This week’s notable decision, Rois-Mendez v. California Physicians’ Service dba Blue Shield of California, Case No. 20-cv-02227, 2021 WL 242906 (C.D. Cal. Jan. 25, 2021), is a proton therapy cancer treatment denial case with a twist. Rois-Mendez was covered under a fully-insured Blue Shield plan when he was diagnosed with parotid gland cancer. He sought coverage from Blue Shield for proton beam radiation therapy (PBRT) at California Protons Cancer Therapy Center (“California Protons”). Blue Shield denied his prior authorization requests for PBRT in June 2019 and by July 2019 he was forced to start treatment due to the medical exigency of his condition even despite Blue Shield’s denials. He privately paid for his treatment. 

Blue Shield denied Alek’s claims on the grounds that Blue Shield considered PBRT to be experimental or investigational for his diagnosis. Months after treatment, on January 23, 2020, he submitted, to Blue Shield, a post-service claim for his out-of-pocket payments. As of the date the operative Complaint was filed, April 3, 2020, Alek had not received any response from Blue Shield regarding his post-service claim. 

It was discovered that Blue Shield started paying a certain amount of Alek’s claims directly to the provider (contrary to the operative plan’s terms) after he submitted his post-service claims to Blue Shield and after he filed his complaint in federal court. 

Since a portion of these claims were paid to the provider after suit was filed (and months after his treatment was over), Blue Shield moved to dismiss Alek’s complaint for lack of subject matter jurisdiction. Blue Shield argued that Alek lacked standing because Blue Shield had already paid California Protons “for the majority of the PBRT [he] has received,” and has denied the “small number of remaining unpaid claims . . . for reasons other than the investigative/experimental exclusion.” 

The Court disagreed with Blue Shield’s argument noting that Blue Shield did not dispute Alek’s allegation or supporting evidence that it initially denied prior authorization for Alek’s PBRT treatment or that it did so on the basis that such treatment is “investigational,” nor did it dispute that it later upheld such decision on appeal. Blue Shield also did not dispute that Alek paid the provider directly for his PBRT treatment and that, as of the date of the operative Complaint, he had not received from Blue Shield a response to his post-service claim nor any reimbursement from Blue Shield for the costs of his PBRT treatment. The Court denied Blue Shield’s motion to dismiss holding that the undisputed facts showed, contrary to Blue Shield’s assertions, that Alek had suffered an injury, specifically, out-of-pocket payments for his PBRT treatment, and that such injury is “fairly traceable” to Blue Shield’s above-described conduct as well as “likely to be redressed by a favorable judicial decision.” 

Plaintiff is represented by Timothy J. Rozelle, Lisa Kantor, and Stacy Monahan Tucker of Kantor & Kantor, LLP. 

This week’s notable decision summary was prepared by Timothy J. Rozelle. Tim is thankful to focus his career on helping patients obtain health benefits for a range of health conditions and more recently has focused specifically on denials of life-saving cancer treatment. If you or a loved one have been denied proton beam therapy radiation claims by an insurance carrier, please give our office a call as we handle these types of claims all over the country. You can also visit our Proton Therapy page at https://www.kantorlaw.net/practice-areas/denials-to-proton-therapy/.

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

Attorneys’ Fees

Ninth Circuit

Villasenor v. Cmty. Child Care Council of Santa Clara Cnty., Inc., Case No. 18-cv-06628-BLF, 2021 WL 242906 (N.D. Cal. Jan. 25, 2021) (Judge Beth Labson Freeman). After finding that Plaintiff was entitled to retirement benefits under an ERISA plan, Plaintiff asked the court to determine the amount owed to him. The Plan calculated the amount based on years of employment. Plaintiff argued that the phrase “period of employment with the Company” included his entire employment with the company, while Defendant argued it meant only the employment period since the plan was established. The court held that it included all years of employment. Where the online calculator referenced in the Plan and provided by the employer also included a longevity bonus, the court concluded Plaintiff was entitled to that as well. He was also awarded back benefits and interest at 4.76%, the average rate during the litigation. The court awarded attorneys’ fees as well and held that partner rates of $650 were reasonable and awarded $128,868 in fees.

Breach of Fiduciary Duty

Sixth Circuit

Sec’y of U.S. Dep’t of Labor v. Kavalec, No. 1:19-CV-00968, 2021 WL 243595 (N.D. Ohio Jan. 25, 2021) (Judge Pamela Barker). The Department of Labor alleged Defendants in this case breached their fiduciary duties by authorizing the payment of their own compensation and personal expenses by the Fund, allowing an ineligible person to participate in Fund, and violations of HIPAA and the ACA. The DOL filed a motion for a preliminary injunction to prevent Defendants from paying themselves wages from the Fund. The court granted the injunction, determining it was likely the DOL would succeed on the merits of its breach of fiduciary duty action, that irreparable harm was likely because Defendants kept transferring money from the Fund to themselves, that the injunction would not cause substantial harm to others, and that it was in the public interest. The court was unpersuaded that Kavalec needed to be paid a salary or he would resign, stating that if he chose to resign an independent fiduciary could easily be appointed by the court.

