This week’s first notable decision is Wit, et al. v. United Behavioral Health, No. 14-CV-02346-JCS, 2020 WL 6479273 (N.D. Cal. Nov. 3, 2020), where the court issued the remedies in two ERISA class actions, Wit et al. v. United Behavioral Health. and Alexander et al. v. United Behavioral Health.

By way of background, the defendant, United Behavioral Health/OptumHealth Behavioral Solutions (“UBH”), administers mental health and substance use disorder benefits for commercial welfare benefit plans, and as such, developed internal guidelines (“Guidelines”). In Wit, following a 10-day bench trial, the court found for Plaintiffs, including that: 1) UBH improperly denied benefits for treatment of mental health and substance use disorders because their Guidelines did not comply with the terms of their insurance plans and/or state law; 2) deliberately used internal guidelines that were found to be inconsistent with the terms of the class members’ health insurance plan, all in an effort to “protect its bottom line;” and 3) UBH lied to state regulators and its own executives responsible for writing and implementing the guidelines—in a concrete attempt to mislead the court in this matter. 

In Alexander, the court found that the Guidelines failed to reasonably interpret the plan’s requirement that they be based on “generally accepted standards of care,” and as such the court found a breach of fiduciary duty and the wrongful denial of claims for benefits. Following, the Plaintiffs sought relief in the following ways: 1) declaratory relief in the form of a declaration that UBH violated the terms of the class members’ plans requiring that coverage be consistent with generally accepted standards of care and clarifying class members’ rights under the plans; 2) an order remanding UBH’s coverage determinations for reprocessing under standards that are consistent with generally accepted standards of care; 3) injunctive relief designed to prevent UBH from harming class members in the same way in the future; and 4) appointment of a special master to monitor UBH’s compliance with the court’s remedies order. 

From the outset, UBH launched several objections, including about Plaintiffs’ request for declaratory relief. UBH argued it should be denied, citing United States v. Washington, 769 F.2d 1353, 1356-1357 (9th Cir. 1985) and other authority. The court, however, found that UBH failed to cite any persuasive authority that a declaratory judgment was inappropriate. In no uncertain terms, the court found that, “[t]he scant authority UBH cites does not support its position,” including their citing of a non-ERISA case. The court concluded that the relief Plaintiffs sought was available under § 1132(a)(1)(B) and that, in the alternative, relief was available under § 1132(a)(3). The court awarded the declaratory relief requested by Plaintiffs. 

Plaintiffs further sought the reprocessing of claims and requested the following specifics: 1) allow for completion of the class members’ records on remand; 2) specify the criteria to be applied on remand; 3) specify the procedures UBH should follow when the reprocessing is complete; 4) expressly require the payment of pre- and post-judgment interest on any benefits to which a class member is entitled after reprocessing; 5) require UBH to certify compliance with the reprocessing procedures and report to the court on its compliance; and 6) set deadlines that ensure that reprocessing proceeds expeditiously. Further, Plaintiffs asked the court to appoint a special master to monitor compliance. 

UBH argued that Plaintiffs had not established the reprocessing remedy would benefit every member of the certified class and therefore such relief should not be awarded. The court found in favor of Plaintiffs’ request for reprocessing of the class members’ claims for coverage. The court rejected UBH’s argument that class members who were denied benefits under the Guidelines, but did not subsequently obtain the treatment for which they had requested coverage, were not entitled to have their claims reprocessed. Going further, the Court called out UBH for the outright harm they have caused: 

“[The harm that] UBH caused by applying overly restrictive guidelines to make coverage determinations goes beyond the money spent by class members who could afford to obtain the treatment that UBH refused to cover. Rather, it was the unfair adjudication of claims that was experienced by all of the class members (and for some deprived them of much-needed treatment that should have been covered by their health plans). 

Another notable conclusion by the court was that UBH would be precluded from offering any new reasons for denying benefits that were not contained in the original denial letters (citing several cases, including Harlick v. Blue Shield of California, 686 F.3d 699, 719–20 (9th Cir. 2012)). Further, the court noted that instead of UBH’s own Guidelines, the most recent versions of CALOCUS [Child and Adolescent Level Of Care Utilization System], CASII [Child and Adolescent Service Intensity Instrument], ASAM [American Society of Addiction Medicine], and ECSII [Early Childhood Service Intensity Instrument] should be used during the reprocessing of claims as the court found that they reflected the “generally accepted standards of care.” 

