Your ERISA Watch – Second Circuit Sends NYU Back to the Drawing Board

Your ERISA Watch – Second Circuit Sends NYU Back to the Drawing Board

Sacerdote v. New York University, No. 18-2707, __ F. 4th __, 2021 WL 3610355 (2d Cir. Aug. 16, 2021) (Before Circuit Judges Newman, Walker and Menashi).
This week’s notable decision is a partial victory for plaintiffs in the latest round of fee cases against universities that allegedly have not been too smart about their pension plan investments. The Second Circuit partially reversed the district court, which had dismissed or ruled in favor of the defendants on all claims.

The plaintiffs in the case represent a class of New York University (NYU) and NYU School of Medicine employees who are participants in one of two 403(b) defined contribution pension plans sponsored by NYU. They sued the University and a committee that oversees the plans, alleging that they breached their fiduciary duties of prudence and loyalty in various ways and engaged in prohibited transactions by causing the plans to pay excessive investment fees and incur unreasonable performance losses. Specifically, the participants challenged the mandated investments in certain proprietary funds of one of the plans’ recordkeeper, TIAA-CREF, as well as the mandated use of TIAA-CREF as a recordkeeper, and they alleged that the defendants allowed the plans to incur unreasonable recordkeeping, investment, marketing, distribution, mortality and expense risk fees. The district court dismissed a number of the participants’ claims on the pleadings, refused to allow an amendment to name the individual members of the committee as defendants, struck plaintiffs’ jury demand, allowed the use of written declarations for all direct testimony at trial, and ruled in NYU’s favor on the remaining claims following a bench trial. Shortly after the trial, the district court judge left the bench to return to her prior law firm, Cravath, Swain & Moore LLP, and the participants moved for a new trial, arguing that the judge should have been disqualified because one of her colleagues at Cravath served on the NYU Board of Trustees.

On appeal, the Second Circuit agreed with the participants with respect to one count in their complaint alleging that the fiduciaries breached their duties in allowing the plans to offer as investments retail-class shares of certain mutual funds rather than lower-cost institutional-class shares of the same mutual funds for which the plans, by virtue of their large size, should have been eligible. The court reasoned “that plaintiffs have alleged ‘that a superior alternative investment was readily apparent such that an adequate investigation’ – simply reviewing the prospectus of the fund under consideration – ‘would have uncovered that alternative.’” The court also faulted the district court’s rationale that prudent fiduciaries might chose retail over institutional shares because they offer greater liquidity. This argument, the Second Circuit found, goes to the merits, impermissibly requires plaintiffs to rule out every possible innocent explanation and runs counter the principle that the complaint must be construed in favor of the plaintiffs. The appellate court also cautioned against using as benchmarks other decisions about prudent cost ranges. Furthermore, the court rejected the notion that the overall mix of funds in the plans was in any way relevant to the question of whether the plan (and its participants) had overpaid for this particular investment when presented with a “binary choice” between paying more for retail-class shares or less for institutional shares in the same mutual funds. Finally, the Second Circuit rejected NYU’s arguments that the district court’s error in dismissing this claim was harmless, in an extended and interesting discussion of the distinction between loss and damages and the shifting burdens of proof in an ERISA claim in the Second Circuit (and four other Circuits) with respect to the same.

The Second Circuit also ruled in favor of the participants on their argument that the district court erred in declining to allow them to amend their complaint to add the individual members of the committee as defendants. Given the particular language of the scheduling order, the court of appeals faulted the lower court’s use of the “good cause” standard of Rule 16(b)(4) of the Federal Rules of Civil Procedure rather than the more liberal standard of Rule 15(a)(2). The Second Circuit concluded that this error was not harmless given the district court’s findings harshly criticizing the performance of two of the committee members, and accordingly remanded for consideration of the motion to amend under the correct legal standard and reconsideration of two related post-trial motions.

