It was a slow week in ERISA-land, as the courts presumably continue to recover from December and January vacations.

Read on for summaries of this week’s cases, which include a potential class action challenge to Hartford’s disability benefit claims handling (McQuillin v. Hartford), another skirmish in the battle between employees and employers over whether plan-wide claims should be arbitrated (Best v. James), and a cow’s powerful $100,000 kick (Stover v. CareFactor).

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

Arbitration

Sixth Circuit

Best v. James, No. 3:20-cv-299-RGJ, 2023 WL 145007 (W.D. Ky. Jan. 10, 2023) (Judge Rebecca Grady Jennings). In early 2020, a putative class of participants of the ISCO Employee Stock Ownership Plan (“ESOP”) filed a breach of fiduciary duty and prohibited transaction class action against ISCO Industries, Inc. and its executives under ERISA Sections 502(a)(2) and (a)(3). Defendants moved to dismiss in favor of enforcing arbitration agreements plaintiffs signed when they were hired. On September 22, 2022, the court granted defendants’ motion. A summary of that decision can be found in the September 28, 2022 edition of Your ERISA Watch. Plaintiffs moved pursuant to Rule 59 for reconsideration. Defendants moved for leave to file a surreply to plaintiffs’ motion for reconsideration. To begin, the court granted defendants’ motion. Defendants argued that plaintiffs were incorrect in their interpretation of federal law regarding arbitration agreements prohibiting plan-wide relief in ERISA actions and their view that class waiver is unenforceable because Section 502(a)(2) mandates proceeding on a class basis. Furthermore, defendants argued that plaintiffs “recharacterized their manifest injustice argument in reply.” The court found these arguments worthy of consideration and thus felt the surreply should be permitted. Next, the court analyzed plaintiffs’ motion for reconsideration. Regarding plaintiffs’ Section 502(a)(3) claims seeking individual monetary relief, the court held that its original analysis concluding that the employment agreements, which contained express references to ERISA actions, bound their Section 502(a)(3) claims to arbitration “remains appropriate.” With regard to plaintiffs’ plan-wide claims brought under Section 502(a)(2), the court concluded that the ESOP’s arbitration amendment, which was signed by ISCO representatives, constituted a valid consent to arbitrate by the plan. “Plaintiffs’ ERISA claims are within the scope of the ESOP Amended Agreement, as it explicitly includes an ‘ERISA Arbitration and Class Action Waiver.’ Under this agreement, Plaintiffs must arbitrate their claims.” Thus, the court denied plaintiffs’ motion to reconsider.

Attorneys’ Fees

First Circuit

Cutway v. Hartford Life & Accident Co., No. 2:22-cv-0113-LEW, 2023 WL 156863 (D. Me. Jan. 10, 2023) (Judge Lance E. Walker). Plaintiff Kevin Cutway sued Hartford Life & Accident Company, the administrator of his long-term disability plan, after the insurer ceased monthly benefit payments to Mr. Cutaway to recover overpayments it says it paid to him through its own recently discovered error. In his action, Mr. Cutway seeks a court order requiring Hartford to stop offsetting his benefits and for reimbursement of the amount withheld to date. Mr. Cutway filed a motion for temporary restraining order or preliminary injunction requesting the court keep Hartford from withholding his monthly benefits during the duration of this litigation. On August 29, 2022, the court issued an order granting Mr. Cutway’s motion, as we summarized in our September 7, 2022 edition. Following that order, Mr. Cutway subsequently moved for attorneys’ fees under ERISA Section 502(g)(1). In this order, the court denied without prejudice Mr. Cutway’s motion. At bottom, the court reasoned that while the outcome of its August 29 ruling “absolutely constituted ‘some meaningful benefit for the fee-seeker,’” that success was ultimately not derived from “delving into meritorious issues.” Rather, the court came to its conclusion “largely upon considering the irreparable harm that Mr. Cutway would face if such relief was not granted.” As the application of a preliminary injunction is not a final factual determination but a protection put in place “to prevent a threatened wrong or any further perpetration of injury,” the court stated that it was only ruling in order to preserve the status quo until the merits of the parties’ arguments have been litigated and decided. Thus, the court concluded the time to explore a fee award will come at a later date when a party “is able to show some degree of success on the merits.”

Breach of Fiduciary Duty

Second Circuit

McQuillin v. Hartford Life & Accident Ins. Co., No. 20-CV-2353 (JS) (ARL), __ F. Supp. 3d __, 2023 WL 177909 (E.D.N.Y. Jan. 13, 2023) (Magistrate Judge Arlene R. Lindsay). Plaintiff John McQuillin sued Hartford Life and Accident Insurance Company under ERISA after his long-term disability benefit claim was denied. Mr. McQuillin’s complaint was dismissed on May 25, 2021, for failure to exhaust administrative remedies. That decision was overturned by the Second Circuit on June 7, 2022, which was the case of the week in our June 15, 2022 edition. The court of appeals concluded that Mr. McQuillin’s administrative remedies were deemed exhausted because Hartford was in violation of ERISA’s regulation requiring a final benefit decision be reached within 45 days of a claimant’s administrative appeal. Following the reversal, Mr. McQuillin filed a motion to amend his complaint. The amended complaint seeks to add a breach of fiduciary duty claim and equitable relief ordering defendant be removed as claim administrator from the plan. The new allegation claims that “Hartford’s unwritten protocols for remanding administrative appeals to its claim department, and relying on the EBSA COVID notice to delay rendering timely benefits decisions, breach Hartford [sic] fiduciary duty to all LTD Plan participants.” Magistrate Judge Lindsay found Mr. McQuillin’s allegations about a systematic claim administration practice in violation of fiduciary duties plausible. However, Magistrate Lindsay conditioned granting Mr. McQuillin’s motion to amend to add the breach of fiduciary duty claim on Mr. McQuillin taking steps to proceed with this claim on behalf of all plan participants. Accordingly, the motion to amend was granted.

Disability Benefit Claims

Seventh Circuit

Arenson v. First Unum Life Ins. Co., No. 20-cv-02800, 2023 WL 184233 (N.D. Ill. Jan. 13, 2023) (Judge John J. Tharp, Jr.). Plaintiff Gregg Arenson, a former executive futures and options trade broker, sued Unum Life Insurance Company challenging its decisions denying his claims for long-term disability benefits and waiver of life insurance premiums. Mr. Arenson, who suffered a stroke caused by the heart condition atrial fibrillation, alleged that Unum improperly discounted the severity of his cognitive disabilities when making its decisions. The parties cross-moved for summary judgment. Upon review of the administrative record, the court held that the medical reports and test results “revealed no severe cognitive difficulties.” The court cited to one of Mr. Arenson’s own neurologists, who discounted that his cognitive difficulties were the result of the stroke and responded to Unum’s inquiries that he believed Mr. Arenson could perform occupational demands and return to work. Unum’s reviewing physicians agreed and explained why they believed Mr. Arenson’s cognitive impairments were not severe or disabling. Based on this information, the court could not conclude that “Unum’s decision was irrational.” Thus, the court affirmed both denials and granted Unum’s motion for summary judgment.

Medical Benefit Claims

Sixth Circuit

Stover v. CareFactor, No. 2:22-cv-1789, 2023 WL 130709 (S.D. Ohio Jan. 9, 2023) (Judge Sarah D. Morrison). In 2021, in an accident which could have been taken straight from the plot of a Thomas Hardy novel, plaintiff Richard Stover was injured by a cow. The cow’s kick caused a severe ankle break which required immediate surgery. As a result of the injury, Mr. Stover incurred more than $100,000 in medical expenses. In this Section 502(a)(1)(B) action, Mr. Stover seeks to overturn his ERISA health plan’s denial of benefits made by the plan’s third-party claims administrator, defendant CareFactor. CareFactor denied the claims for coverage under the plan’s “Occupational Exclusion,” which excludes injuries resulting from work of all kinds including self-employment. In his complaint, Mr. Stover, an employee of a plumbing company, argued that he raises and butchers cattle for personal consumption, and that his injury therefore did not arise from work. CareFactor moved to dismiss the complaint and requested attorneys’ fees. It argued that it was not a proper defendant under Section 502 because it “is simply a non-fiduciary claims administrator.” The court, in a brief and straightforward decision, disagreed with CareFactor’s argument. Referring to the Supreme Court’s decision in Harris Trust & Savings Bank v. Salomon Smith Barney, Inc., 530 U.S. 238 (2000), the court wrote, “Like §502(a)(3), §502(a)(1)(B) identifies the possible plaintiffs in a claim for benefits, but ‘admits no universe of the limit of possible defendants.’” The complaint, the court held, sufficiently alleged that CareFactor exercised control over the benefits denial and subsequent appeals and is therefore a proper defendant to support a Section 502 claim against it. Drawing this conclusion, the court denied both CareFactor’s motion to dismiss and its concurrent motion for attorneys’ fees.