Finally, the court awarded Plaintiffs injunctive relief in several ways. Of particular note, the court found that because there was a “significant danger” of UBH committing recurrent violations by utilizing flawed Guidelines, as a result of the financial temptation tied with applying such Guidelines, the court awarded injunctive relief governing the criteria UBH would be required to apply to coverage determinations. Additionally, the Court found that “UBH abused its discretion in administering the class members’ plans, placing its financial interests before its duties to plan members and depriving members of their right to determinations of coverage that were consistent with their plans.” As such, the court found it was appropriate to appoint a special master to oversee the reprocessing of claims. 

In sum, the court found that UBH had long breached its fiduciary duties to the class members and as a result, “each and every adverse benefit determination” within the class should be remanded to UBH for reprocessing under the manners consistent with the FFCL—and all at UBH’s expense, including the payment of interest. The court further concluded that class members had the right to submit new and additional information that supported their claim for benefits. 

The remedies awarded to Plaintiffs serve as a beacon of hope and a monumental victory for all those who UBH has discriminated against. For far too long, UBH wrongfully denied benefits to people simply because of their diagnosis(es) and their inability to able to prove their treatment was worthy of UBH’s unfair Guidelines designed to favor UBH’s own pockets. We hope that the remedies awarded will be a lesson to all those who administer mental health benefits—no longer will torrid and abusive practices be tolerated, especially when it results in the almighty dollar reigning more important than the treatment needs of human beings.

Kathleen MacDonald is an Insurance Advocate at Kantor & Kantor, LLP. Ms. MacDonald has over 15 years of experience in health appeals and policy, having served as the Policy and Communications Director at the Eating Disorders Coalition in Washington, DC, and as a Health Insurance Advocate for a national non-profit dedicated to mental health. Today, Ms. MacDonald utilizes her experience to appeal on behalf of clients who have been wrongfully denied health or disability benefits.

This week’s second notable decision is another Kantor & Kantor victory in a mental health benefits case from Montana. In Jessica U. v. Health Care Service Corp., No. CV 18-05-H-CCL, 2020 WL 6504437 (D. Mont. Nov. 5, 2020), the court considered the residential treatment of Jessica, a 16-year-old with a long history of medical and mental health conditions. Jessica had a complicated history of gastric distress and illness which preceded her residential treatment by at least four years. She had her gall bladder removed and multiple endoscopies. She was diagnosed with collagenous gastritis and suffered constant nausea. When Jessica was prescribed prednisone, she gained 20 pounds in a short period of time which was highly distressing to her. Her eating disorder behaviors steadily increased from that point. She then had a gastric pacemaker placed, followed by a Jpeg feeding tube. Jessica refused to eat with the feeding tube. 

Jessica was admitted to residential treatment which was focused on the “interwoven nature of Jessica’s physiological health/gastric issues and her eating disorder” and her family’s concept of Jessica as chronically ill. Blue Cross initially approved benefits for residential treatment and then approved benefits when Jessica transitioned to partial hospitalization. However, in June 2015, Jessica’s condition deteriorated during a one-week home pass and upon return to treatment, she self-harmed. Jessica was admitted back to residential treatment, but this time Blue Cross denied benefits claiming that based on the Milliman Care Guidelines (“MCG”), medical necessity was not met. 

The court found that the MCG are not referenced or incorporated into the Plan. The Plan defines medical necessity as “in accordance with generally accepted standards of medical practice.” The court found problems with Blue Cross’s claims that the Guidelines were just a tool for administrators to evaluate Jessica’s case and that the MCG encompass generally accepted standards of care. The court found the “record reveals something different” than Blue Cross’s position. The court noted that of the 32 articles cited by MCG, not one specifically addresses eating disorders. 

The court relied on caselaw which held that the MCG are “by no means the sole measure of medical necessity.” The court found that “it was precisely due to the acute and imminent factors outlined in the MCG, and relied upon” by Blue Cross that resulted in many of the factors regarding Jessica’s treatment and struggles not considered by Blue Cross. Conversely, Blue Cross applied factors which “had absolutely no relation to her unique mental health issues.” For example, Blue Cross concedes Jessica was never a danger to others, but this factor was repeatedly cited in Blue Cross’s denials. The court found Blue Cross’s “rigid application of the MCG” precluded consideration of factors such as Jessica’s family structure, difficulty adjusting to her meal plan, phobia of attending school, and caring for herself adequately.

The court found that Jessica’s treatment team “were in the best position to make credible recommendations regarding the medical necessity of her residential treatment.” Under a de novo review, the court concludes the MCG should not have been applied and that once disregarded, the evidence demonstrated that Jessica’s residential treatment was medically necessary.

The court also determined that the out-of-network provider should be compensated equal to the payment Blue Cross would make if the services had been obtained within the Blue Cross and Blue Shield of Montana service area. The court ordered Blue Cross to pay benefits due to Jessica for residential treatment. 