Seventh Circuit

Hensiek v. Bd. of Directors of Casino Queen Holding Co., Inc., No. 3:20-CV-377-DWD, __F.Supp.3d__, 2021 WL 267655 (S.D. Ill. Jan. 25, 2021) (Judge David W. Dugan). Plaintiffs allege Defendants concealed two transactions which served to benefit the selling shareholders who orchestrated the transactions while acting as fiduciaries. Defendants filed a motion to compel arbitration. The court reviewed caselaw regarding ERISA and arbitration provisions and assumes for purposes of the motion that the Seventh Circuit will determine that statutory ERISA claims are arbitrable. Plaintiffs argue that there is no valid agreement for arbitration and even if agreement was reached, it is unenforceable. The court found that the arbitration provision lacks necessary consideration and therefore is not a valid and enforceable contract provision for the purposes of the Federal Arbitration Act. The court denied the motion. 

Disability Benefit Claims

Third Circuit

Haggerty v. Metro. Life Ins. Co., No. 2:19-CV-1067, 2021 WL 243037 (W.D. Pa. Jan. 25, 2021) (Judge William S. Stickman IV). In this dispute over long-term disability benefits, the court granted MetLife’s Motion for Summary Judgment and denied Plaintiff’s Motion for Summary Judgment as moot. After careful review of the Plan and its provisions the record establishes the futility of a remand because it is clear from the terms and interpretation of the Plan that Haggerty is not entitled to the payment of long-term disability benefits. He never applied for those benefits, and any application in the future would be untimely. The original deadline to file a claim for payment of long-term disability benefits was on February 14, 2017. Because no claim was ever submitted, to comply with the Certificate, Haggerty is required to show that it was not reasonably possible to comply with the deadline, and once it became reasonably possible to comply, he subsequently gave notice and Proof as soon as he reasonably could have. As Haggerty has withdrawn his breach of fiduciary duty claim under § 1132(a)(3), and he does not otherwise address his continued failure to apply, any application made for the payment of long-term disability benefits would be untimely according to the express terms of the Certificate. Therefore, the court holds that an equitable remand for the processing of an application for long-term disability benefits would be futile.

Eleventh Circuit

Wright v. Reliance Standard Life Insurance Company, No. 19-14643, __F.App’x__, 2021 WL 303428 (11th Cir. Jan. 29, 2021) (Before Martin, Newsom, and Branch, Circuit Judges). On August 7, 2017, Wright stopped working. She brought claims for benefits under the long-term disability policy and for a waiver of premiums under the life-insurance policy. After she stopped working, Wright sought medical care multiple times per month for four months. The medical reports arising from those months presented a mixed picture of health. On the one hand, Wright complained of pain and fatigue and was diagnosed with a constellation of health problems, including fibromyalgia, dysautonomia, and Postural Orthostatic Tachycardia syndrome. On the other hand, repeated physical exams found her to exhibit normal strength, range of motion, and neurological and psychological condition. Defendant denied Plaintiff’s claims because it determined that her evidence was insufficient to establish disability. Reliance did not arbitrarily and capriciously deny either claim. Although Wright’s own preferred doctors asserted that she was unable to work, they repeatedly noted that her gait, range of motion, strength, and many other physical conditions were normal during that period. She complained of a wide range of symptoms and ailments, but doctors noted that she was exercising and seemed to think they could prescribe her even more rigorous exercise programs. And while some doctors said that she was totally disabled, others said she was able to work. The decision was affirmed on appeal because it was not arbitrary and capricious. 

ERISA Preemption

Fifth Circuit

ACS Primary Care Physicians Sw., P.A. v. UnitedHealthcare Ins. Co., No. 4:20-CV-01282, __ F.Supp.3d __, 2021 WL 235177 (S.D. Tex. Jan. 22, 2021) (Judge Andrew S. Hanen). Plaintiffs are emergency care physician groups in Texas, and Defendants are health care insurance companies. Unlike some other physicians, emergency care providers are obligated by law to serve all those who require emergent care. As a result of this duty, Plaintiffs are protected by Texas laws that require health care insurers to compensate nonpreferred and non-network emergency medical providers at usual and customary rates. Among many disputes was whether the statutes requiring payment at usual and customary rates were preempted by ERISA. The court held they were not. It explained the emergency care statutes before it are analogous to the Arkansas law considered in Rutledge v. Pharm. Care Mgmt. Ass’n, –– U.S. ––, 141 S. Ct. 474, –– L.Ed.2d –– (2020). In fact, it found them to be less intrusive than the Arkansas law, because they required only that an HMO, EPO, or PPO issuer reimburse at a “usual and customary” rate. Unlike the Arkansas law, the emergency care statutes did not provide for an appeals procedure or enable emergency care physicians to decline to treat the patient. The court could find no legally meaningful distinction, for purposes of express ERISA preemption, between an Arkansas law that regulated the rate at which PBMs reimburse pharmacies, and the Texas emergency care statutes, which regulate the rate at which insurers and insurance plan administrators reimburse emergency care physicians. In terms of “impermissible connection,” the statutes were alike because neither the Arkansas law nor the Texas emergency care statutes imposed a “scheme of substantive coverage.” As stated above, the emergency care statutes merely imposed a rate regulation on insurers and insurance plan issuers. Likewise, none of the statutes “refers” to ERISA because each statute encompassed non-ERISA plans. Nothing in the emergency care statutes placed requirements on an ERISA plan as opposed to a Medicaid, Medicare, military, marketplace or other plan. In other words, the emergency care statutes, like the Arkansas law, applied to insurance plans and issuers regardless of whether they are tethered to an ERISA plan. Thus, there was no ERISA preemption. 