Pleading Issues & Procedure

Tenth Circuit

Smith v. Aetna, No. 22-cv-00426-RMR-KLM, 2023 WL 143025 (D. Colo. Jan. 10, 2023) (Magistrate Judge Kristen L. Mix). Pro se plaintiff Matthew Smith sued Aetna in small claims court challenging its denial of his claim for disability benefits under plans governed by ERISA. Aetna removed the action to federal district court and subsequently moved to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim. Magistrate Judge Mix in this order recommended that Aetna’s motion to dismiss be granted, with leave to amend. The Magistrate Judge stated that Mr. Smith’s complaint “clearly falls short of Rule 12(b)(6),” because other than stating that Mr. Smith was not approved for disability benefits, the complaint is silent about Aetna’s actions, the harm that resulted from those actions, “and what specific legal right the plaintiff believes the defendant violated.” Accordingly, the Magistrate viewed Mr. Smith’s allegations as underdeveloped and devoid of necessary facts to meet the pleading standards of Federal Rule of Civil Procedure 8(a).

Eleventh Circuit

Blessinger v. Wells Fargo & Co., No. 8:22-cv-1029-TPB-SPF, 2023 WL 145449 (M.D. Fla. Jan. 10, 2023) (Judge Tom Barber). Last May, plaintiffs Guy Blessinger, Audra Niski, and Nelson Ferreira sued Wells Fargo & Company under ERISA, as amended by the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”), for failing to provide notice of rights of eligibility to continued health plan coverage in a manner understood by an average plan participant. Plaintiffs, who elected not to continue health plan coverage based on Wells Fargo’s notice, each incurred medical expenses. They argued that the notices they were given discouraged them and others similarly situated from electing COBRA coverage “because they contained misstatements of law related to criminal and civil penalties and IRS penalties.” Wells Fargo moved to dismiss the complaint. First, the court denied the motion to dismiss based on defendant’s argument that the language within the notices was “neither confusing nor legally incorrect.” Such an argument, the court stressed, directly challenges the merits of plaintiffs’ complaint, and is therefore not appropriate for resolution at the pleading stage. However, Wells Fargo’s motion was granted to the extent plaintiffs’ claims related to the notices’ failure to identify the plan administrator. Wells Fargo argued, and plaintiffs conceded, that COBRA notices are not required to identify the plan administrator. Accordingly, the motion to dismiss was granted only with regard to this aspect of plaintiffs’ complaint.

Severance Benefit Claims

Third Circuit

Cope v. Hudson Bay Co. Severance Pay Plan for Emps. Amended & Restated, No. 20-6490, 2023 WL 174960 (E.D. Pa. Jan. 12, 2023) (Judge Chad F. Kenney). On May 25, 2017, Hudson Bay Company, the owner of many clothing and department stores, including Lord & Taylor, enacted a severance plan governed by ERISA to give a sense of security to employees should their positions be eliminated following a merger and acquisition or the sale of one of Hudson Bay’s companies. Such a sale did occur, in the fall of 2019, when Hudson Bay Company sold Lord & Taylor to Le Tote. In swift fashion, Hudson Bay amended the severance plan to remove Lord & Taylor from the list of entities defined as an “Employer.” Just three days after the amendment, plaintiff Roxanne Cope, a sales staffing coordinator at Lord & Taylor, was terminated. Following an unsuccessful attempt at applying for benefits under the severance plan, Ms. Cope commenced this putative class action against the plan, Hudson Bay Company, and the plan’s administrator. In her complaint, Ms. Cope asserted four causes of action; (1) wrongful denial of benefits under Section 502(a)(1)(B); breach of fiduciary duty under Section 502(a)(3); interference with attainment of benefits under Section 510; and violations of Pennsylvania Wage Payment and Collection Law. Defendants moved for dismissal for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6). Their motion was granted by the court in this order, which dismissed Ms. Cope’s complaint with prejudice. First, the court interpreted the plan language to evaluate whether Ms. Cope stated a valid claim under Section 502(a)(1)(B). To be eligible for benefits, the severance plan states that a claimant must be an eligible employee of an employer who incurs a covered termination of employment. The court concluded that Ms. Cope did not allege facts in her complaint demonstrating that Lord & Taylor was an employer, because it was not an “Affiliate” of Hudson Bay Company, as defined by the IRS, at the time of her termination. To draw this conclusion, the court mostly ignored Ms. Cope’s allegations that Le Tote and Hudson Bay were affiliated companies under common control. Thus, the court concluded that the complaint failed to state a claim under Section 502(a)(1)(B). Next, the court applied much the same logic to the breach of fiduciary duty claim, holding that fiduciaries, who are required to apply the terms of the plan when making benefit determinations, did not breach any duty by finding Ms. Cope ineligible for benefits under the plan. Furthermore, the court stated that under Supreme Court precedent amending a plan is not a fiduciary action, and defendants therefore did not breach any duty by amending the plan after the sale of Lord & Taylor to Le Tote. Lastly, the court stated that defendants did not breach any duty by failing to inform Ms. Cope of the amendment to the plan, writing, “there was no obligation for Defendants to disclose information to Plaintiff about potential changes to the Plan that did not apply to her.” Regarding Ms. Cope’s Section 510 claim, the court stated that “amending a plan does not violate Section 510,” and Ms. Cope’s complaint therefore “does not allege any prohibited employer conduct.”  Finally, Ms. Cope’s state law claim, which sought benefits under the severance plan, was dismissed as being preempted by ERISA. The decision ended with the court’s conclusion that amendment to the complaint would be futile. In its view, no allegation could overcome the identified deficiencies.

Withdrawal Liability & Unpaid Contributions

Sixth Circuit

Thrower v. Global Team Elec., No. 3:20-cv-00392, 2023 WL 149994 (M.D. Tenn. Jan. 10, 2023) (Magistrate Judge Jeffery S. Frensley). Two Taft-Hartley funds, a multi-employer pension plan and a multi-employer welfare benefits plan, sued an employer, defendant Global Team Electric, LLC, and its co-owners, defendants Calvin Godwin and Darmelleon Lee, for delinquent contributions and fiduciary breaches. The Funds moved for summary judgment, entry of judgment, and an award of attorneys’ fees under ERISA. Magistrate Judge Frensley recommended in this order that plaintiffs’ motions be granted. Ultimately, the Magistrate concluded that there was no genuine issue of material fact. It was undisputed that the employer was obligated to pay contributions to the Funds on behalf of covered employees per the terms of the governing collective bargaining agreements. Evidence proved that the employer and its owners skirted their duty to make the contributions by using plan assets for personal and business expenses, underreporting the hours worked by covered employees, and falsifying the owners’ own hours of covered employment. Finally, the Magistrate concluded that defendants were fiduciaries under ERISA because of their authority to control management of assets, and that they were responsible fiduciaries and co-fiduciaries for the breaches committed. Thus, it was the Magistrate’s opinion that the Funds’ motion for summary judgment be granted. As for their request for awarded damages in the total amount of $193,112.70, comprised of $176,126.62 in delinquent contributions, statutory penalties, and interest, plus attorneys’ fees and costs in the amount of $16,986.08, Magistrate Frensley also recommended it be granted as the amount of damages was uncontroverted and the attorneys’ fee amount was based on a reasonable lodestar.

Curtis v. Aetna Life Ins. Co., No. 3:19-cv-01579-MPS, 2023 WL 34662 (D. Conn. Jan. 4, 2023) (Judge Michael P. Shea)

In this week’s notable decision, Judge Michael P. Shea applied a “somewhat-novel doctrine of ‘class standing’” to significantly limit claims in an ERISA healthcare coverage class action against Aetna Life Insurance Company. This application of class standing as a hurdle separate and above Article III standing and outside the bounds of Federal Rule of Civil Procedure 23 analysis strikes us as a topic worthy of our readers’ attention.

