This week, no single case jumped out at us as an obvious candidate for case of the week. But keep reading for many interesting decisions, including one awarding costs to Hartford Life Insurance Company in a disability benefit case, Davis v. Hartford Life & Accident Ins. Co., and a fascinating family drama just in time for the holidays, Ben Hill Griffin, Inc. v. Adam “AJ” Anderson.

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

Attorneys’ Fees

Sixth Circuit

Davis v. Hartford Life & Accident Ins. Co., No. 3:14-CV-507-CHB, 2022 WL 17083403 (W.D. Ky. Nov. 18, 2022) (Judge Claria Horn Boom). As Your ERISA Watch has been reporting lately, successful defendants in ERISA benefit suits have been moving for awards of attorney’s fees and costs with increasing frequency over the past couple of years. With few exceptions these motions pursuant to ERISA’s fee and cost provision, Section 502(g)(1), have been denied by courts. In this motion defendant Hartford Life & Accident Insurance Company took a less direct and more incremental approach, moving for reimbursement of costs only under Federal Rule of Civil Procedure 54(d) and/or ERISA Section 502(g)(1). Hartford sought reimbursement of $1,644.25 for deposition transcripts, but more subtlety and perhaps more significantly, Hartford sought a district court decision granting such a motion. In this decision Hartford got just that. Overruling the objections of plaintiff Richard Davis, the court granted Hartford’s motion and awarded the requested costs. To begin, the court stated that it need not reach a conclusion on whether Section 502(g)(1) supplants Rule 54(d) “because under either…an award of costs would be appropriate.” As Hartford ultimately succeeded on its summary judgment claims in this disability benefit action, the court stated that it had the discretionary authority to award costs to Hartford. The court decided to side-step the Sixth Circuit’s King multi-factor test to determine whether to award costs under Section 502(g)(1), finding application of the factors “add[s] little to the Court’s analysis.” Instead, the court decided the deposition transcript costs, at a price of about $3 per page, were necessary, reasonable, and sufficiently detailed. Thus, the court granted the motion and ordered an ERISA plaintiff who was unsuccessful in his legal challenge of the termination of his disability benefits to cover Hartford’s bill of costs.

Breach of Fiduciary Duty

Second Circuit

Plutzer v. Bankers Tr. Co. of S. Dakota, No. 22-561-cv, __ F. App’x __, 2022 WL 17086483 (2d Cir. Nov. 21, 2022) (Before Circuit Judges Newman, Nardini, and Robinson). Plaintiff/appellant Edward Plutzer appealed a judgment from the Southern District of New York dismissing his breach of fiduciary duty and prohibited transaction complaint for lack of Article III standing. Mr. Plutzer is a former employee of Tharanco Group, Inc., and a participant in its Employee Stock Ownership Plan (“ESOP”). In his complaint, Mr. Plutzer alleged that the plan’s trustee, Bankers Trust Company of South Dakota, LLC, as well as the senior officials at Tharanco, caused the plan to overpay for the purchase of 100% of Tharanco’s stock during a transaction that occurred in 2015. The district court dismissed the complaint on March 1, 2022, concluding that the complaint lacked sufficient allegations of an injury in fact traceable to defendants’ actions surrounding the transaction. Upon de novo of the district court’s judgment, the Second Circuit concluded that it could not infer that the plan overpaid for the stock based on the allegations in the complaint. First, the appeals court disagreed with Mr. Plutzer that the steep decline in the valuation of the Tharanco stock following the transaction, as published in the company’s Form 5500s, was factual support for his theory of injury. Rather than focus on the downward turn of the price of the stocks from the $133,430,000 paid by the plan at the sale in 2015 to the $9,800,000 value in 2019, the Second Circuit focussed on the fact that the 2017 and 2018 valuations of the stock were actually higher than the 2015 valuation. The various ups and downs of the valuations following the stock transaction, the Second Circuit held, could not lead a factfinder to draw a reasonable inference in Mr. Plutzer’s favor, and therefore could not bolster his claim of a concrete and particularized injury. Furthermore, the court of appeals found Mr. Plutzer’s claims that defendants utilized unreasonable financial projections to be “speculative and conclusory.” Finally, the court felt that Mr. Plutzer’s complaint did not allege any facts suggesting the Plan paid a control premium, instead “all he actually alleges is that the Plan did not obtain control over Tharanco.” For these reasons, the Second Circuit agreed with the conclusions of the district court and as such affirmed its dismissal.

Sixth Circuit

Blackburn v. Reliance-Standard Life Ins. Co., No. 4:22-CV-00095-JHM, 2022 WL 17082673 (W.D. Ky. Nov. 18, 2022) (Judge Joseph H. McKinley Jr.). Plaintiff Ashley Blackburn and her late husband, Ray Blackburn, were both employees of defendant Baptist Healthcare System. The Blackburns each had life insurance policies through their employment that were provided to all Baptist employees and insured by defendant Reliance-Standard Life Insurance Company. The Blackburns also wanted to obtain supplemental life insurance for each other. Reliance-Standard had a policy against allowing Baptist employees from obtaining spousal supplemental life insurance coverage for a spouse that was also a Baptist employee. Nevertheless, Baptist “continuously represented to Mrs. Blackburn that she could maintain $100,000 of supplemental life insurance coverage on her husband,” and collected premiums for this amount of coverage from Mrs. Blackburn for over 10 years. Then in 2019, Mr. Blackburn developed cancer and Mrs. Blackburn stopped working to take care of her husband. Mrs. Blackburn sought to port her supplemental life insurance policy. Reliance-Standard and Baptist helped her to do this, and again Reliance-Standard collected premiums on the new whole life insurance policy. Mr. Blackburn died in March 2020. Mrs. Blackburn submitted a claim for the $100,000 in supplemental life insurance benefits due under the policy. The claim was denied. Reliance-Standard refunded the premiums for the new policy but not for the original supplemental life insurance policy that the Blackburns had paid for 10 years. Following an unsuccessful administrative appeals process, Mrs. Blackburn commenced this suit under Section 502(a)(3) alleging defendants breached their fiduciary duties by misleading her into believing that she was insured. Mrs. Blackburn also seeks statutory penalties under Section 1132(c) for defendants failing to timely disclose plan documents upon request. Defendant Baptist moved to dismiss. The court denied the motion, holding that Mrs. Blackburn’s action was analogous to the particulars of Varity Corp. v. Howe, 516 U.S. 489, 512 (1996), wherein the Supreme Court held that beneficiaries could sue under Section 502(a)(3) when they could not receive make whole relief through Section 502(a)(1)(B). The court also held that Mrs. Blackburn had sufficiently alleged that she had detrimentally relied on defendants’ written and oral misrepresentations in believing she was fully insured under the supplemental life insurance policy and that she would receive the benefits she “elected and paid for.” Finally, the court did not dismiss the claim for statutory penalties for failure to provide plan documents stating, “[f]acts could come to light during discovery that could convince the Court that Mrs. Blackburn is entitled to statutory penalties. In any event, Mrs. Blackburn was not required to plead prejudice or bad faith to state her claim for them, so the Court has no grounds for dismissing it.” For these reasons, none of Mrs. Blackburn’s claims against Baptist Healthcare were dismissed.

Class Actions

Third Circuit

Wolff v. Aetna Life Ins. Co., No. 4:19-CV-01596, 2022 WL 17156911 (M.D. Pa. Nov. 22, 2022) (Judge Matthew W. Brann). On May 25, 2022, the court issued an order granting plaintiff Joanne Wolff’s motion for class certification in this action challenging defendant Aetna Life Insurance Company’s use of plans’ “Other Income Benefits” provisions to obtain reimbursement of settlement proceeds when no subrogation or reimbursement provision existed in a plan. A summary of that decision can be found in Your ERISA Watch’s June 1, 2022 newsletter. After the issuance of the order granting class certification, Aetna filed a motion for reconsideration asserting that new case law from the Third Circuit requires the court to decertify the class. “Aetna notes that, one month after this Court certified the class, the Third Circuit issued its opinion in Allen v. Ollie’s Bargain Outlet, wherein the court held that, when deciding issues of commonality, court’s ‘must resolve all factual or legal disputes relevant to class certification.’” Relying on this precedent, Aetna argued that the court left a major factual issue unresolved, namely, “whether the language contained in the different plans permits reimbursement of personal injury recoveries.” Additionally, Aetna claimed the court also failed to address what representations were made by Aetna to the class members, and to parse out what effect this has on Ms. Wolff’s misrepresentation-based claim. Last, Aetna argued that the class definition created an impermissible fail-safe class. Ms. Wolff responded that the court analyzed the necessary criteria and answered the critical issues in order to properly certify the class. In Ms. Wolff’s view Aetna was improperly attempting to litigate the merits of the underlying claims, and the Allen decision does not constitute a change in controlling law. The court agreed with Ms. Wolff that Allen “broke no new ground” and therefore denied the motion to the extent that it relied on Allen. Furthermore, the court reiterated that it had already addressed the issues Aetna claimed were left unresolved in its order certifying the class. However, the court stated that, to the extent it failed to use definitive language, it wished to take the opportunity to clarify and eliminate any ambiguity, writing that “nothing in the relevant plans lead the Court to conclude that variations in the plan language prevents certification.” As for Aetna’s argument around misrepresentations the court expressed, “Wolff’s essential averments are that Aetna allegedly misrepresented – by making a request for reimbursement of personal injury recoveries in the first instance – that it was permitted to recover such funds, and that Aetna allegedly failed to disclose to class members that it was not permitted to recover such funds. These facts are common for every class member.” Accordingly, Aetna’s merit’s arguments in favor of decertifying the class were rejected. Nevertheless, Aetna found success in its stance that the class definition created a fail-safe class by defining the class so that membership depended on whether the member has a valid claim. The court agreed, stating that, through its references to the validity of the claim of the potential members, it had indeed created a fail-safe class. To remedy this problem. the court amended the class definition to remove this language, a change to which Ms. Wolff agreed. Aetna’s motion for reconsideration was thus granted to this limited extent, and the class definition was slightly revised.