Medical Benefit Claims

Ninth Circuit 

Rois-Mendez v. California Physicians’ Service dba Blue Shield of California, Case No. 20-cv-02227, 2021 WL 242906 (N.D. Cal. Jan. 25, 2021) (Judge Maxine M. Chesney). See Notable Decision summary.

Caldwell v. UnitedHealthcare Ins. Co., et al., Case No. 19-02861 WHA, 2021 WL 275467 (N.D. Cal. Jan. 27, 2021) (Judge William Alsup). Before the Court was United health plan administrators’ motion for summary judgment on all claims brought by a class of medical insurance plan beneficiaries seeking coverage for liposuction to treat lipedema. Caldwell sought treatment of her lipolymphedema, the late-stage form of lipedema, a chronic progressive condition causing the abnormal accumulation of fat deposits in the trunk and appendages that can possibly become painful, immobilizing, and lead to other health consequences. Since 2017, Caldwell sought to treat her lipolymphedema with liposuction, a surgical procedure which uses suction to remove fatty tissue from the body. Caldwell requested that United approve coverage for liposuction and was twice denied on the basis that her request fell under United’s “unproven” exclusion. Caldwell appealed both denials to United’s first level of internal appeals and United upheld both its 2017 and 2019 denials. On summary judgment, Judge Alsup expressed displeasure with United’s positions claiming that United was “cherry-picking” facts “playing cute and hiding in the weeds.” Alsup criticized United’s failure to provide an administrative record to the court and cited ambiguities in its administrative appeal process. The Caldwell class was certified encompassing individuals who were denied liposuction for lipedema as unproven between the start of 2015 through 2019. Judge Alsup denied United’s motion for summary judgment finding that United had the burden of proof to prove that liposuction was an unproven treatment for lipedema and failed to do so. 

Tenth Circuit

Mark C., et al. v. United Healthcare Ins. Co., et al., No. 2:20-CV-00012-DBB, 2021 WL 288578 (D. Utah Jan. 28, 2021) (Judge David B. Barlow). Plaintiff claims Defendants improperly denied benefits for mental health treatment under ERISA and the Parity Act. Defendants moved to dismiss the Parity Act claim. The court found that Plaintiffs made only conclusory allegations about any medical or surgical analogue. The court found that without facts about actual, as-applied, coverage for analogous medical or surgical treatment, there can be no comparison and thus no claim. The court granted the motion to dismiss without prejudice. 

Pension Benefit Claims

Sixth Circuit

Pynkala v. Blake Enterprises, LLC, No. 2:19-cv-02366, 2021 WL 261695 (W.D. Tenn. Jan. 26, 2021) (Judge Samuel H. Mays, Jr.). In 2008, Plaintiff became a covered participant in Defendants’ unfunded retirement plan. The Plan provided for early retirement benefits, with the written consent of the company, at age 62 and retirement benefits at age 65. In 2018, the company terminated the retirement plan and Plaintiff was not yet 62 years of age. Plaintiff filed a claim for benefits, exhausted her administrative remedies and filed this lawsuit. The court determined that it did not need to reach a decision as to the standard of review, because even under a de novo standard of review, Plaintiff is not entitled to retirement benefits. The court explained that because the Plan was unfunded, Plaintiff had not accrued any benefits and there was no language in the Plan, nor the statutory requirements of ERISA that would permit Plaintiff to receive benefits before the age of 62.

Pleading Issues & Procedure

Sixth Circuit

Hawkins v. Cintas Corp., No. 1:19-cv-1062, 2021 WL 274341 (S.D. Ohio Jan. 27, 2021) (Judge Timothy S. Black). The court denied a motion to compel arbitration and stay proceedings in a putative class action brought by plan participants against their former employer for alleged breaches of fiduciary duty with respect to the investment options in their defined contribution pension plan. The court held that because the participants asserted claims under ERISA Sections 502(a)(2) and 409 for relief to the pension plan, and their claims were based on alleged mismanagement to the entire plan, not to specific individual accounts, the arbitration provisions in the participants’ individual employment contracts could not bind the plan. 

Ninth Circuit

Anderson v. Intel Corp. Inv. Policy Comm., No. 19-CV-04618-LHK, 2021 WL 229235 (N.D. Cal. Jan. 21, 2021) (Judge Lucy H. Koh). Plaintiffs brought this class action under ERISA against Intel’s retirement plan administrators, alleging that they breached their fiduciary duties under ERISA by investing in “non-traditional investments” such as private equity, hedge funds, and commodities, which resulted in the plan incurring higher fees and performing worse than comparable funds. Plaintiffs also alleged that Defendants’ investments were self-interested because Defendants invested in private equity funds that in turn helped to fund Intel’s venture capital division. This case was stayed while the Supreme Court ruled that a related case, Sulyma v. Intel, was not barred by the relevant statute of limitations. After that case was decided, the two cases were consolidated, and Defendants filed a motion to dismiss. The court granted Defendants’ motion. The court found that Plaintiffs had not alleged meaningful benchmarks or comparisons in support of their allegations that the Intel funds performed poorly and had excessive fees. The court further found that Defendants’ alleged deviation from industry allocation standards, and their investments in private equity and hedge funds, were insufficient on their own to establish a breach of fiduciary duty. The court also rejected Plaintiffs’ duty of loyalty allegations, finding their conflict of interest and self-dealing arguments to be conclusory and “devoid of even minimal factual support.”