Plaintiff Dennis E. Curtis, a beneficiary of a Yale University ERISA group medical benefits plan, brought suit on behalf of himself and a class of similarly situated participants and beneficiaries of ERISA healthcare plans administered by Aetna challenging Aetna’s use of medical necessity criteria for physical and rehabilitative therapies not set forth in the plans or their provisions. According to the complaint, these internal “Clinical Policy Bulletins” relied upon by Aetna “modify and limit, to the plan members’ detriment, the plans’ definition of ‘medically necessary.’” Thus, Mr. Curtis alleges that Aetna has violated ERISA by failing to administer the claims for medical benefits in accordance with the language of the plans.

Before Mr. Curtis obtained discovery and moved for class certification under Rule 23, Aetna filed a motion for partial dismissal. Aetna argued that Mr. Curtis, who was denied coverage for physical therapy services, never submitted claims for coverage for additional types of rehabilitation services benefits and therefore lacked class standing to bring these claims. Aetna, however, took a clear position that it was not challenging Mr. Curtis’s Article III standing.

The court found that, despite having Article III standing, Mr. Curtis’s challenges to physical therapy denials were too dissimilar to denials received by other potential class members for the five other therapies – speech, pulmonary rehabilitation, cognitive rehabilitation, occupational, and voice – for Mr. Curtis to have class standing to litigate claims related to these services on behalf of the class. The court reasoned that the evidence Mr. Curtis will need to prove his individual claims for physical therapy benefits will be different from the proof needed to prove the other class members’ claims pertaining to the other challenged therapies. This was so, the court concluded, because the Clinical Policy Bulletins contain unique definitions of medical necessity for these six sub-categories of therapies and it could only decide whether Aetna’s actions violated ERISA by individually analyzing the relevant Clinical Policy Bulletin for each therapy.

Despite Mr. Curtis’ allegation that Aetna’s practice of limiting the definition of medically necessary beyond those of the plans was general to all class members, the court found that under Second Circuit precedent Mr. Curtis did not have a “sufficiently personal and concrete stake in proving [the] other, related claims against” Aetna. Thus, the court focused on the differences between the putative class members rather than Aetna’s challenged common practices.

Finally, the court disagreed with Mr. Curtis’s position that Aetna’s challenge to his class standing should be decided on a Rule 23 motion for class certification and not on a motion to dismiss. The court acknowledged that courts within the Second Circuit are not consistent about when they choose to analyze class standing. However, as the court saw it, Mr. Curtis’s individual claims for physical therapy gave him no incentive to develop medical evidence necessary to prove entitlement to different therapies for which he was never denied coverage. The court concluded that this justified analyzing class standing at the motion to dismiss stage, without the benefit of discovery, or the protections and protocols of Rule 23. For these reasons, the court granted Aetna’s motion, “leaving only (Mr. Curtis’) claims on behalf of a class related to… physical therapy benefits for which he sought coverage.”

In reaching this determination, the district court relied on Second Circuit precedent, including the decision in NECA-IBEW Health & Welfare Fund v. Goldman Sachs & Company, 693 F.3d 145 (2d Cir. 2012). However, in NECA-IBEW, the Second Circuit seemed to use class standing to expand Article III standing, not as a limitation, acknowledging that NECA did not have Article III standing to challenge the misrepresentations made with respect to securities it did not invest in, but that it could nevertheless assert those claims on behalf of the class if the challenged conduct implicated “the same set of concerns” as the misrepresentations that NECA did have Article III standing to challenge. Whether the district court’s decision in this case can be squared with that view of class standing is as “murky” as the “line between traditional Article III standing and so-called ‘class standing.’” Ret. Bd. of the Policemen’s Annuity & Benefit Fund of the City of Chicago v. Bank of N.Y. Mellon, 775 F.3d 154 (2d Cir. 2014). 

In any event, this tension between traditional Article III standing, class standing, and class certification under Rule 23 is a compelling topic and perhaps a noteworthy new trend, made particularly interesting in this decision by Aetna’s clear position that it was not challenging the named plaintiff’s Article III standing.

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

Breach of Fiduciary Duty

Ninth Circuit

Lehr v. Perri Elec., No. 19-17199, __ F. App’x __, 2023 WL 21466 (9th Cir. Jan. 3, 2023) (Before Circuit Judges Thomas, Bennett, and Sung). A former employer, trustee, and plan participant, Colleen Lehr, was criminally prosecuted for embezzling funds from the Perri Electric Inc. Profit Sharing Plan and Profit Sharing Trust Fund. The judgment in the criminal case and bankruptcy proceedings ordered restitution payments in the amounts Ms. Lehr embezzled from the plan. In this ERISA breach of fiduciary duty action against the Perri Electric Inc. company and the plan, Ms. Lehr and her husband Paul argued that the restitution payment she paid to Perri Electric should have been put back into the plan, rather than used by the company to cover business expenses. The district court granted summary judgment in favor of defendants, determining that the Lehrs lacked standing. Plaintiffs appealed. On appeal, the Ninth Circuit affirmed, holding “the district court correctly concluded that Ms. Lehr lacked standing to assert an ERISA breach of fiduciary duty claim” under Parker v. Bain, 68 F.3d 1131 (9th Cir. 1995), which held that “a plaintiff lacks standing under ERISA where they breach their fiduciary duty to the plan by embezzling funds in excess of their claimed account balance.” Although the particulars of this action were mostly not addressed in the Ninth Circuit’s decision, it did state that here “the money allegedly owed to the Plan by Ms. Lehr far exceeds her claimed account balance.” Additionally, the appellate court stated that the judgment in the criminal case against Ms. Lehr ordered payment to the Perri Electric company, not the plan, and a debtor in bankruptcy “cannot designate to which liability its payments will be allocated.” Accordingly, the Ninth Circuit found no error in the lower court’s finding that no mandate in the criminal case or the bankruptcy proceedings required the payment to the company be remitted to the plan. However, this view was not shared among all three judges on the panel. Judge Bennett dissented, finding the Lehrs “established a genuine dispute of material fact as to whether Ms. Lehr’s restitution payment constituted a Plan asset.” Judge Bennett argued that a factfinder could interpret the restitution payment as being intended to compensate the plan rather than the company. The majority’s view was flawed, in Judge Bennett’s opinion, because “by finding that the Lehrs lack statutory standing because the restitution payment was unambiguously not a Plan asset, the majority effectively precludes other Plan participants from challenging defendants’ use of the restitution payment under ERISA.” Judge Bennett reasoned that the criminal and bankruptcy judgments “could have been ordered to Perri Electric in its capacity as a fiduciary of the Plan.” This was supported, Judge Bennett concluded, by the fact that Ms. Lehr’s embezzlement was from the plan and not directly from the company, and the ordered restitution was the “exact amount” stolen by Ms. Lehr from the plan. Thus, looking at the facts favorably to the Lehrs, the dissenting opinion concluded that the purpose of the restitution payment was to remediate the plan for its losses, and therefore the Lehrs in their action are “simply seeking to enforce the bankruptcy judgment and not usurp Perri Electric’s supposed sole and unfettered discretion.” Although Ms. Lehr may not be an innocent party, participants who are, Judge Bennett stated, “are left with no recourse against defendants under the statute,” because the majority’s conclusion essentially finds that defendants didn’t violate any fiduciary duty in using the payment to cover business expenses rather than reimburse the plans.