The court ruled in favor of the defendants on the remaining issues on appeal. The court found that plaintiffs had waived their jury demand. The court also found no abuse of discretion by the trial judge’s practice of requiring direct testimony by written submissions, followed by live cross-examination and redirect. The court likewise concluded that the district court did not err in ruling for NYU on the tried claims, which challenged the plans’ use of several recordkeepers rather than one and the plans’ retention of two proprietary investment funds offered by TIAA-CREF. Finally, the court held that plaintiffs were not entitled to a new trial based on their contention that the judge who presided over the trial was tainted and should have recused herself because of one of the other partners at the firm that she returned to after the trial serves on the NYU Board of Trustees. The Second Circuit concluded, “that plaintiffs’ theories of impropriety are too far-fetched to reasonably call Judge Forrest’s impartiality into question.”

Judge Menashi filed a partial dissent, agreeing with NYU that because the district court found revenue sharing by the plans to be prudent, it necessarily followed that inclusion of retail shares was also prudent, essentially because that was part of the deal. The dissenting judge, who read the scheduling order somewhat more loosely than the majority, also disagreed that the district court applied the wrong standard with respect to the motion to amend.

I hope everyone has found this educational.

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

Attorneys’ Fees

Ninth Circuit
Masuda-Cleveland v. Life Ins. Co. of N. Am., No. CV 16-00057 LEK-WRP, 2021 WL 3683911 (D. Haw. Aug. 19, 2021) (Judge Leslie E. Kobayashi). After a remand from the Ninth Circuit, plaintiff prevailed in her claim for accidental death insurance benefits under an ERISA-governed employee benefit plan. She filed a motion for attorney’s fees, which defendant LINA opposed on various grounds. In reviewing a magistrate judge’s recommendation, the district court accepted the proposed hourly rates of the two attorneys in the case, including a $700 rate from California attorney Jeffrey Metzger, finding that “Plaintiff successfully demonstrated a lack of local counsel who had expertise in ERISA comparable to Mr. Metzger’s, particularly in the type of ERISA issues presented in this case.” The court further agreed with the magistrate that reductions were warranted for block billing, travel billing, and excessive billing. In sum, the court awarded plaintiff $364,946.80 in fees and $3,472.76 in nontaxable costs, for a total award of $368,419.56.

Breach of Fiduciary Duty

Second Circuit
The Providence Groups LLC v. Omni Administrators Inc. , No. 2:20-CV-05067, 2021 WL 3675149, (E.D.N.Y. Aug. 19, 2021) (Judge Frederic Block). Plaintiff Providence decided to switch from a fully insured to a self-insured health plan through an agreement with defendant LEA. Providence entered in an Administrative Services Agreement (“ASA”) with LEA, which agreed to serve as the third-party administrator during the transition. Due to purported mismanagement and violations of the ASA, Providence ended its relationship with LEA and filed a lawsuit setting forth claims for relief under ERISA and, in the alternative, causes of action for negligence, breach of contract, indemnification and specific performance. LEA filed a motion to dismiss plaintiff’s ERISA claims for breach of fiduciary duty (Section 409) and equitable accounting (Section 502(a)(3)). The court granted LEA’s motion as to breach of fiduciary duty for two reasons: (1) The ASA clearly reflected an intent for Providence, not LEA, to be considered a fiduciary for the Plan; and (2) LEA’s role was purely administrative. As to the equitable accounting claim, the court denied LEA’s motion to dismiss. LEA asserted that it must be a fiduciary for Providence to file an equitable accounting claim against it. The court disagreed, stating that the plain language of Section 502(a)(3) does not require the entity from whom an accounting is sought to be a fiduciary. The court also commented that it would be inappropriate to cut off potential equitable remedies at the motion to dismiss stage.

