Yates v. Symetra Life Ins. Co., No. 22-1093, __ F.4th __, 2023 WL 2174840 (8th Cir. Feb. 23, 2023) (Before Circuit Judges Shepherd, Kelly, and Grasz)
The “exhaustion of administrative remedies” doctrine – which requires benefit plan claimants to pursue internal appeals before filing suit – is a staple in ERISA cases. The doctrine is a strange one for several reasons. At the outset, the name itself is confusing, because ERISA cases do not challenge a governmental agency’s decision, and thus they are not really “administrative” in nature. Furthermore, the exhaustion doctrine can be found nowhere in ERISA’s statutory scheme – it is purely a judicial creation.
As a result, the doctrine, like many judge-made doctrines, has been a little fuzzy around the edges. Does the doctrine apply in every kind of ERISA case? If not, which ones? Are there exceptions? If so, when do they apply? This week’s notable decision, in which Kantor & Kantor successfully represented the plaintiff, addresses a fundamental issue at the heart of the exhaustion doctrine: can a plan administrator enforce the doctrine if the plan itself contains no internal appeal procedure?
The plaintiff was Terri Yates, whose husband passed away in December of 2016 from a heroin overdose. Yates’ husband was insured under an ERISA-governed accidental death employee benefit plan sponsored by his employer and administered by defendant Symetra Life Insurance Company.
Yates submitted a claim for benefits, which Symetra denied. Symetra contended that because Yates’ husband’s death was caused by his intentional use of heroin, it was excluded from coverage under the group policy insuring the benefit plan. Specifically, Symetra stated that Yates’ husband’s death was a loss caused by an “intentionally self-inflicted injury.”
Symetra informed Yates in its denial letter that Yates could “request a review” of its decision, and explained its internal review process, including a deadline of 60 days to request an appeal. However, the written plan documents themselves contained no mention of any internal review process. The plan documents also did not provide for any appeal or review procedures following a denial of benefits.
Yates chose not to participate in Symetra’s suggested review process, and instead filed suit in Missouri state court, alleging breach of contract. Symetra removed the case to federal court on the ground that Yates’ claim was preempted by ERISA. Symetra then filed a motion for summary judgment, presenting an exhaustion defense. Symetra contended that Yates’ failure to exhaust the internal review process described in the denial letter precluded her from filing suit under ERISA.
The district court granted Symetra’s motion. However, upon Yates’ motion to alter the judgment, the court reversed itself. The court agreed with Yates that she was not required to exhaust administrative remedies before bringing suit, and further ruled that that Symetra’s denial of her claim was erroneous. Symetra appealed.
The Eighth Circuit tackled two issues in its decision: (1) whether Yates was required to exhaust internal remedies with Symetra before filing suit; and (2) whether the district court erred in finding that Symetra’s decision to deny benefits was wrong.
The court ruled in Yates’ favor on both issues. First, the court explained that the exhaustion doctrine employed by the federal courts in ERISA cases is not mentioned anywhere in the statutory scheme. The courts have nevertheless adopted it as a prudential rule because it serves ERISA’s interests in “giving claims administrators an opportunity to correct errors,” “promoting consistent treatment of claims,” and “decreasing the cost and time of claims resolution.”
The court emphasized, however, that “the requirement that a plan participant first exhaust her administrative remedies before bringing an ERISA suit has consistently been premised on such remedies being expressly prescribed in the participant’s written plan documents.” Because the plan documents contained no exhaustion requirement, the court refused to impose one on Yates.
The Sixth Circuit further explained that this conclusion was consistent with the purpose of ERISA. ERISA case law has “consistently recognized the primacy of written plan documents,” and one of ERISA’s goals is to ensure that plan participants can “learn their rights and obligations under the plan at any time” simply by consulting the plan. Here, however, the plan contained no internal appeal procedures. “Requiring Yates to exhaust internal review procedures that cannot be found in the Plan documents would thus render her reliance on those documents largely meaningless in this context.… Symetra asks that we impose on Yates a requirement to exhaust remedies that are not in the contract the parties entered. We decline to do so.”
The court also noted that its conclusion was consistent with ERISA’s regulations, which set forth minimum requirements for benefit claim procedures, including the right to appeal. The court observed that Symetra’s plan did not satisfy those regulations, which allowed Yates to go directly to court under the regulations’ “deemed exhausted” provision.
Symetra contended that two prior Sixth Circuit decisions supported its argument that exhaustion was required, regardless of whether the plan document contained appeal procedures. However, the Sixth Circuit rejected this contention, explaining that in both cases cited by Symetra the plan at issue contained appeal procedures. Thus, they were not relevant to a scenario where “a plan participant’s written plan documents provide for no contractual review procedures at all.”
Having resolved the procedural question of whether Yates could bring her suit in the first place, the court then turned to the merits of her claim, i.e., whether the district court erred in overturning Symetra’s denial of her benefit claim. Under de novo review, the Sixth Circuit upheld the district court’s decision in Yates’ favor.
In doing so, the court relied heavily on its prior en banc decision in King v. Hartford Life & Accident Ins. Co., 414 F.3d 994 (8th Cir. 2005). In King, the court ruled that the death of a motorcycle rider whose blood-alcohol level was above the legal limit was not an “intentionally self-inflicted injury.” The court reasoned that while the decedent may have acted intentionally in drinking to excess and then riding his motorcycle, it was undisputed that he “did not intend to injure himself by driving his motorcycle on the night of his death.” Likewise, while Yates’ husband’s intentional heroin use may have “contributed to” his “injury,” the overdose injury itself was unintentional.
The court agreed with Symetra that Yates’ husband’s heroin use was “undoubtedly risky, much like driving while intoxicated.” However, the court explained, “whether an ‘intentionally self-inflicted injury’ exclusion applies depends on whether the injury in question was indeed intentional. It does not depend on whether the injury was generally foreseeable or even likely, or whether the injury-causing conduct was risky or even reckless.” Because Yates’ husband’s heroin overdose was an unintended injury, “[t]he plain language of Symetra’s ‘intentionally self-inflicted injury’ exclusion does not apply[.]” The Sixth Circuit therefore affirmed the decision below in its entirety.
Ms. Yates was represented by Kantor & Kantor attorneys Glenn R. Kantor and Sally Mermelstein.
