Host v. First Unum Life Ins. Co., No. CV 18-11504-DPW, __ F. Supp. 3d __, 2021 WL 5040354 (D. Mass. Oct. 28, 2021) (Judge Douglas P. Woodlock).

Disability benefit rulings in ERISA cases are often very dry affairs. The cases are highly factual, and most cases consist of a battle between the claimant’s doctors and the insurance company’s doctors over the claimant’s precise restrictions and limitations.

Not this case, however. This case involved a major bank firing one of its highly compensated employees for pretextual reasons and an insurance company’s choice to take that decision on face value to avoid paying benefits. Almost ten years of litigation followed against the insurer and the bank, culminating in this ruling, which slammed the insurer for its “indolence,” found in favor of the claimant, and cited Henry David Thoreau all at the same time.

The plaintiff, Brian Host, was an executive for Deutsche Bank; his job was Head of Global Communication Technology Corporate Finance in the Technology Investment Banking Group.  As part of his job, he traveled extensively. Unfortunately, on one of these trips, in October of 2009, he ruptured and herniated discs in his lower back and tore the labrum in his right hip. Host returned to work but found traveling and sitting gave him excruciating pain. As a result, he stopped traveling for work and started working from home. In January of 2010, Host had major surgery, and in February of 2010, Deutsche Bank informed Host it was terminating him.

Just prior to his termination, Host filed a claim for long-term disability benefits with Unum. Unum denied his claim, contending that his termination and loss of income was not because of his disability.

Host filed suit against Deutsche Bank in 2011 and against Unum in 2013. Host’s action against Unum was stayed while his Deutsche Bank case proceeded; that case settled in 2015. In 2016 the district court remanded the Unum case for “a more thorough inquiry” into the relationship between Host’s injury and his income loss. On remand, Unum denied Host’s claim again in 2018, contending that “it was not given access to the information it…needed to re-evaluate the claim.” Unum did not respond to Host’s appeal, and he thus filed suit again in 2018.

The parties submitted cross-motions for summary judgment. The court ruled that the abuse of discretion standard of review applied, and thus, “The question before me then is whether Unum’s decision to continue to deny benefits is reasonable and supported by substantial evidence on the record as a whole.”

The answer to this question was a resounding no. The court found that Unum “undertook a lackluster pro forma attempt to obtain information from Deutsche Bank — an attempt that proved fruitless due to Unum’s lack of diligence.” The court noted Unum’s complaints about Host’s cooperativeness, but ultimately found the burden was on Unum to obtain “additional information from Deutsche Bank to make an informed decision, yet it did not take productive steps to do so, despite reasonable options available and no clear reasons for not pursuing these options.” The court found that (1) much of the information Unum said it needed was already in the record, (2) the additional information was not confidential under Host’s settlement agreement with Deutsche Bank, and (3) Unum could have served a subpoena to obtain the information, as the court had suggested, but never did.

Not only did Unum fall short in its information gathering, it also arrived at the wrong conclusion. The court found that Unum relied on “questionable and conclusory assertions, rebutted by available evidence from Deutsche Bank internal communications[,] that Mr. Host was not terminated because of his injury.” Indeed, the court noted “[t]here is no documentation to show that Deutsche Bank was considering terminating Mr. Host before he was injured,” yet ten days after his injury, “Deutsche Bank executives began seriously discussing terminating him, which they fairly quickly decided to do.” As a result, the court easily found that Unum’s denial decision was arbitrary and capricious.

Having found that Unum abused its discretion, the court chose not to remand, noting that the case had already been remanded once and Host had been seeking benefits for ten years. Instead, the court found that the evidence supporting Host’s disability claim was “extensive and persuasive. The sophistication of top executives at a large bank should not prevent an injured employee from receiving the insurance benefits to which he is entitled.” The court conceded that the evidence was circumstantial, but, quoting Thoreau, it amounted to the proverbial “trout in the milk.” Indeed, the court stated that “the record before me discloses a robust school of trout to be found there. It is clear beyond a fair preponderance that Mr. Host was laid off because of his injury and I so find.”

The court therefore granted Host’s summary judgment motion, denied Unum’s, and indicated that, pursuant to a future motion, it would award attorney’s fees to Host, who was represented by ERISA Watch subscribers Mala Rafik and Sarah Burns.