Kokoshka v. Inv. Advisory Comm. of Columbia Univ., No. 19 Civ. 10670 (JPC), 2021 WL 3683508 (N.D.N.Y. Aug. 19, 2021) (Judge John P. Cronan). Plaintiff filed suit under ERISA, arguing that defendant, a named fiduciary to plaintiff’s defined contribution pension plan, breached its fiduciary duty when it decided to remove a certain fund from the menu of available investments in its retirement plan. Defendant argued that it was protected from liability by a safe harbor provision in ERISA that applies to circumstances where an employee can decide how to invest their assets among different options. In the alternative, defendant argued that plaintiff failed to allege facts or produce any evidence demonstrating a breach of fiduciary duty. The Retirement Plan at issue permitted participants to direct their contributions among available investment options. The Committee was established to oversee and administer the Retirement Plan, retaining the “discretionary authority and powers necessary to control and manage [the Retirement Plan's] assets.” The Committee was not required to pick or retain any particular investment option but was instead empowered “to add an Investment Fund or . . . to eliminate an Investment Fund by transferring amounts held thereunder to a successor Investment Fund” as long as “reasonable notice” was given to participants. Plaintiff alleged that defendant acted imprudently in failing to consider the harm that divestiture of a certain fund would have on his “individual savings account,” and acted disloyally in its own interest rather than in the interest of the participants. The court, however, noted that Section 404(c) of ERISA establishes a safe harbor from liability for fiduciaries in the context of certain plans that “provide for individual accounts and permit a participant or beneficiary to exercise control over the assets in his account” so long as the participants are afforded the opportunity to move assets among different investment options, and the plan offers a “broad range of investment alternatives.” The court also considered language from the governing regulations - that “the act of limiting or designating investment options which are intended to constitute all or part of the investment universe of an ERISA § 404(c) plan is a fiduciary function which, whether achieved through fiduciary designation or express plain language, is not a direct or necessary result of any participant direction of such plan.” The court noted and agreed with several courts that have read this statement as precluding application of the safe harbor when a plaintiff's “claims are based on losses and breaches arising from the alleged imprudence of the maintenance and availability of [a fund] as an investment option.” The court found that since plaintiff's claim arises from defendant's decision to remove the fund from the investment options, the safe harbor did not apply. Nevertheless, turning to the claim of breach of fiduciary duty, the court found that plaintiff had not alleged facts, or provided evidence, showing that any duty of care was breached because defendant proffered evidence showing that it engaged in a prudent process when it chose to remove and divest the fund. In sum, the court determined that defendant discharged its fiduciary duty by “monitor[ing] [the] investments, ” and deciding to “remove [an] imprudent one.” Accordingly, the court granted defendant's motion for summary judgment.

Fifth Circuit
Jackson v. AT&T Retirement Services Plan, No. 20-30255, 2021 WL 3624751 (5th Cir. Aug. 16, 2021) (Before Circuit Judges Southwick, Oldham and Wilson). Jackson, a pro se plaintiff, filed a lawsuit against AT&T alleging breaches of fiduciary duty related to the merger of Cingular and AT&T Mobility as well as various allegations related to her work environment. The court allowed plaintiff to amend her complaint four times. Defendants successfully moved to dismiss the fourth amended complaint and plaintiff timely appealed the dismissal of her ERISA claims only. The Fifth Circuit held that plaintiff failed to show any error in the district court’s ruling that there could be no breach of fiduciary duty because the defendants were acting as employers or settlors of a trust, and not in a fiduciary capacity. Plaintiff also failed to show that any acts were taken in violation of the ERISA plan. The Fifth Circuit therefore affirmed.

Class Actions

Second Circuit
Ferguson v. Ruane Cuniff & Goldfarb Inc., No. 17-CV-6685 (ALC), 2021 WL 3667979 (S.D.N.Y. Aug. 17, 2021) (Judge Andrew L. Carter, Jr.). Plan participants brought a putative class action alleging breaches of fiduciary duties under ERISA. After reaching a settlement, the parties sought to certify the class and preliminary approval of the settlement. The court found that the alleged breaches of fiduciary duty were not related to plaintiffs’ employment and thus not subject to arbitration. The court also held that the numerosity, commonality, typicality, and adequacy of representation requirements were all met, certified the class, and granted leave to file the third amended complaint, which added class allegations. The court, however, denied the motion for preliminary approval of the class action settlement agreement because approving the settlement’s injunction provision would circumvent the Secretary of Labor’s independent and unqualified right to sue and seek redress for ERISA violations on the basis that ERISA plans significantly affect the national public interest.

