Below is a summary of this past week’s notable ERISA decisions by subject matter and jurisdiction.
Ramos v. Banner Health, No. 15-cv-2556, 2021 WL 2823079 (D. Colo. July 7, 2021) (Judge William J. Martinez). In this class action, plaintiffs prevailed on some of their claims alleging breach of fiduciary duties related to the Banner Health Employees 401(k) Plan. The court awarded losses and prejudgment interest to the plaintiffs in the amount of $3,131,081.62. Plaintiffs sought attorney fees of $5,286,413.60, costs of $108,564.98 and that the named class representatives each receive a $15,000 incentive award. The court found that plaintiffs’ billing records and hours did not reflect any semblance of billing judgment, were “wildly excessive” and included a large number of hours for redundant tasks. As an example, the court noted that an attorney billed 24 hours in a single day and 64 hours over 3 days. The court criticized the use of block billing, rather than .10-hour increments. Plaintiffs also tasked senior attorneys with work that could have been accomplished by more junior attorneys. In rendering this criticism, the court suggested that senior attorneys should not have been used for depositions, expert, pre-trial and trial work. The court also explained that a 100% fee award would be inconsistent with the success obtained as the court rejected several of plaintiffs’ key theories. Ultimately, the court awarded plaintiffs 20% of their total attorney fees. The court also found the costs to be “grossly excessive” and awarded the same 20%. As to incentive awards, the noted that all the named plaintiffs had already received $2,500 as part of a settlement; considering the relevant factors, the court granted the two named plaintiffs who personally attended the trial a larger amount, $12,500, and granted the five other named class members $7,500 in addition to the $2,500 they had already received.
Breach of Fiduciary Duty
Carter v. The Lincoln National Life Ins. Co., No. 220CV02921SHMATC, 2021 WL 2877912 (W.D. Tenn. July 8, 2021) (Before District Judge Samuel Hayes). Plaintiff filed suit after his claim for long term-disability benefits was denied. Defendant Lincoln National not only filed an answer but brought a counterclaim against plaintiff for failure to reimburse defendant for offsetable funds later recovered, allegedly in accordance with the terms of the policy. Defendant asked that a constructive trust be imposed on any benefits received from Lincoln National or the Social Security Administration. Defendant then brought a motion to dismiss Plaintiff's claim for breach of fiduciary duty which were brought along with his claim for benefits under ERISA Section 1132(a)(1)(B). Defendant argued that the claim must be dismissed because the alleged injury (denial of benefits) can only be remedied under a claim under 1132(a)(1)(b). Plaintiff asserted that the claim for breach of fiduciary duty was brought as an alternative to the benefit claim. The court found that plaintiff failed to plead facts to prove a separate injury which would justify a breach of fiduciary duty claim and therefore granted defendant's motion to dismiss plaintiff's claim under Section 1132(a)(3).
Feinberg v. T. Rowe Price Grp., No. JKB-17-0427, 2021 WL 2784614 (D. Md. July 2, 2021) (Judge James K. Bredar). As part of this complex class action, plaintiffs filed a motion to certify an interlocutory appeal on the narrow question of whether certain language in defendant’s retirement plan was void under ERISA. Plaintiffs argued that a “hardwiring amendment” in the plan that required the trustees to offer only T. Rowe Price funds in the plan violated Section 1110(a) of ERISA and that the district court erred in holding to the contrary. The court denied plaintiffs’ motion, finding that plaintiffs had failed to meet two of the three factors required to justify certification of an interlocutory appeal. The court explained that plaintiffs had failed present “extraordinary circumstances” because plaintiffs did not identify a controlling question of law, as the parties’ disagreement over the language of the hardwiring amendment implicated factual disputes. In addition, the court determined that an appeal would not materially advance the termination of the litigation. The court did not analyze the third factor of whether there was substantial ground for a difference of opinion regarding the lawfulness of the hardwiring amendment since the other two other factors were not met.
Disability Benefit Claims
Holden v. Unum Life Ins. Co. of Am., No. 20-6318, 2021 WL 2836624 (6th Cir. July 8, 2021) (Before Circuit Judges Gibbons, Cook, and Donald). Plaintiff appealed the district court judgment in favor of Unum upholding the insurer’s denial of long-term disability benefits. The court applied an arbitrary and capricious standard of review. The court found Unum’s decision was rational, in that it was possible to offer a reasonable explanation for the denial, even if it was the most reasonable decision. The court found Unum evaluated a comprehensive medical record and was reasonable in using its discretion in not conducting a separate exam of Holden. The court also found that Unum’s decisions did not materially change in reasoning. The court found no rule that required Unum to approved Holden’s long-term disability claim simply because it had approved her short-term disability claim. The court therefore affirmed the lower court’s judgment in favor of Unum.