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

Arbitration

Second Circuit

Board of Trustees of 1199/SEIU Greater NY Benefit Fund v. Manhattanview Nursing Home, No. 20cv6936, 2021 WL 4942768 (S.D.N.Y. Oct. 22, 2021) (Judge Denise Cote). Plaintiffs are the board of trustees of two funds, the 1199/SEIU Greater New York Benefit Fund, and the 1199/SEIU Greater New York Education Fund. Plaintiffs filed this suit against Manhattanview Nursing Home for failing to pay contractually obligated contributions to the funds from October 1, 2015 to December 31, 2018. Plaintiffs seek to compel Manhattanview to pay these outstanding contributions. Defendant filed a 12(b)(1) motion to dismiss and compel arbitration on the ground that the collective bargaining agreement limited the funds’ remedy to arbitration alone. In fact, the collective bargaining agreement does include an arbitration clause that binds Manhattanview and the union. However, the court pointed out that the trustee plaintiffs are not signatories of the collective bargaining agreement, and the trustees are authorized through two trust agreements to recover delinquent contributions due under the agreement via legal suits. These agreements give the trustees “the right … to institute or intervene in any proceeding at law … for the purpose of effectuating collection of any sums due to them from any employer under the provisions of the applicable collective bargaining agreement.” As the presumption of arbitrability “does not apply where a benefit fund (or its trustees) asserts its interests as third party beneficiary to the collective bargaining agreement,” the court examined the collective bargaining agreement for evidence of intent on the part of the parties to require arbitration of disputes between the trustees and the employer. The court determined that neither the collective bargaining agreement nor the trust agreements indicated the parties’ intent to require arbitration between trustees and the employer; nor did any provision in the collective bargaining agreement contemplate that the trustees agreed to be bound by the grievance and arbitration procedure. To the contrary, the language is singularly focused on the binding effect of arbitration on the union, the employer, and employees. Furthermore, the court found unavailing the defendant’s argument that the collective bargaining agreement contains a delegation clause that strips the court of jurisdiction to determine arbitrability. Nor was the court persuaded that the non-signatories were bound by arbitration agreements because of estoppel. For these reasons, defendant’s motion to dismiss and to compel arbitration was denied. 

Attorneys’ Fees

Ninth Circuit

Almont Ambulatory Surgery Ctr. v. Int’l Longshoremen’s & Warehousemen’s Union-Pac. Mar. Ass-n Welfare Plan, No. 20-55464, __ F. App’x__2021 WL 5002216 (9th Cir. Oct. 28, 2021) (Before Circuit Judges Callahan, Owens, and Forrest). Appellants Ambulatory Surgery Center, LLC, and Orange Grove Surgery Center, LLC, appealed the district court’s order awarding attorneys’ fees to appellee International Longshore and Warehouse Union-Pacific Maritime Association Welfare Plan (“the plan”). Appellants filed suit under ERISA and state law seeking payment for thousands of procedures related to gastric banding surgery to hundreds of plan participants, which the district court dismissed for failure to prosecute. After the dismissal was affirmed and the case remanded, the district court awarded fees to the plan. On appeal, appellants argued the district court erred in awarding fees because the plan violated Rule 26 by failing to disclose its insurance policy that provided coverage for the plan’s cost of defense. The Ninth Circuit disagreed, as Rule 26 only requires disclosure of “any insurance agreement under which an insurance business may be liable to satisfy all or part of a possible judgment in the action or to indemnify or reimburse for payments made to satisfy the judgment.” The insurance policy here provided coverage for defense costs, not for the judgment entered in the underlying action. Appellants then argued that an insurance company is not permitted to seek attorney fees under ERISA and the plan’s insurer was the real party in interested with respect to the fee award because it would receive any fees awarded to the plan. The Ninth Circuit again disagreed with appellants, stating that ERISA doesn’t require a party to have paid for its defense out of pocket to receive an award of attorneys’ fees so long as the action was brought by a plan “participant, beneficiary, or fiduciary.” Reasoning that the surgery centers were plan beneficiaries (presumably because they had assignments), the court concluded that requirement of an award of attorneys’ fees was also met. And as the plan was a party to the underlying action, the district court was not found to have erred in its award of fees to the plan. The appellate court also concluded that the district court did not make “a clear error of judgment” in awarding $208,395.45 to the plan because the district court separated the billings submitted into ERISA and non-ERISA categories and shaved off $650,000 in fees that arose from the district court phase and reduced the fees requested by an additional 10% for the non-ERISA claims. Finally, appellants argued that they did not receive adequate notice regarding the plan’s motion for attorneys’ fees because the plan neglected to name them specifically in the moving papers. Despite the moving papers not naming the surgery centers, the plan’s counsel did clearly indicate that the motion was going to be seeking sanctions and fees against all plaintiffs, and the plan did name the centers in its reply brief, allowing them the opportunity to file objections. The totality of these circumstances established that the surgery centers received adequate notice. For these reasons, the district court’s decision was affirmed. 

