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.

This week, we just have a handful of ERISA decisions to report on, and no case of the week. It seems all the excitement is at the polls.

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

 Attorneys’ Fees

Second Circuit

Caccavo v. Reliance Standard Life Ins. Co., No. 19-CV-6025 (KMW), 2022 WL 16631101 (S.D.N.Y. Nov. 2, 2022) (Judge Kimba M. Wood). After prevailing in a lawsuit brought against it challenging its decision to reduce an insured’s disability benefits, defendant Reliance Standard Life Insurance Company concurrently moved in the Second Circuit and in the district court for an award of attorney’s fees and costs. The Second Circuit affirmed the summary judgment order in Reliance’s favor but denied its motion for fees pursuant to ERISA Section 502(g)(1). Given the court of appeals’ denial, plaintiff not only opposed an award of fees in the district court, but also argued that res judicata precludes Reliance from bringing its fee motion. The court disagreed with plaintiff’s preclusion argument, finding that the two motions did not arise from the same cause of action because the work performed during the two stages of litigation were distinct. The court thus evaluated the motion on its merits. To begin, the court was satisfied that Reliance’s summary judgment win, upheld in the Second Circuit, constituted some degree of success on the merits for Reliance to be eligible for an award of fees. Nevertheless, the court was adamant that the Chambless factors, which “very frequently suggest that attorney’s fees should not be charged against ERISA plaintiffs,” weighed against an award in this case. The court did not agree with Reliance that plaintiff acted in bad faith by bringing his action, concluding, to the contrary, that plaintiff had a colorable claim despite not ultimately prevailing. Furthermore, the court was unwilling to deter or discourage valid claims brought by plan participants by granting the motion. Finally, the court declined to comment on the reasonableness of the requested fees, having already concluded that Reliance’s motion for attorney’s fees and costs should be denied.

Ninth Circuit

San Jose Healthcare Sys. v. Stationary Eng’rs Local 39 Pension Tr. Fund, No. 21-cv-09974-SVK, 2022 WL 16637995 (N.D. Cal. Nov. 2, 2022) (Magistrate Judge Susan Van Keulen). San Jose Healthcare System is an acute care hospital in California that commenced this action in 2021, moving to vacate an arbitration award assessed against it for unpaid contributions for its employees in an ERISA-governed multiemployer pension plan. On June 15, 2022, the court issued an order granting San Jose Healthcare’s motion to vacate and denying the pension fund’s motion to confirm the arbitration award. Before the court was a motion filed by San Jose Healthcare for attorney’s fees and costs brought under ERISA Section 502(g)(1) and LMRA. As the court stated, the “only issue in this litigation was whether the arbitration award should be vacated or confirmed, and [San Jose Healthcare] won on that issue.” Accordingly, the court concluded that the employer met the threshold requirement of success on the merits to be eligible for an award of fees under ERISA. Regardless, the court reminded itself of “ERISA’s purposes that should be liberally construed in favor of protecting participants in employee benefits plans,” and accordingly assessed the Hummell factors as weighing against an award. Because the court found the pension fund did not act in bad faith, the court declined to award San Jose Healthcare fees under both ERISA and LMRA and so denied the motion.