Below is a summary of this past week’s notable ERISA decisions by subject matter and jurisdiction.
Attorneys’ Fees
First Circuit
New Eng. Biolabs, Inc. v. Miller, No. 20-11234-RGS, 2023 WL 2140420 (D. Mass. Feb. 21, 2023) (Judge Richard G. Stearns). An employer, New England Biolabs, Inc., filed an ERISA action against one of its employees, Ralph T. Miller, seeking equitable relief under ERISA Section 502(a)(3)(B) in connection with an alleged overpayment of benefits from New England Biolabs’ Employee Stock Ownership Plan. The parties have settled all outstanding claims in this civil action under terms that are not addressed in this order. Before the court here was Mr. Miller’s motion for a $1 million award of attorneys’ fees and costs under ERISA’s fee provision, Section 502(g)(1). Plaintiff opposed the award. In this decision, the court denied the fee and cost motion. It concluded that the First Circuit’s Cottrill factors did not weigh in favor of granting the motion, particularly because the case ended in settlement, meaning “the court never had the opportunity to address the merits of Miller’s claims during the litigation, and… [i]t would be ‘inappropriate’ for the court to resolve these disputes ‘now for the sole purpose of determining [Miller’s] eligibility for attorney fees.” In fact, the court stated that only the second Cottrill factor, the losing party’s ability to pay, favored an award of fees. Nevertheless, under Cottrill, “capacity to pay, by itself, does not justify an award.” Accordingly, because it was “not clear that the settlement reflects the meritoriousness of Miller’s claims,” premised on his assertion that New England Biolabs violated ERISA and undertook this civil litigation to retaliate against him, the court denied Mr. Miller’s motion for fees and costs.
Breach of Fiduciary Duty
Third Circuit
Kaplan v. Saint Peter’s Healthcare Sys., No. 13-2941 (MAS) (TJB), 2023 WL 2071725 (D.N.J. Feb. 17, 2023) (Judge Michael A. Shipp). Ten years ago, in “[w]hat started as a straightforward ERISA action,” plaintiff Laurence Kaplan sued the Saint Peter’s Healthcare System, believing its defined contribution plan to be underfunded by tens of millions of dollars and that it was improperly designated (under ERISA’s 1980 amendment) as a church plan exempted from ERISA regulations. In the intervening decade since the lawsuit began, the Supreme Court in Advocate Health Care Network v. Stapleton expanded ERISA’s church plan exemption to encompass plans maintained by religious groups regardless of whether the plans were formally established by a church to begin with. In this decision, the court applied post-Stapleton case law in order the answer the question before it posed by the parties’ cross-motions for partial summary judgment: “Does the Plan qualify as an exempt church plan under ERISA?” In the end, the court’s answer was yes. Applying a three-part test from the Tenth Circuit, the court held that the healthcare corporation’s defined contribution plan qualified for the church plan exemption because: (1) Saint Peter’s is a tax-exempt nonprofit organization associated with the Roman Catholic Church; (2) the Retirement Plan Committee is a principal purpose organization that both maintains and administers the plan; and (3) the Retirement Plan Committee is associated with the Roman Catholic Church which shares its values. Having reached this conclusion, the court granted Saint Peter’s partial motion for summary judgment and denied Mr. Kaplan’s cross-motion for partial summary judgment. Nevertheless, the epic tale of this action has not reached its final conclusion, as Mr. Kaplan has always maintained that even if the plan qualifies as a church plan, Saint Peter’s has violated its fiduciary duties and contractual obligations under state law.
Tenth Circuit
Garrison v. The Admin. Comm. of Delta Airlines, Inc., No. 20-cv-01921-NYW, 2023 WL 2163566 (D. Colo. Feb. 22, 2023) (Judge Nina Y. Wang). In 2013, Roberta Stepp Garrison’s first husband, Richard Stepp, died. From the time of Mr. Stepp’s death until 2019, Ms. Stepp Garrison received a monthly income survivor benefit from Delta Airlines’ pension plan. It terminated her benefits at that time to reflect a 100% offset of a benefit Ms. Stepp Garrison was not receiving and in fact could not receive, a widow’s benefit from the Social Security Administration. Although Ms. Stepp Garrison was Mr. Stepp’s widow, she had remarried before the age of 60 and was therefore not eligible under the Social Security Administration’s rules to receive a widow’s benefit. Nevertheless, the plan’s administrative committee interpreted the plan terms to conclude that Ms. Stepp Garrison’s second marriage was a forfeiture of a benefit she would otherwise have been entitled to, and that the plan therefore allowed for an 100% offset of that phantom benefit payment. Ms. Stepp Garrison appealed, and when that appeal was exhausted, commenced this lawsuit. In her action she asserted claims under ERISA Sections 502(a)(1)(B) and (a)(3). In a previous order, the court granted summary judgment in favor of defendants on Ms. Stepp Garrison’s claim for benefits. The court then asked her to show cause why her breach of fiduciary duty claims should proceed, by demonstrating how they were not simply repackaged benefit claims. That matter was settled in this order, wherein the court confirmed its earlier suspicions and agreed with defendants that Section 502(a)(3) could not provide an alternate route for Ms. Stepp Garrison upon the failure of her claim under Section 502(a)(1)(B). In essence, the court determined that each of Ms. Stepp Garrison’s breach of fiduciary duty claims sought to remedy the same harm underlying her benefits claim, as all of her asserted claims were inextricably intertwined with one another. Therefore, under Varity, the court found them duplicative, and wrote that this was a case “where Congress [has] elsewhere provided adequate relief for [the] beneficiary’s injury,’ i.e., a claim for wrongful denial of benefits under § 502(a)(1)(B) and equitable relief is not ‘appropriate’ under § 502(a)(3).” Finally, the court emphasized that to the extent Ms. Stepp Garrison was arguing that she could proceed with her fiduciary breach claims because the court granted summary judgment against her on her claim for benefits, this conviction was misguided. The court stated, “the fact that Plaintiff was unsuccessful on Claim One does not permit her to repackage this unsuccessful claim under § 502(a)(3)… Because a remedy was available to Plaintiff for that harm under § 502(a)(1)(B), and because Plaintiff does not argue that this remedy was inadequate, Plaintiff cannot not use § 502(a)(3) as a new vehicle to seek relief for that same injury.” Thus, having drawn this conclusion, the court granted summary judgment in favor of defendants.