Disability Benefit Claims

Eighth Circuit
Chapman v. Unum Life Insurance Co. of America, No. 20-CV-1155 (NEB/BRT), 2021 WL 3667345 (D. Minn. Aug. 18, 2021) (Judge Nancy E. Brasel). Plaintiff suffered from degenerative arthritis in her hands that rendered her unable to perform her job as an endodontist. She sought disability benefits from Provident, her insurer. Provident granted benefits under the insurance policy’s “sickness” coverage, running until she turned 65. Plaintiff contended that she had been “injured” and was entitled to lifetime benefits. Provident disagreed and, after an administrative appeal process, denied her claim for “injury,” but continued to pay benefits for “sickness.” Plaintiff filed suit seeking to overturn Provident’s decision. The parties moved for judgment under a de novo review standard. Under the policy, “Injuries” are “accidental bodily injuries occurring while [the P]olicy is in force.” “Sickness” is a “sickness or disease which is first manifested while [the P]olicy is in force.” And the “fact that a disability is caused by more than one Injury or Sickness or from both will not matter. [Provident] will pay benefits for the disability which provides the greater benefit.” The court agreed with plaintiff, reasoning, as a matter of logic and common sense, disabilities caused by repetitive trauma are often termed “repetitive stress injuries” not “repetitive stress sicknesses.” An ordinary plan participant would likely expect that an insurer would cover repetitive stress injury under Provident’s definition of “accidental bodily injury.” Thus, the degenerative arthritis was an injury under the policy and the court found plaintiff qualified for lifetime benefits.

Harris v. Federal Express Corp. Long Term Disability Plan, No. 21-1049, __ Fed. App'x. __, 2021 WL 3701152 (8th Cir. Aug. 20, 2021) (Before Circuit Judges Shepherd, Grasz, and Kobes). Plaintiff Harris appealed the district court’s ruling upholding defendant’s denial of his claim for long-term disability benefits under an ERISA-governed employee benefit plan. In a one-paragraph decision, the Eighth Circuit affirmed, agreeing with the district court that defendant “did not abuse its discretion in interpreting the plan term ‘any compensable employment,’ as its interpretation required more than a nominal ability to work, and thus did not conflict with the Plan’s goals or with ERISA’s stated purpose.”

Tenth Circuit
Chandhok v. Companion Life Ins. Co., No. CIV 19-0362 JB/JFR, 2021 WL 3635204 (D.N.M. Aug. 17, 2021) (Judge James O. Browning). Defendant filed a motion to alter or amend judgment after the court concluded that defendant’s determination of plaintiff’s disability end date was arbitrary and capricious. The issue was whether the court misapprehended facts in its interpretation of when policy coverage terminated and thus what medical evidence was appropriate to consider. The court denied the motion, explaining that defendant was rearguing an issue that the court previously addressed by raising evidence and presenting arguments that could have been raised before judgment.

ERISA Preemption

Third Circuit
Verrelli v. United Brotherhood of Carpenters, No. CV-21-398-JMV-JBC, 2021 WL 3630304 (D.N.J. Aug. 17, 2021) (Judge John Michael Vazquez). Plaintiffs alleged they were unlawfully fired in retaliation for their protected activity. After defendants removed the case to federal court, plaintiffs filed a motion to remand it to the Superior Court of New Jersey. Defendants argued that the court had federal question jurisdiction based on various federal statutes, including ERISA. Specifically, they argued that plaintiffs’ claims based on retaliation were preempted by ERISA Section 510. Courts employ a two-part test to determine whether a state law claim is completely preempted under Section 502(a) – a federal court has jurisdiction over a state law claim when (1) the plaintiff could have brought the action under Section 502(a) of ERISA and (2) no independent legal duty supports the plaintiff’s claim. The court held that plaintiffs could only bring their claims under Section 510 if they gave information in any inquiry or proceeding relating to ERISA. Construing the contested facts in favor of plaintiffs, the court found that defendants had not sufficiently established that plaintiffs provided such information. Defendants therefore failed the first prong of the preemption test. The court granted plaintiffs’ motion to remand.

