Below is a summary of this past week’s notable ERISA decisions by subject matter and jurisdiction.
Diaz v. BTG Int’l, Inc., 19-CV-1664-JMY, 2021 WL 2414580 (E.D. Penn. June 14, 2021) (Judge John Milton Younge). Before the court were plaintiffs’ motion for final approval of a class action settlement, attorney’s fees, and reimbursement of expenses and lead plaintiff case contribution award. The court noted that to approve the settlement, it would first have to certify the settlement class and determine that notice to the class was appropriate and in accordance with the preliminary order approving class action settlement. The court must then determine whether the settlement is fair, reasonable and adequate. The court must also appoint class counsel to administer the settlement fund and approve compensation for class counsel and the named plaintiffs as class representatives. Before the court can finally approve the settlement agreement, plaintiffs must demonstrate that the settlement class meets the requirements of Federal Rule of Civil Procedure 23 (numerosity, commonality, typicality, and adequacy of representation) and also fit into one of the three categories of class actions set forth in Rule 23(b). Having found that the settlement class met all the requirements, the court granted the motion for final approval of the class settlement. With regard to attorney’s fees, the court held that plaintiffs' attorneys in a class action may petition the court for compensation for any award to the class resulting from the attorneys' efforts and noted that courts use two approaches: the "percentage of the fund" method and the "lodestar" method. The court determined that the lodestar method was appropriate and awarded fees. Finally, regarding the request for class service awards, the court found that class representatives have expended substantial time and effort on this litigation. They sought counsel to assist them (and other Class Members) in initiating this lawsuit and enforcing their rights against the plan. Throughout the litigation, they provided relevant documents, responded to discovery, reviewed pleadings, met with Class Counsel and were responsive by phone and email. Under these circumstances, the court concluded that a $10,000.00 service award to each named Class Representative was reasonable and warranted.
Rush v. GreatBanc Tr. Co., No. 19-cv-00738 2021 WL 2453070 (N.D. Ill. Jun. 16, 2021) (Judge Andrea Wood). Plaintiff is an employee of Segerdahl Corp., which was sold and a portion of the proceeds districted to employee participants in the Employee Stock Ownership Plan (“ESOP”). Plaintiff filed a putative class action against the trustee of the ESOP and various corporate officials alleging that they were ERISA fiduciaries and that, in declining to pursue a sale to competitor companies rather than an investment company, they did not obtain the most profitable sale and thereby violated ERISA. The court certified a class concluding that: (1) plaintiff met the numerosity threshold where there were 464 employees; (2) he established commonality by showing that employees participated in the ESOP; and (3) he also demonstrated typicality and adequacy, despite some potential credibility issues.
Feltington v. Hartford Life Ins. Co., No. 14-CV-6616-GRB-AKT, 2021 WL 2474213 (E.D.N.Y. June 17, 2021) (Judge A. Kathleen Tomlinson). Plaintiff brought a declaratory relief action against Hartford seeking long term disability benefits. Plaintiff moved to obtain discovery beyond the administrative record, and the court issued a mixed decision. The court did not “see the utility” of permitting plaintiff to question a Hartford representative about letters that were not part of the record until after Hartford decided plaintiff’s administrative appeal and concluded its review. The court held that plaintiff has not provided any case-specific allegations to support her suggestion that Hartford has a general policy of favoring the opinions of its retained doctors over other evidence in the administrative record. The court directed Hartford to produce information regarding internal procedures for reopening or reconsidering closed claims and whether the procedures were followed regarding plaintiff’s claim. The court found plaintiff has not demonstrated that one of Hartford’s retained physicians, Dr. Small, exhibited peer review bias which could be imputed to Hartford and the request for his deposition was denied. The court partially granted and denied plaintiff’s request for three interrogatories regarding physician reviewers’ conflict of interest.
Walsh v. CSG Partners, LLC, Case No. 21-MC-345 (GHW)(RWL), 2021 WL 2457069 (S.D.N.Y. June 16, 2021) (Mag. J. Robert W. Lehrburger). Petitioner, U.S. Secretary of Labor, brought a motion to enforce an administrative subpoena by the Employee Benefits Security Administration to respondent, CSG. CSG is an investment bank specializing in Employee Stock Option Plans (“ESOPs”), which are a form of employee pension benefit plans, governed by ERISA. The Secretary opened an investigation of five ESOPs to determine whether any person violated or is about to violate ERISA or any regulation or order issued thereunder. As part of his investigation, the Secretary issued informal document requests to CSG concerning the ESOP transactions and CSG's communications with its business clients. In response, CSG produced more than 25,000 documents. CSG also provided privilege logs for each of the four ESOPs, collectively listing thousands of documents withheld on the basis of attorney-client privilege. Many of those documents were communications involving CSG, CSG's ESOP clients, and those clients’ legal counsel. CSG informed the Secretary that it asserted the attorney-client privilege on behalf of its clients, not for itself. CSG also objected to producing any documents for the period following the closing date of each ESOP. In its motion, the Secretary challenged CSG's assertion of attorney-client privilege and CSG's refusal to produce post-closing documents. The Secretary also requested equitable tolling of the statute of limitations with respect to filing an ERISA claim against CSG based on the delay caused by the instant discovery dispute. The court held that the attorney-client privilege was waived for communications that included attorneys, their clients, and their clients’ legal counsel. The court found that CSG did not serve an interpretive function in its role and that if the doctrine were extended to every situation where a consultant worked to guide a client, it would swallow the basic rule that there is no privilege protecting communications between clients and their accountants. The court further ordered CSG to produce all post-closing communications with the sellers concerning the four ESOPs. Lastly, the court declined to determine whether to equitable toll the six-year statute of limitations on a potential ERISA claim against CSG for the time between the issuance of the subpoena and the time that CSG fully complies. The court found the issue was premature and best left to a later juncture if and when the petitioner asserted such a claim against CSG.