Class Actions
Third Circuit
Lutz Surgical Partners PLLC v. Aetna, Inc., No. 15-2595-BRM-TJB, 2023 WL 2153806 (D.N.J. Feb. 21, 2023) (Judge Brian R. Martinotti). In this putative class action, an out-of-network healthcare provider, Lutz Surgical Partners PLLC, seeks to challenge Aetna’s method of collecting overpayments under one plan it administers by reducing payment to the provider under another one of its plans, a practice known as cross-plan offsetting. Lutz Surgical alleges that this practice violates ERISA Section 502(a)(1)(B) by constituting a wrongful denial of benefits because healthcare providers are not receiving payments from the plans they are submitting claims to, thanks to the muddling of both the payments and the claims adjudication. Thus, in this litigation, Lutz on behalf of a class of out-of-network providers who were denied all or a portion of a submitted benefit payment from Aetna in order to recover a prior alleged overpayment for services rendered to a different patient under a different plan, seeks a court order enjoining Aetna from continuing its cross-plan offsetting practice by declaring the practice illegal. Lutz Surgical moved to certify this proposed class pursuant to Federal Rule of Civil Procedure 23(b)(1)(A), (b)(2), or (b)(3). Aetna opposed certification, and also moved to strike Lutz Surgical’s rebuttal expert reports. Both motions before the court were denied. First, the court swiftly denied Aetna’s motion to strike, concluding that “any alleged failure to disclose (was) harmless,” and regardless, it did not rely on the challenged reports to reach its decision on the motion for class certification. Accordingly, it found “the extreme sanction of excluding evidence…not warranted.” The court then analyzed the proposed class action under Rule 23. As an initial matter, the court concluded that certification was appropriate under Rule 23(a). Simply put, the court held that the class was numerous and shared “at least one common question of law or fact… whether Aetna’s offset practice violates ERISA.” Furthermore, the court stated that Lutz Surgical and its counsel were adequate representatives of the interest of the proposed class members, and Lutz was typical of the other providers similarly harmed by the offsetting practice. However, despite Lutz Surgical’s success under Rule 23(a), the court’s analysis under Rule 23(b) and all of its subsections proved an insurmountable hurdle. First, the court held that under Rule 23(b)(1)(A), certification was not only unsuitable given Aetna’s differing duties under each of the different plans, but because the court would need to scrutinize those documents, individual adjudication would be “not only possible and workable, but required.” And this same problem also precluded certification under Rule 23(b)(2). “[E]njoining Aetna’s offset practice would not provide class-wide relief. Plaintiffs’ claims revolve around whether Aetna can take ‘cross-plan’ offsets without regard to the plan documents’ written terms. Plaintiffs’ claims, however, raise a number of individual issues, subject to various standards of review and provision formulations that could yield different results concerning the legality of Aetna’s offset practice.” Finally, under Rule 23(b)(3), the court held that the common questions between the class members did not predominate over individualized issues, and because of these individual issues, class-wide relief would not be the best possible means of resolving claims as resolution would not be cohesive or manageable. Thus, coming up against the same types of problems that many putative ERISA healthcare class actions have come up against lately, Lutz Surgical was unable to certify its class.
Ass’n of New Jersey Chiropractors v. Aetna Inc., No. 09-3761-BRM-TJB, 2023 WL 2154584 (D.N.J. Feb. 21, 2023) (Judge Brian R. Martinotti). Much like Lutz Surgical above, this putative ERISA class action brought by healthcare providers against Aetna challenged the insurance company’s claims process, specifically here regarding the explanation of benefits forms and the overpayment recovery letters Aetna sent to providers following pre-payment and post-payment reviews respectively. The healthcare providers claim that the challenged communications constitute wrongful denials of benefits under Section 502(a)(1)(B), because the content of the letters does not satisfy ERISA’s “minimum procedural notice and appeal requirements under Section 503.” The plaintiffs seek to have the court remand prior denials and overpayment determinations to Aetna for reprocessing under a full and fair claims review procedure, and also seek injunctive relief to enforce ERISA’s requirements going forward on all future denials and overpayment determinations. In this lawsuit, as in Lutz Surgical, the providers sought certification under Federal Rule of Civil Procedure 23, and again, as in Lutz Surgical, Judge Martinotti denied the motion. One of the central disputes between the parties was the extent to which the challenged letters were standardized. On this issue the court stated, “the letters in this case vary in language, detail, and compliance. Specifically, the proposed class, as defined, includes providers in receipt of complaint and non-complaint letters. Because these letters vary from provider to provider, a determination regarding compliance with ERISA would require the court to delve into each explanatory letter to determine whether Aetna violated ERISA’s notice and appeal requirements.” As a consequence, this and other similar issues pertaining to the differences among the proposed class precluded the court from certifying the class, which it viewed as incohesive and individualized. Thus, the court was “not satisfied the prerequisites of Rule 23” were satisfied and therefore denied plaintiffs’ motion for class certification.