Breach of Fiduciary Duty

Eleventh Circuit

Drake v. BBVA U.S. Bancshares, Inc., No. 2:20-cv-02076-ACA, 2021 WL 4990002 (N.D. Ala. Oct. 27, 2021) (Judge Annemarie Carney Axon). Plaintiff Christine D. Drake filed suit against BBVA US Bancshares, Inc. and several related entities for breach of fiduciary duties in selecting and maintaining investments in an ERISA pension benefit plan. Ms. Drake moved to dismiss without prejudice under Rule 41 (a)(2), hoping to qualify as a member of a class yet to be certified in a related case, Ferguson. Defendants opposed in part the motion, asking that the dismissal to be with prejudice and seeking the payment of costs and attorneys’ fees by plaintiff. The defendants failed to persuade the court that they would suffer clear legal prejudice if Ms. Drake was permitted to dismiss this case and proceed as a putative class member in the Ferguson case. Additionally, the defendants failed to demonstrate that if the case proceeded to a final merits determination, they would be entitled to an award of attorneys’ fees under ERISA. The court therefore determined that an award of attorneys’ fees or costs was not appropriate. Instead, the court granted Ms. Drake’s motion to voluntarily dismiss, without prejudice, with the condition that Ms. Drake may never re-file this action as a named plaintiff against these defendants. If this condition were to be violated, Ms. Drake would be required to pay the costs and attorneys’ fees associated with defendants’ defense. Finally, the court specified that these conditions would not preclude Ms. Drake from qualifying as a member of any class certified in Ferguson, if such a class is certified and Ms. Drake otherwise qualifies as a class member. 

Disability Benefit Claims

Fourth Circuit

Stull v. Life Insurance Co. of North America, No. 3:20-CV-291-DCK, 2021 WL 4993485 (W.D.N.C. Oct. 27, 2021) (Judge David C. Keesler). Plaintiff Philip Stull III brought suit against Life Insurance Co. of North America (“LINA”) for the wrongful denial of benefits and for attorneys’ fees and costs after LINA denied Mr. Stull’s long-term disability benefits claim. Mr. Stull suffers from cervical dystonia which causes involuntary neck muscles contraction which can lead to the head becoming locked in a tilted or sideways position. In 2015, Mr. Stull’s symptoms worsened to such a point that he could no longer perform the duties of his job as regional manager of Cross Technologies. In his position, Mr. Stull was required to travel extensively by car, making driving an essential function of the job. Between neck tremors, neck locking, and opioid pain medication treatments, driving became impossible for Mr. Stull. As described by the plan, an employee is disabled where, “solely because of injury or sickness he or she (becomes) unable to perform the material duties of his or her regular occupation.” LINA paid for Mr. Stull’s short-term disability benefits, but denied Mr. Stull’s long-term disability benefits. Both parties moved for summary judgment. First, the parties disputed the applicable standard of review. As LINA was able to prove that as the claim fiduciary it had the written authority to interpret the terms of the plan and decide eligibility questions, abuse of discretion was deemed by the court to be the appropriate review standard in this case. LINA argued that summary judgment should be granted in its favor because its determination the Mr. Still was not disabled was the product of principled decision making supported by substantial evidence. Lina asserted that Mr. Stull was no longer being treated with opioids and narcotics but was instead being treated with Botox injections. This claim, however, was proved untrue as plaintiff submitted evidence from a doctor’s appointment during the relevant time in which the doctor’s notes indicated that Mr. Stull was continuing to take an opioid to treat his underlying conditions. Next, LINA argued that Mr. Stull’s primary care physician and his neurologist declined to provide any work restrictions to LINA. Again, through documentation, this was proved to be factually erroneous. Finally, LINA argued that its decision was appropriately decided based upon by the opinions of three of its doctors. Although the judge did not take issue with the qualifications of these physicians, the court was not satisfied by the doctor’s reliance solely on medical records as opposed to in person examinations. Specifically, whether the head and hand tremors were significant enough to limit the ability to drive and work, was found by the court to be a determination a doctor could only make in person. For these reasons the court granted summary judgment in favor of Mr. Stull and, rather than remanding the case, ordered LINA to reinstate and pay for the disability benefits. As for plaintiff’s motion for attorneys’ fees and costs, the parties were directed to meet and confer. Should these efforts to confer fail, plaintiff could seek the court’s intervention. 