Raya v. Barka, No. 19-cv-2295-WQH-AHG, 2023 WL 27358 (S.D. Cal. Jan. 3, 2023) (Judge William Q. Hayes). On March 19, 2019, the Department of Labor informed the Calbiotech, Inc. 401(k) Profit Sharing Plan that it was opening an investigation into its operations. The Department’s letter informed the plan that it had found that Calbiotech and the other plan fiduciaries failed to timely remit employee contributions and loan payments and failed to make mandatory safe harbor employer contributions into the accounts of the eligible participants in violation of ERISA. Despite this conclusion, the Department of Labor informed the plan that it had decided not to take legal action. Nevertheless, the plan and its fiduciaries did face legal action, when on December 2, 2019, pro se plaintiff Robert Raya filed this ERISA lawsuit challenging defendants’ conduct in administering the plan. In addition to a claim for benefits and claims for breaches of fiduciary duties, Mr. Raya also included a retaliation claim, arguing that defendants unlawfully terminated him in retaliation for requesting plan documents. The court previously granted summary judgment to defendants on plaintiffs’ claim for benefits, leaving Mr. Raya’s claims for equitable relief pertaining to defendants’ breaches of fiduciary duties pursuant to Sections 502(a)(2) and (a)(3), along with his Section 510 retaliation claim. Defendants moved for summary judgment. The court addressed the breach of fiduciary duty claims first. To begin, the court agreed with defendants that the plan’s phrase about matching contributions describing “‘an amount…as determined by the Board,’ expressly gives the Board of Calbiotech discretion to set the amount of matching contribution and does not preclude the Board from setting the amount to zero.” Accordingly, the plan documents allowed the board not to allocate matching contributions, and thus the court found no breach of fiduciary duty on this basis. Thus, defendants were granted summary judgment on the breach of fiduciary duty claims to the extent they were based on defendants’ failure to make matching contributions to the plan. Next, the court found that uncontroverted evidence established that defendants remitted Mr. Raya’s loan payments to his account in their entirety. Although the Department of Labor had found wrongdoing by defendants for failing to remit loan payments to other participants, the remittance schedule the Department provided demonstrated that Mr. Raya’s account was unaffected because the first unremitted payment occurred after Mr. Raya’s loan was fully repaid. Accordingly, defendants were granted summary judgment on the loan payment remittances claims as well. However, the court determined that the final basis for Mr. Raya’s breach of fiduciary duty claims – that defendants failed to make safe harbor matching contributions to the plan – raised a genuine dispute of material fact precluding an award of summary judgment. Additionally, the court found Mr. Raya had standing to assert this claim as a plan participant. Nevertheless, the court permitted Mr. Raya to proceed only with his breach of fiduciary duty claim asserted under Section 502(a)(2), concluding that his Section 502(a)(3) claim was duplicative and without a distinct remedy. Finally, the court denied defendants’ summary judgment motion on Mr. Raya’s retaliation claim. The court concluded that this claim may be timely, as Mr. Raya provided evidence which could indicate fraudulent concealment justifying tolling the statute of limitations. For these reasons, defendants achieved mixed success and their summary judgment motion was granted in part and denied in part as described above.

Disability Benefit Claims

Eighth Circuit

Diaz v. Metropolitan Life Ins. Co., No. 21-cv-679 (MJD/JFD), 2023 WL 112586 (D. Minn. Jan. 5, 2023) (Judge Michael J. Davis). Plaintiff Raul Diaz worked as a flight attendant for American Airlines for over 30 years until he experienced a tragic accident falling off a roof in 2017, which left him injured and disabled. The fall resulted in a calcaneal fracture of his right foot and the injury required four surgeries. Eventually, Mr. Diaz was diagnosed with avascular necrosis, or the death of bone tissue due to lack of blood supply. Mr. Diaz was never physically the same afterwards and was left with debilitating symptoms, including an inability to walk or stand for extended periods of time. In this action he sought a court order overturning defendant Metropolitan Life Insurance Company’s decision to terminate his long-term disability benefits after 24 months, the plan’s limitation for certain musculoskeletal disorders. The parties cross-moved for summary judgment. In this order the court concluded that MetLife abused its discretion and granted summary judgment in favor of Mr. Diaz. In particular, the court concluded the medical record supported Mr. Diaz’s avascular necrosis diagnosis, and MetLife therefore acted arbitrarily and capriciously in finding Mr. Diaz not disabled due to any nonlimited condition. The court found MetLife’s reviewing doctor’s conclusion that “there remains no evidence of imaging to support” the diagnosis of avascular necrosis problematic, especially since the doctor failed to request any additional imaging or medical records and did not attempt to speak to or consult Mr. Diaz’s treating physicians for further clarification. Had MetLife’s reviewers sought evidence of imaging to support the diagnosis rather than simply stating their conclusion to the contrary they would have found it. The court wrote, “the record is filled with evidence of medical imaging to support the claim of Diaz and his treating physicians that Diaz suffers from avascular necrosis. This includes a March 2019 CT Scan, a June 2019 MRI, a November 2019 CT Scan, a bone density test, and x-rays.” Confronted with this objective medical evidence that MetLife failed to address, the court found that MetLife had not satisfied its duties under ERISA as the plan’s administrator. In sum, the court felt that MetLife’s review of Mr. Diaz’s claim was not a quality review, and “MetLife cannot rewrite the administrative record now.”

Ninth Circuit

Veronica L. v. Metropolitan Life Ins. Co., No. 3:21-cv-01260-HZ, 2022 WL 18062830 (D. Or. Dec. 28, 2022) (Judge Marco A. Hernandez). Plaintiff Veronica L. worked for Google for twelve years as a Senior UX Writer until she became disabled in the summer of 2017. At that time, Veronica became unable to carry on working, describing how she “used to be able to push myself through at will and got to a point that I couldn’t push through anymore. I didn’t have the capability anymore.” From 2017 onward, Veronica explained that her mental and physical health problems led her to lead “an entirely different life.” Defendant Metropolitan Life Insurance Company (“MetLife”) approved Veronica’s long-term disability benefit claim but did so for her psychiatric and mental health symptoms, limiting her eligibility for benefits to the plan’s 36-month limitation period. 36 months later, MetLife informed Veronica that it would be terminating her benefits. Following an unsuccessful administrative appeal, Veronica commenced this ERISA suit seeking reinstatement of benefits. She argued that her severe chronic fatigue syndrome, a non-limited condition under her plan, has left her unable to work and that she is therefore entitled to benefits beyond the limitation period. As support, Veronica included medical records from her treating physicians, and all of these health care professionals opined that Veronica’s reports of her symptoms were entirely credible and the level of fatigue she was experiencing could not be attributed to her mental health conditions. MetLife’s reviewing doctor of osteopathy agreed that Veronica suffered from chronic fatigue syndrome but found that no objective evidence supported a finding that the disease was severe enough to be disabling on its own. On de novo review of the administrative record under Federal Rule of Civil Procedure 52, the court ultimately faulted MetLife for conducting a paper-only review of a condition which can only be diagnosed upon subjective symptoms and a physician’s in-person credibility assessment of those self-reported symptoms. Additionally, the court stated that MetLife’s blanket statement of a “lack of objective evidence” was inappropriate because “[f]atigue, like pain, is an inherently subjective condition.” To the court, MetLife’s failure to conduct an independent medical evaluation failed to develop the record such that “the Court cannot definitively determine whether Plaintiff is disabled due to a non-limited condition under the Plan.” To rectify this inadequate review, the court concluded that remand to the plan administrator to further develop the incomplete record was the proper recourse in this instance and declined to award judgment to either party at this time.

Exhaustion of Administrative Remedies

Ninth Circuit

Schmidt v. Employee Deferred Comp. Agreement, No. CV-22-01464-PHX-ROS, 2023 WL 35027 (D. Ariz. Jan. 3, 2023) (Judge Roslyn O. Silver). Widow Patricia Schmidt sued her late husband’s employer, the Temprite Company, its deferred compensation top hat plan, and the plans’ fiduciaries, seeking a lifetime monthly benefit of $4,583.33, to which she believes she is entitled under the terms of the plan. Following her husband’s death, the company took actions to frustrate Ms. Schmidt’s claim, at first outright denying the existence of the plan before Ms. Schmidt was able to locate plan documents among her husband’s possessions. Once she had done so, Ms. Schmidt attempted to apply for the benefits. At that point, the company changed gears, stating that Ms. Schmidt was not entitled to both shares of Temprite stock and plan benefits. Unable to exhaust the administrative appeals process, Ms. Schmidt pursued legal action. Defendants moved to dismiss and alternatively moved to transfer. To begin, the named plan administrator, defendant Bob Brown, moved to dismiss for lack of personal jurisdiction. Mr. Brown argued that, contrary to plan documents produced by Ms. Schmidt naming him as the plan administrator, he could not be deemed the plan administrator because “he never performed the work of plan administrator.” The court disagreed, holding Mr. Brown’s argument “does not prove what Brown thinks it does. Construed in the light most favorable to Patricia, Brown’s statement that he has not acted as the plan administrator is evidence he has not performed tasks he should have performed.” Thus, at least at this stage of litigation, the court was satisfied that Mr. Brown is the plan’s administrator and thus subject to “ERISA’s nationwide service of process statute.” Next, the court addressed defendants’ position that Ms. Schmidt failed to exhaust administrative remedies. The court construed defendants’ position as paradoxical because they were simultaneously claiming the top hat plan did not exist while also arguing Ms. Schmidt was required to comply with its claim procedures. Given the allegations in Ms. Schmidt’s complaint, the court found that there was no reasonable procedure to exhaust, stressing that, while top hat plans are excepted from some ERISA requirements, they are not exempt from the requirement that they follow a reasonable procedure for handling benefit claims. “In simple terms, it would not have been reasonable to require Patricia send an administrative claim to Brown, an individual who disavows any role in the administration of the top hat plan.” Furthermore, there was evidence Ms. Schmidt made a reasonable attempt to comply with the claims procedure. For these reasons, the motions to dismiss were denied. Finally, the court also denied defendants’ undeveloped motion to transfer.