Messing v. Provident Life & Ins. Company, No. 1:20-CV-351, 2021 WL 2820662 (W.D. Mich. July 7, 2021) (Judge Hala Y. Jarbou). Plaintiff, a former managing partner at a law firm, had received disability benefits from Unum since 1998. He claimed to be disabled by depression—specifically claiming that he was unable to handle the stress of being a trial attorney. In 2018, Provident found plaintiff was again able to work as a lawyer and terminated his benefits. After an appeal, plaintiff sued and Provident counterclaimed to recover previous policy payments, asserting that plaintiff had misrepresented his inability to work as a lawyer. Provident’s claim was based on information, discovered after plaintiff sued, that he had done some legal work in thirteen cases between 1999 and 2013. Plaintiff never disclosed this to Provident. Under the de novo standard, the court determined plaintiff had not established he remained disabled, although it did not consider the evidence of legal work because this was not in the administrative record. In essence, it weighed the report of an independent medical examiner (IME) hired by Provident, a rebuttal report from a doctor hired by plaintiff, and the conduct (or lack thereof) of plaintiff’s long-time treatment provider. The court found the IME report to be substantial in its testing and explanations. This warranted greater weight. In contrast, the court viewed the rebuttal report to be conclusory, warranting little weight. The kicker was that in 2017 plaintiff’s treatment provider had opined he was not able to work an occupation, but in 2018 she refused to express an opinion about plaintiff’s ability to work as a lawyer. Without an explanation for this change, the IME report carried the day. Turning to Provident’s counterclaim, the court ruled Provident had the burden to show that plaintiff’s purported misrepresentations induced benefit payments. However, at best, Provident showed it would have investigated the claim had it known the information about plaintiff’s legal work. The court acknowledged that investigation may have led to a benefit denial, but it also may not have. Because Provident failed to establish an essential element of its restitution claim, plaintiff was entitled to summary judgment on the counterclaim.
Nunnelly v. Life Ins. Co. of N. Am., No. 4:19-CV-01383-HNJ, 2021 WL 2826430 (N.D. Ala. July 7, 2021) (Mag. J. Herman Johnson, Jr.). Plaintiff sued LINA after LINA denied his claim for long-term disability benefits, and the parties filed cross-motions for judgment. LINA’s motion included a declaration from a LINA executive, which plaintiff moved to strike on the basis that: (1) the declarant was not named in LINA’s initial disclosures, and (2) the declaration testimony constituted inadmissible hearsay. The court granted LINA’s motion for judgment, denied plaintiff’s motion for judgment, and granted plaintiff’s motion to strike the aspects of the declaration which commented upon claim handling specifics, as that went beyond the certification of the administration record. The court rejected the broader argument that the declaration constituted hearsay, holding that the declaration certified and authenticated the claim file as required by Federal Rules of Evidence 803(6) and 902(1). Regarding the merits of the case, the court concluded that the medical records, opinions of plaintiff’s treating physicians, and opinions of LINA’s medical reviewers did not demonstrate that plaintiff remained continuously unable to work throughout the relevant period.
Stone v. Signode Indus. Grp. LLC, No. 1:17-CV-5360, 2021 WL 2894159 (N.D. Ill. July 9, 2021) (Mag. J. Susan E. Cox). This is a class action by employees of a packaging plant against the employer and related entities alleging that the employer assumed an obligation to pay ERISA-governed health-care benefits to retirees. The employees sued after the employer terminated the plan. The employees won on the merits of their claim, prevailed on appeal, and the case was remanded for a determination as to damages. The employees served written discovery regarding (1) “saved expenditures” and “other consequential gains” realized after defendants ceased providing benefits, and (2) “injunction compliance” regarding the restoration of benefits. Defendants objected, and the employees filed a motion to compel. On the first issue, the magistrate judge ruled in favor of the employees. The court noted that defendants’ arguments were largely merits-based – i.e., that the employees were not entitled to the extra-contractual relief to which the discovery was relevant. However, the court found that these arguments were improper on a discovery motion, which only evaluates the relevance of the requested information. On the second issue, the court ruled in favor of defendants. The court characterized the employees’ discovery request as a “fishing expedition” to explore whether defendants were complying with the injunction against them. The court found this improper, stating, “Plaintiffs are attempting to accomplish through standard discovery what should be attempted through post-judgment enforcement proceedings before the District Judge.”
