plan is a “top-hat” plan exempt from ERISA’s fiduciary duties. As a result, defendants maintained that the plan does not trigger the exception to attorney-client privilege. Mr. Kramer subsequently brought a motion to compel seeking these withheld documents. Shortly after, he also brought a motion for extension of time, requesting that the court extend the discovery timeline after its ruling on his motion to compel. Defendants opposed both motions. The court stated that the motion to compel “turns on one question: Whether the Plan is a top-hat plan.” To answer this question, the court broke its analysis into two parts. In the first, the court held that the selectivity of the plan was clear, as it served less than one percent of all employees at the company, all of whom were high-level individuals receiving high compensation. The harder question, which the court took more time with, was whether the plan provided deferred compensation. Mr. Kramer argued that deferred compensation requires participants to make affirmative deferral elections throughout their employment, and that severance plans like the one at issue do not function in this way. Defendants, adopted a broader reading of deferred compensation, “defining it simply as compensation in the future for past work.” Naturally, under their definition the plan does provide for deferred compensation and therefore would qualify as a “top-hat” plan. The court looked to a Ninth Circuit decision in a case where this somewhat novel issue came up. There the Ninth Circuit ruled that “the policy behind the top-hat exception supports the broader view that ‘deferred compensation’ includes the retirement payments deriving from (the plaintiff’s) severance Agreement.” The court was persuaded by this logic, agreeing that “whether the Plan requires participants to make deferral elections does not help distinguish the Plan as one covering employee ‘capable of protecting their own pension expectations,’ from one covering those employees who cannot.” Accordingly, the court adopted defendants’ interpretation, and concluded that the plan is a “top-hat” plan, and that the fiduciary exception to the attorney-client privilege does not apply. Thus, the court denied Mr. Kramer’s motion to compel. Finally, the court denied Mr. Kramer’s motion for the extension, as it was denying the underlying discovery motion and because Mr. Kramer did not demonstrate good cause. More to the point, the court wrote that “reopening discovery at this time would thwart the ‘primary goal’ that ERISA actions be resolved ‘inexpensively and expeditiously.’” For the foregoing reasons, both of Mr. Kramer’s motions were denied.

ERISA Preemption

Fifth Circuit

Theunissen v. United Healthcare of La., No. 22-2812, 2023 WL 2913529 (E.D. La. Apr. 12, 2023) (Judge Susie Morgan). Two surgeons commenced this action against United Healthcare Insurance Company to challenge adverse benefits determinations for three related reconstructive breast surgeries performed on a cancer patient, N.T. Plaintiffs were assigned benefits from the insured patient. In their action they asserted three causes of action, a claim under ERISA Section 502, a claim for breach of contract under Louisiana state law, and another state law claim for detrimental reliance. The ERISA claim has been stayed. In this decision, the court ruled on United’s motion to dismiss the state law claims under Federal Rule of Civil Procedure 12(b)(6). United argued that the breach of contract and detrimental reliance claims were both completely preempted by ERISA. The court agreed. It applied the two-step Davila preemption test and concluded that both prongs were satisfied here. First, the court concluded that the assignment of benefits meant that the surgeons have derivative standing to sue under ERISA. Second, the court held that neither state law cause of action implicated an independent legal duty because they were both premised on pre-authorization letters which the court found to be “a reflection of, and not separate from, the Plan; rather, they implicate a right to benefits under the Plan.” In light of these terms which tie benefit eligibility to the Plan language, the court stated that it could not resolve the state law claims without consulting and analyzing the Plan itself to make a determination of benefits. Accordingly, the court dismissed the two state law claims. Finally, he court ended its decision by granting plaintiffs leave to amend their complaint to assert the preempted state law claims as federal claims, should they choose to do so.