Tyce v. AT&T Corp., No. 3:21-CV-00040-FDW-DSC, 2021 WL 5022377 (W.D.N.C. Oct. 28, 2021) (Judge Frank D. Whitney). Plaintiff Dorothea Tyce brought suit challenging the denial of her disability benefits claim by her employer, AT&T Corporation, and its Southeast Disability Benefits Program. Shortly after taking Family Medical Leave, Ms. Tyce applied for short-term and long-term disability benefits under the program. The short-term benefits were approved a week later for about a seventh month period. The benefits were then terminated. After administratively appealing this denial, the benefits were extended for another few months and then again terminated, on the same day that Ms. Tyce’s employment ended. This time, Ms. Tyce did not file a second-level appeal of the denial of her short-term disability benefits. The court examined this benefit denial under the abuse of discretion standard. First, plaintiff failed to support her statement of facts as required by Rule 56(c), as she was determined by the court to be merely reasserting the factual allegations from her complaint and not properly addressing defendants’ assertions. Having failed to do so, plaintiff did not meet her burden to demonstrate a genuine issue of material fact. Additionally, plaintiff’s claims were found to be time barred, as Ms. Tyce did not exhaust her administrative appeals and failed to file her suit within the limitations period set forth in the SPD. Finally, even if the court could ignore all of the above, the court concluded that the denial decision was itself rational and reasonable and supported by substantial evidence as the SPD expressly provided that short-term benefits end on the day the participants “employment is terminated,” as in the circumstances here. For these reasons, the court found the denial decision not to be an abuse of discretion and defendants’ motion for summary judgment was granted. 

Ninth Circuit

Rogala v. Hartford Life & Accident Insurance Co., No. 3:20-cv-01556-JR, 2021 WL 4948212 (D. Or. Oct. 25, 2021) (Judge Jolie A. Russo). Plaintiff Michael Rogala brought suit against defendant Hartford Life and Accident Insurance Company after the denial of his long-term disability benefits. Plaintiff alleged he was disabled under his ERISA disability benefit plan by Major Depressive Disorder starting on May 8, 2017. Defendant argued that plaintiff did not qualify for benefits as he was no longer an active employee during the relevant time period, and because medical evidence did not support his claim for benefits. The court needed to answer two main questions to determine benefits eligibility. First, was Mr. Rogala an active employee during the relevant time period as required by his plan? Second, assuming Mr. Rogala did qualify, did medical records support that Mr. Rogala was indeed disabled throughout the 90 day elimination period and the two year long-term disability period? Importantly, from April 10 to May 7, 2017, Mr. Rogala was in jail. Then from May 8, 2017 until the date of his termination, Mr. Rogala’s supervisor confirmed that Mr. Rogala was not performing regular duties on his scheduled workdays. Under the long-term disability plan “active employee” is defined as “an employee who works for the employer on a regular basis in the usual course of the employer’s business.” Therefore, a claimant is not considered an “active employee” if he or she is not performing necessary work duties on workdays. The court therefore concluded that Mr. Rogala was not actively at work during the relevant time period. This alone disqualified Mr. Rogala from eligibility, but the court further noted that plaintiff failed to meet his burden of proving continuous disability throughout the 90 day elimination period and beyond. Accordingly, the court entered judgment in favor of defendant and plaintiff’s motions for judgment and supplementing the administrative record were denied. 