Burns v. Guardian Life Ins. Co. of Am., No. CV 20-1496, 2021 WL 2815980 (W.D. La. July 6, 2021) (Judge S. Maurice Hicks, Jr.). Guardian filed a motion to dismiss on ERISA preemption grounds, which was not opposed by the plaintiff. The court granted the motion, agreeing that plaintiff’s claim for breach of contract was preempted by ERISA. The court applied a two-pronged test to determine whether the state law claim relates to an employee health benefit plan for the purposes of ERISA preemption. First the court asked whether the state law claim address areas of exclusive federal concern, such as the right to receive benefits under the terms of an ERISA plan, and then turns to whether the claims directly affect the relationship among the traditional ERISA entities—the employer, the plan, its fiduciaries, and the participants and the beneficiaries. Plaintiff’s claim to recover interest and “all sums reasonable” under La. R.S. 22:9082 was founded upon his claim for unpaid benefits and affects traditional ERISA entities. The interest claim centered upon whether plaintiff had a right to receive benefits under the terms of an ERISA plan, and courts have consistently found such a claim to be preempted. As result, the court ruled that plaintiff’s claims to recover interest and “all sums reasonable” were expressly preempted.
Mabry v. ConocoPhillips, No. 3:20-CV-00039-SLG, 2021 WL 2805358 (D. Alaska July 6, 2021) (Judge Sharon L. Gleason). Plaintiff moved for reconsideration of the court’s prior dismissal of defendant Alight Solutions, LLC, a plan service provider that had misstated plaintiff’s pension benefits. The court granted the motion consistent with the recent Ninth Circuit decision in Bafford v. Northrop Grumman, which held that state law claims for professional negligence and negligent misrepresentation for providing misinformation about pension benefits are not preempted by ERISA. Because the court found the state law claims were not preempted, it analyzed whether plaintiff had alleged sufficient facts that he is a third-party beneficiary to the contract between Alight and ConocoPhillips for his professional negligence claim. The court ruled plaintiff’s complaint sufficiently alleged he was a third-party beneficiary to the contract with respect to the services that Alight rendered directly to the plan participants, such as preparing pension benefit statements, processing pension applications and deciding first-level benefit appeals. The court also rejected Alight’s argument that plaintiff could not allege justifiable reliance as a matter of law because plaintiff knew a portion of his benefits were payable to his ex-spouse and because there were disclaimers in the benefit statements stating they were only “estimates.” The court found the allegations sufficient because plaintiff had received two letters stating his ex-spouse’s benefit would be segregated from his, he further alleged he made employment, savings and spending choices based on the pension estimates and Alight provided no precedent to show that plaintiff’s reliance on the estimates in planning his retirement were unreasonable. The court also agreed, in line with Bafford, that an online request for a benefit statement may suffice as a “written request” under ERISA Section 105.
Exhaustion of Administrative Remedies
Sullivan v. Nissan Supp. Ex. Ret. Pl., No. 3:20-CV-00752, 2021 WL 2809113 (M.D. Tenn. July 6, 2021) (Judge Eli Richardson). In this dispute over supplemental executive retirement benefits, defendants filed a motion to dismiss plaintiff’s lawsuit for failure to exhaust administrative remedies. Plaintiff argued that defendants did not follow the claims procedures in the plan and therefore he should not be required to exhaust administrative remedies. Among other procedural irregularities, defendants sent plaintiff a purported denial letter which did not inform plaintiff of his right to appeal or how to do so. Because defendants did not follow the plan’s claims procedures, the court deemed plaintiff to have exhausted his administrative remedies. The court likewise denied defendants’ request to remand the claim back to the plan, concluding that such a remand was appropriate considering that defendants had not complied with the plan’s claims procedures while handling the claim initially, and there was no indication defendants would handle the claim properly on remand. The court agreed with defendants that “things should have gone down differently,” but concluded that this was the fault of defendants, not of plaintiff.