Royal Heritage Home, LLC v. Bluestone, No. 20-4157 (ES) (CLW), 2021 WL 3630300 (D.N.J. Aug. 17, 2021) (Judge Esther Salas). Plaintiff, an employer, had originally filed a complaint in state court alleging that defendant made representations regarding the cost of a retirement plan that would be completely funded by employee contributions. Plaintiff thereafter was surprised by an $85,000 life insurance premium that accompanied the plan and learned that the plan was not fully funded by plaintiff’s employees, as defendant promised. Plaintiff alleged causes of action for violation of the New Jersey Consumer Fraud Act, intentional and negligent misrepresentation, breach of the covenant of good faith and fair dealing, and unjust enrichment. Defendant removed the matter to federal court asserting ERISA preemption, and then moved to dismiss. Plaintiff opposed the motion and requested that the court remand to state court for lack of jurisdiction. The court found that plaintiff, as an employer, did not qualify as a participant, beneficiary, or fiduciary entitled to bring an ERISA claim. Even if it were, plaintiff’s claims for misrepresentation and bad faith are not the type of claims governed by ERISA. Because plaintiff did not claim entitlement to rights, benefits or anything else under the terms of the life insurance plan, there was no claim under ERISA. Instead, plaintiff’s claims were based on the pre-plan conduct of defendant and therefore were not preempted by ERISA. Accordingly, the court held that plaintiff’s claims were not completely preempted by ERISA and remanded the case to state court.

Sixth Circuit
Rogers Transport, Inc. v. Holden, No. 3:21-CV-00485, 2021 WL 3603795 (M.D. Tenn. Aug. 13, 2021) (Judge Aleta A. Trauger). Plaintiffs filed suit against defendants after defendants failed to invest funds into a particular investment as promised. Plaintiffs brought five causes of action, only one of which (a state law claim for breach of fiduciary duty) even ostensibly raised a federal question. Defendants filed a notice of removal based on ERISA preemption. Plaintiffs opposed the motion and moved to remand, arguing that they were not seeking benefits under the plan, but rather were suing based on defendants’ statements and conduct. The court noted that a claim is completely preempted when “a claim satisfies both prongs of the following test: (1) the plaintiff complains about the denial of benefits to which he is entitled only because of the terms of an ERISA-regulated employee benefit plan; and (2) the plaintiff does not allege the violation of any legal duty (state or federal) independent of ERISA or the plan terms.” Under this test, the court granted plaintiffs’ motion to remand, holding that defendants failed to establish how this case would satisfy the first prong of the test. In fact, the court noted that plaintiffs were “not complaining about the denial of a benefit to which they are entitled… To the contrary, the crux of their complaint is that they are not, in fact, entitled to the tax and investment benefits that they thought they were purchasing.”

Ninth Circuit
PIH Health Hospital-Whittier v. Cigna Healthcare of California, Inc., No. 2:20-CV-11595-ODW-MAAx, 2021 WL 3616641 (C.D. Cal. Aug. 16, 2021) (Judge Otis D. Wright, II). Plaintiff medical providers alleged Cigna refused to pay for emergency services to Cigna-covered patients. Cigna removed the action to federal court, claiming federal jurisdiction based on ERISA preemption. Cigna then filed a first amended notice of removal. Plaintiffs moved to remand the action and requested costs. The court found that Cigna’s amended notice of removal ultimately failed to establish removability. Plaintiffs alleged that based on prior payments Cigna created implied contracts under which Plaintiffs were entitled to reimbursement. The court found this was an independent right arising out of California law. The court found the claims did not rely on assignments of patients and therefore were not derivative claims. The court granted the motion for remand but denied the request for fees because Cigna possessed an objectively reasonable basis for seeking removal.

Exhaustion of Administrative Remedies

Fifth Circuit
Aubert v. Blue Cross & Blue Shield Inc., No. CV 20-307-RLB, 2021 WL 3642039 (M.D. La. Aug. 17, 2021) (Judge Richard L. Bourgeois, Jr.). Plaintiff sought benefits for health equipment prescribed following his stroke. Blue Cross filed a motion for summary judgment based on plaintiff’s alleged failure to exhaust administrative remedies. No opposition was filed. The court found the plan required plaintiff to complete a first level of appeal prior to filing a civil action under ERISA. The court found no dispute that plaintiff failed to submit the required documentation for the claim and failed to seek an administrative appeal. Therefore, the court found there was no dispute that plaintiff failed to fully exhaust his administrative remedies prior to filing the lawsuit. The court granted summary judgment to defendant and dismissed the claims without prejudice.