Unite Here Retirement Fund, et al. v. City of San Jose, et al., No. 5:20-CV-06069-EJD, 2021 WL 292533 (N.D. Cal. Jan. 28, 2021) (Judge Edward J. Davila). The court denied a hotel manager’s motion to dismiss a union’s withdrawal liability suit over $1.1 million in unpaid retirement funds. “This Court sees no reason to depart from the holding in Irigaray Dairy and from the numerous circuit and district courts that support the proposition that, under ERISA, a party’s status as an employer, including for the purposes of withdrawal liability, is appropriate for judicial review, not arbitration.”

Retaliation Claims

Seventh Circuit

Clapper v. United Airlines, Inc., No. 20 CV 2635, 2021 WL 260232 (N.D. Ill. Jan. 26, 2021) (Judge Manish S. Shah). The court denied dismissal of Plaintiff’s Section 510 claim where Plaintiff alleged that she was terminated, at least in part, to prevent her from relying on United-provided benefits. Here, Plaintiff, a 67-year-old flight attendant, took home (and never used) an iPad that a passenger left behind and allegedly forgot to return it as she was dealing with health issues. “Where Clapper specifically asked United not to take any action that could interfere with her medical leave, it’s a reasonable inference that United’s desire to prevent Clapper from relying on United-provided benefits was at least a motivating factor in the decision. The way United fired her also supports an inference of intent—Clapper alleges United did so quickly, without allowing her to access the employee grievance process or giving her another chance to explain herself. Finally, Clapper alleges that United intended to phase out the Rush employee benefits program. Given that United knew about Clapper’s upcoming surgery, declined her request to postpone any action until after her surgery, fired her before the surgery in contravention of its normal procedures, and intended to phase out the benefits program she was relying on, Clapper has adequately alleged that United intended to interfere with her benefits.” Clapper’s request for reinstatement as a flight attendant is equitable relief. The court also found that equitable relief under ERISA would not be impermissibly duplicative of the equitable relief Clapper could obtain under Title VII, the ADA, and the ADEA.

Your ERISA Watch is made possible by the collaboration of the following Kantor & Kantor attorneys:  Brent Dorian Brehm, Sarah Demers, Elizabeth Green, Andrew Kantor, Anna Martin, Michelle Roberts, Tim Rozelle, Peter Sessions, Stacy Tucker, and Zoya Yarnykh.

This week’s notable decision is Religious Sisters of Mercy v. Azar, Case No. 3:16-cv-00386, __F.Supp.3d__, 2021 WL 191009 (D.N.D. Jan. 19, 2021). In these consolidated cases, a coalition of entities affiliated with the Catholic Church and the State of North Dakota challenged the implementation of Section 1557 of the Affordable Care Act (“ACA”) contending that the Department of Health and Human Services (“HHS”) and the Equal Employment Opportunity Commission (“EEOC”) interpreted Section 1557 and related antidiscrimination laws in a way that compelled them to perform and provide insurance coverage for gender transitions and abortions.  Continue Reading Court Grants Catholic Church Permanent Injunction Regarding Coverage of Gender-Transition Procedures

Good morning, ERISA Watchers! Today’s notable decision is a good one for employee stock ownership plan (ESOP) participants. In Gamino v. KPC Healthcare Holdings, Inc. et al., No. 5:20-CV-01126-SB-SHK, 2021 WL 162643 (C.D. Cal. Jan. 15, 2021), District Judge Stanley Blumenfeld, Jr. denied motions to dismiss brought by several defendants against whom the plaintiff-participant alleged multiple violations of fiduciary duties with regard to a 2015 stock transaction.

The basic alleged facts are as follows: Plaintiff Danielle Gamino is a former employee of Defendant KPC Healthcare Holdings Inc. and a participant in its ESOP. In 2015, KPC’s CEO, Defendant Kali Pradip Chaudhuri, sold 100% of the company’s stock to the ESOP, for which the ESOP paid Chaudhuri more than the fair market value for the stock and incurred significant debt to do so. The price was between 891% and 1,484% of the value implied by the prices KPC’s predecessor traded on the public market in early 2013. (And probably much cheaper on amazon prime.) Overseeing and facilitating this transaction was Defendant Alerus Financial, N.A., an appointed independent trustee, who could be removed only by KPC. The plan administrator, the ESOP Committee, failed to file and disclose a bunch of documents it was required to under ERISA. This was a failing of the Defendant Board of Directors who serve on and monitor the ESOP Committee.