Pension Benefit Claims

Second Circuit

Maddaloni v. Pension Tr. Fund, No. 19-cv-3146 (RPK) (ST), 2023 WL 22633 (E.D.N.Y. Jan. 3, 2023) (Judge Rachel P. Kovner). Plaintiff Mark Maddaloni sued the Pension Trust Fund of the Pension, Hospitalization and Benefit Plan of the Electrical Industry and its board under Section 502(a)(1)(B), arguing defendants’ denial of his application for disability pension was an abuse of discretion. Mr. Maddaloni claimed defendants’ reliance in their denial on a plan term that required participants receiving workers’ compensation or disability benefits to apply for disability pension within two years of the date of disability onset was arbitrary and capricious because he was not receiving either. Thus, Mr. Maddaloni argued that under the terms of the plan his application was timely. Defendants responded that the plan was silent on the issue of whether participants who were not receiving workers’ compensation or disability benefits had to apply for disability pension benefits, and they were therefore able to rely on the summary plan description and their own “broad discretion” to impose this limitation. The court rejected defendants’ argument, concluding it “misunderstands the power of ERISA trustees.” Instead, only three requirements were necessary, the court held, for Mr. Maddaloni to be eligible for disability pension: (1) being permanently disabled; (2) having at least 10 pension credits; (3) and being employed by contributing employers for 10 years immediately prior to disability onset. The court concluded defendants failed to meet their burden of establishing that Mr. Maddaloni, who was receiving Social Security disability benefits, did not satisfy these requirements. Furthermore, the court held that Mr. Maddaloni complied with the application requirements in place at the time when he submitted his application. Accordingly, the court granted summary judgment in favor of Mr. Maddaloni, and denied in part defendants’ motion for summary judgment, granting summary judgment in favor of defendants only on Mr. Maddaloni’s alternative claim asserted under Section 502(a)(3), which Mr. Maddaloni did not object to. However, because the court felt it could not “conclude that plaintiff is entitled to benefits,” it opted to remand to the board for further proceedings consistent with its ruling here.

Pleading Issues & Procedure

Fourth Circuit

Int’l Painters & Allied Trades Indus. Pension Fund v. I. Losch, Inc., No. Civ. BPG-19-3492, 2023 WL 24247 (D. Md. Jan. 3, 2023) (Magistrate Judge Beth P. Gesner). A multi-employer pension fund and its trustees filed an ERISA lawsuit to collect withdrawal liability payments after a contributing employer ceased payments into the fund. Last September, the court granted plaintiffs’ motion for summary judgment and awarded withdrawal liability, interest, and liquidated damages. Defendants moved pursuant to Federal Rule of Civil Procedure 59(e) to alter or amend that judgment. In this order the court denied their motion. At bottom, the court held that defendants’ arguments amounted “to nothing more than a disagreement with the court’s conclusion,” and a rehashing of rejected arguments. Specifically, the court expressed that it considered and addressed defendants’ position that defendant Harry Yohn satisfied the requirements of the spousal attribution exception, reiterating how it had “discussed defendants’ argument at some length in its memorandum opinion.” As there was no intervening change in controlling law nor any new evidence not previously available, the court concluded that defendants needed to demonstrate the court’s ruling was a clear error of law. To the court, defendants here did not do so, and in fact did not even engage with the court’s conclusions regarding the spousal attribution exception. Mere disagreement, the court held did not suffice to clear the high bar necessary to overturn or revise the court’s judgment. Accordingly, all remains as before.

Provider Claims

Third Circuit

University Spine Ctr. v. Edward Don & Co., No. 22-3389, 2023 WL 22424 (D.N.J. Jan. 3, 2023) (Judge John Michael Vazquez). A healthcare provider given an assignment of benefits by its patient sued a healthcare plan, the Edward Don & Company, LLC plan, and its claims administrator, Cigna Health and Life Insurance, under ERISA Section 502(a)(1)(B) after the plan paid only $6,184.46 of a medically necessary spinal surgery for which they billed $340,316. Defendants moved to dismiss pursuant to Federal Rule 12(b)(6), arguing the provider failed to state a claim by failing to allege how the payment of $6,18.46 violates the plan. The provider had included in its complaint language from the plan that explains that the plan will pay for the lesser of either the provider’s normal charge, the Medicare allowable fee for the same service, or the 80th percentile of charges made by providers for the same service in the same geographic location. Although plaintiff’s complaint seemed to draw the conclusion that a payment of about $6,000 for spinal surgery must be in violation of the policy language, the complaint failed to explain what calculation defendants used to determine their rate of reimbursement, and precisely what about that calculation was incorrect. Because of this, the court agreed with defendants that Plaintiff failed to state a claim by “merely referenc[ing] the relevant provision without articulating how and why it entitles Plaintiff to additional compensation.” Dismissal, however, was without prejudice, and the provider may replead to address this stated deficiency.

Statute of Limitations

Second Circuit

Spillane v. N.Y.C. Dist. Council of Carpenters & Joiners of Am., No. 21 Civ. 8016 (AT), 2023 WL 22611 (S.D.N.Y. Jan. 3, 2023) (Judge Analisa Torres). Patrick and Deborah Spillane, a retired member of the New York City District Council of Carpenters and Joiners of America union and his spouse, brought an ERISA, LMRDA, and state law claims against the union, its pension and welfare funds, union leadership, and the funds fiduciaries after a union trial found that Mr. Spillane performed employment for a non-union contractor, and the trial “verdict” was subsequently used as grounds to terminate the Spillanes’ pension and healthcare benefits. Plaintiffs asserted ERISA claims under Sections 502(a)(1)(B) and (a)(3), for benefits and breaches of fiduciary duties respectively. Defendants moved to dismiss for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6). The court began its analysis by addressing the pension plan’s one-year statute of limitations. Plaintiffs argued that a 365-day window within which to commence legal action was unreasonably short. The court disagreed and referred to decisions by other courts in the Southern District of New York which have upheld “limitations provisions that afforded participants less than a year to file suit following a denial of benefits.” Accordingly, the court granted defendants’ motion to dismiss the Section 502(a)(1)(B) claim for pension benefits as untimely. Next, the court analyzed the claim for healthcare benefits. The relevant plan documents for the welfare plan conferred discretionary authority upon the fund’s trustees. Thus, the court held that the arbitrary and capricious standard of review applied. Plaintiffs’ assertion that the union trial verdict was flawed was found by the court not to “establish that the Fund Defendants’ actions were arbitrary and capricious. The Fund Defendants’ interpretation that…Spillane worked in disqualifying employment [and] was no longer eligible for benefits under the Welfare Plan, is supported by the plain language of the 2003 Welfare Plan SPD and the SMMs defining ‘disqualifying employment.’” Thus, the court held that plaintiffs failed to state a claim for benefits. Next, the court dismissed plaintiffs’ breach of fiduciary duty claim under ERISA as “conclusory.” Plaintiffs’ LMRA claims held up no better than their ERISA claims and were also dismissed under Rule 12(b)(6). The court also declined to exercise supplemental jurisdiction over the state law tort claim. Finally, the court denied plaintiffs’ motion for leave to amend their complaint, holding amendment would be futile.