Life Insurance & AD&D Benefit Claims

Sixth Circuit
Metropolitan Life Ins. Co. v. Little, No. 1:19-cv-1657, 2021 WL 3603963 (N.D. Ohio Aug. 13, 2021) (Judge Pamela A. Barker). In this interpleader action and twisted family saga, two sisters, Sharon Little (“Sharon”) and Kenya Little (“Kenya”), asserted competing claims to decedent Reuben Little's life insurance proceeds, payable under a group plan that Metropolitan Life Insurance Company issued through the decedent's former employer, General Motors (“GM”). The court noted that, although courts ordinarily “need not look beyond the beneficiary designation form to determine the appropriate beneficiary,” this rule was inapplicable where “the validity” of the designation was “in question.” To resolve this question of validity, the court looked at two factors: capacity to execute a beneficiary designation and undue influence. Having found that the evidence demonstrated that as far back as 2008, the decedent’s physical and mental condition was in decline and that Kenya did exert undue influence, the court concluded that designations executed in 2009 and 2011 naming her the beneficiary of the life insurance policy were invalid as a matter of law and a 1982 form designating Sharon was valid and controlled the disbursement of the life insurance proceeds.

Medical Benefit Claims

Ninth Circuit
Goodman v. Motion Picture Indus., No. 20-55937, __ F. App’x. __, 2021 WL 3615415 (9th Cir. Aug. 16, 2021) (Before Smith and Lee, Circuit Judges, and District Judge Eduardo C. Robreno). Under the terms of the health insurance plan, a divorced spouse “becomes ineligible for benefits at the end of the month in which the date of the final decree of dissolution of marriage or divorce is entered.” Plaintiff argued that the administrator’s interpretation of “final decree of dissolution of marriage or divorce” was a legal question tied to the interpretation of the California Family Code—which required de novo rather than abuse of discretion review. The court disagreed. The only question was whether the state-court marital dissolution order constituted a disqualifying event under the terms of the plan. The phrase “final decree of dissolution of marriage or divorce” did not incorporate or rely on any definitions from California state law. No statutory interpretation was necessary, so abuse of discretion review applied. The court also held it was not an abuse of discretion for the administrator to treat a February 2016 judgment by a family law court as a “final decree of dissolution of marriage.” The judgment of dissolution stated: “Marital or domestic partnership status is terminated and the parties are restored to the status of single persons.” Even accepting plaintiff’s argument that this judgment was merely interlocutory because it did not resolve the divorce proceedings in their entirety, that did not mean it was unreasonable for the plan administrator to treat the judgment as a “final decree” for purposes of determining benefits eligibility. The judgment unambiguously terminated the status of the marriage, which reasonably counted as a “final decree of dissolution of marriage” under the plain meaning of that phrase. It was therefore not an abuse of discretion for the administrator to treat the 2016 judgment as a “final decree of dissolution of marriage” disqualifying plaintiff from eligibility for spousal benefits under the Plan. Finally, the plan documents stated: “To qualify for COBRA coverage, the Plan Office must be notified within 60 days of the date that the final decree of divorce or dissolution is filed with the court, or the date that coverage would have terminated because of the divorce, whichever is later.” An average plan participant would have reasonably understood the phrase “final decree of divorce or dissolution” to cover the February 2016 judgment of dissolution of marital status. Plaintiff, however, did not notify the plan office of the divorce until December 2017. Because plaintiff failed to notify the plan office within 60 days of the filing of the judgment, the plan was not obligated to send plaintiff any additional information about her right to continue coverage nor was it subject to penalties.