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

Class Actions

First Circuit

Glynn, et al. v. Maine Oxy-Acetylene Supply Co., et al., No. 2:19-CV-00176-NT, 2020 WL 6528072 (D. Me. Nov. 5, 2020) (Judge Nancy Torresen). The Second Amended Complaint “alleges that Defendants Maine Oxy, Guerin, and Gentry breached the fiduciary duties that they owed to ESOP participants under 29 U.S.C. §§ 1132(a) (Counts I, II, and VIII), 1106 (Count III), 1109 (Counts IV and IX), and 404(a)(1) (Counts V, VI, and VII).” Plaintiffs moved for class certification of the following class: “All Maine Oxy employees who participated in the company ESOP and who sold their shares back to Maine Oxy after [the Albistons] sold [their] 51% interest in the company.” The court granted the motion, finding that all requirements of FRCP 23(b)(3) are met.

Fourth Circuit

Reetz v. Lowe’s Companies, Inc., et al., No. 518CV00075KDBDCK, 2020 WL 6528866 (W.D.N.C. Nov. 5, 2020) (Judge Kenneth D. Bell). In this case, Plaintiffs allege that Defendants breached their fiduciary duties with respect to the Hewitt Growth Fund. The parties stipulated regarding class certification and the dismissal of individual defendants. The court preliminarily certified the following class pursuant to FRCP 23(b)(1): All participants and beneficiaries of the Lowe’s 401(k) Plan whose Plan account balances were invested in the Hewitt Growth Fund at any time on or after October 1, 2015, through the date of judgment, excluding Defendants, any of their directors, and any officers or employees of Defendants with responsibility for the Plan’s investment or administrative functions. The court also preliminarily appointed Nichols Kaster, PLLP and Tharrington Smith LLP as counsel for the class.

Ninth Circuit

Crosby v. California Physicians’ Serv., No. SACV1701970CJCJDEX, __F.Supp.3d__, 2020 WL 6535790 (C.D. Cal. Nov. 2, 2020) (Judge Cormac J. Carney). This matter involves a putative class action where Plaintiffs, who are insured under the California Association of Professional Employees Benefit Trust plan issued by Blue Shield, allege that Defendants systematically deny, reduce, or revise down insurance coverage for medically necessary Applied Behavior Analysis (“ABA”) therapy for children with Autism Spectrum Disorder (“ASD”) in violation of ERISA. Plaintiffs moved for class certification which the court denied on the basis that Plaintiffs lack Article III standing. Specifically, the court found that Plaintiffs cannot show they have sustained a sufficiently concrete injury or that a favorable decision would redress their injury. Plaintiffs ultimately received all the ABA therapy they sought for their son and their only injury was their need to pursue administrative appeals. These appeals were necessary for Plaintiffs to assert their claims in federal court. Whether Plaintiffs win or lose does not change the fact that Defendants will make medical necessity decisions based on their son’s individual circumstances as they have in the past. The court also found that the proposed class does not satisfy the requirements of Rule 23(a). The court dismissed the case.

Disability Benefit Claims

Fourth Circuit

Cruz v. Charter Communications Short Term Disability Plan, 2020 WL 6390667 (D.S.C., Nov. 4, 2020) (Judge J. Michelle Childs). Plaintiff filed suit against her employer’s self-funded short-term disability benefit plan in response to the Plan’s denial of her claim for benefits. The parties filed cross-motions for summary judgment. Under the abuse of discretion standard, the court found that substantial evidence supported Sedgwick and the Plan’s decision. Most persuasive to the court was the fact that Plaintiff’s physicians failed to explain how conditions prevent her from performing her own occupation but Sedgwick’s independent medical reviewers did provide such explanations regarding why Plaintiff was able to perform her own occupation.

Discovery

Ninth Circuit

Chacko v. AT&T Umbrella Benefit Plan No. 3, No. 2:19-cv-1837 JAM DB (E.D. Cal. Nov. 9, 2020) (Magistrate Judge Deborah Barnes). “The crux of the parties’ dispute concerns whether defendant has the contractual authority to demand its claims administrator, Sedgwick, and its vendor, NMR, produce responsive documents.” In support of Plaintiff’s position, the court found that the contract between Sedgwick and AT&T provides that Sedgwick “shall maintain complete and accurate records relating to the Work and the performance” of the contract and that Sedgwick “shall provide to” defendant “all . . . records, including financial records relating to the invoices, and payment obligations and supporting documentation[.]” Further, this is Plaintiff’s third motion to compel but this is the first time Defendant asserted that the responsive documents are not under Defendant’s control. The court found Defendant’s argument unpersuasive and declined to give it another bite at the apple. The court granted Plaintiff’s motion with respect to documents in possession of Sedgwick. The court did not grant the motion as to documents in NMR’s possession since Plaintiff has not produced any evidence establishing a contractual relationship between the Plan and NMR as it relates to the production of the discovery at issue. The court denied Plaintiff’s request for terminating sanctions as unjustified at this time and denied the Plan’s request for a protective order.