ERISA Preemption

Seventh Circuit

United Auto Workers Local 578 v. Oshkosh Corp., No. 20-C-666, 2021 WL 5028461 (E.D. Wis. Oct. 29, 2021) (Judge William C. Griesbach). This suit pertains to a labor dispute and subsequent arbitration award between the United Auto Workers Local 578 Union and the Oshkosh Corporation relating to the administrative of Accident & Sickness (A&S) benefits under a collective bargaining agreement. The arbitrator found that after Oshkosh had transferred administration of the A&S benefits to Cigna, the administration of those benefits differed significantly from the previous ways the program had administered benefits and was therefore in violation of the collective bargaining agreement. Oshkosh was required to “return to the past practices of how A&S claims were reviewed and administered prior to the change to Cigna.” The Union then brought suit alleging that Oshkosh continued to be in violation of the CBA and the arbitration award in its handling of these claims. Defendant argued that ERISA preempted these claims, reasoning that any improper denial of payment was governed by ERISA, and not only did the arbitrator not order payment of individual claims or require removing attendance points, because the program was governed by ERISA, the arbitrator had no authority to do so. The union, on the other hand, argued that its claim arose under another federal law, the Labor-Management Relations Act, and that claims for benefits under ERISA governed plans have been found to be arbitrable. In addition, the Union argued that it’s A&S benefit is not an ERISA governed plan at all and instead falls within the “payroll practice” exception. The court disagreed that ERISA preempted plaintiff’s claims. Nevertheless, as the arbitrator made no mention of benefits being paid or reinstatement of benefits denied, the court found that it has no authority to order Oshkosh to do so or to require removing the negative attendance marks. In other respects, not pertaining to ERISA, Oshkosh was found not to be in compliance with the arbitration award and was directed to return to past practices and remedy its claims review processes. 

Tenth Circuit

Huff v. MetLife Insurance Co., No. 21-CV-0284-CVE, 2021 WL 4952501(N.D. Okla. Oct. 25, 2021) (Judge Claire V. Eagan). Plaintiff Roland Huff filed suit against Metropolitan Life Insurance Company alleging state law claims of breach of contract and bad faith. Mr. Huff was employed by BP until his retirement in 1999 and participates in the BP Retiree Group Universal Life (GUL) Program, a welfare benefit plan. Until 2012, Mr. Huff’s monthly premium payments for his life insurance coverage were approximately $200 per month. In 2013, he received a letter from MetLife stating that, “as announced by BP in your Annual Enrollment materials, rates for the BP Retiree Group Universal Life Program will increase over a two year period effective January 1, 2014.” Since these increases went into effect, plaintiff’s life insurance premiums have increased from $200 per month to $1,943.04 per month by 2021. Plaintiff claims he has contacted MetLife requesting specific documentation explaining the drastic increase in his premiums, and MetLife has not provided him with this requested documentation. MetLife moved to dismiss pursuant to Rule 12(b)(6) arguing that plaintiff’s state law claims are expressly preempted by ERISA, and that, under ERISA, plaintiff does not state a valid claim against it. MetLife was able to prove to the court through documentation that BP’s GUL plan is an employee benefit plan within the meaning of ERISA, as it is a welfare benefit plan for eligible employees and contains a page detailing employee’s rights under ERISA. Satisfied that the plan was governed by ERISA, the court ruled that ERISA indeed preempted the state law claims. The court was also persuaded by MetLife’s further argument that plaintiff failed to state an ERISA claim because Mr. Huff brought neither a claim for relief specifically outlined in ERISA nor did he seek to recover benefits due to him under the terms of the plan. Additionally, as plaintiff failed to name BP as a defendant in his complaint, the complaint alone was deemed inadequate to state a plausible claim under ERISA. Finally, the “relief” plaintiff requested, document production from defendant, was determined by the court to be a discovery request rather than a claim for relief. Therefore, the court granted defendant’s motion to dismiss, but granted Mr. Huff was granted leave to amend his complaint to allege a claim under ERISA and include his former employer as a defendant.  