The Defendants moved to dismiss seven counts against them, all of which the court denied. The counts are as follows:

Count I alleges that Alerus engaged in a prohibited transaction in violation of ERISA § 406(a) by causing the ESOP to purchase 100% of the shares of KPC stock purchased from Chaudhuri. It also seeks to impose liability for the prohibited transaction on Chaudhuri based on his knowing participation in the transaction since he knew it was not for adequate consideration. The court found this count is adequately pled and survives even if Plaintiff did not identify a specific fund held by Chaudhuri against which equitable relief can attach.

Count II alleges that Chaudhuri violated his fiduciary duties under ERISA § 406(b) when he engaged in the 2015 transaction and acted in his own interest adverse to those of the ESOP. The court found that the Complaint adequately pleads a violation of this provision where it asserts that he received consideration from a transaction involving plan assets. 

Count III alleges that Alerus breached its fiduciary duty under ERISA § 404(a) by failing to undertake an appropriate investigation of the fair market value of the stock in the 2015 transaction. The court found that the allegations are sufficient to allege a claim for breach of fiduciary duty due to a lack of prudent investigation. The alleged facts support the plausible inference that the 2015 transaction was not for fair market value. Plaintiff need not offer information concerning Alerus’s due diligence process especially where that information is within the sole control of the trustee and other defendants.

Count IV alleges that the ESOP Committee failed to make required disclosures in the SPD. The court agreed with Plaintiff that the failure to provide a complete and statutorily compliant summary plan description upon request establishes a claim for statutory penalties. “The wrong suffered by Plaintiff here existed regardless of whether there was bad faith or fraud on the part of Defendants. It follows that the statutory penalty likewise does not require an allegation of bad faith or other independent wrongful acts.” Plaintiffs also need not show a loss caused by the breach in order to state a claim for equitable relief.

Count V alleges the ESOP Committee failed to timely file the required Form 5500 and provide the summary annual report to class members. The court found that Plaintiffs can pursue equitable relief based on these purported violations.

Count VI alleges that the ESOP Committee failed to timely provide documents in response to Plaintiff’s written request, including valuation reports. The court rejected KPC’s argument that “ERISA does not require a plan administrator to produce to an ESOP participant the confidential valuation that only the independent ESOP trustee obtained, especially where the administrator is not in possession of that valuation.” The Complaint states that the annual valuation report was requested to understand how the values of Plaintiff’s shares was determined and the court cannot conclude that this allegation is insufficient to state a claim.

Count VII alleges that KPC and the Directors breached their respective duties to monitor the fiduciaries they appointed and had the power to remove. Because Plaintiff has plausibly plead the breaches upon which this Count is based, the court found that it is adequately pled.

Plaintiffs are represented by ERISA Watchers Daniel Feinberg and Darin Ranahan of Feinberg, Jackson, Worthman & Wasow LLP; R. Joseph Barton and Colin Downes of Block & Leviton LLP; and Richard Donahoo of Donahoo & Associates.

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

Attorneys’ Fees

Tenth Circuit

James C. v. Aetna Health & Life Insurance Company, No. 218CV00717DBBCMR, 2021 WL 76162 (D. Utah Jan. 8, 2021) (Judge David Barlow). In opposition to Plaintiffs’ motion for attorneys’ fees, Defendant suggested that Rule 68 required a reduction in the requested fee amount. Defendant claimed it had made a formal offer of judgment in a phone call on March 8, 2019, when it “offered to stipulate to a remand of this case to Aetna.” Defendant did not reduce the offer to writing or serve it in a manner required by Rule 5(b), nor did they put forward any specific terms of the telephone offer. Defendant also did not indicate they were willing to pay attorneys’ fees or to acknowledge that their actions in the underlying insurance coverage review were arbitrary and capricious. Thus, the court found the facts did not establish a valid Rule 68 offer. Defendant also challenged the hourly rates of Plaintiff’s counsel. Those rates were $600 for Brian King and $250 for Nediha Hadzikadunic. King has 35 years of legal experience, 26 of which were devoted to ERISA. The court concluded that a reasonable hourly rate in its community for a highly experienced ERISA practitioner such as King was $450 per hour in this case based on a 2019 case awarding King $400 per hour. Defendant agreed Hadzikadunic’s rate was reasonable. The court also reduced King’s time from 90.5 hours to 76.9 hours. It reduced Hadzikadunic’s time from 109.7 hours to 93.2 hours. It did so despite expressly noting the time was “not inappropriate.” In total, the court awarded $57,905 for attorney time.