Eleventh Circuit

Waters v. AIG Claims, Inc. et al., Case No. 2:17-CV-00133-RAH-KFP, 2020 WL 6389852 (M.D. Ala Oct. 30, 2020) (Judge R. Austin Huffaker, Jr). This case involves an Objection to a Magistrate Judge’s Order based on the denial of Plaintiffs’ motion to compel as to a group of documents withheld by Defendants based on privilege created after the lawsuit was filed.  Plaintiff challenged the Magistrate Judge’s ruling on the grounds of the fiduciary exception, because after Plaintiffs filed the lawsuit, Defendants continued to administer the plan.  Defendants countered that it produced post-litigation documents for which there was any gray area as to whether the documents involved ongoing plan administration. The Magistrate Judge reviewed post-litigation documents in camera and confirmed the validity of the privilege asserted. The court overruled Plaintiffs’ objection. This case is useful to argue that documents created after a lawsuit has been filed should be produced if such documents pertain to ongoing plan administration.

ERISA Preemption

Fourth Circuit

Mebane, et al. v. GKN Driveline North America, Inc., No. 1:18CV892, 2020 WL 6525820 (M.D.N.C. Nov. 5, 2020) (Judge Loretta C. Biggs). Plaintiffs claim that Defendant violated state law by deducting a “tobacco surcharge” from their paychecks without obtaining “the required advance written authorization” or “providing advance written notice of the amount to be deducted” in violation of N.C. Gen. Stat. § 95-25.8. Defendant argued that this claim is preempted by ERISA because the deduction is a component of GRN’s employee welfare benefit plan. The court concluded “as a preliminary matter that there are sufficient facts in the record to satisfy the threshold determination that the Plan is an employee benefits plan governed by ERISA, that it includes the tobacco surcharge, and that this surcharge is the one to which Plaintiffs refer in their Complaint. Thus, ERISA preemption applies.”

Fifth Circuit

Marco Z. v. UnitedHealthcare Insurance Company, et al., Case No. SA-20-CV-00351-JKP, 2020 WL 6492921 (W.D. Tex. Nov. 4, 2020) (Judge Jason Pulliam). Plaintiff was a participant under a health plan established by Forma Automotive and insured by United Healthcare (the “defendants”). Plaintiff required surgery and extensive hospitalization in Mexico. The hospital in Mexico was a non-network provider and did not have a contract with United. Plaintiff provided an assignment to the hospital and the hospital employed Med X a domestic claims adjustment and billing company to obtain any medical insurance benefits due Plaintiff. United denied benefits claiming that all information had not been received needed to process the claim.  Plaintiff filed a lawsuit alleging causes of action for (1) compelled production of the administrative record; (2) breach of contract; (3) unjust enrichment; (4) quantum meruit; and, (5)-(7) violations of various Texas laws. Defendants filed a motion to dismiss and sought to dismiss claims (2)-(7) under the complete preemption doctrine and claim (1) for failure to state a claim upon which relief may be granted. The court noted that the parties misunderstood the complete preemption doctrine but explained that conflict preemption applied. The court granted defendants motion with leave to amend as to claims (2)-(7) based on conflict preemption and claim (1) for failure to state a claim upon which relief can be granted. This opinion provides a nice discussion of complete vs. conflict preemption.

Ninth Circuit

Adams v. Symetra Life Ins. Co., Case No. CV-18-00378, 2020 WL 6441034 (D. Ariz. Nov. 3, 2020) (Judge Jennifer G. Zipps). Adams asserts state law causes of action against Symetra for breach of insurance contract and breach of the duty of good faith and fair dealing. However, this action arises out of Adams’s claim for monthly benefits under a group disability policy. Symetra filed a motion for partial summary judgment and asserted that ERISA provides Adams’s exclusive remedy because (1) his company was an “employee organization” under ERISA and it established or maintained a welfare benefit plan, and (2) Adams, as an employer, purchased insurance coverage for Adams and at least two employees, thereby establishing a benefit plan subject to ERISA. Magistrate Judge Bowman issued a Report and Recommendation which considered and rejected both arguments, concluding first that the company was not an employee organization as defined by ERISA because the company’s members were independent contractors, and not employees, and, second, Adams did not establish or maintain the Policy. Here, Symetra objected to the conclusions. The court agreed with Magistrate Judge Bowman’s conclusions and held that ERISA did not preempt Adams’ state law claims. 