Ninth Circuit

C.P. v. Blue Cross Blue Shield of Ill., No. 3:20-cv-06145-RJB, 2022 WL 17092846 (W.D. Wash. Nov. 21, 2022) (Judge Robert J. Bryan). In this class action, plaintiffs are challenging defendant Blue Cross Blue Shield of Illinois’s practice of administering exclusions for gender-affirming medical care for transgender individuals in self-funded ERISA healthcare plans. Plaintiffs argue these policy exclusions violate the anti-discrimination provision, Section 1557, of the Affordable Care Act. Pending before the court were motions from both parties to exclude each other’s expert testimony pursuant to Federal Rule of Civil Procedure 702 as well as Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579 (1993). Plaintiffs offered testimony of several medical professionals, Doctors Ettner, Karasic, and Schechter, who each opined that gender-affirming care is important and medically necessary for individuals diagnosed with gender dysphoria. Additionally, plaintiffs’ expert, Dr. Fox, provided information to the court estimating the size of the class. In contrast to plaintiffs’ experts, Blue Cross relied on experts holding the opposite view, that gender-affirming care is not medically necessary, and that medical consensus on its effectiveness as treatment is split. Furthermore, Blue Cross’s experts offered testimony outlining how requiring plans to pay for this type of care would be a costly burden for employers. Finally, Blue Cross’s expert, Dr. Carr, put forth evidence that contested the number of class members estimated by Dr. Fox. The court denied Blue Cross’s Daubert motion without prejudice and denied without prejudice in part and granted in part plaintiffs’ motion. Specifically, the court was unwilling to exclude the testimony of either party’s expert witnesses to the extent they spoke to the medical necessity of the healthcare at issue. The court found all of the doctors to be sufficiently qualified and appropriately providing testimony on their areas of expertise based on sufficient facts and data as to make their contributions to case relevant and reliable. The court also stated that the opinions of each party’s experts on this topic was central to answering the question of whether there is medical consensus regarding the value of these treatments for people with gender dysphoria and gender variance, the answer to which goes to the heart of the dispute at the center of this action – whether Blue Cross and the plans it administered were discriminating on the basis of sex. Blue Cross’s motion to exclude Dr. Fox’s opinions about the number of class members was also denied, as the court felt Blue Cross’s arguments about the reliability of Dr. Fox’s testimony did not go to admissibility. The court also allowed Blue Cross’s expert testimony pertaining to the economic impact of gender-affirming treatment to proceed because their expert is a qualified professor of healthcare management and his testimony is relevant. Lastly, the court excluded as untimely the response of Dr. Carr, Blue Cross’s expert, to Dr. Fox’s estimate of the number of class members. In all other respects, the expert testimony will proceed, but as the motions were denied without prejudice the court’s rulings may be revisited at trial.

ERISA Preemption

Fourth Circuit

Vigdor v. UnitedHealthcare Ins. Co., No. 3:21-CV-517-MOC-DCK, 2022 WL 17095211 (W.D.N.C. Nov. 21, 2022) (Magistrate Judge David C. Keesler). A group of patient plaintiffs alongside a provider plaintiff, Providence Anesthesiology Associates, P.A., filed a putative class action in North Carolina state court against UnitedHealthcare Insurance Company and related entities alleging that through targeted network terminations with providers, the insurers have violated the North Carolina Patient Protection Act, a state law that prohibits insurers from “subjecting an insured to the out-of-network benefit levels offered under the insured’s approved health benefit plan when they have an insufficient network.” Plaintiffs also asserted claims for breach of contract and unfair and deceptive trade practices. UnitedHealthcare removed the action to the district court based on federal question jurisdiction, arguing plaintiffs’ claims arise under and are preempted by ERISA. Plaintiffs moved to remand. Their motion was referred to Magistrate Judge David C. Keeler, who in this report and recommendation recommended the motion for remand be granted. Magistrate Judge Keeler agreed with plaintiffs that the court lacks subject matter jurisdiction and ERISA preemption is not implicated by the complaint, which pertains to a state law that regulates insurance providers by dictating the rate of payments rather than the right to payment.

Ninth Circuit

Alders v. Yum! Brands, Inc., No. CV 22-1303 PSG (DFMx), 2022 WL 17184561 (C.D. Cal. Nov. 23, 2022) (Judge Phillip S. Gutierrez). Plaintiff Tim Alders worked for defendant Yum! Brands Inc. and Taco Bell Corp. for 25 years from 1995 to 2020. Throughout that time, Mr. Alders alleges, his employer misclassified him as an independent contractor rather than an employee in order to make him ineligible to participate in the companies’ benefit plans. Mr. Alders originally filed a lawsuit against defendants in federal court on July 9, 2021, alleging both ERISA and state law claims. Defendants moved to dismiss the complaint. The court issued an order dismissing Mr. Alders’ ERISA claims for lack of standing as he was not a plan participant and thus “did not have a colorable claim to vested benefits.” When the court dismissed the ERISA claims, it elected not to exercise supplemental jurisdiction over the remaining state law claims. After the dismissal, Mr. Alders filed this present second action (“Alders II”) in state court alleging only claims for violations California state labor laws. Defendants then removed Alders II to federal court on the basis of ERISA preemption. Mr. Alders subsequently moved to remand the action back to state court and moved for attorney’s fees incurred as a result of the removal. Defendants moved for dismissal or alternatively to transfer venue. The court granted Mr. Alders’ motion for remand, denied his motion for attorney’s fees, and denied defendants’ motions. The court stated that removal was not proper, stressing that “[t]he Court’s analysis remains unchanged – Plaintiff still lacks statutory standing to bring his claims under ERISA as he was not a plan participant.” Because Mr. Alders was never a plan participant, the court held once again that he could not have brought a claim under ERISA and therefore the first prong of the Davila test was unsatisfied. However, although the court agreed with Mr. Alders that defendants lacked a reasonable basis for removal, it declined to award fees because Mr. Alders failed to comply with Local Rule 7-3’s meet-and-confer mandate.

Medical Benefit Claims

Sixth Circuit

Zucca v. First Energy Serv. Co., No. 5:21-CV-01345-CEH, 2022 WL 17092803 (N.D. Ohio Nov. 21, 2022) (Magistrate Judge Carmen E. Henderson). Plaintiff Mark Zucca, a participant in the First Energy Healthcare Plan, sued First Energy Service Company and Anthem Blue Cross and Blue Shield after his claim to obtain authorization for his son’s specialized targeted narrative language autism treatment provided by an out-of-network speech/language pathologist was denied by defendants. In the denial letters defendants stated that “in-network doctors…can provide this service.” The parties filed cross-motions for judgment on the administrative record under abuse of discretion review. Although the court agreed with defendants that they had a principled and deliberate review process in place, the court stated that “[a]t no point in the appeals process did Anthem identify any in-network providers that could provide the services that Mr. Zucca requested and that the determination to deny the claim was therefore not supported by substantial evidence.” The court held that Mr. Zucca’s son requires specialized advanced therapies and defendants failed to prove that any in-network provider offered these necessary treatments. Thus, the court found that defendants’ determination was abuse of discretion and Mr. Zucca was awarded summary judgment. In addition, the court held that Mr. Zucca is clearly entitled to an award of benefits. The court concluded that remanding to Anthem, providing it with a second chance to deny benefits, when it failed repeatedly to locate an in-network provider who could provide the services the Zucca family requires would not be in the interest of justice. As for an award of interest, costs and attorney’s fees, the court provided Mr. Zucca sixty days from the date of the order to file briefing on the matter.