ERISA Preemption

Seventh Circuit

State of Illinois ex rel. Miller v. Am. Nat’l Ins. Co., No. 3:22-cv-00501-GCS, 2022 WL 16553189 (S.D. Ill. Oct. 31, 2022) (Judge Gilbert C. Sison). Plaintiff Zeb Miller sued American National Insurance Company, Standard Life & Accident Insurance Co., American National Life Insurance Company of Texas, and Garden State Life Insurance Company on behalf of the State of Illinois under the Illinois False Claims Act alleging that defendants defrauded the state of millions of dollars of premium tax revenue by failing to pay annual state privilege taxes on the premiums collected from employers sponsoring ERISA-governed employee benefit plans, and by failing to report stop-loss insurance premiums. Defendants removed the complaint, which was brought in state court, to the federal district court of the Southern District of Illinois alleging the action against them was completely preempted by ERISA. Plaintiff moved to remand. Plaintiff argued the court lacks subject matter jurisdiction and ERISA does not preempt the action because the Illinois False Claims Act is a state law that regulates insurance, meaning the claim falls under ERISA’s savings clause. In response, the insurance companies argued that the claim relates to and is connected with the administration of self-funded ERISA plans and that the privilege tax does not fall under the savings clause. The court decided that it didn’t need to reach a conclusion on the applicability of the savings clause because defendants were “operating under the conflict preemption provisions,” which the court stated, “may serve as a defense to Plaintiff’s [Illinois False Claims Act] claim, [but] does not serve as the basis for federal jurisdiction.” Concluding that it also lacked diversity jurisdiction, the court granted the motion to remand. Nevertheless, the court held that defendants had an objectively reasonable basis for removal and so declined to award plaintiff attorneys’ fees and costs.

Ninth Circuit

California Surgery Ctr. v. UnitedHealthcare, Inc., No. CV 19-02309 DDP (AFMx), 2022 WL 16700377 (C.D. Cal. Nov. 3, 2022) (Judge Dean D. Pregerson). Healthcare providers commenced this lawsuit against UnitedHealthcare, Inc. and UnitedHealthcare Insurance Co., asserting state law causes of action to seek payment of medical bills for treatments and surgeries they provided to an insured patient. Defendants moved to dismiss plaintiffs’ fifth amended complaint, arguing the claims are preempted by ERISA. Central to the providers’ claim was the fact that United terminated the coverage of the patient, which plaintiffs argued they did to avoid paying the claims at issue. Because of this detail, plaintiffs argued that there are factual questions that need to be answered, including whether the termination of the patient’s coverage was proper, whether United had the ability to terminate the coverage, and whether the patient was insured during the relevant period. The court, however, concluded that the answers to the questions could not be reached without interpreting the ERISA plan, and the state law claims therefore have significant connections to the plan itself. Accordingly, the court agreed with the United defendants that the claims were preempted. Thus, the court granted the motion to dismiss the fifth amended complaint and did so with prejudice.

Tenth Circuit

IHC Health Servs. v. Meritain Health Inc., No. 2:19-cv-861, 2022 WL 16701908 (D. Utah Nov. 3, 2022) (Judge Howard C. Nielson, Jr.). A healthcare provider, IHC Health Services, Inc. d/b/a Primary Children’s Medical Center, sued Meritain Health, Inc., a subsidiary of Aetna, asserting claims for unjust enrichment and breach of contract in connection with unpaid medical bills for an insured patient treated at the hospital in 2013. The parties filed cross-motions for summary judgment. Meritain argued first that the state law claims were preempted by ERISA. The court disagreed. Because this action does not affect the relations among the primary ERISA entities and because IHC Health is asserting a claim for damages for a breach of the contract between it and Anthem, the court held the case did not fall under the ERISA preemption umbrella. Having decided this initial matter, the court proceeded to the merits of IHC’s breach of contract claim and concluded that it satisfied all the elements of the claim under Utah law. Accordingly, the court granted summary judgment in favor of IHC on its breach of contract claim and awarded damages and interest. Finally, the court awarded summary judgment in favor of Meritain on the unjust enrichment claim, which requires the absence of an enforceable contract and thus was pled in the alternative to IHC’s breach of contract claim.