Exhaustion of Administrative Remedies

Fifth Circuit

Mission Toxicology, LLC, et al. v. Unitedhealthcare Insurance Company, et al., No. 5:17-CV-1016-JKP, 2020 WL 6491662 (W.D. Tex. Nov. 4, 2020) (Judge Jason Pulliam). Plaintiffs are laboratories seeking to recover unpaid claims from Defendants on behalf of Defendants’ insureds. Defendants moved for summary judgment on the basis that the Labs did not exhaust their administrative remedies. The court granted the motion, finding “there is no reasonable basis to infer that the Hospitals presented their claims on behalf of the patients or that the Hospitals presented their claims and appeals through any administrative process set out in an ERISA plan. Without that reasonable inference, the Court similarly cannot reasonably infer that the same claims and appeals made by Integrity for the Labs were in accordance with any ERISA plan of any patient through any assignment. To show exhaustion of administrative remedies for some claims, the Labs want to piggyback on the claims submitted on behalf of the Hospital. While the Court declines to find at this time that such piggybacking is precluded in all circumstances, it does not work here, even assuming without deciding that the Hospital claims and appeals submitted by Integrity can also be attributed to the Labs. It necessarily fails here because providers such as the Hospitals are seeking payment of claims on their own behalf, not on behalf of any patient through an assignment of claims. Furthermore, as shown by the typical ERISA plans, providers and patients must pursue different administrative processes even though each process starts with the filing of a claim.” The court also found that the Labs failed to carry their burden to show that exhausting would be futile.

Tenth Circuit

Eschler v. The Lincoln National Life Insurance Company, No. 2:20-CV-467 DB, 2020 WL 6450509 (D. Utah Nov. 3, 2020) (Judge Dee Benson). Defendant’s 12(b)(6) motion sought to dismiss Plaintiff’s lawsuit in its entirety on the basis that Plaintiff failed to pursue two administrative reviews of Lincoln National’s adverse claim decision prior to filing suit and thus failed to exhaust administrative remedies. The Plan required two appeals before suit was filed. The court did not consider Plaintiff’s complaint to the Better Business Bureau as a second appeal even though Lincoln responded to that complaint. This finding was based on Lincoln explaining in response to the BBB complaint that Plaintiff had another appeal and Lincoln would provide a full and fair review upon submission of that appeal. Plaintiff also failed to show another appeal was futile. Thus, the court dismissed Plaintiff’s (a)(1)(B) claim. The court did not dismiss Plaintiff’s (a)(3) claim because “exhaustion is generally not required for a claim of breach of fiduciary duty.” 

Medical Benefit Claims

Eighth Circuit

Vercellino v. Optum Insight, Inc., et al., 2020 WL 6484066 (D. Neb. Nov. 2, 2020) (Judge Brian C. Buescher). This case involves a dispute over whether an ERISA plan is entitled to reimbursement for benefits it paid for Plaintiff’s medical treatment in the event that Plaintiff recovers in tort from a third party for damages related to his injuries. Plaintiff alleged a breach of fiduciary duty and sought a declaration that Defendants are not entitled to reimbursement from his potential recovery as well as an injunction preventing Defendants from asserting such a lien or claim. Defendants asserted counterclaims seeking a declaration that the plan is entitled to reimbursement from any such recovery as well as an order enforcing an equitable lien to that effect. In granting Defendants’ Motion for Summary Judgement, the court found that under an abuse of discretion standard, the plan’s interpretation of policy language allowing it to pursue reimbursement for third party recoveries was not ambiguous. It also rejected Plaintiff’s argument that the fact that he was a minor at the time of the accident had any bearing on the court’s analysis, noting that it knows of no requirement that an ERISA plan obtain the assent of a beneficiary for the covered person to be bound by plan terms, and saw no reason to impose such a requirement here. Finally, the court rejected Plaintiff’s argument that Defendant violated its fiduciary duty by failing to inform Plaintiff of the potential consequences of the plan language allowing for such recoveries, noting that Plaintiff “points to no evidence indicating any false or misleading statement by Defendants, [nor any] allegation that Defendants failed to comply with the general disclosure requirements of ERISA.”

Ninth Circuit

Wit, et al. v. United Behavioral Health, No. 14-CV-02346-JCS, 2020 WL 6479273 (N.D. Cal. Nov. 3, 2020) (Magistrate Judge Joseph Spero). See Notable Decision summary above.