Disability Benefit Claims

Sixth Circuit

Fenwick v. Hartford Life & Accident Insurance Co., Case No. 20-5595, __F.App’x__, 2021 WL 100549 (6th Cir. Jan. 12, 2021) (Circuit Judges Suhrheinrich, McKeague and Readler). In this dispute over disability benefits, Plaintiff claimed that she was disabled due to back and neck issues. Hartford obtained surveillance of Plaintiff’s activities but it is not described in any detail. Plaintiff’s treating doctors endorsed some sedentary work capacity. Hartford performed an Employability Analysis Report “EAR” which determined that Plaintiff had the transferrable skills to be an Office Manager and terminated benefits.  After Plaintiff appealed, Hartford commissioned two paper reviews from Dr. Jerome Siegel and Dr. James Boscardin, which also included discussions with Plaintiff’s medical providers. One provider advised that Plaintiff was capable of sedentary to light work and the other advised, after hearing about the surveillance, that Plaintiff could probably work in a sedentary work capacity. The panel held that the district court correctly applied the arbitrary and capricious standard of review. The panel rejected Plaintiff’s argument that Hartford Fire made the determination rather than Hartford Life and there was no delegation of authority. The panel explained that where decisionmakers act on behalf of the plan administrator and are employed with the same corporate family, the plan administrator is exercising its discretionary authority. The district court also correctly determined that Hartford’s decision was not arbitrary and capricious. Hartford’s cancellation of the IME was reasonable because there was a consensus of medical opinion, including Plaintiff’s own treating providers. Hartford did not fail to consider the effects of Plaintiff’s prescriptions, because there was a lack of support in the record that her prescriptions prevented her from working. The EAR was reasonable because Plaintiff’s past work experience as a Store Team Leader and Logistics Executive Team Leader qualified her to be an Office Manager. Finally, Plaintiff argued that relying on the national median wage was unreasonable where she had been out of the work force for seven years and would only be able to earn an entry level salary. The panel relied on the Plan language which requires that the participant “may reasonably become qualified.” The judgment of the district court was affirmed. 

Discovery

Tenth Circuit

Doe v. Intermountain Health Care, Inc., et al., Case No. 2:18-cv-807-RJS-JCB, 2021 WL 151090 (D. Utah Jan. 16, 2021) (Magistrate Judge Jared C. Bennett). Plaintiff brought this action against IHC and SelectHealth alleging improper denial of mental health treatment at a residential treatment facility. Plaintiff moved to compel Defendants to produce an amended privilege log withheld as privileged. Documents were submitted for in camera review and included approximately 1,317 pages comprised primarily of email discussion threads and documents attached to those emails. Plaintiff identified three reasons why the disputed documents should be discoverable: contending that certain documents were (1) not protected by attorney-client privilege because they do not constitute communications in which legal advice was sought or conveyed and contain purely factual information, (2) not prepared in anticipation of litigation and (3) not privileged because they fell within the fiduciary exception to privilege. Defendants asserted (1) the fiduciary exception does not apply because (1) the emails reflect Defendants’ requests and receipt of legal advice from Defendants’ in-house counsel and outside counsel and (2) Defendants contend that certain emails and documents attached to emails—although independently containing non-privileged information—relate to the facilitation of legal advice. The court identified which needed to be produced (most of the in-camera review) and did not need to be produced. 

ERISA Preemption

Eleventh Circuit

Syrowik v. Vineyards Dev. Corp., Case No.: 2:20-cv-744-FtM-38MRM, 2021 WL 100372 (M.D. Fla. Jan. 12, 2021) (Judge Sheri Polster Chappell). Plaintiff was a participant in her employer’s severance and retirement program. After her position terminated, she demanded severance under the program and brought suit with state law causes of action. Her employer, Vineyards, argues that the program is a plan subject to ERISA and preempts any state law claims. The court held that the program was not a “plan” under ERISA because it provides no specific funding sources, does not comply with ERISA reporting obligations, does not provide a plan description or procedure to employees explaining how to obtain benefits under the program, and because benefits constitute a one-time event rather than ongoing management of benefits. The court therefore remanded the case to state court.

Exhaustion of Administrative Remedies

Seventh Circuit

McCutchan v. Coriant Operations, Inc., No. 20 C 561, 2021 WL 83734 (N.D. Ill. Jan. 11, 2021) (J. Charles P. Kocoras). Plaintiff, an employee of Coriant and a participant in its retirement plan, brought this action under ERISA against Coriant and other plan administrators. Plaintiff alleged that when Coriant was acquired by another company, Defendants failed to adequately notify him that if he did not liquidate his investment in one of his funds, he would receive the market value of the investment at the time of acquisition instead of the book value, which was greater. Defendants filed a motion to dismiss, arguing that Plaintiff failed to exhaust his appeals, which the court granted. Plaintiff contended that he had several conversations with Coriant’s benefits manager, but the court ruled that these conversations did constitute appeals under the plan and that Plaintiff had not adequately pleaded that any exceptions to the exhaustion doctrine applied.

Life Insurance & AD&D Benefit Claims

Fifth Circuit

Wilson v. United of Omaha Life Insurance Company, et al., No. 3:20-CV-377-DPJ-FKB, 2021 WL 141700 (S.D. Miss. Jan. 14, 2021) (Chief Judge Daniel P. Jordan III). Wilson was injured in a single-car accident when he drove his Dodge Charger off the road, through a ditch, and into two trees. His left hand was severed in the wreck, and his left arm was later amputated at the hospital. Wilson made a claim for accidental-limb-loss benefits under two insurance policies, and United denied Wilson’s claims under both policies, primarily based on intoxication exclusions to coverage. Initially, the court found that Plaintiff failed to exhaust his administrative remedies, but, even if he had, his case still failed on the merits. In this case, both policies gave United “the discretion and the final authority to construe and interpret” the policies. The court thus reviews United’s denial of benefits under the abuse-of-discretion standard: “If the plan fiduciary’s decision is supported by substantial evidence and is not arbitrary and capricious, it must prevail.” There is substantial evidence that Plaintiff was intoxicated, with a BAC of 0.142. Thus, Defendant correctly applied the intoxication exclusion.