Life Insurance & AD&D Benefit Claims

Seventh Circuit

Rickelman v. Securian Life Insurance Co., No. 20-cv-1124-slc, 2021 WL 5038753 (W.D. Wis. Oct. 27, 2021) (Magistrate Judge Stephen L. Crocker). Siblings Brandon, Ryan, and William Rickelman brought suit against Securian Life Insurance Company challenging the denial of their claim for accidental death benefits under insurance policies belonging to their father Kevin Rickelman. Kevin Rickelman was an employee of 3M Company and was a participant in 3M’s benefits programs, including its accidental death and dismemberment coverage to which the plaintiffs are beneficiaries. According to plaintiffs, an unintentional fall was the cause of Mr. Rickelman’s death. This is supported by Kevin’s death certificate, on which the medical examiner identified the immediate cause of death as “complications of subdural hemotoma”, with underlying causes of “closed head injury” and “fall to floor.” The medical examiner deemed Kevin’s death an accident. However, also noted on the death certificate and by the treating hospital physicians, were other contributing conditions including: pneumonia with sepsis, liver and renal failure, hypertension, non-Hodgkin’s lymphoma, and alcohol abuse. It was clear from blood samples taken at the hospital that Mr. Rickelman was not drinking on the day of his fall. Importantly, under the policy terms, an accidental death benefit is payable from deaths resulting, “directly and independently from all other causes, from an accidental bodily injury which was unintended, unexpected, and unforeseen,” with the bodily injury being the “sole cause” of the death. Securian based its denial on the fact that Kevin’s subdural hematoma was not the “sole cause” of his death as he had various contributing health conditions. The parties filed cross motions for summary judgment. Plaintiffs argued that although their father suffered from a number of health conditions, including conditions that may have eventually killed him, only the subdural hematoma caused by the accidental fall actually killed him. The court found this argument unpersuasive, as plaintiffs were unable to identify evidence to support their assertion that the other health conditions listed on the death certificate played no contributing role in Kevin’s death. The court deferred to defendants’ conclusions that these conditions indeed contributed to the death in two ways; the diseased liver and failing kidneys causing significant weakness and dizziness which likely led to the fall, and after the head injury the inability to form blood clots due to the liver failure contributed to the subdural hematoma, the cause of death. The court noted, “nothing on the death certificate contradicts these opinions, which were reasonably based on all the available evidence.” As such, the court found Securian’s denial neither arbitrary nor capricious, and entered judgment in favor of defendant. 

Pleading Issues & Procedure

Second Circuit

Vellaliv v. Yale University, No. 3:16-cv-1345-AWT, 2021 WL 5010015 (D. Conn. Oct. 28, 2021) (Judge Alvin W. Thompson). Plaintiffs are participants in the Yale University Retirement Account Plan who brought suit alleging that defendants, fiduciaries of the plan, failed to monitor and control the excessive recordkeeping and administrative compensation by Teachers Insurance and Annuity Association of America (TIAA), and allowing allegedly impermissible cross-sales of TIAA products and services to plan participants. Plaintiffs moved for leave to file supplemental evidence, including findings from the Office of the Attorney General (OAG) of New York and the Securities and Exchange Commission (SEC) regarding TIAA. Plaintiffs contended that the documents support their positions in the case because “the OAG . .  found, integral to TIAA’s sale process were sales representatives’ cold-calls to preselected participants in TIAA administered employer-sponsored retirement plans … to offer free financial planning services, … which were often described as included in, or a benefit of, the investor’s retirement plan.” Additionally, the SEC found evidence of misleading statements about TIAA’s non-profit heritage in its marketing materials, which the SEC concluded lead clients to believe that TIAA services and its salespeople were operating without financial motivation when promoting particular products. Based on this, the court disagreed with defendants that the documents were “not relevant to any issue in the case.” Nor were the documents found to be impermissible hearsay. Defendants additionally argued that the evidence at issue was precluded by Rule 408. Again, the court disagreed, as TIAA was not a party in the case. Accordingly, plaintiffs’ motion for leave was granted. 