Withdrawal Liability & Unpaid Contributions

Seventh Circuit

Trs. of the Chi. Reg’l Council of Carpenters Pension Fund v. Drive Constr., No. 19 C 2965, 2023 WL 22141 (N.D. Ill. Jan. 3, 2023) (Judge Virginia M. Kendall). Trustees of multi-employer ERISA pension funds sued an employer for unpaid contributions under collective bargaining agreements between the employer and the Chicago Regional Council of Carpenters union. In this order the court granted plaintiffs’ motion for leave to file a second amended complaint to add an additional defendant, a company they believe is under common control with the first employer, which they allege was created to avoid paying millions of dollars to the funds in contributions. Plaintiffs expressed in their motion that they discovered the existence of the alter ego of the first company thanks to an investigation by the Illinois Attorney General, and that defendant “deliberately concealed” this corporate relationship “throughout the litigation.” Furthermore, the trustees, relying on subpoena responses during the attorney general’s investigation, offered evidence that the employers failed to submit over $9 million to the pension funds and thus moved to file the second amended complaint to allege their original contribution claims against both companies as either alter egos or as a single employer. The court disagreed with the employer that permitting the amendment would be unduly prejudicial, holding that this “appears to be a bona fide change in circumstances,” as the relationship between the employers “was not available until (the) response to the AG’s subpoena in the separate investigation.” Finally, the court held “[i]f Plaintiff’s allegations prove to be true…denying the filing of the SAC would serve to shield Defendants from liability due to their own actions of concealing the ownership of the company,” and that the interest of justice would therefore be promoted by granting plaintiffs’ motion.

Happy New Year ERISA Watchers. For our first issue of 2023, we thought we’d take a moment to look back on the highs and lows of 2022 in the world of ERISA. In that spirit, we have compiled a somewhat subjective list of the best and worst decisions of the past year. We included only ERISA cases and not decisions that are sure to affect ERISA plans, such as the Supreme Court’s decision in Dobbs v. Jackson Women’s Health Organization, which certainly tops our list of worst decisions of 2022.

Here is our list of the Best ERISA Decisions of 2022:

  1. Hughes v. Northwestern University, No. 19-1401, 142 S. Ct. 737, 2022 WL 199351 (U.S. Jan. 24, 2022). This unanimous decision from the Supreme Court, authored by Justice Sotomayor, reversed the Seventh Circuit’s adoption of a categorical rule that imprudent options in a 403(b) plan’s investment line-up are “neutralized by prudent, lower-cost options.” The Court wisely recognized that “even in a defined-contribution plan where participants choose their investments, plan fiduciaries are required to conduct their own independent evaluation to determine which investments may be prudently included in the plan’s menu of options.”
  2.  Collier v. Lincoln Life Assurance Co. of Bos., No. 21-55465, 53 F.4th 1180, 2022 WL 17087828 (9th Cir. Nov. 21, 2022) (Before Circuit Judges Paez and Watford, and District Judge Richard D. Bennett). The Ninth Circuit has repeatedly recognized that a plan administrator may not present “a new rationale to the district court that was not presented to the claimant as a specific reason for denying benefits during the administrative process.” In this decision, the court expanded on this precedent to hold that the “district court clearly errs by adopting a newly presented rationale when applying de novo review.” This Kantor & Kantor victory is sure to have a significant impact in ERISA benefit litigation in the coming year and beyond.
  3. Gragg v. UPS Pension Plan, No. 22-3379, __ F.4th __, 2022 WL 17729625 (6th Cir. Dec. 16, 2022) (Before Circuit Judges Batchelder, Griffin, and Kethledge). In this decision, the Sixth Circuit held that “[t]he limitations period for an ERISA claim ‘to recover benefits due’ under a plan does not expire before the alleged underpayment on which the claim is based.” Emphasizing that an ERISA benefit claim accrues “when the plaintiff discovers, or with due diligence should have discovered, the injury that is the basis of the action,” the court reasoned that, in an underpayment case, this injury does not occur until the plaintiff receives the first underpayment, and not when he is told that he will receive that amount.
  4. Boley v. Universal Health Servs., No. 21-2014, 36 F.4th 124, 2022 WL 1768984 (3d Cir. Jun. 1, 2022) (Before Circuit Judges Greenaway, Jr., Scirica, and Cowen). In this decision, the Third Circuit recognized sensible limits to the Supreme Court’s Article III standing decision, Thole v. U.S. Bank N.A., 140 S. Ct. 1615 (2020), in a case challenging excessive fees associated with some of the investment options in a defined contribution plan. The court concluded that Article III did not prevent plaintiffs from representing class members who were allegedly harmed by investments in other funds that were imprudent for the same reason as the funds in which the named plaintiffs were invested.
  5. Cloud v. The Bert Bell/Pete Rozelle NFL Player Ret. Plan, No. 3:20-CV-1277-S, 2022 WL 2237451 (N.D. Tex. Jun. 21, 2022) (Judge Karen Gren Scholer). The final case on the Best Decisions list is a district court decision that we believe (or at least hope) represents a change in direction for courts reviewing benefit denials under the National Football League’s disability plan. The court allowed the plaintiff, through discovery, to pull back the curtain “on the inner workings of Defendant The Bert Bell/Pete Rozelle NFL Player Retirement Plan.” This peek revealed alarming claim-handling practices, including the fact that the board in charge of deciding Cloud’s appeal made its decision at a ten-minute-long “pre-meeting” during which it (purportedly) reviewed 100 other appeals, with each appeal involving a file of “hundreds or thousands of pages of documents.” To the court, “[t]he Board’s review process, its interpretation and application of the Plan language, and overall factual context all suggest an intent to deny Plaintiff’s reclassification appeal regardless of the evidence,” leading the court to conclude that the board did not give Cloud a full and fair review of his claim for the highest level of disability benefits under the plan. Based on its own review of the evidence, the court concluded that he was entitled to those benefits.

Here is our list of the Worst ERISA Decisions of 2022:

  1. Wit v. United Behavioral Health, No. 20-17363, __ F. App’x __, 2022 WL 850647 (9th Cir. Mar. 22, 2022) (Before Circuit Judges Christen and Forrest, and District Judge Michael M. Anello). In this eight-page unpublished memorandum decision, the Ninth Circuit swept away countless extensive rulings over seven years from the magistrate judge presiding over this case, including the judge’s lengthy decision finding that United Behavioral Health (UBH) engaged in “pervasive and long-standing violations of ERISA” by adopting and applying mental health and substance use disorder guidelines that were unreasonable and inconsistent with generally accepted standards of medical care. Applying an abuse of discretion standard, the Ninth Circuit concluded that UBH reasonably interpreted the plans as not requiring that benefits be paid for generally accepted standards of medical care. Whether the panel or the en banc court reconsiders this ruling remains to be seen.
  2. Klaas v. Allstate Ins. Co., No. 20-14104, 21 F.4th 759, 2021 WL 6124337 (11th Cir. Dec. 28, 2021) (Before Circuit Judges Pryor, Luck, and Brasher). In this decision from the Eleventh Circuit (which is technically a 2021 case, but we reported on it in 2022), the court, based on reservation of rights clauses in summary plan descriptions, held that plan participants had no right to life insurance benefits they were repeatedly promised by their employer, Allstate. The court also held that plaintiffs’ claims based on misrepresentations were untimely because the last misleading statements were made more than six years before they filed suit. The court’s reliance on summary plan descriptions, along with its failure to allow the introduction of extrinsic evidence on the meaning of the reservation of rights clauses, earn this decision a place on the Worst list. This placement is cemented by the fact that the court looked to the last date defendants made promises of lifetime benefits, rather than the date on which those promises were rescinded, in determining that plaintiffs’ fiduciary breach claim was untimely.
  3. Turner v. Allstate Ins. Co., No. 2:13-cv-685-RAH-KFP [WO], 2022 WL 17640165 (M.D. Ala. Dec. 13, 2022) (Judge R. Austin Huffaker, Jr.). On remand, the Allstate class action litigation again lands on the Worst list, this time based on the district court’s disregard of clear recusal rules. The plaintiffs argued that the district court judge who had ruled against them on summary judgment should have recused herself because she owned shares in the Allstate Corporation at the time she ruled in the company’s favor. A different district court judge ruled that there was no risk of injustice from the judge’s failure to recuse herself given the affirmance by the Eleventh Circuit, and further ruled that the failure to recuse “would not undermine the public’s confidence in the judicial process.” If this is correct, it is hard to understand the point of the court’s own mandatory recusal rules.
  4. Carfora v. Teachers Ins. Annuity Ass’n of Am., No. 21 CIVIL 8384 (KPF), 2022 WL 4538213 (S.D.N.Y. Sep. 28, 2022) (Judge Katherine Polk Failla). In this case, a district court in New York decided that the Teachers Insurance Annuity Association of America (TIAA), which administered a defined contribution pension plan in which the plaintiffs participated, was not acting as a fiduciary in soliciting plaintiffs to roll over their plan assets into TIAA’s proprietary “Portfolio Advisor Program.” This holding effectively allowed TIAA to escape liability for problematic sales tactics that allegedly included lying to plan participants to get them to invest in subpar investments.   