Wit v. United Behavioral Health, No. 14-CV-02346-JCS, 2020 WL 6469764 (N.D. Cal. Nov. 3, 2020) (Judge Joseph C. Spero). Plaintiffs brought putative class actions alleging they were improperly denied coverage for mental health and substance use disorders by UBH which administers these benefits under their health plans. The court previously certified two classes, Wit and Alexander. The court considered UBH’s Motion for Summary Judgment in which UBH contends Plaintiffs cannot demonstrate concrete injury due to alleged ERISA violations and allegedly flawed Guidelines. The court held that Plaintiffs’ theory of liabilities is in line with the plain language of ERISA and existing case law. The court found that ERISA permits participants to recover not only benefits due but also to enforce a participant’s rights under a plan. This broad remedial provision does not support UBH’s position that Plaintiffs must show they were actually denied benefits as a result of the Guidelines. The court found that case law provides that breach of fiduciary duty claims are not limited to those in which injury alleged is the actual denial of benefits. Regarding standing, the court found that intangible harms, such as denial of the Plaintiffs’ right to Guidelines that were developed for their benefit and to a fair adjudication of their claims, may be cognizable under ERISA. The court found there is a “risk of real harm” because the Guidelines “are at the heart of Plaintiffs’ claims.” The court dismissed Plaintiffs’ request for a surcharge. The court previously found that under the named Plaintiffs’ plans the Guidelines exception does not allow UBH to adopt standards that are inconsistent with generally accepted standards and the court declined to revisit the question on summary judgment. The court found there is material dispute of fact as to what law applied to claims governed by Texas law. The court denied UBH’s Motion for Summary Judgment with the exception of the surcharge remedy.

Wit v. United Behavioral Health, No. 14-CV-02346-JCS, 2020 WL 6462401 (N.D. Cal. Nov. 3, 2020) (Judge Joseph C. Spero). UBH brings a Motion for Class Decertification in which it asks the court to decertify the three classes it certified for trial. The court rejected UBH’s challenges as to commonality and typicality which the court has already rejected. The court also rejected UBH’s argument that Plaintiffs have failed to establish a common injury and adequacy requirement. UBH also claimed the classes should be decertified because some class members’ claims were approved following an administrative appeal. The court is troubled by individuals in the class definition whose claims were paid because it has always been the court’s understanding that class members were denied coverage. The court modifies the class definitions by adding to the class definitions the phrase, “and was not subsequently approved, in full, following an administrative appeal.” If class members were notified in writing that their claims were covered as a result of an administrative appeal, they are no longer members of the class. The court concludes the classes must be partially decertified to exclude individuals whose claims were denied on administrative appeal rather than initial denial unless they received actual and timely notice. The court stayed the case and tolled the limitations period for class members who will be excluded by 120 days after notice is sent. 

Jessica U. v. Health Care Service Corp., No. CV 18-05-H-CCL, 2020 WL 6504437 (D. Mont. Nov. 5, 2020) (Judge Charles C. Lovell). See Notable Decision summary above.

Tenth Circuit

James C., et al. v. Aetna Health & Life Ins. Co., et al., Case No. 18-cv-00717, 2020 WL 6382043 (D. Utah Oct. 30, 2020) (Judge David Barlow). J.C. received treatment at Outback Therapeutic Expeditions (Outback), a behavioral health program in Utah, and Monarch School. After the treatment was completed, J.C. submitted claims to Aetna for treatment at these facilities, but Aetna denied the claims for the failure to obtain precertification. Although the Plan required precertification for these services, it also provided a specific avenue for reimbursement of covered treatment despite the lack of precertification. Consequently, the court held that Aetna’s denials of J.C.’s claims for lack of precertification did not comport with the Plan’s requirements and were unreasonable. The court also held that Aetna could not revive in litigation an abandoned administrative basis for denial—an assertion that the Plan had an wilderness therapy exclusion. The court found Aetna’s benefits decision arbitrary and capricious, remanded the claims for Aetna’s re-review and granted Plaintiff’s attorneys’ fees. 

Pension Benefit Claims

Fourth Circuit

Bonner v. SYG Assocs., Inc., No. 1:19-CV-1514, 2020 WL 6384147 (E.D. Va. Oct. 30, 2020) (J. T.S. Ellis, III). Plaintiff brought this action contending that she was the surviving “spouse” for the purpose of the death benefit of an ERISA-governed 401(k) plan. Defendants denied Plaintiff’s claim on the ground that the decedent had not yet divorced his prior second wife, and therefore Plaintiff, decedent’s third wife, was not a true “spouse” for the purpose of ERISA and the plan. (This decision was clouded by the fact that the two plan administrators who made this decision were daughters of the deceased from his first marriage, and had contacted the deceased’s second wife encouraging her to make a claim and split the proceeds with them.) Plaintiff filed a motion for judgment, which the court denied. The court agreed that the decedent had named no beneficiary and that the benefits were required to be given to his “spouse.” However, the court found that Defendants had successfully rebutted the presumption created by Virginia law that Plaintiff’s marriage was valid. Specifically, Defendants presented evidence that no divorce was ever entered in any jurisdiction where decedent and his second wife had lived or were married. As a result, Plaintiff was not a legal “spouse” and therefore was not entitled to benefits. The court further found that Plaintiff was not entitled to equitable relief under ERISA, because even though the two daughters breached their fiduciary duty by agreeing to split the benefit with the second wife, Plaintiff had no claim to the funds in the first place and therefore no standing to object.