Disability Benefit Claims
Fourth Circuit
Aisenberg v. Reliance Standard Life Ins. Co., No. 1:22-cv-125, 2023 WL 2145499 (E.D. Va. Feb. 21, 2023) (Judge T.S. Ellis, III). Plaintiff Michael Aisenberg sued Reliance Standard Life Insurance Company challenging its denial of his long-term disability benefit claim. Mr. Aisenberg is an attorney in the D.C. Metro area who worked as a principal cyber-security counsel for the MITRE Corporation, an advisory role wherein Mr. Aisenberg worked with senior leadership in government agencies, which was by all accounts a “demanding and stressful” occupation. In July 2020, Mr. Aisenberg “underwent open heart surgery with a double coronary artery bypass graft.” He subsequently felt unable to return to work and thus applied for disability benefits. Reliance Standard denied the benefit application, holding that no physical exam findings or other objective medical results demonstrated that Mr. Aisenberg was unable to perform the work functions of his occupation “beyond January 12, 2021.” Following an unsuccessful administrative appeal, Mr. Aisenberg initiated this civil suit. The parties cross-moved for summary judgment, and on November 15, 2022, Magistrate Judge John F. Anderson issued a report and recommendation recommending the court grant Mr. Aisenberg’s motion for summary judgment and deny Reliance’s summary judgment motion. Reliance promptly objected. In this order the court overruled in part and sustained in part Reliance’s objections. First, the court concluded that the Magistrate Judge was correct in his view that Reliance abused its discretion by failing to consider or assess Mr. Aisenberg’s risk of future harm in returning to legal work. “Defendant’s final decision takes the firm position that ‘being at risk’ is not considered a sickness or injury that Defendant will consider in making a disability determination. As the Report and Recommendation properly noted, this conclusion runs contrary to ERISA precedent.” Precedent in both the Third Circuit and Fourth Circuit, the court stated, indicate that “the risk of future harm from work-related stress for a plaintiff with heart conditions may qualify as a disability for the purposes of LTD benefits.” In addition, the court agreed with the Magistrate that Reliance cannot now raise new arguments in litigation that it did not assert as the original basis for its denial, “[a]s the Fourth Circuit has explained, an ERISA defendant is limited to the justifications for denial of benefits that the defendant provided in the administrative process.” However, Reliance did find success with another one of its objections to the report and recommendation. Reliance maintained that under discretionary review it has the authority to interpret the policy’s term “own occupation” here to mean attorney, rather than to mean the very specific position Mr. Aisenberg held when he became disabled. The court sustained this objection, agreeing that reading “own occupation” to mean attorney was not unreasonable. However, the court noted that Reliance did not analyze what other attorney positions existed in the national economy or evaluate whether Mr. Aisenberg could physically perform the material duties of that hypothetically less-stressful legal work. Accordingly, the court adopted the report and recommendation in part, granting summary judgment in favor of Mr. Aisenberg with respect to its conclusion that Reliance abused its discretion by failing to consider the risk of future harm when making its benefits determination. Reliance, in turn, was granted summary judgment with regard to its interpretation of the term “regular occupation.” Finally, the court decided that “given the paucity of record evidence regarding whether there are other attorney jobs in the economy that do not involve high stress duties, it is appropriate to remand the matter to the plan administrator for further consideration of whether there exists other, less stressful attorney positions that Plaintiff could perform without risking further harm to his heart condition.”
ERISA Preemption
Sixth Circuit
GGB Mgmt. v. J.P. Farley Corp., No. 4:22-cv-00208, 2023 WL 2139840 (N.D. Ohio Feb. 21, 2023) (Judge Charles E. Fleming). For one month, December of 2017, GGB Management Company had a gap in health insurance coverage for its employees when it transitioned away from a self-funded plan. As a result of being uninsured for that one-month period, the employees of GGB who required medical care or pharmaceutical services during that time ended up submitting claims that were never processed and suffered financially as a result. Accordingly, two of those plan participants filed a lawsuit against GGB seeking remedies for GGB’s failure to pay premiums for the plan and for its refusal to pay claims submitted during that time. In response, GGB pointed the finger elsewhere, to the plan’s claim administrator, J.P. Farley Corporation, and to its insurance agent, Insurance Navigators Agency Inc., and that company’s president, John T. Woods. So, in response to the lawsuit brought by the plan participants, GGB filed a third-party complaint against J.P. Farley, Insurance Navigators, and Mr. Woods for their roles in allowing the lapse in coverage. The third-party complaint was struck, however, which prompted GGB to then file an independent indemnification action in state court against those same defendants. The indemnification action was subsequently removed to the federal district court, under defendants’ belief that the state law claims were preempted by ERISA. GGB, disagreeing, moved to remand. In this order, the court granted the motion to remand the state law claims against Insurance Navigators Agency and Mr. Woods, and denied the motion to remand the claims asserted against J.P. Farley Corp. Specifically, the court held that the allegations pertaining to the insurance agency and its president were not preempted because “GGB’s allegations against INA and Woods do not implicate a violation in relation to an ERISA plan; GGB’s contention is that they failed to timely secure one entirely, and, therefore, there was no plan under which GGB’s employees could submit claims for payment.” Conversely, the court held that the claims against J.P. Farley were preempted because GGB was alleging that J.P. Farley failed to process and pay submitted claims “thereby failing to perform their contractual obligations pursuant to the Service Agreement,” which directly relates to the ERISA plan and its administration. Finally, because all of the claims asserted against J.P. Farley shared a common nucleus of facts, the court decided to exercise its discretion to retain supplemental jurisdiction over the one state law claim, GGB’s intentional misrepresentation claim, asserted against J.P. Farley, that was not preempted. For these reasons, the claims against J.P. Farley will remain in federal court, and the claims against Insurance Navigators Agency and Mr. Woods will proceed back in state court.
Eleventh Circuit
Surgery Ctr. of Viera v. UnitedHealthcare Ins. Co., No. 6:22-cv-793-PGB-DAB, 2023 WL 2078554 (M.D. Fla. Feb. 17, 2023) (Judge Paul G. Byron). Plaintiff Surgery Center of Viera, LLC provided surgical care to a patient with cervical radiculopathy in 2018. That patient was insured under an ERISA-governed healthcare plan maintained by defendant UnitedHealthcare Insurance Company. Prior to performing the medically necessary surgery, plaintiff obtained pre-authorization. Following the surgery, plaintiff submitted a bill for $193,348, which it claims was in line with the terms of its repricing agreement with UnitedHealthcare. United, however, reimbursed only about a fifth of the cost of billed charges. The surgery center, which was assigned benefits of the insured patient, then requested documentation to understand United’s justification for the downward adjustment. United did not provide this information. To remedy the underpayment, Surgery Center of Viera commenced this lawsuit alleging that the partial payment violates their repricing agreement and seeking damages of at least $116,252.34 to remedy the alleged breach. Plaintiff asserted claims of breach of contract, unjust enrichment, and quantum meruit. United moved to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). It argued that plaintiff’s state law claims relate to the administration of the plan and were therefore defensively preempted under ERISA’s preemption provision. United also argued that aside from preemption, plaintiff failed to sufficiently state a claim that it breached any agreement because plaintiff did not plausibly allege that it was a party to the repricing agreement. Finally, United argued that plaintiff failed to state plausible equitable claims for relief. The court granted the motion to dismiss. To begin, the court addressed ERISA preemption. The court began its analysis by writing, “Plaintiff might be able to allege an independent basis for its state law claims. Namely, the Repricing Agreement allegations, when interpreted in the light most favorable to Plaintiff, may establish an independent basis for suit that is separate and district from the Plan.” However, the court went on to question if the repricing agreement was really separate and distinct, given the surgery center’s connection in its complaint challenging the gap between the repricing agreement rate of payment and the “reasonable and customary charges” required under the terms of the ERISA plan. Furthermore, the court was confused about plaintiff’s allegations regarding United’s failure to comply with ERISA claims review procedures and document production requirements, stating that it was “at a loss to understand why Defendant is both obligated to comply with ERISA’s document production requirement due to inquiries regarding the Claim and yet Plaintiff’s cause of action is somehow ‘separate and distinct’ from the ERISA plan.” Noting that the surgery center may be able to address and clarify these issues and ambiguities, the court dismissed the state law claims but did so without prejudice allowing plaintiff to replead them. Moreover, assuming the state law claims are re-pled so as not to be preempted by ERISA, the court utilized the remainder of its decision to reject United’s other bases for dismissal. Accordingly, Plaintiff was given until March 3 to amend its complaint consistent with the directives the court gave in this order.