Tenth Circuit

Betterton v. World Acceptance Corp., No. CIV-22-238-SLP, 2023 WL 2914287 (W.D. Okla. Apr. 12, 2023) (Judge Scott L. Palk). In April 2021, plaintiff Virgin L. Betterton, II (now deceased and substituted in this matter by the administrator of his estate) brought this action in state court asserting a claim of intentional infliction of emotional distress against his former employer and related defendants premised on what he believed was their intentional firing of him because of his cancer diagnosis. Mr. Betterton premised his claim on the company’s own policies and procedures in terminating him. In the state court proceeding, defendants argued that plaintiff’s rights relate to an employee medical benefit plan subject to ERISA and filed a motion to dismiss the action based on complete ERISA preemption. The court denied the motion to dismiss and found that the claim was not preempted. Then, ten months later, defendants removed the action to the federal district court, resurrecting their preemption arguments. Plaintiff moved to remand the action. Plaintiff argued that remand is proper because the removal was untimely filed, and because the state law claim is not preempted by ERISA and defendants therefore cannot establish subject matter jurisdiction. The court agreed and granted the motion to remand. The court was not persuaded by defendants’ argument that plaintiff’s discovery responses, deposition testimony, and other related representations made by plaintiff and plaintiff’s counsel at the state court hearing constituted “other papers” which established a right to removal based on complete ERISA preemption. “In the Court’s view, Plaintiff’s responses to the requests for admissions do not provide a basis for removal. Those responses refer directly back to the Complaint which expressly disavows any federal claim.” Analyzing defendants’ preemption argument under the Davila test, the court held that the intentional infliction of emotional distress claim was “centered on (Mr. Betterton’s) alleged wrongful termination because he had cancer. Such a claim is not preempted.” Resolution of this claim, the court found, would not require analyzing the terms of the ERISA medical plan. Thus, having found neither prong of the Davila test satisfied, the court agreed with plaintiff that the state law claim was not preempted and therefore granted the motion to remand the lawsuit to state court.

Eleventh Circuit

Sarasota County Pub. Hosp. Dist. v. Cigna Healthcare of Fla., No. 8:23-cv-263-KKM-TGW, 2023 WL 2867064 (M.D. Fla. Apr. 10, 2023) (Judge Kathryn Kimball Mizelle). Plaintiff Sarasota County Public Hospital District sued defendants Cigna Healthcare of Florida and Cigna Health and Life Insurance Company in state court, asserting state law causes of action, seeking reimbursement for emergency medical services it provided to a patient covered under an ERISA plan. The Cigna defendants removed the case to federal court, arguing that the state law causes of action are preempted by ERISA. Plaintiff moved to remand the action, and Cigna moved to dismiss the complaint for failure to state a claim. In this decision, the court granted the motion to remand and denied the motion to dismiss, concluding that it lacked subject-matter jurisdiction over the claims. The court analyzed the operative complaint under the Davila factors and concluded that it was not completely preempted. First, the court held that the healthcare provider was not bringing a claim under ERISA’s civil enforcement provisions and was not challenging a denial of benefits, but rather an underpayment under state law. Second, the court found the state law claims were grounded in independent legal duties, seeking “recovery of additional payment under Florida law.” Lastly, the court found this rate of payment action would not interfere with ERISA’s goal of providing a national uniform plan administration scheme. For these reasons, the court found that Cigna had not met its burden of establishing subject matter jurisdiction.