Disability Benefit Claims

Ninth Circuit

Cameron v. Sun Life Assurance Co. of Can., No. 2:21-cv-02092 JLS (AFM), 2022 WL 16635235 (C.D. Cal. Nov. 2, 2022) (Judge Josephine L. Staton). Plaintiff Duane Cameron worked as a radiology administrator for USC Verdugo Hills Hospital until a series of cardiological conditions left him unable to continue working and he applied for disability benefits. In this action Mr. Cameron challenged defendant Sun Life Assurance Company of Canada’s decision to terminate his long-term disability benefits. Upon de novo review of the administrative record the court concluded that Mr. Cameron was disabled as defined by his policy from the date of termination until January 29, 2020. The court reasoned that the medical evidence and the conclusions of Mr. Cameron’s treating physicians supported this conclusion, especially considering the high-stress environment of his hospital workplace and its effect on his heart. However, the court went on to find that Mr. Cameron, who would suffer a heart attack and undergo a coronary angioplasty in early March 2020, did not qualify for disability benefits beyond January 29, 2020, because Mr. Cameron’s physician, who examined Mr. Cameron on that date, “gave no indication he believed Plaintiff continued to be disabled” in his visit notes. Therefore, despite his heart attack a month later, the court concluded that in “February 2020, there is no evidence that Plaintiff…continued to suffer cardiac-related issues.” Having drawn these conclusions, the court awarded Mr. Cameron benefits through January 29, 2020, as well as prejudgment interest, but held off awarding costs or attorney’s fees until briefing has been submitted.

Life Insurance & AD&D Benefit Claims

Fifth Circuit

Rushing v. Sun Life Assurance Co. of Can., No. 22-cv-1454, 2022 WL 16579789 (W.D. La. Nov. 1, 2022) (Magistrate Judge Mark L. Hornsby). Plaintiff Katie Rushing brought suit against Sun Life Assurance Company of Canada after her claim for benefits under her late husband’s accidental death and dismemberment policy was denied. Sun Life denied the claim on the grounds that his death, the result of a car crash, did not meet the policy’s definition of an accident. After this lawsuit challenging the denial was brought, Sun Life switched its grounds for denial, arguing that the results of Mr. Rushing’s toxicology report provided additional grounds for denial. Sun Life moved to stay and to remand for administrative review on this new basis for denying the claim. Ms. Rushing opposed the motion. She argued that Sun Life had the toxicology report when it conducted the administrative review process and that it should not be allowed to get a second chance at denying the claim on new grounds. The court agreed with Ms. Rushing, stating that it did not wish to give Sun Life an opportunity to improve its situation after the fact. “Remand may be appropriate to provide a remedy to a claimant who has been denied a full and fair opportunity to address an issue during the administrative process, but it is not appropriate for the plan or insurer to wait until a case is in federal court and then seek remand to build a new basis for denial that it reasonably could have developed during the administrative process.” Defendant’s motion was thus denied.

Pleading Issues & Procedure

Ninth Circuit

Johnson v. Carpenters of W. Wash. Bd. of Trs., No. C22-1079-JCC, 2022 WL 16699170 (W.D. Wash. Nov. 3, 2022) (Judge John C. Coughenour). Union carpenters in Washington, Idaho, Montana, and Wyoming who were participants in two collectively bargained multiemployer plans, the Carpenters Individual Account Pension Plan of Western Washington, and the Carpenters Retirement Plan of Western Washington, filed this putative ERISA class action challenging the management of plans by defendants, the Carpenters of Western Washington Board of Trustees, Callan LLC, and individual board members. Specifically, plaintiffs allege that these fiduciaries invested “in highly speculative indexes, which incurred over $250 million in losses.” The individual board member defendants moved for declaratory judgment and indemnification, seeking to establish that the board is responsible for indemnifying them in this action. The board for its part sought to stay this judgment or to limit the scope of indemnification. Plaintiffs opposed the indemnification request and additionally moved to strike the indemnification claims in individual board member defendants’ answers. In this decision the court found the matter could be decided without staying the action and issued this order granting the motion for declaratory judgment and indemnification and denying plaintiffs’ motion to strike. The court held that the indemnification provisions within the trust agreements require the trust to indemnify the individual trustees and this action falls within the indemnification clauses’ scope. The court was also satisfied that the indemnification provisions and their terms were consistent with ERISA, and clarified a limitation within the provisions, holding that should the court issue a final decree finding the individual trustees personally liable for breaching their fiduciary duties, the trustees would be required to repay any indemnification payment made to them by the board. Finally, the court stated that plaintiffs’ opposition and motion to strike failed for lack of standing. The court concluded that under Thole plaintiffs did not have a “personal stake in the outcome” of the motion for indemnification or an injury in fact to satisfy the standard for standing.