Sixth Circuit

Love v. Talbert House, Case No. 1:19-cv-448, (S.D. Ohio Nov. 3, 2020) (Judge Susan J. Dlott).  Plaintiff sued her employer and retirement benefit administrator for employer contributions to her 401(k). The court upheld the Magistrate Judge’s determination that the voluminous emails between the insured and the employer sufficed to exhaust administrative remedies. The court agreed that the employer’s motion to dismiss should be denied and allowed the claims against the employer to continue. The court also agreed that the motion to dismiss the benefit administrator should be dismissed.     

Seventh Circuit

Lysengen ex rel. Morton Bldgs., Inc. v. Argent Tr. Co., Case No. 20-1177, 2020 WL 6472637 (C.D. Ill. Nov. 3, 2020) (Judge Michael Mihm). Plaintiff sued her employer, alleging ERISA violations in the purchase and financing of its ESOP. The question had already been raised at the state court with different parties and found in favor of Defendants. Defendants moved to dismiss the federal action and asked the court to take judicial notice of the ruling. The federal court declined, noting that their arguments for judicial notice were akin to those for collateral estoppel, which did not apply here as the parties were different. The court found that Plaintiff alleged enough facts to indicate that the ESOP overpaid for the Morton stock at issue, that the complaint could proceed, and denied the motion to dismiss.  

Ninth Circuit

Michael v. Conagra Brands, Inc. Pension Plan et.al., No. 4:18-CV-00277-DCN, 2020 WL 6384723 (D. Idaho Oct. 30, 2020) (Judge David Nye). Defendant’s motion for summary judgment was granted in this dispute over how to interpret the Conagra Pension plan’s language regarding calculation of benefits. The court found under an abuse of discretion standard that the plan language was not ambiguous, and “independently came to the conclusion that the interpretation as set forth by [the plan administrators] was correct” as opposed to Plaintiff’s proposed method.

Plan Status

Fourth Circuit

Lyon Shipyard 401(k) Plan v. Subeh Tr. of Lonnie E. Jones Revocable Living Tr. Agreement, No. 19-2013, __F.App’x__, 2020 WL 6391099 (4th Cir. Nov. 2, 2020) (Judges Diaz, Floyd, and Shedd). The issue of whether the 401(k) plan was an ERISA plan, and therefore federal common law should be applied to the issues rather than Virginia state law, was raised for the first time during the appeal. The appellate court declined to opine on whether the plan was governed by ERISA because this issue was not raised at the trial court.

Pleading Issues & Procedure

Sixth Circuit

IUOE Local 324 Retirement Trust Fund, et al., v. LGC Global FM, LLC (F/K/A Lakeshore Rickman JV, LLC), et al., No. CV 17-13921, 2020 WL 6391622 (E.D. Mich. Nov. 2, 2020) (Judge Linda V. Parker). Plaintiffs filed a motion for leave to file an amended witness list to add Tiskono Crawford in their action to recover fringe benefits. The court considered the following factors to determine whether a failure to disclose was substantially justified or harmless: 1) the surprise to the party against whom the evidence would be offered; (2) the ability of that party to cure the surprise; (3) the extent to which allowing the evidence would disrupt the trial; (4) the importance of the evidence; and (5) the non-disclosing party’s explanation for its failure to disclose the evidence. The court concluded that while Plaintiffs’ previous nondisclosure of the witness they seek to add may not have been substantially justified, the court found it to be harmless because Plaintiffs’ desire to add this witness could not be a surprise to Defendants because Plaintiffs referred extensively to his deposition testimony when they sought to amend their complaint previously, and due to COVID, the trial will be several months away. Thus, to the extent there is any surprise, Defendants can cure it by seeking leave of court to take whatever additional discovery they find necessary. For the same reason, allowing Mr. Crawford to testify will not disrupt the trial. Fourth, the evidence appears crucial to Plaintiffs’ alter ego/single employer claim. Finally, while Plaintiffs offer no explanation for their failure to identify Mr. Crawford as a witness earlier, the cause appears more likely to be the result of negligence or oversight rather than “underhanded gamesmanship.”