Sixth Circuit

Unum Life Ins. Co. of Am. v. Willis, No. 119CV02719STAJAY, 2021 WL 129819 (W.D. Tenn. Jan. 13, 2021) (Chief Judge S. Thomas Anderson). This matter concerns competing claims on the proceeds of a life insurance policy issued by Unum. Here, Ms. Willis’ equitable interest in the Unum life insurance policy vested upon being designated as a beneficiary in the divorce decree. The question before the court is the scope of Ms. Willis’ interest. The court found the decree’s terms to be ambiguous. The court has several persuasive pieces of extraneous evidence that indicate the intent of the parties to the marital dissolution agreement (“MDA”) to designate Ms. Willis as the fifty percent beneficiary of the contract, but no evidence of intent in favor of Ms. Willis’ position aside from the ambiguous language of the MDA and her own position. The mere fact that the MDA refers to Ms. Willis as “the beneficiary” does not necessarily exclude the existence of other beneficiaries. The court next applies the interpretive doctrine of contra proferentum which holds that any contractual ambiguities should be construed against the drafter. Here, the drafter is Ms. Willis through counsel, as parties stipulated to the fact that the decedent was unrepresented during the MDA proceedings and that Ms. Willis’ attorney drafted the MDA. The ambiguity in the contract as relates to the scope of Ms. Willis’ interest in the Unum policy should therefore be construed against Ms. Willis and in favor of the position that she was only intended to be the fifty percent beneficiary.

Medical Benefit Claims

Seventh Circuit

Schwartz, et al. v. Anthem Insurance Companies, Inc., et al., No. 1:20-CV-69 RLM-MPB, 2021 WL 146751 (N.D. Ind. Jan. 15, 2021) (Judge Robert L. Miller, Jr.). Plaintiffs, parents of the minor J.S., sued Defendants regarding J.S. not receiving a prescribed vaccine, and so contracting respiratory syncytial virus. Plaintiffs filed a motion to remand. J.S. was born a preemie and was prescribed Synagis, an antibody used to immunize children against respiratory syncytical virus. Plaintiffs allege Anthm would not authorize J.S.’s third and last dose of Synagis and he ultimately contracted the virus, spent 20 days in the hospital, 17 of those on life support. The court considered whether Plaintiffs’ claims were preempted by ERISA. Plaintiffs argue that they are not claiming a denial of coverage for medical care but rather claiming that Defendants “failed to use reasonable care in processing and filling J.S.’s preapproved prescription.” The court found that the claim exists independent of the ERISA plan and is not completely preempted. However, the court found that ERISA clearly preempts claims based on allegations that Defendants failed to give prior authorization for J.S.’s third dose of Synagis. The court found that the Plaintiffs cannot avoid federal jurisdiction by amending out of their complaint claims that are completely preempted by ERISA. The court denies the motion to remand. 

Eighth Circuit

J.P. v. BCBSM, Inc., Case No. 18-3472 (MJD/DTS), 2021 WL 131234 (D. Minn. Jan. 14, 2021) (Judge Michael J. Davis). Before the court was Plaintiffs’ motion for class certification seeking to certify a class of 221 identified persons covered under ERISA-governed plans in which certain charges for health benefit claims were offset based on the following language in their SPDs: “Payments made in error or overpayments may be recovered by the Claims Administrator as provided by law.” Based on this type of SPD provision, Blue Cross recovered alleged overpayments from certain past claims by not issuing checks on later claims made by participants. The class involved the withholding of nearly $300,000 in payments under 84 different applicable ERISA plans. The court held that Plaintiffs could not establish commonality because “[i]n order for there to be a common question regarding Blue Cross’s authority to offset, the Court would need to know that all class members participated in plans with only SPDs and no other plan documents with relevant terms . . . The evidence before the Court is that many class members did participate in plans with wrap documents that control over the SPD . . . Individualized inquiry into 84 sets of different plan documents to determine Blue Cross’s authority to offset in each plan is incompatible with a finding that the commonality prong has been met.” By extension, the court also held that the class representatives could not be found to be typical and adequate. Therefore, Plaintiffs motion for class certification was denied. 

Tenth Circuit

Kirsten W. v. California Physicians’ Serv., No. 219CV00710DBBJCB, 2021 WL 83264 (D. Utah Jan. 11, 2021) (Judge David Barlow). Plaintiff alleges Defendant improperly denied benefits for mental health treatment under ERISA and the federal Parity Act. Defendant filed a motion to dismiss the Parity Act claim. The Parity Act claim is not based on the terms of the benefit plan but rather the application of the benefits plan. As such, Plaintiff must allege facts showing disparate treatment. The court found that Plaintiff provided conclusory statements and general assertions of disparate treatment without details as to how BSC treated medical claims. The court found the allegations are insufficient to defeat the motion to dismiss. The court granted leave to amend her complaint because the plan documents have not been provided. 