Plan Status

Fourth Circuit

Sherwood v. Valley Health Sys., No. 5:23-cv-00005, 2023 WL 2859126 (W.D. Va. Apr. 10, 2023) (Judge Thomas T. Cullen). Plaintiff James B. Sherwood sued his former employer, defendant Valley Health System, after his severance benefit payments were terminated pursuant to a non-compete provision. In this action, Mr. Sherwood asserted two alternate causes of action, seeking to overturn the termination of his benefits. First, Mr. Sherwood brought a claim seeking a declaration that the plan is in violation of Virginia common law, as the state of Virginia does not permit non-compete clauses. However, Mr. Sherwood also asserted a claim in the alternative under ERISA if the court determines that the severance plan is an ERISA-governed plan. Valley Health System moved to strike several paragraphs of Mr. Sherwood’s complaint, moved to dismiss Mr. Sherwood’s complaint completely for failure to state a claim, and finally moved for costs in connection to Mr. Sherwood’s voluntary dismissal of a state law action he filed before bringing this federal civil lawsuit. Much of this decision was focused on the status of the severance plan and whether it qualifies as an ERISA plan. Ultimately, the court concluded that it did. It highlighted the fact that the plan requires an ongoing administrative scheme to operate. The court found that this was true because the administrator needs to interpret plan provisions, administer and make several months’ worth of payments, and apply discretion to determine the continued eligibility of the 36 individuals who qualify as participants under the plan. Accordingly, the court found that the plan is an employee welfare benefit plan within the meaning of ERISA, and therefore granted the motion to dismiss Mr. Sherwood’s state law claim as preempted by ERISA. Nevertheless, the court denied the motion to dismiss Mr. Sherwood’s ERISA claim, believing that “disposition of this legal question is more procedurally appropriate for summary judgment with the benefit of a complete factual record.” Finally, the court declined to award defendant costs. It concluded that Mr. Sherwood’s dismissal of his state law action and subsequent filing of this federal action “were not pursued in bad faith, vexatiously, or for oppressive reasons.” And under ERISA Section 502(g)(1), the court stated that a fee award was not appropriate at this juncture because Valley Health System has not yet achieved any success on the merits.

Pleading Issues & Procedure

Third Circuit

Pue v. N.J. Transit Corp., No. 22-2616, __ F. App’x __, 2023 WL 2930298 (3d Cir. Apr. 13, 2023) (Before Circuit Judges Hardiman, Porter, and Freeman). Pro se appellant Anthony Pue appealed a district court decision dismissing his action against his former employer the New Jersey Transit Corporation and denying his motion for a default judgment. The district court granted New Jersey Transit’s motion to vacate the default that the Clerk had previously entered after New Jersey Transit failed to appear in the action “for good cause.” The good cause identified by the court was its lack of subject matter and diversity jurisdiction over Mr. Pue’s claims. The district court interpreted Mr. Pue’s complaint to conclude that he was asserting three causes of action; (1) a breach of contract claim; (2) a claim for violation of a collective bargaining agreement under the Labor Management Relations Act (“LMRA”); and (3) a claim for disability pension benefits under ERISA. However, the district court wrote that because New Jersey Transit Corporation “is sufficiently intertwined with New Jersey such that it ‘is entitled to claim the protections of the Eleventh Amendment immunity,” Mr. Pue could not sue it under either federal statute. Specifically, the court stated that New Jersey transit is a political subdivision and Mr. Pue therefore could not bring a claim under LMRA. Regarding the ERISA claim, the court found that the collective bargaining agreement and the retirement plan are government plans exempt from ERISA. Finally, the district court stated that it lacked diversity jurisdiction, as both Mr. Pue and New Jersey Transit are New Jersey residents, and it declined to exercise supplemental jurisdiction over his state law claim. On appeal, the Third Circuit affirmed the district court’s judgment. The court of appeals first addressed the district court’s decision to grant New Jersey Transit’s motion to vacate the default. The Third Circuit expressed that as a general rule it does not favor entry of default judgments. Additionally, the appeals court wrote that “the District Court properly concluded that it lacked subject-matter jurisdiction over Pue’s claims. Thus, it correctly granted N.J. Transit’s motion to vacate the default and denied Pue’s motion for default judgment.” The Third Circuit went on to state that it agreed with the district court’s underlying analysis that New Jersey Transit is a political subdivision of the government as it is “allocated within the Department of Transportation,” and because it performs “public and essential governmental functions.” Finally, the Third Circuit noted that the members of the board are government officials including the Comissioner of Transportation, the State Treasures, and other members appointed by the Governor. In sum, to the extent that Mr. Pue’s complaint could be fairly construed as raising ERISA and LMRA claims, the court of appeals agreed with the district court that it lacks subject-matter jurisdiction over those claims.