Pension Benefit Claims

Eleventh Circuit

Ben Hill Griffin, Inc. v. Adam “AJ” Anderson, No. 8:21-cv-2311-VMC-TGW, 2022 WL 17177038 (M.D. Fla. Nov. 23, 2022) (Judge Virginia M. Hernandez Covington). In the strangest and most factually complicated case this week, plaintiff/employer Ben Hill Griffin, Inc. sought a declaratory judgment as to the distribution of decedent Adam Anderson’s pension plans: the Ben Hill Griffin, Inc. Employees’ Profit-Sharing Plan and Trust Agreement and the Ben Hill Griffin Inc. Management Security Plan. This single case involved a murder, a suicide, two ERISA plans, ten claimants comprised of an ex-wife with a Qualified Domestic Relation’s Order (“QDRO”) and a blended family of nine children, both biological and adopted, the applicability of Florida’s slayer statute, DNA testing, and one would presume, a partridge in a pear tree. At its simplest, the case revolved around the deaths of husband and wife Adam and Eva Anderson on July 19, 2021. Based on the evidence found at the couple’s home alongside the conclusions of the autopsy reports, it was determined that Eva was shot to death by Adam, who then committed suicide. As Adam died after his wife, his death certificate indicated his marital status at the time of death as “widowed.” The court broke the defendants up into two camps. The first group of defendants were labeled the “Anderson Defendants.” This group was comprised of Adam’s ex-wife, Michelle Anderson, and all of Adam’s biological and adopted children. The second group of defendants were called the “Wilkerson Defendants.” This group was made up of Eva’s children from a previous marriage, whose claims to the pension benefits were predicated on their mother’s claim as the named beneficiary and Adam’s spouse. The Anderson Defendants moved for summary judgment. Their motion was granted by the court. Tuning out all the noise, the court found its answer to how to distribute the benefits in the language of plans themselves. First, the court addressed the profit-sharing plan. The court held that the designation listing Eva as the sole beneficiary did not control, as the language of the plan required a named beneficiary to be alive at the time of the participant’s death, and Eva predeceased her husband. Thus, the court said, at the time of Adam’s death “he neither had a named beneficiary nor a ‘surviving spouse.’” The court also held that Florida’s slayer statute was inapplicable, because Adam, the murderer, did not stand to benefit in anyway. Because of this, Eva’s children were determined to not be entitled to a portion of the benefits. However, Michelle Anderson’s QDRO was found to be valid and applicable, and the court therefore incorporated its terms into the division of benefits. Finally, the court accepted the results of a DNA test which proved that one of the claimants, defendant Candice Luke, was Adam’s biological child and therefore qualified as a beneficiary.  Working through these details, the court ultimately decreed, “$35,578.81…is to be set aside for Michelle Anderson pursuant to the family Court’s Qualified Domestic Relations Order. The remainder of the death benefit payable under the Profit-Sharing Plan is to be distributed to Adam Anderson’s children, including Candice Luke, per stripes.” Turning to the Management Security Plan, the court once again read the language of the plan and of the beneficiary designation form closely and ruled that Michelle Anderson and defendant A.W.A., the minor child of Adam and Eva, were each entitled to a portion of the benefits. Thus, having worked out the details and cleaned up the mess, the court granted the Anderson Defendants’ motion for summary judgment, figured out who got what from each plan, and closed the case.

Pleading Issues & Procedure

Third Circuit

Applebaum v. Fabian, No. 22-1049, __ F. App’x __, 2022 WL 17090172 (3d Cir. Nov. 21, 2022) (Before Circuit Judges Ambro, Krause, and Bibas). Plaintiff/appellant Edita Applebaum brought suit in the district of New Jersey challenging things that occurred during probate court proceedings of her late husband’s estate. Ms. Applebaum asserted claims under ERISA, the Racketeer Influenced and Corrupt Organizations Act (“RICO”), and state common law. Ms. Applebaum’s complaint was dismissed in the district court. The district court held the RICO claims were untimely, the ERISA claim was barred by the probate exception, and the state law claims were not properly pled. On appeal, the Third Circuit affirmed. Regarding the ERISA claim, the decision stated, “while Applebaum argues that she was the valid beneficiary of her husband’s 401(k) plan and that its proceeds should have bypassed the probate system, Applebaum’s beneficiary designation, and thus her right to estate property, is precisely what is disputed here. As a result, this claim falls squarely within the ‘probate exception’ to our jurisdiction.” Thus, dismissal of the ERISA claim, along with the rest of the district court’s ruling, was affirmed by the court of appeals.

Fourth Circuit

UFG Holdings, LLC v. Demayo Law Offices, L., No. 3:21-CV-375-GCM-DCK, 2022 WL 17095210 (W.D.N.C. Nov. 21, 2022) (Judge Graham C. Mullen). On September 19, 2022, Magistrate Judge David C. Keesler issued a report and recommendation recommending the court deny defendant Demayo Law Offices’ motion to dismiss the Section 502(a)(3) claim against it. Defendant timely objected to the report. The court conducted a review of the Magistrate’s report and concluded that “the recommendation to deny the Defendants’ Motion to Dismiss is correct and in accordance with law.” However, because the issue of the applicability of Section 502(a)(3) to attorneys of ERISA beneficiaries is an area of “substantial difference of opinion…among district courts in this circuit,” the court granted defendant’s alterative request for certification of the order for interlocutory appeal.

Ninth Circuit

Regenold v. RELX Inc., No. 22-CV-04419-RS, 2022 WL 17096162 (N.D. Cal. Nov. 21, 2022) (Judge Richard Seeborg). Plaintiff Todd Regenold was an employee of defendant RELX, Inc. for over five years. In March 2022, Mr. Regenold was informed that his position was being eliminated. Mr. Regenold was provided notification of his severance package including 26 weeks of severance pay and six months of paid membership to an executive outplacement service. However, shortly before Mr. Regenold’s final day at the company he was informed that he was under investigation for misconduct. RELX then informed Mr. Regenold that he was not an “employee in good standing” and therefore was ineligible for his previously promised severance benefits. Rather than appeal this decision, Mr. Regenold sued RELX in state court for breach of contract. RELX removed the matter to the federal district court on ERISA preemption grounds. Mr. Regenold moved to remand, arguing the plan was not ERISA governed because it did not require an ongoing administrative scheme. RELX moved to dismiss the complaint as being preempted by ERISA, and for failure to exhaust administrative remedies. Concluding that the plan in fact qualified as an ERISA severance pay plan under the Department of Labor regulations, the court denied Mr. Regenold’s motion to remand and granted without prejudice RELX’s motion to dismiss, allowing Mr. Regenold the opportunity “to bring a new action upon exhausting administrative remedies.”

Venue

Eleventh Circuit

Brannigan v. Anthem Ins. Co., No. 8:21-cv-2353-KKM-SPF, 2022 WL 17175845 (M.D. Fla. Nov. 23, 2022) (Judge Tom Barber). In this very brief order, the court adopted a Magistrate’s report and recommendation which recommended denying defendant Anthem Insurance Company’s motion to dismiss but granting its alternative motion to transfer. The court agreed with the Magistrate that Anthem had an insignificant connection to the middle district of Florida to warrant it as the proper venue, whereas Anthem’s headquarters in Indianapolis, which was the location where it made the relevant decision to deny coverage, factored in favor of transferring the case to the southern district of Indiana. Thus, without any fanfare, the court ordered the action to be transferred.

Withdrawal Liability & Unpaid Contributions

Ninth Circuit

Bd. of Trs. of IBEW Local 100 Pension Tr. Fund v. Cole, No. 1:21-CV-0750 AWI EPG, 2022 WL 17156147 (E.D. Cal. Nov. 22, 2022) (Judge Anthony W. Ishii). Plaintiffs the Board of Trustees of IBEW Local 100 Pension Trust Fund and the Joint Electrical Industry Trailing Trust Fund sued an employer, defendant Michael Cole d/b/a Michael Cole Electric for failure to conduct audits from 2016 to 2019. Plaintiffs moved for partial summary judgment on the issue of whether Michael Cole Electric is bound by a collective bargaining agreement. Plaintiffs argued that Michael Cole Electric is the successor of Cole Electric Repair Services, the electrical company that Michael Cole ran until 2006, which had signed the collective bargaining agreement governing the ERISA plans. Plaintiffs went on to express that even if the court were to conclude that Michael Cole Electric was not the successor of Cole Electric Repair Services, Michael Cole and Michael Cole Electric manifested an intent to abide by the terms of the collective bargaining agreement. To begin, the court held that the evidence did not demonstrate that Mr. Cole’s second electrical company was the successor to his first as Mr. Cole himself was the only “the only employee common to both.” Accordingly, the court did not grant summary judgment in favor of plaintiffs on their successor theory. However, regarding the actions of Mr. Cole and Michael Cole Electric and whether those actions bound them to the collective bargaining agreement, the court acknowledged that evidence cut both ways. Because of this conflict, the court stated that in viewing the evidence in the light most favorable to Mr. Cole it could not say as a matter of law that Michael Cole Electric adopted the collective bargaining agreement or was bound by its terms. Thus, this issue remained unresolved, and plaintiffs’ partial summary judgment motion was denied.