Pension Benefit Claims

Eighth Circuit
Brennan v. Northern States Power Co., No. CV 20-2085, 2021 WL 3636048 (D. Minn. Aug. 17, 2021) (Judge John Tunheim). Plaintiff brought this action against her employer alleging that it improperly calculated her retirement and pension benefits by refusing to credit the time she worked for the Nuclear Management Company (“NMC”), an affiliate organization that was later absorbed by defendant employer Xcel. Defendant moved to dismiss for failure to state a claim. The court granted the motion. It held that because the Xcel Pension Plan explicitly prohibited crediting the time that employees worked for NMC, and plaintiff received separate NMC benefits, she failed to meet her burden of demonstrating that she was entitled to the benefits she sought.

Pleading Issues & Procedure

Third Circuit
Gerber v. A&L Plastics Corp., No. CV-19-12717-ES-CLW, 2021 WL 3616179 (D.N.J. Aug. 16, 2021) (Judge Esther Salas). Plaintiffs alleged defendants withheld money from their paychecks for health insurance and taxes but then pocketed the money for personal use rather than paying the health insurance premiums or taxes. They sued defendants for breaches of ERISA and COBRA, but defendants failed to appear in the action. Plaintiffs filed a motion for default judgment, which the court denied, finding that the pleadings were inadequate to establish liability. Plaintiffs alleged defendants violated 29 U.S.C. § 1132(a)(1)(B) by not providing notice and election coverage forms to plaintiffs, but these allegations did not comport with an ERISA claim for benefits due. Plaintiffs also claimed defendants had violated COBRA by not informing them of their rights but did not include any factual allegations about who was at fault and what they failed to do. Because of insufficient factual pleadings, the court denied plaintiffs’ motion and gave them the option to amend their complaint or abandon their federal claims.

Provider Claims

Third Circuit
Somerset Orthopedic Assoc. v. Horizon Healthcare Servs., No. 19-8783, 2021 WL 3661326 (D.N.J. Aug. 18, 2021) (Judge John Michael Vazquez). Plaintiffs, out-of-network medical providers, alleged that the insurer defendants underpaid them for services they provided to participants in ERISA healthcare plans. Defendants moved to dismiss on various grounds. Plaintiffs alleged they obtained an assignment of benefits and power of attorney (POA) from the patients involved, which allowed them to bring their action. In a prior ruling, the court had determined that some of the health plans at issue had anti-assignment clauses. In the amended complaint, plaintiffs argued that, despite the anti-assignment clauses, the POAs granted them standing to sue, and the court agreed, denying defendants’ motion on that ground. The court, however, dismissed plaintiffs’ ERISA claims because they failed to identify any plan terms demonstrating that they should have been paid their full billed amount.

Statutory Penalties

Tenth Circuit
Jackson v. eLynx Tech., LLC, No. 20-CV-000344-GKF-SH, 2021 WL 3633483 (N.D. Okla. Aug. 17, 2021) (J. Gregory K. Frizzell). Plaintiff Jackson is the widow of the former CEO of defendant eLynx, who died in 2020, leaving her as a beneficiary under eLynx’s ERISA-governed employee life insurance benefit plan. During the state court probate action occasioned by her husband’s death, Jackson’s attorney submitted a request for benefit plan documents to eLynx. eLynx initially rejected the request due to Jackson’s alleged misconduct during the contentious probate proceedings, but eventually produced the documents 94 days after the request. Jackson filed this action against eLynx and its current CEO under ERISA seeking a statutory penalty for failing to timely produce the plan documents. The court dismissed the CEO from the action, finding that she was not the plan administrator, and thus she could not be personally held liable for failing to provide the documents. However, the court granted judgment to Jackson on her claim against eLynx, finding that she had made a proper request to which eLynx did not timely respond. The court exercised its discretion to award $35 per day (reduced from the statutory maximum of $110) in penalties for a total of $2,205. The court also found that Jackson was entitled to attorney’s fees under ERISA and directed her to file a motion in that regard.


Your ERISA Watch is made possible by the collaboration of the following Kantor & Kantor attorneys: Brent Dorian Brehm, Jaclyn Conover, Beth Davis, Sarah Demers, Elizabeth Green, Elizabeth Hopkins, Andrew Kantor, Monica Lienke, Anna Martin, Susan Meter, Tim Rozelle, Peter Sessions, Stacy Tucker, and Zoya Yarnykh.