Fourth Circuit

Chisholm v. Mountaire Farms of N.C. Corp., No. 1:21cv832, 2023 WL 2914929 (M.D.N.C. Apr. 12, 2023) (Magistrate Judge L. Patrick Auld). Plaintiff Robert Chisholm brought suit against his former employer, Mountaire Farms of North Carolina Corporation, for violations of the Americans with Disabilities Act (“ADA”), the Family and Medical Leave Act (“FMLA”), and ERISA in connection with Mountaire Farm’s decision to fire him. Defendant moved to dismiss the complaint in its entirety with prejudice. It argued that the ADA claim was time-barred, Mr. Chisholm was employed for too short a time to qualify for FMLA, and that all the claims were insufficiently pled. The court granted the motion to dismiss, but did so without prejudice, except for the FMLA claim, which Mr. Chisholm himself agreed was “erroneously pled.” Regarding the ADA claim, the court disagreed with Mountaire Farms that the claim was untimely. However, the court concluded that Mr. Chisholm failed to state both the ADA and ERISA claims, as the facts supporting them were “slim.” Despite the court dismissing the claims without prejudice, the court did not expressly grant Mr. Chisholm leave to amend his complaint to address the identified deficiencies. And then something odd happened. The Fourth Circuit, in another case, upended nearly 30 years of precedent and changed its rules regarding the appealability of dismissals at the pleading stage. Under the old rules, the Fourth Circuit would apply a case-by-case analysis to determine whether or not such a dismissal would be considered a final order that could immediately be appealed. Under the new rule, where the district court dismisses without providing leave to amend, the order is final and appealable. Thus, the Fourth Circuit admonished that “when the district court believes a deficiency in a complaint can be cured, it should say so and grant leave to amend.” Given this new standard, Magistrate Judge Auld issued this recommendation that the district court grant Mr. Chisholm’s motion to amend the judgment and authorize him to file an amended complaint under Rule 59(e). “[G]iven Plaintiff’s expressed desire to amend his Complaint,” and the fact the Fourth Circuit would almost certainly allow Mr. Chisholm to amend his complaint under the new standard, Magistrate Auld recommended the court grant the motion and permit Mr. Chisholm the opportunity to file an amended complaint.

Eighth Circuit

GS Labs LLC v. Medica Ins. Co., No. 22-cv-2988 (SRN/TNL), 2023 WL 2918021 (D. Minn. Apr. 13, 2023) (Judge Susan Richard Nelson). In October 2021, plaintiff GS Labs sued defendant Medica Insurance Company alleging it refused to fully reimburse it for the COVID-19 diagnostic testing that it had provided to thousands of Minnesotans insured by the company. In that first action, GS Labs asserted state law causes of action and a federal claim for violation of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). Medica moved to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). The court granted that motion, dismissing the CARES Act claim with prejudice, and dismissing the state law claims without prejudice as it declined to exercise supplemental jurisdiction. Like almost all of its sister courts, the court held that the CARES Act does not create a private right of action. GS Labs has appealed that decision, and an appeal is pending in the Eighth Circuit. Meanwhile, GS Labs filed a second lawsuit against Medica. Here, GS Labs has resurrected its state law claims, and has asserted a new cause of action under ERISA Section 502. Defendant Medica filed a motion to dismiss this second lawsuit, arguing that res judicata bars the claims for tortious interference, breach of contract, and underpayment of ERISA benefits. The court agreed in part. As an initial matter, the court stated that res judicata did not bar the state law causes of action that were dismissed without prejudice in the first lawsuit. The same, however, was not true of the ERISA claim. Regarding the ERISA claim, the court held that all four elements of res judicata were met and that GS Labs was therefore precluded from bringing this claim. The court was satisfied that Medica showed that the first suit dismissing the CARES Act with prejudice resulted in a final judgment on the merits applicable to the ERISA claim which it concluded “should have been brought together in GS Labs I.” Furthermore, the court concluded that the two suits involving the same parties were based upon a common nucleus of facts because the CARES act and ERISA claims arose from the same injury and the same conduct. Accordingly, the court dismissed the ERISA claim with prejudice. As for the state law causes of action, the court took the same path it chose for the first lawsuit and declined to exercise supplemental jurisdiction. Thus, these claims were once again dismissed without prejudice.