Sixth Circuit

Secretary of US Department of Labor v. Kavalec, No. 1:19-CV-00968, 2021 WL 4975103 (N.D. Ohio Oct. 26, 2021) (Judge Pamela A. Barker). The Secretary of Labor brought claims against defendant Robert Kavalec for breach of fiduciary duty, self-dealing, disloyalty, and imprudence, alleging that Mr. Kavalec engaged in prohibited transactions and determined and approved his own compensation from the fund while acting as a fund trustee. The Secretary then moved for a preliminary injunction removing the fund’s current trustee and appointing an independent fiduciary. The fund then moved to strike the Secretary’s reply brief, and the fund and Mr. Kavalec moved for trial dates. First, the court examined whether to grant the preliminary injunction by factoring the likelihood of success of the merits, possible irreparable injury absent injunction, cause of harm to others, and the public interests served by the injunction. One of the court’s major concerns was that the fund has failed to pay over $1.7 million in claims to Medical Mutual, the fund’s claims administrator, to pay the claims of individual participants. The fund was told by Medical Mutual that it was “seriously delinquent in its payment of claims for members.” The court determined that the fund, Kavalec, and the successor trustees have failed to take steps to address these Medical Mutual claims. The Secretary asserted his strong likelihood of success on the self-dealing, disloyalty, and imprudence claims, arguing that the court already twice concluded this likely success in its previous orders. Additionally, the Secretary argued that Mr. Kavalec’s supposed resignation and appointment of a close associate was a “blatant attempt to continue exerting control over the fund while thwarting the appointment of an independent fiduciary to oversee the fund.” The court agreed with the Secretary’s arguments and found a strong likelihood of success of the merits of these claims. The court also found that failing to appoint an independent fiduciary to resolve pending claims and wind down the fund would almost certainly cause irreparable injury to the beneficiaries. Next, the court agreed with the Secretary that removing Kavalec as the trustee and appointing an independent fiduciary would not cause harm to others, as the proposed fiduciary, Receivership Management, was well-qualified for these required duties. Finally, evaluating the public interest of granting the motion for injunction, the court found granting the motion would advance the policy objectives of ERISA and thus serve a public interest. As all four factors weighed in favor of the issuance of the preliminary injunction, the court granted the Secretary’s motion removing the fund’s current trustee and appointing an independent fiduciary. The court found meritless the fund’s motion to strike the Secretary’s reply brief in support of plaintiff’s motion for preliminary injunction. Finally, the two separate motions for trial dates were denied. The court asserted that the newly appointed independent fiduciary would require some time to gain access to, review, and evaluate the fund and its records, as well as evaluate the outstanding claims. Therefore, scheduling trial dates was found to be premature. 

Washington v. Lenzy Family Inst., No. 5:21-cv-1102, 2021WL 4975126 (N.D. Ohio Oct. 26, 2021) (Judge Sara Lioi). Plaintiff Leonard Washington filed suit against the Lenzy defendants, United, and two John Does alleging a violation of COBRA and ERISA for failure to give notice of COBRA continuation of rights and related benefits information, for failure to produce a summary plan description of any material modification of the benefits plan, and for breach of fiduciary duties. Plaintiff moved for leave to amend, which the defendants opposed. Mr. Washington asserted that an amendment is required “in order to conform the complaint to the facts and evidence including … for equitable estoppel, additional breaches of fiduciary duties, and correcting the name of defendant United HealthCare.” Defendants argued that the motion should be denied as it would cause undue delay, unduly prejudice defendants, and demonstrated bad faith. According to defendants, there was no new fact or evidence to warrant the motion to amend and that plaintiff could have included these allegations in his original complaint but failed to do so. Instead, defendants asserted, Mr. Washington’s motion reveals bad faith and was likely an intentional strategy to “(hold) a few causes of action in reserve.” Mr. Washington also failed to follow the standard of practice of presenting a copy of the proposed amended complaint along with his motion for leave to amend, aggravating the judge and defendants. Nevertheless, plaintiff’s motion for leave to amend was granted, as the case was pending less than two months when the motion to amend was filed and no case management dates or deadlines had yet been set. However, should the defendants file a successful motion to dismiss the amended complaint, the court signaled its willingness to entertain a motion by defendants for the sanction of an award of reasonable attorneys’ fees and costs. 