Whether you agree with which list these decisions belong on, we hope you all agree that these were some of the most important ERISA decisions from the past year. Read on for summaries of last week’s ERISA-related rulings.

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

Breach of Fiduciary Duty

First Circuit

Sellers v. Trustees of Boston College, No. CV 22-10912-WGY, __ F. Supp. 3rd __, 2022 WL 17968685 (D. Mass. Dec. 27, 2022) (Judge William G. Young). This is yet another in a long line of cases involving institutions of higher education and financial services advisors TIAA and Fidelity. Two former employees of Boston College (BC), Connie Sellers and Sean Cooper, brought this putative class action against the trustees of BC and its plan investment committee, alleging that they breached their fiduciary duties under ERISA in administering and monitoring BC’s two defined contribution 401(k) retirement plans, which were administered by TIAA and Fidelity. Defendants filed a motion to dismiss. Plaintiffs first argued that BC caused them to “incur unreasonable fees during the class period in the form of high recordkeeping expenses and excessive investment management fees.” Defendants argued that these claims were not supported by facts and were purely speculative, but the court noted the information asymmetry between the parties, and cited specific allegations by plaintiffs comparing BC’s plans to other plans, as well as BC’s failure to issue requests for proposals in order to reduce fees. Plaintiff further argued that defendants should have ceased investing with TIAA because of negative court decisions and regulatory investigations of TIAA, and because those funds underperformed a market index. The court found that plaintiffs’ evidence on these arguments was “certainly not overwhelming” and seemed swayed by defendants’ argument that plaintiffs needed more than a “single metric” to assess performance. Ultimately, however, the court ruled that “disputes over the appropriateness…of benchmarks…are inappropriate at the motion to dismiss stage,” and that plaintiff’s allegations were sufficient. For similar reasons, the court ruled that plaintiffs’ allegations against Fidelity, while “relatively thin,” passed muster. In doing so, the court noted that TIAA and Fidelity “make up a large percentage of the investment offerings in the two plans,” which “also weighs in favor of Plan Participants establishing a plausible breach of the duty of prudence.” As a result, although it was a close call, the court denied defendants’ motion in its entirety: “While each of Plan Participants’ allegations taken individually are likely insufficient to survive a motion to dismiss, the totality of the pleaded facts raise a plausible – not merely conceivable – inference that Boston College breached their fiduciary duties under ERISA.”

Fifth Circuit

Roton v. Peveto Fin. Grp., LLC, No. 3:20-CV-3569-X, 2022 WL 17994020 (N.D. Tex. Dec. 29, 2022) (Judge Brantley Starr). Plaintiffs Robert Roton and Jacqueline Juarez were employees of Legacy Counseling Center, which offered an ERISA-governed 403(b) savings plan to its employees. Plaintiffs alleged that they “were never provided with any meaningful opportunity to participate” in the plan, which was only offered to high-level company officers. Plaintiffs brought two claims under ERISA, for plan benefits under 29 U.S.C. § 1132(a)(1)(B), and breach of fiduciary duty under 29 U.S.C. § 1132(a)(2), against Legacy and its financial advisor Peveto Financial Group. Before the court were several motions. First, the court denied Peveto’s motion for judgment on the pleadings regarding standing, because plaintiffs had standing to sue for breach of fiduciary duty under the Supreme Court’s decision in LaRue v. DeWolff, Boberg & Associates, Inc. However, it granted Peveto’s motion regarding plaintiffs’ request for “lost opportunity costs” in the form of “missed market gains,” finding that these constituted impermissible extracontractual damages under ERISA. Peveto also filed a motion for summary judgment, contending that it was not a fiduciary under ERISA and that even if it was, it did not breach any fiduciary duty. The court denied this motion, finding there were genuine disputes of material fact as to both claims. In so ruling, the court noted that Legacy and Peveto presented different evidence, and “it is difficult to know which party was initiating, administering, authorizing, and managing Legacy’s 403(b) accounts, and which party is now trying to shirk responsibility.” As for Legacy, it filed a motion for summary judgment, arguing that its plan was exempt from ERISA under Department of Labor “safe harbor” rules. The court agreed, deciding in Legacy’s favor on the central element of whether the employer offered a “reasonable choice” to its employees. Plaintiff argued that only one advisor (Peveto) and one product (American Funds) was offered, but the court found that multiple investment options were available from American Funds, and thus the safe harbor provision was satisfied. Thus, the court granted Legacy’s summary judgment motion. Finally, the court addressed Peveto’s motion to strike plaintiffs’ jury demand, and Peveto’s motions regarding expert testimony. The court agreed that plaintiffs were not entitled to a jury under ERISA because of the equitable nature of their claims, and excluded testimony from one of plaintiff’s experts, concluding that her report “impermissibly offers conclusions of law and opinions on ultimate legal issues, and that the rest of her report’s conclusions are factual, and thus are improper for an expert witness.” The court did, however, agree to consider the expert’s report “in the nature of an amicus brief and give her conclusions the weight they are due.”

Disability Benefit Claims

Ninth Circuit

Abrams v. Unum Life Ins. Co. of America, No. C21-0980 TSZ, 2022 WL 17960616 (W.D. Wash. Dec. 27, 2022) (Judge Thomas S. Zilly). At the beginning of 2020, plaintiff William Abrams, an attorney with a long career as a partner at several large law firms, was earning a base salary of $525,000 and was planning on running in three major international marathons that year. However, in April, he began suffering from frequent fevers, severe fatigue, and mental fogginess, resulting in “a sharp decline in Plaintiff’s legal abilities.” In July, he stopped working and submitted a claim for long-term disability benefits to defendant Unum Life Insurance Company of America, the insurer of his firm’s ERISA-governed LTD employee benefit plan. Unum denied Mr. Abrams’ claim, and then, despite a 900-page submission involving the support of seven different doctors, Unum denied his appeal as well. Mr. Abrams filed suit, and the parties filed cross-motions for judgment, which were decided in this order. The court noted that the trial work performed by Mr. Abrams, with which the court was “intimately familiar,” requires “a high-level of cognitive work” and is “mentally and physically grueling.” The court concluded under de novo review that Mr. Abrams could no longer do that work, noting the “significant shift in his demeanor and abilities,” the fact that “Plaintiff’s doctors agree that he is sick” with either chronic fatigue syndrome (CFS) or long COVID, and “Neuropsychological testing revealed that Plaintiff was not malingering.” The court further observed that “Plaintiff has exhausted his savings account, sold his house, and drawn on retirement savings to afford daily life,” which he would not have done if he were able to work. Unum countered that Mr. Abrams’ doctors could not agree on a diagnosis and he did not satisfy the criteria for CFS, but the court noted that “[t]he accuracy of Plaintiff’s diagnoses is not, however, the question before the Court.” The only question was whether Mr. Abrams could return to work with his symptoms, which the court answered in the negative. As a result, the court granted Mr. Abrams’ motion for judgment regarding his claim for benefits. However, it denied Mr. Abrams’ motion regarding Unum’s bad faith, noting that “the evidence of disability is not overwhelming,” and finding that “multiple relevant pieces of evidence in this case support Defendant’s denial.”

Discovery

Tenth Circuit

Kilbourne v. Guardian Life Ins. Co., No. 2:22-CV-036-DBB-DBP, 2022 WL 17960482 (D. Utah Dec. 27, 2022) (Magistrate Judge Dustin B. Pead). Plaintiff Kameron Kilbourne filed this action against defendant Guardian Life Insurance Company, the insurer of his employer’s ERISA-governed employee long-term disability benefit plan. Mr. Kilbourne contended that he was disabled and entitled to benefits after suffering from three pulmonary embolisms and declining health while receiving multiple diagnoses. Guardian disagreed, denying his claim for LTD benefits at the outset, based largely on the report of its reviewing physician, Dr. Benjamin Kretzmann. Mr. Kilbourne sued, and then filed a motion for discovery, seeking depositions of Guardian’s medical consultants and employees. Mr. Kilbourne argued that (1) “several diagnoses listed by the physician reviewer are unsupported by the same medical records that Defendant ultimately relied upon in denying benefits,” (2) Dr. Kretzmann erroneously dated his report, (3) his second pulmonary embolism “was not listed in the physician’s report,” and (4) “the record indicates that Plaintiff received short-term disability benefits, yet then was denied LTD benefits under very similar standards.” Under these circumstances, the court agreed that “the totality of the unique circumstances leads the court to find that additional discovery is warranted.” Thus, the court granted Mr. Kilbourne’s motion in part, allowing him to take the deposition of Dr. Kretzmann, as well as a Rule 30(b)(6) deposition of a “witness for Defendant that can speak to the possible irregularities in the record and other relevant inquiries.”