Ninth Circuit

Valley Pain Ctrs. v. Aetna Life Ins. Co., No. CV-19-05395-PHX-DJH, 2023 WL 2933475 (D. Ariz. Apr. 13, 2023) (Judge Diane J. Humetewa). Mental healthcare providers sued Aetna Life Insurance Company in this civil suit seeking payment of benefits. Aetna responded by filing thirteen counterclaims against the healthcare providers, arguing that they were engaged in a billing scheme designed to financially harm it. Those thirteen counterclaims included ERISA equitable relief claims, RICO claims, fraud claims, and other state law causes of action. Four of the counterclaim defendants were sued in their individual capacities – Greg Maldonado, Thomas Moshiri, Sean Maldonado, and James Allen. Last week, Your ERISA Watch reported on a decision granting in part and denying in part Greg Maldonado and Thomas Moshiri’s motions to dismiss the counterclaims asserted against them. In this decision, the court reached similar conclusions in its ruling on Sean Maldonado and James Allen’s motions to dismiss. Sean Maldonado is the Assistant Director of Operations at Pantheon Global Holdings, LLC. James Allen is the Executive Vice President of Advanced Reimbursement Solutions, LLC and Pantheon Global Holdings, LLC. Mr. Maldonado and Mr. Allen argued that neither of them were personally liable for the actions committed by the outpatient treatment centers, and that Aetna’s counterclaims did not contain sufficient factual allegations to demonstrate their personal involvement in the alleged scheme. In this decision which essentially paralleled the earlier decision, the court granted Sean Maldonado’s motion to dismiss the RICO claims, the ERISA claim, and the negligent misrepresentation claim. However, the court denied his motion to dismiss the tortious interference with contract, fraud, civil conspiracy, aiding and abetting, unjust enrichment, and money had and received counterclaims. With regard to James Allen’s motion, the court dismissed the fraud and negligent misrepresentation claims, the RICO claims, the civil conspiracy claim, the aiding and abetting claim, and the ERISA claim, and denied the motion to dismiss for all other claims. The ERISA claims specifically were dismissed because the court concluded that Aetna did not allege the funds in question were specific and identifiable and “remained in possession of the Counterclaim Defendants.”

Provider Claims

Third Circuit

Hutchins v. Teamsters W. Region & Local 177 Health Care Plan, No. 22-04583 (SDW) (MAH), 2023 WL 2859803 (D.N.J. Apr. 10, 2023) (Judge Susan D. Wigenton). In the summer of 2021 an insured patient, Joseph Hutchins, underwent complex surgery on his cervical spine at an in-network hospital. During the procedure, Dr. Cynthia Tainsh provided “intraoperative neuromonitoring services.” Dr. Tainsh is an out-of-network provider. She was reimbursed only $579.23 for her services, which was a small fraction of her submitted bill of $32,860.70. Mr. Hutchins executed a limited Power of Attorney, appointing Dr. Tainsh his attorney in fact, and granting her the authority to pursue necessary means to receive her reimbursement from his healthcare plan, the Teamsters Western Region and Local 177 Healthcare Plan, and its administrator, Aetna, Inc. Unable to receive the difference in the billed rate and the reimbursed rate during the administrative appeals process, Dr. Tainsh pursued legal action, filing this one-count complaint under ERISA Section 502(a)(1)(B). Defendants moved to dismiss for failure to state a claim and for attorneys’ fees. The court began with the motion to dismiss. It agreed with defendants that the Power of Attorney was an improper attempt to work around the plan’s valid anti-assignment provision. “Dr. Tainsh…is not functioning as an agent on behalf of a principal; any recovery achieved will not benefit Mr. Hutchins in any way, as…he does not owe a debt to Dr. Tainsh, and she is not seeking to vindicate a right on his behalf. Plaintiff’s counsel concedes as much by admitting that ‘in this case, there is no dispute between the patient and his medical provider.’” Thus, the court found that the power of attorney here was functioning as an assignment of benefits, and because assignments are barred under the plan, concluded that Dr. Tainsh lacked derivative standing to pursue her claim. For this reason, the court granted the motion to dismiss. However, it declined to award attorneys’ fees to defendants under ERISA Section 502(g)(1).