Life Insurance & AD&D Benefit Claims
Fourth Circuit
Hayes v. Prudential Ins. Co. of Am., No. 21-2406, __ F. 4th __, 2023 WL 2175736 (4th Cir. Feb. 23, 2023) (Before Circuit Judges Wilkinson and Heytens, and District Judge Hudson). In 2015, Anthony Hayes lost his employment working as an environmental engineer because of terminal medical issues. When his “employment ended, so did his employer-provided life insurance.” Mr. Hayes had 31 days to convert his policy into an individual policy. He missed that deadline by 26 days. His health continued to decline, and in June of 2016, Mr. Hayes died. Following the death of her husband, plaintiff-appellant Kathy Hayes submitted a claim for the benefits. Her claim was denied by Prudential on the ground that Mr. Hayes failed to timely convert his policy after his employer-provided coverage ended. Ms. Hayes thought this was wrong as her husband was incapacitated during the conversion period. She appealed the denial, and when that was unsuccessful, sued Prudential under ERISA Section 502(a)(1)(B). The district court concluded that Prudential “reasonably denied Plaintiff’s request for benefits’ because ‘Hayes received timely notice of his conversion rights’ and ‘did not convert his life insurance to an individual policy during the [c]onversion [p]eriod.’” The district court also stated that because Ms. Hayes did not assert a claim under Section 502(a)(3) it could not apply the doctrine of equitable tolling. Thus, the court granted summary judgment in favor of Prudential under abuse of discretion review. Ms. Hayes appealed. The Fourth Circuit in this decision summarized its position: “The trouble for plaintiff is unfortunate, but simple. As plaintiff admits, Hayes ‘failed to convert his life insurance coverage in the time set forth in the policy.’ Awarding benefits would thus require…modifying the plan’s terms to provide a workaround to its conversion deadline,” which is something that “the Supreme Court said Subsection (a)(1)(B) does not permit.” Stressing ERISA’s focus on written plan terms, the court of appeals held that Prudential fulfilled its duty to abide by the plan language and had not abused its discretion in denying the claim. Therefore, the district court’s judgment was affirmed.
Eighth Circuit
Powell v. Minnesota Life Ins. Co., No. 22-2096, __ F. 4th __, 2023 WL 2174841 (8th Cir. Feb. 23, 2023) (Before Circuit Judges Gruender, Benton, and Shepherd). Through his employment with Deere & Company, Scott Powell was provided with an ERISA group life insurance policy issued by Minnesota Life Insurance Company and Securian Life Insurance Company. On August 31, 2020, Mr. Powell took an early retirement package that Deere was offering to its employees. Per the terms of the life insurance policy, Mr. Powell had 31 days to convert his life insurance policy. However, Mr. Powell never received a conversion notice from Deere, from Minnesota Life, or from Securian. He thus did not apply for conversion or continue paying premiums. Then, on February 5, 2021, Mr. Scott died. Shortly after his death in that same month, Minnesota Life and Securian sent a letter to Mr. Powell which read, “Due to a recent audit, we discovered you were not provided with your option to keep this coverage when your employment terminated. Unfortunately, due to an error, you did not receive communication about your option to continue coverage after terminating. If you elect to continue coverage, it will be retroactive to the coverage termination date, and premiums must be paid back to that date.” Of course, Mr. Powell was not able to take this opportunity to convert his policy. However, his widow, plaintiff Kristina Powell, interpreted the letter as extending the deadline for converting the life insurance policy, especially as the plan allows for posthumous conversion. Thus, Ms. Powell attempted to obtain life insurance benefits under Mr. Powell’s policy. Her claim was denied, as was her appeal of the denial. Ms. Powell then took legal recourse, suing the insurance companies under ERISA Sections 502(a)(1)(B) and (a)(3). Her complaint was dismissed on the pleadings. The district court held that it could not plausibly infer that Ms. Powell had a claim for benefits as the undisputed facts showed that Mr. Powell never applied for conversion within the 31-day window following the end of his employment, and that the letter did not extend that opportunity. It also held that the defendants did not have a duty under ERISA to give notice to Mr. Powell on how to continue his life insurance policy, meaning no fiduciary breach could be inferred from her complaint. Ms. Powell appealed to the Eighth Circuit. In this order the Eighth Circuit affirmed the conclusions of the district court. It agreed that the February 2021 letter did not extend Mr. Powell’s conversion window, interpreting the word “it” to unambiguously refer to “coverage” and not the “option to continue coverage.” The Eighth Circuit explained, “[c]ontrary to Kristina’s argument, then, the letter did not extend the original conversion period that ended 31 days after Scott left Deere, in October 2020. Rather, it offered a new 31-day period, from February 24 to March 27, 2021, during which Scott could apply for conversion and receive coverage retroactive to his departure from Deere. But because Scott died on February 5, 2021, outside of this new window, his death did not trigger the policy’s automatic-death-benefit provision.” Thus, the court of appeals concluded the district court had not erred in dismissing the claim for benefits. Nor did it find that the lower court erred in dismissing the breach of fiduciary duty claim. Because the plan did not require notice, and the Eighth Circuit agreed with the district court that ERISA does not require notice of conversion rights either, the appeals court found that Ms. Powell’s allegations could not give rise to an inference of any breach and that the claim was accordingly insufficient.