Provider Claims

Sixth Circuit

Henry Ford Hosp. v. Oakland Truck & Equip. Sales, Inc., No. 21-12352, 2022 WL 18028252 (E.D. Mich. Dec. 30, 2022) (Judge David M. Lawson). Plaintiff Henry Ford Hospital provided medical care to Monica Chaney on two occasions, once in 2017 and again in 2019. Ms. Chaney was insured through an ERISA-governed employee health care plan sponsored by defendant Oakland Truck & Equipment Sales. The hospital contended it was underpaid for its services and brought this action against Ms. Chaney, Oakland Truck, and the third-party claim administrator of the health plan, ClaimChoice LLC. Defendants, who were jointly represented, filed a motion for summary judgment, which was decided in this order. Defendants first contended that the hospital’s claims relating to the 2017 treatment were time-barred either under ERISA’s three-year statute of limitations found in 29 U.S.C. § 1113(2), or under the plan’s contractual one-year limitation period. The court rejected both arguments. First, the court noted that § 1113(2) does not apply because that limitation only applies to breach of fiduciary duty claims, which were not present here. Second, the one-year contractual period also did not apply because under the plan that period only begins running after a claim is denied, and in this case the hospital was repeatedly told the claim was “approved,” “processed,” and “awaiting release of funds.” Thus, the hospital’s claim was timely under ERISA’s six-year statute of limitations on claims for plan benefits (as borrowed from Michigan law). The court also rejected defendants’ argument that it was entitled to summary judgment on the issue of whether the hospital obtained preauthorization for the 2017 treatment because the hospital presented documentation suggesting that it had received such authorization from a case manager. As for the 2019 claims, the hospital admitted that its only recourse was against Ms. Chaney because she refused to sign an assignment of rights. Under Michigan breach of contract law, the court ruled that the hospital had a colorable claim against Ms. Chaney and thus denied her motion for summary judgment. (However, the court did find it “curious” that she had refused to assign her rights regarding the 2019 treatment and wondered if there was a conflict of interest regarding defendants’ joint representation, because Ms. Chaney arguably had a claim against the other defendants for that treatment.)

Venue

Fourth Circuit

Trauernicht v. Genworth Financial Inc., No. 3:22-CV-532, 2022 WL 18027618 (E.D. Va. Dec. 30, 2022) (Judge Robert E. Payne). Plaintiffs Peter Trauernicht and Zachary Wright brought this putative class action against Genworth Financial, contending that Genworth breached its fiduciary duty under ERISA by “selecting, retaining, and otherwise ratifying poorly-performing investments for participants of the Genworth Financial Inc. Retirement and Savings Plan.” At the pretrial conference, the court noted that another judge in the Eastern District of Virginia (albeit in the Alexandria division, not the Richmond division where this case is pending) was already presiding over two cases involving related issues. The court requested position papers regarding venue transfer from the parties. Plaintiffs argued in favor of transfer, while defendants argued against, relying on a forum selection clause in the plan which provided that “[a]ny action in connection with the Plan…may only be brought in Federal District Court for the Eastern District of Virginia, located in Richmond, Virginia.” The court found that there was “nothing to suggest that the forum-selection clause is invalid or unreasonable,” and thus the Court “will abide by the clear language of the clause and, therefore, declines to transfer the case to the Alexandria Division.”

Withdrawal Liability & Unpaid Contributions

Fourth Circuit

United Food & Commercial Workers Unions & Participating Employers Pension Fund v. Supervalu Inc., No. CV DKC 22-0295, 2022 WL 17978273 (D. Md. Dec. 28, 2022) (Judge Deborah K. Chasanow). This case involves a dispute between a union multiemployer pension benefit plan and one of its contributing employers, Supervalu. The fund was certified to be in “critical status” in 2010. Since then, the fund has periodically reevaluated its financial projections and created updated rehabilitation plans, which have involved higher contribution rates from employers like Supervalu. In 2020, one day before the 2017 collective bargaining agreements were set to expire, Supervalu and the union signed an extension. In 2022, the plan sued Supervalu, contending that it was not contributing at the correct rate. Shortly after filing suit, the parties completed negotiation of new CBAs which included retroactive changes to the 2017 CBAs and new provisions that were not included in the 2017 CBAs. The parties filed cross-motions for summary judgment, raising the threshold issue of “whether—and when—the 2017 CBAs ‘expired.’” The fund argued that the 2017 CBAs expired in 2020, and thus Supervalu should have paid higher rates based on the schedule the fund was allowed to unilaterally choose after that date. Supervalu contended that the 2017 CBAs never actually expired and thus its obligation to adopt the fund’s updated contribution schedules “has not yet been triggered.” The court agreed with the fund, noting that the 2017 CBA contained a 2020 expiration date, and that the 2022 negotiations included backdating of the new CBAs to match the expiration of the old CBAs in 2020. “Thus, because the bargaining agreements signed earlier this year retroactively became ‘the governing CBA[s]’ in July 2020, the 2017 CBAs have ‘long since expired.’” Supervalu argued that the new CBAs were not really new, but simply agreements to continue the 2017 CBAs past their original expiration date. The court rejected this argument, however, finding that the language in the agreements and the conduct of the parties demonstrated that the 2022 CBAs “were new bargaining agreements, not extensions of the old CBAs.” As a result, the court granted the fund’s summary judgment motion, and denied Supervalu’s.

Seventh Circuit

Central States, Se. & Sw. Areas Pension Fund v. Transervice Logistics, Inc., No. 20-3437, __ F.4th __, 2022 WL 17843034 (7th Cir. Dec. 22, 2022) (Before Circuit Judges Sykes, Hamilton, and Brennan). This published opinion involves collective bargaining agreements between a union and two employers involving contributions to the union’s ERISA-governed multiemployer pension benefit plan. The CBAs were both set to expire on January 31, 2019, and both contained “so-called ‘evergreen clauses’ that extended them a year at a time until either party provided timely written notice expressing an ‘intention to terminate’ the agreements.” In November of 2018, the union sent letters to the employers noting that the CBAs would expire soon and expressing a desire to negotiate new agreements. The parties eventually completed those negotiations, which required payment to a new fund beginning on February 1, 2019. On January 30, 2019, the employers informed the union that they would stop providing pension contributions to the old fund, after which plaintiff brought this action. Plaintiff contended that the evergreen clauses extended the CBAs for an additional year, requiring the employers to maintain contributions to the old fund through January 31, 2020. The district court rejected this argument and ruled for the employers, finding that the November 2018 negotiation letters “constituted an unequivocal expression of the intent to terminate the current contract.” The Seventh Circuit disagreed and reversed. Citing its own precedent and cases from other circuits, it stated that evergreen clauses must be “strictly interpreted” according to their terms. Here, the evergreen clauses in the CBAs provided that the CBAs would continue in force until one party provided the other with “timely ‘written notice’ expressing an ‘intention to terminate.’” The “obvious import” of the November 2018 letters was that “the union hoped to negotiate new agreements with the employers.” However, “the letters said nothing about terminating the existing agreements regardless of whether or not new agreements were reached.” The employers cited statements by the union regarding negotiation of a “new” contract, and the “termination date” of the CBAs, as evidence that the CBAs were no longer valid. However, the Seventh Circuit ruled that these comments did not satisfy its strict interpretive standard. The court also stated that at the time of the letters, there was no guarantee that new CBAs could be successfully negotiated, and thus it fulfilled the purpose of ERISA to leave the CBAs in place, protecting beneficiaries, until there was an “express intent” to terminate, which never occurred. The court admitted that its decision might seem inequitable, as it required the employers to contribute to two different funds for the same hours worked by the same employees. However, the court observed that equitable defenses are not permitted under Section 515 of ERISA, and “for good reasons,” because “enforcing these contracts as written both complies with the terms of the statute and protects third-party beneficiary plans and workers.”