Collier v. Lincoln Life Assurance Co. of Bos., No. 21-55465, __ F.4th __, 2022 WL 17087828 (9th Cir. Nov. 21, 2022) (Before Circuit Judges Paez and Watford, and District Judge Richard D. Bennett)

This week’s notable decision is a Kantor & Kantor victory in the Ninth Circuit addressing what arguments ERISA plan administrators and judges are allowed to make in considering whether a benefit claim was decided properly.

The plaintiff is Vicki Collier, an insurance sales agent who started working for the Automobile Club of Southern California in 2013. Unfortunately, Ms. Collier experienced “persistent pain in her neck, shoulders, upper extremities, and lower back, which limited her ability to type and sit for long periods of time.”

Ms. Collier was eventually diagnosed with several orthopedic impairments which affected her mobility. She underwent a variety of treatments, including surgery, and tried ergonomic accommodations, but her pain continued, and she was forced to stop working in 2018.

Ms. Collier submitted a claim for benefits to Lincoln Life, the insurer of the Auto Club’s long-term disability benefit plan. Lincoln denied her claim based on a report by a reviewing physician that concluded she did not meet the plan’s definition of disability. Neither the report nor the denial letter mentioned Ms. Collier’s credibility or alleged that Ms. Collier had not submitted objective medical evidence.

Ms. Collier appealed and submitted additional evidence to support her claim. In response, Lincoln arranged for an independent medical examination by a physician who concluded that while Ms. Collier had limitations, she still had the capability to work full-time. Based on this report, Lincoln denied Ms. Collier’s appeal on the same ground as its original denial, i.e., that she did not satisfy the plan’s disability definition. Lincoln added that “ergonomic equipment [was] readily available,” but “without specifying what equipment was available or how it would be implemented to accommodate Collier’s restrictions.”

Having exhausted her appeals, Ms. Collier brought this action. In court, Lincoln raised three arguments in support of the denial, all of which were accepted by the district court in ruling for Lincoln. The district court “determined that Collier was not disabled for three intertwined reasons: (1) Collier was not credible in her reporting of pain symptoms; (2) Collier’s medical providers relied on her pain symptom reports, so their opinions were less credible and the remaining objective medical evidence did not support her allegations; and (3) even if the court believed Collier’s reports of pain, her typing restrictions could be readily accommodated with ergonomic equipment, such as voice-activated software.”

Ms. Collier contended that the district court should reject Lincoln’s objective evidence and credibility arguments because Lincoln did not raise those arguments in its denial letters. However, the district court concluded that because “a court must ‘evaluate the persuasiveness of conflicting testimony and decide which is more likely true,’” credibility determinations were inherently part of its review. Ms. Collier appealed to the Ninth Circuit.

The Ninth Circuit began by reviewing the purpose of ERISA and its administrative procedures. The court noted that ERISA was “remedial legislation” designed to protect plan beneficiaries by giving them a “full and fair review” of their claims for benefits. As a result, ERISA has thorough claim administration rules that are “procedurally robust.” Among these rules is a requirement that denial letters contain the “specific reason or reasons for the denial.” Furthermore, “[i]f a plan administrator relies on a new or additional rationale during the review process, the administrator must provide the rationale to the claimant and ‘give [her] a reasonable opportunity to respond.’”

Because of these rules, the Ninth Circuit observed that it had already held that “a plan administrator undermines ERISA and its implementing regulations when it presents 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.” The court also explained that it had previously “expressed disapproval of post hoc arguments advanced by a plan administrator for the first time in litigation.” (In doing so, the court cited three successful appeals litigated by Kantor & Kantor: Mitchell v. CB Richard Ellis Long Term Disability Plan (2010), Harlick v. Blue Shield of Cal. (2012), and Wolf v. Life Ins. Co. of N. America (2022), which ERISA Watch examined earlier this year.)

In response to Ms. Collier’s arguments that Lincoln violated these rules, the court concluded, “We agree.” The court noted that Lincoln “did not cite Collier’s lack of credibility or the lack of objective evidence when it denied her claim initially and on review.” Instead, it only argued in its denial letters that she did not meet the plan’s definition of disability. “Lincoln did not specify that it found Collier not credible, that she failed to present objective medical evidence, or that such evidence was required under the Plan.” Instead, Lincoln waited until litigation to make these arguments, which “effectively ‘sandbagged’ Collier with new rationales at a stage in the proceedings where she could not meaningfully respond.”

The Ninth Circuit noted that it had tackled the issues raised above before, but this case presented a new wrinkle: “Although we have held that a plan administrator may not hold in reserve a new rationale to present in litigation, we have not clarified whether the district court clearly errs by adopting a newly presented rationale when applying de novo review. We do so now.”

The Ninth Circuit emphasized that when a court is conducting a de novo review of a benefit denial, “it evaluates the plan administrator’s reasons for denying benefits without giving deference to its conclusions or opinions.” This meant that if Lincoln had questioned Ms. Collier’s credibility in its denial letters, “the district court would have been within its province to review the administrative record and determine whether the evidence supported that decision.”

However, a district court “cannot adopt post-hoc rationalizations that were not presented to the claimant, including credibility-based rationalizations, during the administrative process.” The Ninth Circuit rejected the idea that credibility determinations are “inherently part of the de novo review…. If the denial was not based on the claimant’s credibility, the district court has no reason to make a credibility determination.” In short, “[t]he court must refrain from fashioning entirely new rationales to support the administrator’s decision.”

The Ninth Circuit noted that a contrary conclusion “would evade ERISA’s protections for the same reasons a plan administrator undermines ERISA’s protections when asserting new arguments for the first time in litigation.” A contrary conclusion would also undermine the goals of ERISA to “reduce the number of frivolous lawsuits under ERISA; to promote the consistent treatment of claims for benefits; to provide a nonadversarial method of claims settlement; and to minimize the costs of claims settlement for all concerned.”

The only remaining question was what remedy was appropriate. Ms. Collier urged the court to reach the merits of her benefit claim, but the Ninth Circuit demurred and remanded to the district court “with directions to reconsider its decision in light of our opinion.” This meant “review[ing] the administrative record afresh to determine whether Lincoln correctly denied Collier’s claim,” without “rely[ing] on rationales that Lincoln did not raise in the administrative process to deny benefits.”

This published decision is important because it clarifies the scope of a trial court’s authority in reviewing a benefit denial. Ultimately, the Ninth Circuit concluded that “[t]he district court’s task is to determine whether the plan administrator’s decision is supported by the record, not to engage in a new determination of whether the claimant is disabled.” It is also a big victory for plan participants, who too often are surprised at trial with arguments the plan administrator never raised – and sometimes never even considered – during the claim process. It sends a message to plan administrators to be more careful and thorough when deciding claims, which of course is their duty as fiduciaries. Stay tuned to ERISA Watch to see if administrators take this lesson to heart.

Ms. Collier was represented by Kantor & Kantor attorneys Glenn Kantor, Sally Mermelstein, and Zoya Yarnykh. Thanksgiving has come early here in the Ninth Circuit.

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

Attorneys’ Fees

Ninth Circuit

Metaxas v. Gateway Bank F.S.B., No. 20-cv-01184-EMC, 2022 WL 16949939 (N.D. Cal. Nov. 15, 2022) (Judge Edward M. Chen). This August, the court granted plaintiff Poppi Metaxas’s summary judgment motion on her claim for termination benefits, and granted defendants’ cross-motion for summary judgment on her claim for disability benefits. A summary of that decision can be found in Your ERISA Watch’s August 31, 2022 edition. After her partial summary judgment win, Ms. Metaxas moved for an award of attorney’s fees totaling $316,880 pursuant to ERISA Section 502(g)(1). The court began its decision by expressing that Ms. Metaxas met the threshold condition of “some degree of success” on the merits to be eligible for an award of fees. The court then considered whether an award of fees was warranted under the Ninth Circuit’s Hummell factors. First, the court agreed with Ms. Metaxas that her employer’s actions were an abuse of discretion constituting culpability and bad faith. The court also found that Gateway Bank is able to satisfy an award of fees. However, the court found that the deterrent factor of a fee award was a neutral factor as the particulars of the case were idiosyncratic. The fourth factor, whether the action resolved a significant legal question regarding ERISA or whether the fee award will have a benefit to other participants and beneficiaries, weighed against Ms. Metaxas, as again the case was very individualized. Finally, the court evaluated the relative merits of the parties’ positions and found that its ruling that defendants abused their discretion regarding the termination benefits meant that Ms. Metaxas had greater ultimate success in the case and this factor should be weighed in her favor. Because three of the five factors weighed in favor of awarding fees, with only one factor weighing against, the court concluded an award of attorney’s fees was appropriate. Thus, the court went on to determine the proper amount of the award. To begin, the court adjusted the rate of Ms. Metaxas’s attorney, Scott Kalkin, from $850 per hour to $800 per hour. The more drastic reduction involved the number of billed hours. The court reduced the requested 372.8 billed hours down to 236.55 total hours. This reduction was for duplicative or unnecessary hours, time spent on unsuccessful arguments, as well as the court’s way of reflecting Ms. Metaxas’s mixed success overall. With this new lodestar created, the court awarded Ms. Metaxas fees in the amount of $189,240. Lastly, the court granted Ms. Metaxas’s motion for reimbursement of her $400 filing fee.