Pension Benefit Claims
Third Circuit
Salvucci v. The Glenmede Corp., No. 22-1891, 2023 WL 2175754 (E.D. Pa. Feb. 23, 2023) (Judge Eduardo C. Robreno). After a long battle with cancer, Carla Marie Salvucci died in November of 2020, unmarried at age 64. Ms. Salvucci never received pension benefits under her defined benefit plan, and as pertinent here did not alter the payment method of her accrued benefits to any of the available options allowing an unmarried participant to name a beneficiary. Her cousin, the plaintiff in this action, Louis Salvucci, believes that Ms. Salvucci’s employer, the Glenmede Corporation, and the compensation committee of the company’s board of directors, the plan’s sponsor and administrator, breached their fiduciary duty to Ms. Salvucci to inform her of the appropriate benefit election options given her health situation. Accordingly, as the executor of Ms. Salvucci’s estate, Mr. Salvucci brought this action against those fiduciaries asserting claims under ERISA Section 502(a)(3) and 510. Defendants moved to dismiss. Their motion was granted in this order. The court agreed that the complaint did not plausibly allege any breach of fiduciary duty or any adverse employment action to state claims under either Section 502 or 510. Specifically, the court held that the complaint failed to demonstrate that defendants were not in compliance with ERISA regulations as the information provided to Ms. Salvucci was accurate, and written in an unambiguous way sufficient to inform her of her election options, and “the consequences for either opting to elect or failing to elect certain benefits.” Accordingly, the court held that “Ms. Salvucci was not actively misled by Defendants,” and that Mr. Salvucci thus did not state a facially plausible claim for relief pursuant to Section 502(a)(3). The court found Mr. Salvucci’s Section 510 claim to be even further afield, expressing that nothing within the complaint could give rise to an inference that defendants “took any unlawful employment action against Ms. Salvucci for the specific purpose of interfering with her attainment of a pension benefit right.” Finally, because Mr. Salvucci had already amended his complaint twice, dismissal was with prejudice.
Pleading Issues & Procedure
Ninth Circuit
Betts v. Brnovich, No. CV-22-01186-PHX-JJT, 2023 WL 2186576 (D. Ariz. Feb. 22, 2023) (Judge John J. Tuchi). Pro se plaintiff Shane Betts got into two car accidents in September and December of 2015. He incurred medical expenses as a result of those accidents. Ultimately, his treating provider billed him directly rather than his ERISA plan. The insurance policy of the at-fault driver of the more serious car accident covered these medical costs. “As a result, instead of the Plan seeking subrogation from the third-party insurer – or compensation from the insurance settlement – for medical care coverage the Plan would have provided for the patient’s medical treatment, the medical care providers sought compensation directly from the insurance settlement.” Thus, in this roundabout way, the ERISA plan was left out of the accounting. However, as the court noted, this detail was fairly insignificant because “in either instance reimbursement for the patient’s medical costs would have been sought from the insurance settlement.” Furthermore, this is not the first time this billing dispute was before a court. The Arizona judicial system already resolved the parties’ conflicts. Resolution was not in Mr. Betts favor, though, and following an unsuccessful appeal to the Arizona Court of Appeals, he commenced this action in the federal court system. Mr. Betts asserted claims under ERISA, RICO, and § 1983. Defendants moved to dismiss. The court granted their motion. It held that Mr. Betts had not alleged facts to support a lawsuit against state court judges for what he viewed as errors in their decisions, that he couldn’t sue private actors under § 1983, that his RICO allegations were conclusory, and that the ERISA claims were barred by the Rooker–Feldman doctrine, res judicata, and collateral estoppel, meaning he cannot relitigate issues he already brought or could have brought during the state court action. Thus, the complaint was dismissed with prejudice.
Provider Claims
Third Circuit
University Spine Ctr. v. Cigna Health & Life Ins. Co., No. 22-02051 (SDW) (LDW), 2023 WL 2136482 (D.N.J. Feb. 21, 2023) (Judge Susan D. Wigenton). A healthcare provider, University Spine Center, sued an ERISA plan sponsor, Arcadis U.S., Inc., and the plan’s claims administrator, Cigna Health and Life Insurance Company, for reimbursement of billed charges for healthcare services it provided to a covered patient. Defendants moved to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). The court granted their motions in this order with prejudice. It agreed with defendants that the plan’s unambiguous anti-assignment provision precluded the provider from bringing this civil action. Moreover, the court found plaintiff’s argument that defendants waived the right to enforce the anti-assignment clause in the operable 2018 plan “strain(ed) credulity,” as there was “no indication of an intentional and knowing relinquishment of a right by either Defendant.” Thus, the court held that the complaint could not proceed due to lack of standing.
Seventh Circuit
Advanced Physical Med. of Yorkville v. SEIU Healthcare Il Home Care & Child Care Fund, No. 22 C 2976, 2023 WL 2161664 (N.D. Ill. Feb. 22, 2023) (Judge Matthew F. Kennelly). Plaintiff Advanced Physical Medical of Yorkville, Ltd., a healthcare provider claiming to be an assignee of benefits for an insured patient, sued SEIU Healthcare IL Home Care and Child Care Fund and its board of trustees under ERISA and state law for failing to provide reimbursement for covered services it provided to the patient. Defendants moved to dismiss, arguing that Advanced Physical did not have standing to sue under ERISA. In this order, the court agreed and granted the motion. Given the plan’s provision forbidding assignment of benefits, the court held that Advanced Physical could not assert its ERISA causes of action. Additionally, the court dismissed the two state law claims of misrepresentation and promissory estoppel. The court found the state law claims did not have any independent basis for federal subject matter jurisdiction and declined to exercise supplemental jurisdiction over them. Accordingly, the action was dismissed.