Sixth Circuit

My Premier Nursing Care v. Auto Club Grp. Ins. Co., No. 21-cv-12657, 2023 WL 2839073 (E.D. Mich. Apr. 7, 2023) (Judge Matthew F. Leitman). A healthcare provider, plaintiff My Premier Nursing Care, sued two insurance companies – an auto insurer, defendant Auto Club Group Insurance Company, and a health insurer, defendant United HealthCare Insurance Company, seeking reimbursement for treatment it provided to an insured patient after he was involved in a car crash. United moved to dismiss the claims against it. The court started its analysis by stating that plaintiff’s brief in opposition to the motion to dismiss “makes no substantive arguments as to why its claims against United HealthCare are plausible. Instead, My Premier argues only that United HealthCare’s motion to dismiss should be denied because it is, in reality, one for summary judgment and because United HealthCare relies upon an ambiguous provision in the ERISA plan under which [the patient’s] health insurance policy was issued.” The court disagreed with plaintiff on both points. First, the court disagreed with My Premier’s assertion that it is an intended beneficiary of the ERISA plan. In fact, the Sixth Circuit has already expressly rejected the contention that healthcare providers qualify as beneficiaries of ERISA health insurance plans. Further, the court held that My Premier lacked derivative standing to bring its ERISA claim because it did not, and thanks to an anti-assignment provision could not, assert that it had been assigned benefits. The court also found the plan language, contrary to My Premier’s arguments, to be unambiguous. For these reasons, the court dismissed the ERISA cause of action. Finally, the court dismissed plaintiff’s declaratory judgment and “third party beneficiary” claims, finding both insufficiently pled. Additionally, like the ERISA claim, the court held that My Premier did not have standing to pursue these claims. Accordingly, United’s motion to dismiss was granted in its entirety.

Retaliation Claims

Fifth Circuit

Sibley v. Citizens Bank & Tr. Co. of Marks, No. 3:20CV282-GHD-JMV, 2023 WL 2899280 (N.D. Miss. Apr. 11, 2023) (Judge Glen H. Davidson). Approximately seventeen months after plaintiff Franklin Sibley began receiving retirement benefits, his former employer Citizens Bank and Trust Company allegedly rewrote history. According to Mr. Sibley’s complaint, the Bank, which was at that point facing financial stress due to a fraudulent loan and in need of immediate liquid capital, asserted the “termination for cause” clause in the Supplemental Executive Retirement Plan Agreement to stop issuing payments. In a letter dated January 20, 2020, Mr. Sibley was informed that the bank’s board of directors was immediately terminating the Supplemental Executive Retirement Plan Agreement and all future payments because Mr. Sibley had been “verbally terminated for cause.” One day after this letter was sent to Mr. Sibley, the board of directors sent a Consent Order Status Report to the Mississippi Department of Banking and the Federal Deposit Insurance Corporation asserting that “the Bank’s capital ratios remain above the minimums required by the Order,” and also that the termination of Mr. Sibley’s pension benefits “provided another $1,049,633 of capital to the Bank in January 2020.” Following an unsuccessful administrative appeal, Mr. Sibley commenced this lawsuit against the Citizens Bank and the chairman of its board of directors, defendant Payton MB Self III. In the operative complaint, Mr. Sibley asserted three causes of action under ERISA Sections 503, 502, and 510. Citizens Bank, Mr. Self, and Mr. Sibley each moved for judgment in their favor under Rule 56. The court denied judgment to all parties on the Section 502 and 510 claims, concluding that genuine issues of material fact precluded summary judgment. However, the bank was awarded judgment in its favor on Mr. Sibley’s Section 503 claim, as the court concluded that the termination letter was compliant with ERISA’s requirements and their underlying “goal being to explain the denial of benefits and ensure an adequate review of that denial.” Finally, with regard to Mr. Sibley’s claim for benefits, the court established that it would conduct abuse of discretion review given the plan’s discretionary clause. However, because there is conflict of interest present, and as the facts lead to a plausible inference that that conflict may have affected defendants’ decision, the court stated that it would “apply some skepticism to its review of Citizens Bank’s decision.” Nevertheless, as mentioned above, the court did not resolve the merits of the adverse benefit decision itself and denied the motions for summary judgment on the claim for benefits and the retaliation claim, concluding that genuine issues of fact exist.