Pension Benefit Claims

Ninth Circuit

Baird v. BlackRock Institutional Tr. Co., No. 17-CV-01892-HSG, 2021 WL 105619 (N.D. Cal. Jan. 12, 2021) (J. Haywood S. Gilliam, Jr.). Plaintiffs, participants in BlackRock’s employee retirement benefit plan, alleged that BlackRock and other Defendants “violated various ERISA requirements and their fiduciary duty by improperly favoring their own proprietary funds when selecting investment options for the BlackRock Plan,” resulting in unfavorable returns for Plaintiffs. The court had previously certified a class, and the parties filed cross-motions for summary judgment. The court denied both motions. The court found that disputed issues of material fact existed as to whether Defendants failed to follow the plan’s investment policy statement (IPS), and thus whether they violated their fiduciary duties. Specifically, the court found that it was disputed whether Defendants received legal advice regarding their investments and whether attorneys were present at meetings, as was required by the IPS. The court also found there were disputed issues of fact as to the reasonableness of Defendants’ compensation and whether their actions constituted a conflict of interest. Finally, the court rejected Defendants’ statute of limitations argument, finding that Plaintiffs had alleged ongoing misconduct by Defendants and had not challenged a single time-barred transaction.

Pleading Issues & Procedure

Seventh Circuit

McCutchan v. Coriant Operations, Inc., No. 20 C 561, 2021 WL 83734 (N.D. Ill. Jan. 11, 2021) (J. Charles P. Kocoras). Plaintiff, an employee of Coriant and a participant in its retirement plan, brought this action under ERISA against Coriant and other plan administrators. Plaintiff alleged that when Coriant was acquired by another company, Defendants failed to adequately notify him that if he did not liquidate his investment in one of his funds, he would receive the market value of the investment at the time of acquisition instead of the book value, which was greater. Defendants filed a motion to dismiss Plaintiff’s claim for breach of fiduciary duty, arguing that Plaintiff had “repackaged” his denial of benefits claim. The court denied the motion. The court found that Plaintiff’s two claims were different; the recovery of benefits claim alleged that his claim was wrongly denied, whereas the breach of fiduciary duty claim alleged that he had been given untimely notice. However, the court dismissed the acquiring company as a defendant, as it was not involved in any of the allegations, and struck Plaintiff’s jury demand, as there is no federal right to a jury trial under ERISA.

Remedies

Seventh Circuit

Cent. States, Se. & Sw. Areas Pension Fund v. Rodriguez, No. 18-CV-7226, 2021 WL 131419 (N.D. Ill. Jan. 14, 2021) (Judge Jorge Alonso). After a plan participant died, Plaintiffs mistakenly continued to pay his pension for roughly seven months. Plaintiffs, seeking return of the overpayments, filed suit against the participant’s widow and moved for summary judgment. In this case, Defendant did not respond to Plaintiffs’ motion for summary judgment. Defendant did not respond to Plaintiffs’ statement of facts, so the court deemed undisputed every fact in Plaintiffs’ statement of facts that was supported by admissible evidence. Plaintiffs, however, put forth no evidence that the $14,704.56 that the Fund deposited in Defendant’s account is still there. Even if Plaintiffs were correct that they had an equitable lien on each mistaken deposit of $1,838.07 (for a total of $14,704.56) as of the moment each mistaken deposit was made, dissipation of those funds would eliminate both the lien and the Fund’s ability to enforce it via ERISA § 502(a)(3). However, Plaintiffs argued that the relief they sought was surcharge, which they argued was equitable relief. The court agreed that the remedy of surcharge was an equitable remedy. The remedy was not appropriate, though, because a surcharge is a remedy for the beneficiary from the trustee, not a remedy for the trustee from a third party. Plaintiffs asserted a claim for “unjust enrichment under the federal common law of ERISA.” Plaintiffs wanted the court to recognize their claim for unjust enrichment under the common law of ERISA, and plaintiffs sought, as a remedy, “restitution” of the $14,704.56. The motion was denied, because plaintiffs have not shown they are entitled to judgment as a matter of law on such a claim. The cases plaintiffs cited did not support the existence of such a claim, and the court held it was not at liberty to write one into ERISA.

Statutory Penalties

Sixth Circuit

Gibson v. Ford Motor Co., No. 3:18-CV-43-RGJ, 2021 WL 77470 (W.D. Ky. Jan. 8, 2021) (Judge Rebecca Grady Jennings). Plaintiff brought a claim for statutory penalties and breach of fiduciary duty against former employer Ford and Conduent, the online platform administering the company’s pension plan. The court had previously granted summary judgment to both Ford and Conduent on Plaintiff’s claim for statutory penalties because Ford was not required to respond to Plaintiff’s request for plan documents if the requested document did not exist. Plaintiff requested the court amend its opinion to allow them to serve discovery asking whether Conduent had the plan document in question—a document explaining how transactions are processed in the online platform. The court granted Plaintiffs’ motion, allowing the discovery to be served. It did not opine on whether Plaintiff would be entitled to statutory penalties if a responsive document exists.

Your ERISA Watch is made possible by the collaboration of the following Kantor & Kantor attorneys:  Brent Dorian Brehm, Sarah Demers, Elizabeth Green, Andrew Kantor, Anna Martin, Michelle Roberts, Tim Rozelle, Peter Sessions, Stacy Tucker, and Zoya Yarnykh.