Eighth Circuit

Sanzone v. Mercy Health, No. 4:16 CV 923 CDP, 2020 WL 6483951 (E.D. Mo. Nov. 4, 2020) (Judge Catherine D. Perry). The court determined in a prior ruling that the retirement plan at issue in this case was a church plan exempt from regulation by ERISA, and the Eighth Circuit affirmed. On remand, the court was asked to determine whether depriving Plaintiffs of protections under ERISA conferred standing on them to allege that the exemption violated the Establishment Clause of the First Amendment. The court found that Plaintiffs did not have standing to make such a challenge. Plaintiffs alleged that because the plan was not subject to ERISA’s minimal funding requirements, the plan was at substantial risk of being unable to pay benefits. However, the court found that the plan was funded for the next ten years and that Plaintiffs had not alleged that the plan had failed to pay or was in danger of failing to pay any benefits. As a result, their claims presented a “hypothetical injury,” not an actual injury. The court further found that Plaintiffs would not even have had standing if the plan was governed by ERISA, because of the Supreme Court’s restrictive ruling on ERISA standing issued earlier this year in Thole v. U.S. Bank. The court therefore dismissed Plaintiff’s constitutional claim as well as their supplemental alternative state law claims.

Severance Benefit Claims

Ninth Circuit

Lillywhite v. AECOM, et al., No. C18-1840-JCC, 2020 WL 6445824 (W.D. Wash. Nov. 3, 2020) (Judge John C. Coughenour). This case involves a dispute between a Washington-based employee and his former employer regarding his termination following his August 26, 2016 workplace accident. He seeks, inter alia, civil enforcement of severance benefits under ERISA. Plaintiff alleges that his employer failed to provide him the severance payment required under the plan. Defendants put forth sufficient uncontroverted evidence to indicate that Plaintiff was terminated for cause given his poor judgment and failure to follow the company’s safety policies and practices, ultimately leading to the accident resulting in injuries to him, his co-worker, and risk of injury to the public. The court granted summary judgment to Defendants, finding there is no basis for Plaintiff’s claim for unpaid severance payments brought under 29 U.S.C. section 1132(a)(1)(B). 

Withdrawal Liability & Unpaid Contributions

Second Circuit

Division 1181 Amalgamated Transit Union-New York Employees Pension Fund & Its Board of Trustees v. New York City Department of Education, et al., No. 14CV7405ERKSMG, 2020 WL 6449268 (E.D.N.Y. Nov. 2, 2020) (Judge Edward R. Korman). “The crux of this dispute is whether Plaintiffs can require Contractors to contribute to the Fund based on provisions in contracts between DOE and the Contractors to which the Fund is not a party. Because such contribution obligations are not cognizable under ERISA, Plaintiffs’ ERISA claims are dismissed for failure to state a claim. Having dismissed all of Plaintiffs’ claims that arise under federal law, I decline to exercise pendent jurisdiction over Plaintiffs’ state law breach of contract claims and dismiss those claims for lack of subject matter jurisdiction.”

Third Circuit

Kelly, et al. v. Green Air Mechanical, LLC, No. 1:20-CV-00257, 2020 WL 6487485 (M.D. Pa. Nov. 4, 2020) (Judge Kane). The court granted Plaintiffs’ motion for default judgment.

Board of Trustees, Roofers Union Local 30 Combined Health and Welfare Fund, et al. v. Hughes Urethane Construction Co., Inc., No. 2:19-CV-01820-JDW, 2020 WL 6445931 (E.D. Pa. Nov. 3, 2020) (Judge Joshua D. Wolson). “Hughes Urethane made a choice: in exchange for getting access to union labor, it agreed to use union labor and to make contributions to the Funds. It cannot avoid that obligation by having a non-union owner/employee perform the work. It owes contributions to the Funds for Mr. Hughes’s work, just as it would for any other employee. The Court will grant the Funds’ partial summary judgment motion.” 

Fourth Circuit

Trustees of The National Electrical Benefit Fund v. Great Lakes Electrical Contractors, Inc., No. GJH-20-0591, 2020 WL 6393382 (D. Md. Nov. 2, 2020) (Judge George J. Hazel). The court granted Plaintiff’s Motion for Default Judgment in the total amount of $15,186.37.

Eighth Circuit

Greater St. Louis Construction Laborers Welfare Fund, et al. v. Gateway Construction Services, Inc., No. 4:20-CV-00808 SEP, 2020 WL 6483944 (E.D. Mo. Nov. 4, 2020) (Judge Sarah E. Pitlyk). The court granted Plaintiffs’ motion for default judgment. The “Court finds that Plaintiffs have provided sufficient evidence to support their motion. Considering all amounts due, Defendant owes Plaintiffs a total of $61,131.03.”

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.