Eleventh Circuit

Mullins v. Securian Life Insurance Co., No. 2:21-cv-247-SPC-NPM, 2021 WL 4991519 (M.D. Fla. Oct. 27, 2021) (Judge Sheri Polster Chappell). After receiving several hundred thousand dollars in life insurance benefits from Securian Life Insurance Company, plaintiff Marie Mullins was told the benefits payment was an error and that she was required to return the sum that had been paid to her. Ms. Mullins sued Securian along with UPS under ERISA. The policy at issue belonged to Timothy O’Conner, Ms. Mullins’ former boyfriend. Mr. O’Conner worked for UPS and participated in USP’s employee life insurance plan to which he designated Mullins as sole beneficiary. This beneficiary determination was never changed, so Securian life issued the benefit payments to Ms. Mullins after Mr. O’Conner’s death. However, after the benefits were distributed Ms. Mullins, Securian found out that UPS terminated Mr. O’Connor in 2000, causing the original policy to lapse. A few months later, Mr. O’Connor was rehired by UPS and re-enrolled in the plan. This time, Mr. O’Connor did not specifically designate any beneficiary, which meant that, upon his death, the proceeds ought to have been paid to his family. Having discovered this, Securian requested Ms. Mullins return the proceeds paid allegedly in error. Ms. Mullins’ original suit was dismissed by the court. Ms. Mullins amended, and once again defendants moved to dismiss for lack of Article III standing to sue under ERISA. Defendants argued, and the court agreed, that the original beneficiary designation naming Mullins lapsed during the few month period when Mr. O’Connor was not working for UPS, meaning that Ms. Mullins no longer a plan beneficiary able to sue under ERISA. The court previously found that Ms. Mullins lacked standing, and her amended complaint was unpersuasive to alter that initial finding. In particular, the court was not swayed by plaintiff’s attempts to seek declarations of her rights under ERISA trough the Declaratory Judgment Act. Accordingly, defendants’ motions to dismiss were granted. 

Provider Claims

Fifth Circuit

Bond Pharmacy d/b/a Advanced Infusion Solutions v. Advanced Health Systems, No. 3:21-CV-123-KHJ-MTP, 2021 WL 4955447 (S.D. Miss. Oct. 25, 2021) (Judge Kristi H. Johnson). Plaintiff Bond Pharmacy d/b/a Advanced Infusion Solutions is a pharmacy in Mississippi that provides home infusion therapy for patients to receive pain medications. Plaintiff brought suit against defendants Advanced Health Systems, Inc. and Blue Cross Blue Shield of Mississippi for breach of contract, breach of implied duty of good faith, unjust enrichment, breach of implied-in-fact contract, and failure to provide benefits under ERISA plans. According to plaintiff, Blue Cross has refused to pay for millions of dollars’ worth of treatment. Defendants moved for partial dismissal under Rule 12(b)(1), contending that plaintiff does not have standing to bring the ERISA claims. Defendants also moved to dismiss under Rule 12(b)(6) for failure to exhaust an administrative appeal process. Plaintiff argued that it “has standing under appropriate assignments of benefits obtained from the patients enrolled in the ERISA plans.” Additionally, plaintiff contends that Blue Cross owes benefits to those patients under the ERISA plans for the medically necessary services provided. The court agreed that a health care provider with a valid assignment of benefits from the plan participant or beneficiary has derivative standing to bring an ERISA claim to recover benefits. However, Advanced Infusion Solutions did not include the assignments of benefits from its patients for the court to evaluate. Advanced Infusion Solutions argued that requiring it to do so at the pleading stage of the case would be unfair and burdensome. The court disagreed. Citing the Fifth Circuit decision in Cell Science Systems Corp., the court held that, “in order to survive the Rule 12(b)(1) motion to dismiss for lack of jurisdiction, [the plaintiff] was required to put forth evidence of valid and enforceable assignment of benefits from the ERISA plan participants and/or beneficiaries.” Without the assignments of benefits, the court could not decide whether plaintiff had standing to bring its ERISA claims. Not having done so, Advanced Infusion Solutions has failed to meet its burden of proof. Therefore, the court granted defendants’ partial motion to dismiss under Rule 12(b)(1), granting plaintiff leave to amend and include the assignments of benefits in its amended complaint. Having granted the partial motion to dismiss on Rule 12(b)(1), the court did not evaluate the arguments for the Rule 12(b)(6) motion to dismiss.