Vest v. Nissan Supp. Exec. Ret. Plan II, No. 3:19-1021, 2021 WL 2515239 (M.D. Tenn. June 18, 2021) (Mag. J. Barbara D. Holmes). Vest, an executive for Nissan Americas, resigned and accepted a job with Bridgestone. After resigning, she submitted a claim for benefits under Nissan’s ERISA-governed executive retirement plan. Nissan sent an “advisory position” to Vest asking for more information, aimed at determining whether Vest had violated Nissan’s non-compete rules. Vest provided the requested information, but Nissan failed to make a timely decision on her claim. The parties disputed whether Nissan’s initial disclosures of the administrative record were satisfactory, which led to Vest filing a motion asking the court to require Nissan to “produce a copy of the full, unredacted administrative record” and permit her to “conduct discovery related to deficiencies in the administrative record, the Plan administrator’s compliance with ERISA regulations, and possible conflicts of interest.” The magistrate judge granted plaintiff’s motion in part. The judge ordered Nissan to remove redactions in the record referring to other executives who had made similar benefit claims. The judge further ruled that Vest’s discovery requests were “entirely reasonable in light of Nissan’s failure to follow the terms of the Plan in processing her claim.” The judge ordered Nissan to produce all information submitted, considered, or generated in connection with the advisory position. The judge reserved decision on Vest’s other requests.
Sunwoo v. JPMorgan Chase & Co., No. 20-CV-5410 (VSB), 2021 WL 2443814 (S.D.N.Y. June 15, 2021) (Judge Vernon S. Broderick.) Plaintiff brought suit against defendants for breach of contract and fraudulent misrepresentation under state law, and denial of benefits under JPMC's Severance Plan, pursuant to ERISA. Defendants sought dismissal of plaintiff's complaint on the grounds that: (1) ERISA preempts plaintiff's state common law claims; and (2) plaintiff did plausibly state a claim under ERISA that the JPMC Plan Administrator's decision to deny plaintiff additional severance benefits was arbitrary or capricious. The court held that: (1) because plaintiff's state law claims inextricably “relate to” an ERISA-governed Severance Plan, they are preempted by ERISA and accordingly dismissed; and (2) the Plan Administrator's denial of plaintiff's administrative appeal was not arbitrary and capricious, his ERISA claim is likewise dismissed.
Exhaustion of Administrative Remedies
Delauter v. Nissan Supp. Exec. Ret. Plan II, No. 3:20-CV-00609, 2021 WL 2515238 (M.D. Tenn. June 18, 2021) (Judge Eli Richardson). Delauter, an executive for Nissan Americas, left Nissan’s employ and then sent several communications to Nissan about the payment of benefits under its ERISA-governed executive retirement plan. Nissan never adequately responded, so he filed suit. After he filed suit, a Nissan executive committee voted to find Delauter ineligible for benefits under the plan’s fraud/disloyalty provisions. Defendants filed a motion to dismiss for failure to exhaust administrative remedies, arguing that Delauter never initiated a claim for benefits in the manner required by the plan. The court found that the plan language regarding the submission of claims was ambiguous. The court further found that even though the plan granted discretionary authority to Nissan’s administrative committee, that committee made no decisions in the case; the only decisions were made by the executive committee instead. Thus, the court ruled no deference was warranted and the ambiguity in the plan should be construed in favor of Delauter. Under this approach, the court found that Delauter had submitted a “written request for benefits” as required by the plan, and that defendants did not timely respond to that request. The court therefore denied defendants’ motion to dismiss.
Medical Benefit Claims
Atlantic Shore Surgical Assocs. ex rel. Je v. United Healthcare Ins. Co., No. 3:20-CV-03065, 2021 WL 2411373 (D.N.J. June 14, 2021) (Judge Freda L. Wolfson). Plaintiff, a health care provider, sued defendants, the health plan insurer and the employee benefit plan itself, after its claims for out of network medical services went unpaid. Defendants moved to dismiss on the basis of an anti-assignment clause within the plan documents, which plaintiffs contended was unenforceable. The court found plaintiff's interpretation of the clause in question "untethered" from the proper context, instead finding that the plain language "clearly prohibits benefit assignments" and that the language plaintiff alleged undermines the anti-assignment clause merely "provides further explanation," which does not render the clause unenforceable. As such, the court granted defendant’s motion to dismiss.