Life Insurance & AD&D Benefit Claims
Cho v. First Reliance Standard Life Ins. Co., No. 20-55314, __ Fed. App’x __, 2021 WL 2885855 (9th Cir. July 9, 2021) (Before Circuit Judges Callahan and Forrest, and District Judge Richard Seeborg). First Reliance appealed from the district court’s order awarding Cho the full amount of her dependent spouse’s life insurance benefits. First Reliance contended no benefits were due because the insured did not provide evidence of insurability. The district court ruled that First Reliance had waived this requirement, citing Salyers v. Metropolitan Life Ins. Co., 871 F.3d 934 (9th Cir. 2017). First Reliance argued that Salyers did not apply because the plan had a non-waiver clause. The Ninth Circuit agreed that the “Effective Date of Dependent Insurance” clause emphasized the evidence of insurability requirement so clearly that no reasonable person would doubt proof of good health was a necessary condition to coverage. However, the Ninth Circuit found that Cho was entitled to the benefits for which she paid. For over a year defendants accepted her premiums without any submission of evidence of insurability even though it “knew or should have known” the terms of the plan required such evidence. Defendants’ actions were “so inconsistent with an intent to enforce” the requirement that it was reasonable for Cho to believe she was not required to submit such evidence. The insertion of a non-waiver clause in the operative policy did not displace this conclusion: “Allowing insurers like First Reliance essentially to vitiate Salyers and the good behaviors it seeks to promote by including one sentence in their plans would be unfair and unjust.” The Ninth Circuit further ruled that First Reliance could not maintain a claim for contribution or indemnification against Cho’s employer, noting that ERISA does not provide for “an equitable remedy of contribution in favor of a breaching fiduciary.” In enacting ERISA, there was no indication that Congress intended to “soften the blow on joint wrongdoers.”
Bircher v. Metropolitan Life Ins. Co., No. 20-55608, 2021 WL 2885845 (9th Cir. July 9, 2021) (Before Circuit Judges Fisher, Watford, and Bumatay). Plaintiff sought supplemental life insurance benefits under a plan sponsored by AT&T. The district court ruled against her. She appealed. The summary plan description stated the life insurance benefits ended upon termination of employment, except for eligible former employees of AT&T West. Plaintiff contended the deceased was part of AT&T West by virtue of being employed by AT&T within the Nevada and California region. AT&T asserted decedent was an employee of AT&T Corp, not AT&T West. The Ninth Circuit did not find plaintiff’s geographic-based argument persuasive, nor did the argument rebut the district court’s factual finding on this issue. The court also did not mind that MetLife had lost the 1988 SPD that was in effect at the time of decedent’s retirement or that MetLife may have committed various procedural violations, concluding that these irregularities had no impact on whether decedent was an employee of AT&T West. The district court’s decision was affirmed.
Medical Benefit Claims
Henkel of America, Inc. v. ReliaStar Life Ins. Co., No. 3:18-CV-00965 (JAM), 2021 WL 2857503 (D. Conn. July 8, 2021) (Judge Jeffrey Alker Meyer). Henkel sponsors a self-funded health plan, which paid an eye-popping $50 million in prescription drug costs for two of its employees. This suit was filed after ReliaStar, the stop-loss carrier, refused to repay Henkel for these prescription costs. Express Scripts was the company contracted to perform review of prescriptions, including interpretation and review for plan compliance, safety and efficacy and clinical appropriateness. Express Scripts moved for summary judgment. The court denied its motion, finding issues of material fact that should proceed to a jury to determine whether Express Scripts, and its affiliate, were conducting appropriate reviews including approval of the prescriptions based on prior authorization policies without confirming lab results and whether it knew that the prescriptions were incorrect or inappropriate for the participants.
Pleading Issues & Procedure
Eastern Cent. Ill. Pipe Trades Health & Welfare Fund v. Prather Plumbing & Heating, Inc., Case No. 1:18-cv-1434, __ F.4th __, 2021 WL 2819035 (7th Cir. July 7, 2021) (Before Circuit Judges Brennan, Scudder, and Hirsch). Two ERISA-governed employee benefit funds filed suit in federal court to hold a newly formed, family-run plumbing company liable for an ERISA funding obligations on the basis that it stepped into the predecessor family company’s obligations. The funds rooted their claim in the federal common law doctrine of successor liability and contended that was enough to show their claim arose under federal law and therefore raised a federal question properly in federal court under 28 U.S.C. § 1331. The district court agreed, proceeded to the merits, and concluded it would be inequitable to hold the new entity responsible for the other’s unpaid plan contributions on a theory of successor liability. On appeal, the Seventh Circuit held that the district court should have dismissed the suit because the federal question jurisdiction statute does not itself create a cause of action and the funds failed to identify any other federal statute authorizing their action in federal court. In doing so, the appellate court found that for a case to “aris[e] under” federal law for purposes of Section 1331, it is not enough for a plaintiff to merely call upon a constitutional provision, a federal statute, or a principle of federal common law in the complaint. The cause of action must be explicitly conferred through federal statute or implied by a judicial inference regarding Congress’s intent. The court found that although the funds cited two provisions of ERISA in their jurisdictional statement on appeal—the civil enforcement provision, 29 U.S.C. § 1132, and the provision mandating that employers contribute to multiemployer benefits plans, 29 U.S.C. § 1145—neither section authorizes a lawsuit to hold a successor liable for a prior ERISA judgment. Rather, 29 U.S.C. § 1132 provides a right of action for persons, including employee benefits plans, to enforce Section 1145, but the funds’ complaint did not purport to hold the company liable for violating Section 1145. Accordingly, the appellate court vacated the district court’s judgment and remanded with instructions to dismiss for lack of jurisdiction.