Breach of Fiduciary Duty

Third Circuit

Krutchen v. Ricoh U.S., Inc., No. 22-678, 2022 WL 16950264 (E.D. Pa. Nov. 15, 2022) (Judge Juan R. Sanchez). Former employees of defendant Ricoh U.S. Inc. initiated this putative class action on behalf of themselves, the Ricoh Retirement Savings Plan, and similarly situated participants against the company, the administrative committee, the board, and individual Doe defendants for breaching their fiduciary duty of prudence by failing to control the plan’s administrative costs and fees, and for failing to monitor co-fiduciaries. Defendants moved to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). The court agreed with defendants that it could not infer that fiduciary breaches were committed given plaintiffs’ “apples to oranges” fee comparisons within the complaint. “A meaningful benchmark must include both the quality and type of recordkeeping services provided by comparator plans to show that identically situated plans received the same services for less.” Because plaintiffs’ complaint did not provide detailed outlines of the services received for the prices paid, providing instead that the services “fell within the broad range” of services all recordkeepers provide, the court held that it could not adequately make decisions about what similarly situated fiduciaries would do, and plaintiffs therefore failed to state a claim. Furthermore, as the court held there was no valid breach of prudence claim, it also dismissed the derivative failure to monitor claim. For this reason, the court granted the motion to dismiss. The court did, however, allow plaintiffs the opportunity to amend their complaint to address its current shortcomings.

Ninth Circuit

Gomo v. NetApp, Inc., No. 17-cv-02990-BLF, 2022 WL 16972492 (N.D. Cal. Nov. 16, 2022) (Judge Beth Labson Freeman). Plaintiff Daniel Warmenhoven, the CEO of defendant NetApp, Inc., along with other executives of the company, filed this lawsuit in 2017 asserting a claim for plan benefits against NetApp and the Executive Medical Retirement Plan under Section 502(a)(1)(B), and an alternative claim for breach of fiduciary duty against NetApp under Section 502(a)(3), in connection with NetApp’s termination of the plan, which had been represented to the participants as providing guaranteed lifetime health insurance benefits. On September 9, 2019, the court granted summary judgment to defendants. Plaintiff Warmenhoven appealed that ruling in Warmenhoven v. NetApp, Inc., 13 F.4th 717 (9th Cir. 2021). On appeal, the Ninth Circuit affirmed the judgment pertaining to the Section 502(a)(1)(B) claim. However, the judgment as to the alternative breach of fiduciary duty claim was vacated and remanded to the district court for further proceedings. The appeals court held that there was a genuine dispute as to whether NetApp breached its duties by representing to the plan participants that the plan provided them with lifetime health insurance benefits. The district court had not addressed whether there was appropriate equitable relief available to plaintiffs on the Section 502(a)(3) claim. Thus, the Ninth Circuit remanded to the district court “to consider in the first instance the merits of NetApp’s argument for summary judgment based on the remedy prong.” (The decision was Your ERISA Watch’s case of the week in our September 22, 2021 newsletter.) And so that’s exactly where this decision, ruling on NetApp’s revised summary judgment motion, picked up. The decision evaluated the claim with respect to the two remedies Mr. Warmenhoven sought, reformation and surcharge. First, the court concluded that reformation was not an appropriate equitable remedy in the case because Mr. Warmenhoven failed to present evidence that NetApp’s true intent was to give up its legal right to amend the plan at any time. However, the court stated that Mr. Warmenhoven could pursue the remedy of surcharge under a breach of duty theory because NetApp’s representations about lifetime health insurance caused Mr. Warmenhoven actual harm. “Warmenhoven stayed at NetApp under the mistaken impression that he and his wife would be provided lifetime health insurance benefits. Since termination of the Plan, Warmenhoven has incurred more than $4,000 a year in out-of-pocket expenses to purchase replacement health insurance.” Because a reasonable fact finder could determine that NetApp’s misrepresentations regarding the terms of the plan caused this harm, the court found that Mr. Warmenhoven may be able to recover surcharge as an appropriate remedy for the breach of fiduciary duty claim. Having so concluded, the court denied NetApp’s motion for summary judgment.

Class Actions

Fourth Circuit

Stegemann v. Gannett Co., No. 1:18-cv-325 (AJT/JFA), 2022 WL 17067496 (E.D. Va. Nov. 17, 2022) (Judge Anthony J. Trenga). Participants of The New Gannett 401(k) Savings Plan commenced this putative class action against Gannett Co. Inc. and the plan’s benefit committee for breaches of fiduciary duties of prudence and diversification based on defendants’ decision to include, maintain, and not close earlier a single stock fund, “the TEGNA Stock Fund,” despite its high risk. In the words of the court, “Plaintiffs claims rest on the premise that offering the TEGNA Stock Fund was imprudent for want of diversification and overconcentration; and that the Defendants breached their duties of prudence and diversification by failing to recognize and/or remediate the problem sooner.” Defendants moved for summary judgment, while plaintiffs moved for class certification. Defendants’ primary argument for summary judgment, as well as their principal argument against class certification, was that plaintiffs’ claims are precluded by the safe harbor provision contained in ERISA Section 404(c). Plaintiffs and the court disagreed. The court concluded that the safe harbor provision doesn’t shield fiduciaries from their decisions over which investment options to offer plan participants in investment menus, nor does it absolve fiduciaries of their duties to observe, evaluate, and adjust the investment menus over time. ERISA fiduciaries, the court held, cannot rely on participants’ choices as absolving them of responsibility when the choices those participants make are comprised of options provided to them by those with ultimate control over the investment portfolio. Additionally, the court stated that defendants were not otherwise entitled to summary judgment at this stage while material facts and conflicting expert opinions remain unresolved. For these reasons, the court denied defendants’ summary judgment motion. The court then segued to evaluating the motion to certify the class of participants whose accounts included investments in the TEGNA Stock Fund during the class period. The class of 12,000 potential members easily satisfied the numerosity requirement. As for commonality, the court held that common questions over defendants’ actions regarding the TEGNA Stock Fund united the members. Furthermore, the court stated that the named plaintiff’s claims arise from the same events and conduct as the other members and were therefore typical. Finally, it was uncontested that the named plaintiff and her counsel were adequate representatives of the class. Certification under Rule 23(a) was therefore satisfied. As for certification under Rule 23(b)(1), the court concluded that certification was warranted and appropriate to avoid inconsistent adjudications establishing incompatible standards of conduct for defendants, and because individual adjudications could impair the ability to protect the interests of the other members. Thus, the motion for class certification was granted.

Discovery

Eighth Circuit

Bjordal v. Hartford Life & Accident Ins. Co., No. 21-2540 (JRT/LIB), 2022 WL 16966711 (D. Minn. Nov. 16, 2022) (Judge John R. Tunheim). Plaintiff Marit R. Bjordal commenced this action challenging the denial of her claim for long-term disability benefits by defendant Hartford Life & Accident Insurance Company. Ms. Bjordal moved to compel discovery seeking to identify the complete plan documents that apply to her claim to establish the correct standard of review. Specifically, Ms. Bjordal believed that the policy may have been renewed or updated after a Minnesota state law banning discretionary language went into effect, and that de novo review would therefore be applicable to her suit. Magistrate Judge Leo Brisbois denied the discovery motion, holding that the accurate plan documents were already before the court, and they establish that the plan includes a discretionary clause predating the Minnesota law making abuse of discretion standard of review applicable. Ms. Bjordal appealed Magistrate Brisbois’s order. In this decision, the court affirmed the Magistrate’s order, concluding that “the Magistrate Judge did not clearly err in finding that the Court’s review of Hartford’s denial was limited to abuse of discretion and Bjordal failed to meet an exception that would permit her to obtain discovery beyond the administrative record.” Thus, the court’s review will be limited to the evidence contained in the administrative record to conclude whether the denial was arbitrary and capricious.