Statute of Limitations
Sixth Circuit
Vanover v. Appalachian Reg’l Healthcare, Inc., No. 6:21-179-KKC, 2023 WL 2167377 (E.D. Ky. Feb. 22, 2023) (Judge Karen K. Caldwell). Plaintiff Dana Vanover sued the Appalachian Regional Healthcare, Inc. Pension Plan seeking judicial review of the plan’s denial of his claim for disability retirement benefits. Defendant moved for summary judgment. It argued that Mr. Vanover’s claim is untimely thanks to a 2019 plan amendment establishing a two-year statute of limitations following a final adverse benefit determination within which a participant may commence an ERISA civil action. Mr. Vanover opposed the plan’s summary judgment motion, contending that the statute of limitations was inapplicable to his lawsuit because the only enumerated commencement date in the 2019 amendment was July 1, 2019, which post-dated when the pension committee issued its final determination of his claim. Mr. Vanover maintained that his claim was timely under the analogous 5-year statute of limitations in the state of Kentucky. The court first needed to decide whether the relevant section of the plan amendment, the portion of the amendment which established the two-year statute of limitations for the filing of civil actions, went into effect on July 1, 2019, or whether it went into effect on the date the amendment was signed, May 10, 2019. Looking at the language of the amendment, the court concluded that the July 1st date did not apply to the relevant section, as it was only found within another section of the amendment and no other language of the plan indicated “that the July 1, 2019 effect date is incorporated into the other amendments,” or referenced in those other sections. Having established this fact, the court held that the relevant section of the amendment went into effect on the date when the amendment was signed and executed, May 10, 2019, which was before Mr. Vanover received his final benefit ruling. Additionally, in line with its sister courts and with Supreme Court precedent, the court here concluded that the two-year limitations period was “an entire year longer than the limitations period that the Supreme Court found permissible,” and thus was reasonable and enforceable. Thus, the court held that the limitations period applied to Mr. Vanover’s claim. Finally, the court rejected Mr. Vanover’s argument that the amendment’s limitation should not be applied because the plan failed to give him notice of the limitations period. It stated that Mr. Vanover provided no authority which “requires the Plan to provide such notice.” For these reasons, the court upheld the statute of limitations, and because Mr. Vanover “did not file his lawsuit before the limitations period expired,” found his claim untimely. Defendant’s motion for summary judgment was therefore granted and the complaint was dismissed with prejudice.
Ninth Circuit
Draney v. Westco Chemicals, Inc., No. 2:19-cv-01405-ODW (AGRx), 2023 WL 2186422 (C.D. Cal. Feb. 24, 2023) (Judge Otis D. Wright, II). In early 2019, plaintiffs Daniel Draney and Lorenzo Ibarra sued their employer, Westco Chemicals, Inc., and the other fiduciaries of the Westco 401(k) plan, for breaches of fiduciary duties in connection with the plan’s exclusive and non-diversified investments throughout the 2010s in certificates of deposits (“CDs”), which are by nature low-risk but also low-interest bearing. Thus, as a result of the plan’s sole investments in CDs, plaintiffs allege that they and the other plan participants collectively suffered losses of over $1 million in fund growth. The case progressed, and on May 7, 2021, the parties informed the court they had reached a settlement. The story was not over, however. Upon review of the $500,000 settlement, the court concluded that the mandatory non-opt-out nature of the proposed class was not appropriate because of potential conflicts “between class members whose claims were time-barred and those whose claims were not.” The parties were not able to renegotiate the terms of their agreement to reach a settlement consisting of an opt-out class, and accordingly the case returned to active status. Plaintiffs moved to certify their class. Meanwhile, defendants moved for summary judgment. Defendants argued that plaintiffs’ claims were time-barred under ERISA’s statute of repose because the underlying alleged breach, the plan’s investments in CDs, which first began in 2010, was one single isolated violation which plaintiffs had actual knowledge of as early as 2011. The court agreed. The court concluded that plaintiffs’ arguments, stressing the ongoing nature of the breach, including defendants’ continuing decisions to purchase and sell the CDs, and their failure to monitor their performance or to hire a professional investment advisor, were “not well taken.” The court stated that case law makes it abundantly clear that plan participants cannot “rely on a ‘continuing breach’ theory to overcome ERISA’s three-year statute of limitations where the alleged breaches are all of the same character and the plaintiff knew of early breaches more than three years before bringing suit.” Therefore, the court did not view the additional purchases and sales of the CDs as imparting materially new information about the underlying fiduciary breaches of prudence or loyalty, and because it was clear that plaintiffs knew about the investments in CDs, which were a “running joke” among the employees, the court stated that the action, brought in 2019, was untimely. The court thus granted defendants’ motion for summary judgment on the time-barred claims and denied as moot plaintiffs’ motion for class certification.
D.C. Circuit
Dooley v. United Food & Commercial Workers Int’l Pension Plan for Emps., No. 22-2153 (JEB), 2023 WL 2139200 (D.D.C. Feb. 21, 2023) (Judge James E. Boasberg). Plaintiff Thea C. Dooley began working for the United Food & Commercial Workers Local 555 and Local 1439 in 1997. Upon employment, Ms. Dooley became eligible to enroll in the UFCW International Pension Plan for Employees. However, through what Ms. Dooley now believes were breaches of fiduciary duties by the Plan and her Union, Ms. Dooley did not enroll in the plan until three years later in 2000, when she became aware that, although eligibility in the plan was automatic, enrollment was not. Decades later, when she was ready for retirement, Ms. Dooley sought to retroactively obtain credit for those first three years of employment when she was eligible for enrollment but not actually enrolled in the plan. Her application for these additional benefits was denied, and that denial was upheld during the internal appeals process. This suit followed, wherein Ms. Dooley asserted claims against the plan and the union under ERISA Sections 502(a)(1)(B), and (a)(3). The union moved to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), and the plan moved for judgment on the pleadings pursuant to Federal Rule of Civil Procedure 12(c). Both motions were granted in this order. The court first addressed the claim asserted under Section 502(a)(1)(B). The court stated that Ms. Dooley could not recover any benefits due under the plan as she was not a plan participant for those first three years, that she could not enforce any right under the terms of the plan, and that she could not request the court to alter the terms of the plan. Simply put, the court stated, “Plaintiff accrued neither pension benefits for the years of 1997, 1998, or 1999 nor the right to purchase service credit for those years.” Thus, the court granted judgment to the plan on Ms. Dooley’s first count. The court then addressed Ms. Dooley’s breach of fiduciary duty claim pursuant to Section 502(a)(3) and concluded the allegations of breaches were untimely as the last alleged breach occurred prior to Ms. Dooley enrolling in 2000, and because she had actual knowledge of the breach upon enrollment at that time. Accordingly, under ERISA’s statute of repose, the court held that Ms. Dooley’s window to address the alleged wrongdoing had “long since expired.” For this reason, the court granted the plan’s motion for judgment and the union’ motion to dismiss the 502(a)(3) claim.