Dual Diagnosis Treatment Center, Inc. v. Horizon Blue Cross Blue Shield of New Jersey, No. CV-20-15285-SDW-AME, 2021 WL 2886085 (D.N.J. July 9, 2021) (Judge Susan D. Wigenton). Plaintiffs are substance abuse and mental health treatment centers that provided out-of-network services to eleven patients who were insured under defendants’ health plans. Defendants filed a motion to dismiss. The court found that it remained unclear whether plaintiffs were authorized assignees for any specific patients. The court also found it was not even clear that the provider, Dual Diagnosis, alleged an injury-in-fact because it was not listed as being owed payments. Further, the district court concluded that the complaint only contained vague and conclusory statements regarding plan terms that covered the claimed benefits. The court granted the motion to dismiss and permitted plaintiffs leave to file an amended complaint.
Advanced Physicians, S.C. v. Conn. Gen. Life Ins. Co., No. 3:16-CV-2355-G, 2021 WL 2857241 (N.D. Tex. July 8, 2021) (Judge A. Joe Fish). Plaintiff provided medical care to retired NFL players who are members of NFL Player Insurance Plan. Defendant is the plan administrator. After extensive correspondence between the parties to resolve disputes over whether medical care provided was treating work-related injuries and therefore excluded under the plan, plaintiff initiated this lawsuit to recover benefits due under the plan. The court found that plaintiff had not exhausted its administrative remedies available under the plan because it had not formally appealed the denial of the relevant claims, despite the informal communications between the parties. The court also determined that defendant’s interpretation of the work-related exemption and defendant’s presumption that all claims from plaintiff were work-related were consistent with the plan terms. Defendant’s denial of the claims was supported by multiple internal personnel opinions and one external entity opinion based upon a review of a sampling of medical records, which the court found to be substantial evidence. Defendant’s motion for summary judgment was granted both because of plaintiff’s failure to exhaust administrative remedies and because defendant’s decisions were not arbitrary and capricious. Judgment was entered for defendant.
Statute of Limitations
Kayser v. Guardian Life Ins. Co. of Am., 19-cv-454 (NSR), 2021 WL 2827042 (S.D. N.Y. July 7, 2021) (Judge Nelson S. Román). Plaintiff filed suit against defendants for breach of contract, fraud and violation of ERISA. Before the Court was Defendant Guardian’s motion for summary judgment as to the claims against Guardian only based on Guardian’s denial of plaintiff’s claim for long-term disability benefits. Plaintiff conceded that its state claims against Guardian were preempted by ERISA. That left only the ERISA claims at issue, which Guardian argued was time-barred. The Court found that Plaintiff sufficiently pled facts to put Defendant on notice that she was pursuing a breach of fiduciary duty claim and thus the Court denied Defendant's motion for summary judgment only as to Plaintiff's ERISA claim arising from an alleged breach of fiduciary duty pertaining to “fraud or concealment.” However, the court concluded that the plaintiff’s claim for benefits was time-barred under an applicable three-year statute of limitations. Accordingly, the court granted in part and denied in part Guardian’s motion for summary judgment.
Withdrawal Liability & Unpaid Contributions
Local 705 Int'l Bhd. of Teamsters Pension Fund v. Pitello, No. 20-2142, --- F.4th ---- 2021 WL 2818326 (7th Cir. Jul. 7, 2021) (Before Circuit Judges Wood, Lefkow, and Easterbrook). Gradei’s Express Co. withdrew from the Local 705 International Brotherhood of Teamsters Pension Fund. Generally, companies that withdraw from multi-employer funds must pay a penalty. Gradei’s, however, argued that it did not have to contribute further upon withdrawal because it had ceased all operations, and filed bankruptcy. Both the trial court and the appellate court agreed that because the owners of Gradei’s were still in business in other operations which it had used to further Gradei’s business as well, that was sufficient to establish that Gradei’s business was under common control with the other businesses, and the owner of all the businesses was personally liable for the withdrawal fees.
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