ERISA Preemption

Fifth Circuit

Abraham v. Blue Cross & Blue Shield of Tex., No. 1:22-CV-00538-RP, 2022 WL 16985065 (W.D. Tex. Nov. 16, 2022) (Magistrate Judge Susan Hightower). Plaintiff Robert Abraham filed suit in state court in Texas against Blue Cross & Blue Shield of Texas alleging Blue Cross mishandled his claim for reimbursement of psychotherapy sessions and that the insurer’s actions constituted bad faith under Texas law. Blue Cross removed the case to federal district court on the basis of federal question jurisdiction premised on ERISA preemption. Mr. Abraham moved to remand, arguing his insurance plan isn’t governed by ERISA “because it is fully insured.” Mr. Abraham additionally requested Rule 11 sanctions. Blue Cross in turn moved to dismiss. Blue Cross responded that the plan, regardless of being fully insured, is governed by ERISA because it is an employer-sponsored group welfare benefit plan. Accordingly, Blue Cross argued that Mr. Abraham needed to bring a claim under Section 502(a)(1)(B), and his bad faith claim was therefore preempted. Magistrate Judge Hightower agreed, concluding that the plan, established by employer Salem Abraham, LLC and Salem Trading, was purchased for its employees, was financed by Salem Trading, and was therefore governed by ERISA. Thus, Judge Hightower recommended that both the motion for remand and the request for sanctions be denied. Regarding the motion to dismiss premised on complete preemption, Judge Hightower agreed that both prongs of the Davila test were met as Mr. Abraham could have brought a claim under ERISA and no independent legal duty could be identified in the complaint. The claim was therefore found to be completely preempted. Because Mr. Abraham did not respond to the motion to dismiss or request leave to amend, the Magistrate recommended the appropriate course of action was to dismiss the complaint without prejudice to replead under ERISA.

Exhaustion of Administrative Remedies

Fourth Circuit

Moore v. Verizon Commc’ns, No. 1:22-cv-51 (RDA/IDD), 2022 WL 16963245 (E.D. Va. Nov. 15, 2022) (Judge Rossie D. Alston). Plaintiff Sylvia Moore worked for defendant Verizon Communications, Inc. from 1989 until she resigned in 2017. After her resignation, Ms. Moore learned that some of her earned pension credit was being reduced due to maternity leave she took in late 1992 and early 1993. Ms. Moore subsequently filed a claim in December of 2017 relating to this reduction of benefits. Verizon denied the claim and informed Ms. Moore that her credited service was not reduced for her maternity leave. In the denial letter, Verizon informed Ms. Moore of her appeal options and notified her that she had to submit an appeal within two months of the denial. Ms. Moore did not appeal the denial of her claim within that time period. Instead, she next communicated with Verizon in June of 2020, informing the company that she was seeking legal assistance. Then, on January 18, 2022, Ms. Moore filed this action, within which she alleged ERISA claims under Section 502(a)(1)(B) and (a)(3), a breach of contract state law claim, discrimination claims under Title VII, the Pregnancy Discrimination Act, the Equal Pay Act, and the Civil Rights Act, and finally a claim for violating a consent decree relating to an EEOC class action similarly premised on unlawful denial of service credit to female employees who took pregnancy leave. Verizon moved to dismiss, which the court converted to a motion for summary judgment under Rule 56. First, the court dismissed the state law breach of contract claim, the gravamen of which was an allegation that Ms. Moore was deprived pension credit, as being preempted by ERISA. Next, the court evaluated the ERISA claims themselves. Ms. Moore’s claim under Section 502(a)(1)(B) was dismissed for failure to exhaust administrative remedies. The court agreed with Verizon that the undisputed facts demonstrate that Ms. Moore never exhausted the appeals process and that she was therefore barred from bringing her claim. As for Ms. Moore’s breach of fiduciary duty claim under Section 502(a)(3), the court stated that Verizon’s actions, including “explaining plan benefits and processing Plaintiff’s claim,” were ministerial acts rather than fiduciary duties and that the Section 502(a)(3) claim therefore failed. Moving to the non-ERISA claims, the court stated Ms. Moore was not a part of the class covered by the EEOC settlement because her maternity leave occurred after the class period, which spanned from 1965 to 1983. Finally, the discrimination claims were found to be untimely because Ms. Moore did not bring them after her receipt of her right-to-sue notice from the EEOC. Accordingly, Verizon’s motion was granted, and Ms. Moore’s action was dismissed.

Life Insurance & AD&D Benefit Claims

Sixth Circuit

Phillips v. Sun Life Assurance Co. of Can., No. 1:20-cv-937, 2022 WL 16964176 (S.D. Ohio Nov. 16, 2022) (Judge Douglas R. Cole). Siblings Paris Phillips and his sister, M.A., were the named beneficiaries of their late mother’s life insurance policy. Their mother, Nicole Powell, tragically died at the age of 33 in April 2014. Both Paris and M.A. were minors at the time. The policy proceeds were paid unconditionally to the siblings’ grandmother, Adlen Silas. In the intervening years since Ms. Powell’s death the following events occurred: the money never reached the children, Ms. Silas passed away, and Paris Phillips reached adulthood. After turning 18, Mr. Phillips submitted a claim to defendant Sun Life Assurance Company of Canada on behalf of himself and his sister, seeking the proceeds from their mother’s policy. Sun Life never responded, prompting Mr. Phillips to file this action seeking the money he and his sister are owed under the plan. Sun Life moved for dismissal, or in the alternative for joinder, arguing that Silas’s estate is a necessary party under Federal Rule of Civil Procedure 19(a). The court denied this motion, concluding that Sun Life did not meet its burden of establishing that Ms. Silas’s estate was a necessary party. Specifically, it was the court’s view that it could provide complete relief without Ms. Silas’s estate and “proceeding without Silas’s estate will not impair its claimed interests, as the estate has claimed no interest.” Finally, and perhaps most importantly, the court emphasized that Ms. Silas was not a named plan beneficiary and “Sun Life has failed to put forward any evidence showing that Silas ever claimed, or had any basis for claiming, that she was the rightful beneficiary of the policy proceeds.” If Sun Life ends up being ordered to pay life insurance proceeds it already paid once before, that will be because of Sun Life’s own actions mistakenly paying Ms. Silas and not because Sun Life had a risk of inconsistent obligations to both the children and Ms. Silas. For these reasons, Sun Life’s motions for dismissal or joinder were both denied.

Subrogation/Reimbursement Claims

Third Circuit

Freitas v. Geisinger Health Plan, No. 4:20-CV-01236, 2022 WL 16964006 (M.D. Pa. Nov. 16, 2022) (Judge Matthew W. Brann). Plaintiffs Lori Freitas and Kaylee McWilliams filed this putative class action against Geisinger Health Plan and its subrogation agent, Socrates, Inc., alleging violations of ERISA Sections 502(a)(1)(B) and (a)(3) in connection with defendants’ demands for reimbursement from their ERISA welfare benefits plans (“the Employer Plans”) that included health insurance from the Geisinger Health Plan. In a prior order the court denied defendants’ motion to dismiss the complaint. At that time, the court held that the only plan document before it, “the Certificate,” did not contain an explicit right to subrogation or reimbursement and without a reimbursement clause defendants’ arguments for dismissal were unavailing.” Since then, discovery began in the case, during which plaintiffs produced their Employer Plans to defendants. After receiving those documents, defendants broadened their view of what constituted the governing documents of the plan to include not only the Certificate but also the Employer Plans, which included explicit reimbursement clauses. Plaintiffs strongly disagreed with this expansion of the relevant plan documents. Thus, this dispute between the parties over the governing plan documents was the central focus of the decision, which ruled on several motions: defendants’ motion to dismiss or alternatively for summary judgment, plaintiffs’ motion to strike defendants’ motion to dismiss, and plaintiffs’ motion to compel documents relevant to their putative class. The court began by denying plaintiffs’ motion to strike. The court rejected their argument that defendants’ motion was untimely, as well as their assertion that defendants were taking a second bite of the apple re-litigating the same issues addressed in their previous motion to dismiss. In addition to not striking the motion to dismiss, the court also converted it into a Rule 56 summary judgment motion. The most critical decision for the court was resolution of the dispute over what constituted the relevant plan documents and by extension whether the plan included subrogation clauses. The court reasoned that as welfare benefit plans the Employer Plans were “on their face…part of Plaintiffs’ overall ERISA plans,” and should therefore be included alongside the Certificate as the governing documents. The court rejected plaintiffs’ arguments for why the Certificate alone should govern, including (1) their contention that “the Certificate expressly excludes the Employer Plans,” (2) the fact that the Employer Plans provide that the Certificate controls if there are any inconsistencies among the documents, and (3) plaintiffs’ argument that defendants had relied on the Certificate “as the basis for their authority for reimbursement.” Ultimately, because the court concluded the plan documents included both the Certificate and the Employer Plans, plaintiffs’ entire complaint, premised on defendants’ unfounded reimbursement claims, was undermined. Accordingly, the court made quick work of the remainder of the summary judgment motion and held that defendants were entitled to reimbursement and had not breached any fiduciary duty through their reimbursement demands. For these reasons, defendants were granted summary judgment, and plaintiffs’ motion to compel was denied.