Statutory Penalties
Ninth Circuit
Estate of Dick v. Desert Mut. Benefit Adm’rs, No. 2:21-cv-01194-HL, 2023 WL 2071523 (D. Or. Feb. 17, 2023) (Magistrate Judge Andrew Hallman). In June of 2020 Susan Dick was diagnosed with liver cancer. The following month, Ms. Dick sent a preauthorization request to her healthcare plan for coverage of Short Interval Radiation Therapy to treat her cancer while she awaited a liver transplant. Her preauthorization request was denied by the plan based on its medical policy regarding radiation oncology. Ms. Dick and her family members asked to see the medical policy. This request was denied by the plan. So too was Ms. Dick’s internal appeal of the plan’s rejection of her preauthorization request. Nevertheless, Ms. Dick underwent radiation therapy, incurring out-of-pocket expenses totaling $229,173.27. Tragically, Ms. Dick later died from her cancer. Her estate, represented by counsel, requested all documents concerning the denial, including the medical policy. They were not provided a copy. It would be almost one year later when the plan finally provided a copy of the medical policy it relied on as the basis of its denial to Ms. Dick’s estate. Subsequently, the estate initiated this action, alleging the denial was an abuse of discretion and requesting statutory penalties of $110 per day for wrongfully withholding the medical policy after written requests. On December 19, 2022, the court heard oral argument in this matter. In this order, it granted summary judgment in favor of the estate. First, addressing the denial of benefits, the court held that the medical policy was not a plan document and that because “there was no silence or ambiguity within the Plan that would have permitted (defendant) to rely on the Medical Policy as the basis for its denial,” its reliance on the medical policy was an abuse of discretion. The court stated that it was unwilling to allow defendant to utilize the summary plan description “incorporate its unspecific ‘medical guidelines’ into the Plan,” as this would run contrary to the governing plan document and would be “less favorable to Ms. Dick.” Finally, the court rejected defendant’s alternative basis for denial, that the treatment was investigational, as it did not adopt this basis during the administrative proceedings and so could not do so in litigation. Having found the denial arbitrary and capricious, the court proceeded to explain its reasoning on whether it would exercise its discretion to award statutory penalties pursuant to Section 502(c)(1), and if so, at what rate. The court stated that it was uncontroverted that defendant failed to provide the medical policy when requested and that that failure violated ERISA’s mandate that administrators provide all documents they rely on to make decisions. This failure, the court stated, undoubtedly hurt Ms. Dick and her family. However, because defendant did quote the relevant substantive portion of the medical policy in the denial, the court stated that some of the damage was mitigated. Accordingly, it concluded that an award of half of the maximum amount, or $55 per day, was appropriate in this instance. For these reasons, judgment was ordered in favor of the estate and the estate was directed to prepare an appropriate judgment consistent with this decision.
Venue
Second Circuit
Angell v. The Guardian Life Ins. Co. of Am., No. 22-CV-4169 (JPO), 2023 WL 2182323 (S.D.N.Y. Feb. 23, 2023) (Judge J. Paul Oetken). Plaintiff Betty Angell sued the Guardian Life Insurance Company of America under ERISA Section 502(a)(1)(B) in the Southern District of New York, challenging the insurer’s termination of her disability waiver of life insurance premiums benefit. Guardian moved to transfer the case to the District of Rhode Island pursuant to Section 1404(a). It argued that Rhode Island was a superior forum for this ERISA action because Ms. Angell is a resident of Rhode Island, she received medical treatment in Rhode Island, and the “locus of operative facts” is in all respects Rhode Island. In this decision, the court agreed and granted the motion to transfer. It stated that the convenience of the witnesses, the convenience of the parties, the locations of the relevant events and parties, and the interests of justice favored transfer. The only factor which weighed against transferring the case was Ms. Angell’s choice of forum. Although an important consideration, the court said ultimately that it felt Ms. Angell’s choice of forum was outweighed by other considerations and was mitigated by the fact that Rhode Island is Ms. Angell’s home forum. Thus, the court concluded that Ms. Angell would not be unduly inconvenienced by the transfer. Accordingly, the case will be moved from the Empire State to the Ocean State.
Tenth Circuit
T.S. v. Anthem Blue Cross Blue Shield, No. 2:22CV202-DAK, 2023 WL 2164401 (D. Utah Feb. 22, 2023) (Judge Dale A. Kimball). Plaintiffs are a mother and her child who have sued Anthem Blue Cross Blue Shield under ERISA and the Mental Health Parity and Addiction Equity Act, challenging Anthem’s denials for inpatient residential mental healthcare treatment. Plaintiffs are represented in this action by counsel Brian S. King, who specializes in representing plaintiffs in ERISA mental illness healthcare actions. Mr. King is based in Utah. Thus, plaintiffs chose the District of Utah as their forum, seeking the privacy of a district court outside their home state and to keep down the travel costs of their attorney. Anthem moved to transfer venue to the Western District of North Carolina. It argued that North Carolina was a more appropriate venue for this action as the plaintiffs are residents there and the residential treatment center was located there. In this decision the court agreed with Anthem and transferred the case. The court did not comment on plaintiffs’ privacy concerns. However, with regard to plaintiffs’ reasoning about the location of their legal counsel, the court said that it was not persuaded the lawsuit should proceed in Utah simply because Mr. King is located in the state. Instead, it concluded that other factors outweighed plaintiffs’ forum selection. “Under a practical consideration of all the facts, the Western District of North Carolina is the forum with the greatest connection to the operative facts of this case and is the most appropriate forum. Thus, the practical considerations and the interest of justice weigh in favor of transferring the case to the Western District of North Carolina.”