Severance Benefit Claims

Ninth Circuit

Beryl v. Navient Corp., No. 20-cv-05920-LB, 2023 WL 2908805 (N.D. Cal. Apr. 11, 2023) (Magistrate Judge Laurel Beeler). Plaintiff Louis Beryl sued his former employer, Navient Solutions LLC. Mr. Beryl asserted two ERISA claims, a claim for severance benefit payments under Section 502(a)(1)(B), and a breach of fiduciary duty claim for the denial of benefits under ERISA Section 502(a)(3). In addition, Mr. Beryl asserted a breach of employment contract claim and a claim for waiting-time penalties under California’s Labor Code. The case proceeded to concurrent jury and bench trials. The jury returned a verdict in Mr. Beryl’s favor. In this decision the court issued its order under Rule 52 on the ERISA claims and the claim asserted under the California Labor Code. “Based on the evidence at trial and jury findings that bind the court, Navient Corporation wrongfully failed to pay Mr. Beryl his severance benefits and waiting-time penalties.” The court issued an award to Mr. Beryl in the amount of $920,666.33. Specifically, it held that Navient Corp. failed to establish that Mr. Beryl’s termination was “for cause,” and that he failed to perform any of his required responsibilities. Rather, the court stated that the evidence proved that “Mr. Beryl and his team worked very hard,” even “putting in long days over the holidays during a time when his wife gave birth.” Accordingly, under de novo review, the court was satisfied that Mr. Beryl met his burden of proof and was entitled to benefits under the ERISA severance plan. The court spent the remainder of the decision applying the terms of the plan to calculate the award of benefits and determine the amount of the bonus Mr. Beryl was entitled to, the applicable multiplier, and the amount which represented his lost healthcare, dental, and vision benefits. Because not all of these amounts were established by the terms of the plan, meaning there wasn’t direct recompense under ERISA Section 502(a)(1)(B) for some of the benefits, the court also decided to award equitable relief to Mr. Beryl under his second claim asserted under Section 502(a)(3). Finally, the court also established the appropriate penalties under California’s Labor Code. Tallying these amounts, the court was left with its final total, which it then awarded to Mr. Beryl. 

Venue

Seventh Circuit

Torre v. Nippon Life Ins. Co. of Am., No. 22 C 7059, 2023 WL 2868058 (N.D. Ill. Apr. 10, 2023) (Judge Rebecca R. Pallmeyer). Plaintiff Graciela Dela Torre brought suit against defendant Nippon Life Insurance Company of America to challenge its termination of her long-term disability benefits. Nippon Life moved to transfer the action to the Southern District of New York. The court began its decision by establishing that venue was proper in the Northern District of Illinois because “this is ‘where the breach took place’ – meaning, it is where Ms. Dela Torre was to receive the denied benefits – and Nippon can be found in this district, because it has a physical office in Schaumburg, Illinois.” On the other hand, the court also held that Nippon Life proved that venue would be proper in the Southern District of New York as well because that is where the plan is administered and where Nippon Life is located. However, the court placed the greatest emphasis on the fact that Ms. Dela Torre picked the Northern District of Illinois to file her complaint, which is her home district. The court found Nippon Life’s arguments concerning convenience not very convincing. Overall, the court ruled that the balance of factors did not strongly favor Nippon Life, and as such declined to disturb Ms. Dela Torre’s choice of forum. Accordingly, the court denied the motion to transfer.