Amara v. Cigna Corp., No. 20-202, __ F. 4th __, 2022 WL 16842742 (2d Cir. Nov. 10, 2022) (Before Circuit Judges Livingston, Kearse, and Lee)

ERISA practitioners are familiar with the Supreme Court’s 2011 decision in CIGNA Corp v. Amara, a seminal case in which the Court discussed, among other things, the contours of ERISA’s equitable remedies under 29 U.S.C. § 1132(a)(3).

The case involved a class action challenge by Cigna employees to the way Cigna calculated benefits under its pension plan. The Supreme Court ruled that federal courts are not allowed to reform benefit plans under 29 U.S.C. § 1132(a)(1)(b), but ERISA’s (a)(3) equitable provision does allow for such a remedy. The Court remanded the case for further proceedings.

And further proceedings there were. The case went down to the district court, and then back up to the Second Circuit, which in 2014 affirmed the district court’s final judgment ordering Cigna to reform its pension plan. The Second Circuit then sent the case back to the district court, where the parties wrangled over how benefits should be calculated under the newly reformed plan. The district court resolved these disputes in a series of four orders issued in 2016 and 2017.

Under these “methodology orders,” Cigna began calculating the new benefits in 2018, and by February of 2019, it had paid nearly $30 million in past-due benefits to over 8,900 class members.

However, this was not the end of the story. In April of 2019, plaintiffs moved to enforce the methodology orders and to hold Cigna in contempt and impose sanctions. In their motions, plaintiffs contended that Cigna had not properly complied with the court’s orders. The district court denied these motions, and plaintiffs appealed.

After appealing, plaintiffs moved for an equitable accounting of Cigna’s efforts to satisfy the judgment, which the district court also denied. Plaintiffs appealed this decision as well, and the two appeals were consolidated by the Second Circuit.

Cigna filed a motion to dismiss the first appeal, which the Second Circuit addressed first. Cigna argued that the court did not have jurisdiction over plaintiffs’ challenge to the methodology orders because the orders became final more than 30 days before plaintiffs appealed. The Second Circuit noted that post-judgment orders such as the district courts’ orders in this case are ordinarily appealable, but determining when they are “final” for the purposes of appealability can sometimes be difficult. After surveying relevant case law, the court concluded that “a district court’s postjudgment order is final when it ‘has finally disposed of [a] question, and there are no pending proceedings raising related questions.’”

Under this rule, the court agreed with Cigna that plaintiffs’ challenge to the methodology orders was untimely. The court noted that Cigna began calculating and paying benefits immediately after the issuance of the methodology orders, and relied on those orders to do so. Thus, “from a practical perspective, it was therefore essential for Plaintiffs (or Cigna, if it so chose) to appeal promptly.”

Plaintiffs argued that the methodology orders were not final, and thus were still appealable, until plaintiffs moved to enforce. However, the court rejected this argument because “it implies that they could have challenged the Methodology Orders…at ‘some nebulous time in the future,’” and further implied that the orders “were immune from appellate review (because they were non-final) unless Plaintiffs chose to move for further relief.” Neither implication made sense to the court.

The Second Circuit arrived at a different result regarding plaintiffs’ motion for sanctions, finding it was timely and appealable. However, the court limited its review “only to whether the district court properly interpreted the Methodology Orders in the Sanctions Order, not whether the Methodology Orders were correctly decided in the first instance.” On this issue, the court quickly found no reversible error, concluding that the district court reasonably interpreted its prior orders.

As for plaintiffs’ second appeal, regarding the denial of their motion for an equitable accounting, the Second Circuit again affirmed, finding no clear error. The court stated that plaintiffs “largely rehash[ed] factual arguments” that allegedly showed “substantial issues” with Cigna’s implementation of the relief. However, Cigna provided “acceptable explanations” to the district court for the compliance issues plaintiffs raised. Based on these explanations, which were supported by declarations from Cigna detailing its efforts to satisfy the judgment, the district court “made a factual finding that Cigna had adequately complied with the final judgment. That finding was not clearly erroneous.” As a result, the district court’s orders were affirmed in their entirety.

Janet Amara filed this action more than 20 years ago, in 2001, and it has survived through two district court judges, three appeals to the Second Circuit, and one appeal to the Supreme Court. Is it finally over? It sure seems that way, but stay tuned to ERISA Watch to find out…

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

Class Actions

Sixth Circuit

Nolan v. Detroit Edison Co., No. 18-13359, 2022 WL 16743866 (E.D. Mich. Nov. 7, 2022) (Judge David M. Lawson). In this order, the court granted final approval of a class action settlement in a suit challenging the implementation of and transition to a new cash balance retirement plan. As the court summarized it, “the core question in this case is whether the DTE Retirement Plan – or the Retirement Choice Decision Guide that the defendants provided to certain DTE employees – promised an ‘A+B Benefit’ to participants who, in 2002, elected to move from the Traditional Pension Plan to the Cash Balance Plan.” The court conducted a fairness hearing on October 25, 2022, during which no objections were made. Assessing the $5.5 million settlement, and its proposed individual distributions of up to $69,207.17 to the 466 class members, the court was satisfied that the settlement was the product of informed and fair negotiations and was thus reasonable and adequate. This was especially true, the court held, because the settlement will secure a significant recovery for the members of the class and plaintiffs’ prospect of success on the merits was an uncertain thing. Additionally, named plaintiff Leslie Nolan’s request for a $15,000 incentive payment was granted, as the court considered the payment “just compensation for time and effort spent on bringing this action to a successful conclusion.” Regarding the class itself under Rule 23(a) and (b)(1)(A), the court stuck to its analysis during its preliminary settlement approval order and reaffirmed that the class met all requirements of Rule 23 given the commonality between the members, defendants’ systematic actions, and the fact that class resolution will avoid inconsistent adjudications and incompatible standards of conduct for the defendants. Accordingly, the court certified the class unconditionally. Finally, the court evaluated class counsel’s motion for $1,833,333.33 in attorneys’ fees and $72,707.08 in expenses. The court reduced the requested attorneys’ fee award from 33.33% of the entire common fund to 33.33% of the fund after litigation expenses were subtracted from the total. From this calculation, the court awarded attorneys’ fees in the amount of $1,804,097.64, which the court felt adequately compensated the attorneys for their work done and the results they achieved. The expense reimbursement was awarded at the amount requested. Having made these decisions, the court granted the motion and dismissed the claims with prejudice, bringing this suit to its conclusion.

Ninth Circuit

C.P. v. Blue Cross Blue Shield of Ill., No. 3:20-cv-06145-RJB, 2022 WL 16835839 (W.D. Wash. Nov. 9, 2022) (Judge Robert J. Bryan). In this decision, the court granted a motion to certify a class of transgender individuals who allege their claims for medical care to treat gender dysphoria were denied under self-funded ERISA plans administered by defendant Blue Cross Blue Shield of Illinois in violation of the anti-discrimination provision of the Affordable Care Act (“ACA”). The court certified a class defined as all individuals who are participants or beneficiaries of ERISA self-funded group health plans administered by Blue Cross containing categorical exclusions of gender-affirming healthcare services and whose claims were denied or will be denied pre-authorized coverage of treatment within those exclusions. Evaluating the class under Rule 23(a), the court held that class of upwards of 1,740 individuals satisfied the numerosity requirement. Blue Cross’s arguments for why the class did not satisfy the commonality and typicality requirements failed to persuade the court against certifying the class. Contrary to Blue Cross’s assertions, the court disagreed that the varying language of each of the plans defeated commonality. Rather, the court agreed with plaintiffs that Blue Cross’s actions and the steps it took in denying the claims were common to all members regardless of the language of the individual plans. Furthermore, the court found the applicability of the Religious Freedom Restoration Act (“RFRA”) and Blue Cross’s possible defense under RFRA to be “in doubt.” As for typicality, the court found the claims of the class members to be similar enough to warrant certification. The court found the relief plaintiffs seek – an order declaring Blue Cross’s actions violated the rights of these individuals under the ACA – and the opportunity to have their claims reprocessed to be appropriate for class-wide restitution. Finally, regarding certification under Rule 23(a), Blue Cross did not challenge the adequacy of the named plaintiff or class counsel, and the court affirmed that they were adequate representatives of the interests of the class. Regarding Rule 23(b), it was clear to the court that independent adjudications of whether Blue Cross is subject to the anti-discrimination provision when acting as a third-party plan administrator “would be dispositive of the interests of the other members not parties to the individual adjudications or would substantially impair or impede their ability to protect their interests.” For these reasons, the court certified the class.

Disability Benefit Claims

Fifth Circuit

Bedwell v. Schlumberger Grp. Welfare Benefits Plan, No. 4:18-cv-04515, 2022 WL 16824813 (S.D. Tex. Nov. 8, 2022) (Magistrate Judge Andrew M. Edison). Plaintiff Barney Bedwell sued the Schlumberger Group Welfare Benefits Plan and its administrative committee after his long-term disability benefits were terminated when his plan’s definition of disability changed from being unable to perform the duties of one’s “own occupation” to “any occupation.” The parties filed cross-motions for summary judgment. Magistrate Judge Edison issued this order recommending the court deny Mr. Bedwell’s summary judgment motion and grant the committee’s motion. In the magistrate’s opinion, the plan’s reliance on the opinions of its reviewing doctors over those of Mr. Bedwell’s treating doctors was not an abuse of discretion, especially because the opinions of the two sets of doctors were not wholly inconsistent or incompatible interpretations of the medical record. Furthermore, Magistrate Edison did not agree with Mr. Bedwell’s assertion that the plan’s administrator failed to credit the opinions of his treating doctor. Instead, it was Magistrate Edison’s view that the reviewing doctors and the plan administrator evaluated the opinions of Mr. Bedwell’s doctor and simply disagreed with the doctor’s assessment. For these reasons, Magistrate Edison could not conclude that defendants’ actions were an abuse of discretion, and therefore recommended that their decision to terminate the benefits be upheld by the court.

Ninth Circuit

Logan v. The Prudential Ins. Co. of Am., No. 2:20-cv-01742-KJM-JDP, 2022 WL 16836642 (E.D. Cal. Nov. 9, 2022) (Judge Kimberly J. Mueller). Plaintiff Tammy Logan sued The Prudential Insurance Company of America under ERISA Section 502(a)(1)(B) challenging the insurer’s denial of her claim for long-term disability benefits. Ms. Logan sought disability benefits after being diagnosed with osteoarthritis and radiculopathy, and after undergoing two surgeries on her ankle and knee. The court reviewed Prudential’s denial under de novo review and found Ms. Logan disabled for the entirety of the “own occupation” period of disability. The court stated that it found no reason to discredit Ms. Logan’s own attested pain, symptoms, and inability to work, stating, “Logan consistently sought treatment for her pain, including surgeries and physical therapy…[t]he evidence of this treatment… corroborates her claims of pain. It is unlikely she undertook this extensive, intrusive, and lengthy effort to treat an invented ailment.” The court additionally credited the opinions of Ms. Logan’s treating doctors over the opinions of Prudential’s reviewers who “faced an incentive to give an opinion in Prudential’s favor,” and whose opinions and analyses have been discounted by other courts. Finally, the court cited the Social Security Administration’s award of disability benefits to Ms. Logan as additionally bolstering her position. The court thus held that Ms. Logan was disabled between June 19, 2019 and July 2, 2021. As to whether Ms. Logan remains disabled under the “any occupation” definition of disability, the court felt it could not speak to the matter on the record currently before it and thus remanded the matter to Prudential for a decision on that question. Finally, the court held Ms. Logan is entitled to an award of attorneys’ fees and costs and directed the parties to confer over the amount of an appropriate award. Ms. Logan was also awarded prejudgment interest at the rate prescribed in 28 U.S.C. § 1961 to compensate her for the lost time of unpaid benefits.

Discovery

Ninth Circuit

RJ v. CIGNA Health & Life Ins. Co., No. 20-cv-02255-EJD (VKD), 2022 WL 16839492 (N.D. Cal. Nov. 9, 2022) (Magistrate Judge Virginia K. Demarchi). Plaintiffs in this putative class action are challenging defendant Cigna Health & Life Insurance Company’s failure to reimburse submitted mental health care claims at usual, customary, and reasonable rates, alleging the underpayments are a breach of plan provisions in violation of ERISA. Plaintiffs asked the court to allow them to take 16 depositions, six beyond the ten depositions automatically available to them under Federal Rule of Civil Procedure 30(a)(2). Upon consideration of the parties’ arguments, the court ultimately settled on granting plaintiffs leave to take two additional depositions, for a total of 12. Specifically, plaintiffs requested six additional depositions which included a current Cigna employee, a former Cigna employee, and four unidentified witnesses from four non-party benefit plan sponsors. As it is early and therefore difficult for the plaintiffs to make the particularized showing of need for additional depositions that is required, and because the testimony of the six requested individuals would likely contain overlapping information, the court held that the proper course of action would be to allow plaintiffs to take depositions of two additional party or party-affiliated witnesses and pick for themselves which two they wish to take.

Pension Benefit Claims

First Circuit

Haslam v. McLaughlin, No. 22-11268-RGS, 2022 WL 16823011 (D. Mass. Nov. 8, 2022) (Judge Richard G. Stearns). After benefits from her late brother’s ERISA-governed retirement plan were paid to his ex-wife, defendant Wendy Sheppard, plaintiff Debra Haslam commenced this suit against the trustees of the retirement plan, the plan’s administrator, the plan’s insurer, and Ms. Sheppard. Ms. Haslam brought ERISA claims under Sections 502(a)(1)(B) and (a)(3), as well as state law breach of fiduciary duty, breach of trust, breach of contract, negligence, unjust enrichment, and conversion claims. Defendants moved to dismiss. The court granted the motion. The court agreed with defendants that the only relevant document was Mr. Sheppard’s beneficiary designation, made after the divorce, which designated Wendy Sheppard as his primary and sole beneficiary. Because Ms. Haslam did not prove the existence of any form involving the ERISA plan that listed her as her brother’s beneficiary prior to his death, the court held that Ms. Haslam did not state a valid claim under ERISA. Her state law claims, similarly predicated on whether she was the proper beneficiary under the benefit plan, were also dismissed as preempted by ERISA. Finally, the court declined to exercise supplemental jurisdiction over the claims against Ms. Sheppard, and so granted her motion to dismiss as well.

Withdrawal Liability & Unpaid Contributions

Second Circuit

Careful Bus Serv. v. Local 854 Health & Welfare Fund, No. 21 Civ. 10472 (LGS), 2022 WL 16856270 (S.D.N.Y. Nov. 10, 2022) (Judge Lorna G. Schofield). Faced with looming insolvency caused by the COVID-19 pandemic, defendant Local 854 Health and Welfare Fund attempted to amend its trust declaration, and by extension its collective bargaining agreement, to provide for a termination premium for former contributing employers equal to each employer’s “incurred but not reported” expenses. Incurred but not reported expenses are claims made by participants while they were eligible for benefits, but which were not reported until after a given participant’s eligibility has ended. Plaintiffs Careful Bus Service Inc. and X-L Escort Services, Inc. are two such employers who had collective bargaining agreements with the union and were assessed termination premiums after they switched their healthcare coverage. They commenced this suit challenging an arbitration decision which found in favor of defendants. Plaintiffs moved for summary judgment seeking declaratory judgment that the trust declaration was not validly amended to add the termination premium. Their motion was granted. The court held that the undisputed facts showed the amendment did not follow the requirements outlined in the collective bargaining agreement and the “purported amendment adding the Termination Premium to the Trust Declaration is therefore invalid and not binding on Plaintiffs.” The court added that the amendment was also “not incorporated by reference in the CBA.” Accordingly, the court held that plaintiffs do not owe defendant a termination premium. Nevertheless, the court stated that neither party was entitled to an award of attorneys’ fees because defendants’ position was not meritless or made in bad faith and awarding fees to the employers would negatively impact the Fund and its participants which directly cuts against ERISA’s purposes.

Seventh Circuit

Cent. States, Se. & Sw. Areas Pension Fund v. Oudenhoven Constr., No. 20 C 887, 2022 WL 16744280 (N.D. Ill. Nov. 7, 2022) (Judge Gary Feinerman). In March of 2016, defendant Oudenhoven Construction, Inc. permanently ceased its operations. That closure effected a complete withdrawal of the company from the Central States, Southeast and Southwest Areas Pension Fund. Accordingly, on January 11, 2017, the Fund sent the company a notice and demand for withdrawal liability assessed at $597,074.43. Despite engaging in a phone call with the Fund and sending a letter to the Fund requesting a review of the withdrawal liability determination, Oudenhoven Construction never formally demanded arbitration to contest the withdrawal liability determination. Maintaining that it was not required to respond to Oudenhoven’s request for review and having waited more than 120 days from the date of the company’s request for review, the Fund and its trustees commenced this action seeking a judicial order holding Oudenhoven and businesses under common ownership with it jointly and severally liable for the full amount of the assessed withdrawal liability to the Fund as well as attorneys’ fees, costs, damages, and interest. The Fund moved for summary judgment. As it was undisputed that defendants never demanded arbitration, and “MPPAA provides that an employer must timely demand arbitration even if a pension plan does not respond to a request for review,” the court concluded that the Fund in no way hindered defendants’ ability to timely demand arbitration and their failure to do so means the plan is entitled to collect the entire amount of withdrawal liability. For this reason, the court granted the Fund’s summary judgment motion, and gave the Fund until November 18 to file a motion to recover attorneys’ fees, costs, interest, and statutory damages.