Pension Benefit Claims
Masten v. Metro. Life Ins. Co., No. 18-CV-11229 (RA), 2021 WL 2418464 (S.D.N.Y. June 14, 2021) (Judge Ronnie Abrams). Plaintiffs William Masten and Catherine McAlister brought a putative class action against MetLife alleging that their retirement plan’s use of outdated mortality tables to calculate alternative benefits violated the requirements of ERISA. They claimed that the Plan’s use of mortality tables from 1971 and 1983 to convert default retirement benefits into the alternative benefits that they opted to receive constitute unreasonable actuarial assumptions, in violation of the statutory requirement that alternative benefits be “actuarially equivalent.” MetLife moved to dismiss on the pleadings. The court held that the absence of specifications as to “what conversion factors or range of assumptions” would be considered reasonable—or would be necessary for actuarial equivalence—did not constitute a “fatal defect” mandating dismissal of the complaint. Requiring plaintiffs to specify what set of assumptions would be reasonable would impose a pleading standard that was more stringent than that required by ERISA or the Federal Rules of Civil Procedure. It was sufficient that plaintiffs’ factual allegations alleged the use of outdated mortality assumptions reduced the present value of their benefits by more than $7,000 each. The court also held that ERISA required the Plan administrators to use reasonable assumptions when converting single life annuities into alternative benefits. The court next determined that plaintiffs had stated a plausible claim under ERISA’s non-forfeiture requirements. Finally, the court held that dismissal was not warranted under RISA’s statute of limitations or exhaustion requirements.
Wehner v. Genentech, Inc., No. 20-CV-06894-WHO, 2021 WL 2417098 (N.D. Cal. June 14, 2021) (Judge Williams H. Orrick). In this class action 401(k) plan fee case, defendants moved to dismiss the first amended complaint, arguing that plaintiff failed to sufficiently compare the plan’s fees with other plans using other recordkeepers. The court agreed that the allegations in the coplaint failed to focus on the specific services the recordkeeper provided to the specific plan at issue. However, the court declined to dismiss the allegations because Appendix B to defendant’s motion to dismiss provided a comparison of the kind of services that Fidelity provides to the plan at issue and the kinds of services other providers perform for the fifteen comparator plans. The court also declined to dismiss plaintiff’s allegation that the per participant recordkeeping and administrative fee was unreasonable. The court did, however, grant defendant’s motion to dismiss the claims that defendants’ selection and retention of the Roche custom target date funds were inappropriate investments due to poor performance because plaintiff’s allegations were too general to allege imprudence.
Pleading Issues & Procedure
Digiovine v. Saudi Arabian Oil Co., No. 1:19-cv-04595, 2021 WL 2454211 (N.D. Ill. June 16, 2021) (Judge Charles Ronald Norgle). The court granted defendant’s motion to dismiss under Rule 12(b)(5) for insufficient service of process. The Rule 12(b)(5) argument hinged on the Foreign Sovereign Immunities Act of 1976 (“FSIA”), specifically 28 U.S.C. § 1608(b), which details the requirements for service of process on an instrumentality of a foreign state. The court determined that FSIA applied because the defendant was an instrumentality of the Kingdom of Saudi Arabia and ERISA did not override the FSIA’s service requirements.
Kurisu v. Svenhard Swedish Bakery Supp. Key Mgmt. Ret. Plan, No. 20-cv-06409, 2021 WL 2474439 (N.D. Cal. June 17, 2021) (Judge Edward M Chen). Plaintiffs worked for Svenhard Swedish Bakery for over 30 years and were participants in its Retirement Plan (the “Plan”) established for its employees. In November 2019, Svenhard sold almost all of its assets to United States Baker, Mountain States Bakeries LLC and Central California Baking Company (hereinafter the “Bakery Defendants”). As part of the sale, the Bakery Defendants were obligated to make the payments under the Plan. Plaintiffs, who retired in 2017 and early 2019, respectively, allege that they have not been paid the full amount of retirement benefits owing. To that end, plaintiffs filed suit against the Plan, individuals who allegedly administered the Plan and the Bakery Defendants, seeking the full amount of benefits. The Bakery Defendants filed a motion to dismiss on the grounds of improper venue and failure to state a claim upon which relief can be granted. The court addressed the improper venue ground only. The court explained that there is no such thing as “pendent party venue” and that the burden is on plaintiffs to establish that venue is proper as to each defendant, including the Bakery Defendants. The court held that plaintiffs were unable to establish venue as to the Bakery Defendants under the ERISA venue provision as the Bakery Defendants were located in Oregon, the Plan was administered in Oregon and the alleged breach took place in Oregon. The motion to dismiss was denied, but the claims against the Bakery Defendants were severed and transferred to the District of Oregon.
Dunn v. SW Airlines Co. Voluntary Sep. Program 2020, No. 20-CV-3535-WJM-STV, 2021 WL 2416469 (D. Colo. June 14, 2021) (Judge William Martinez). Defendants filed a motion to transfer venue based on the plan’s forum selection clause. The court opined that a plaintiff’s forum choice has no weight when a there is a valid forum selection clause in an ERISA plan. The court was not swayed by plaintiff’s arguments that the venue transfer would be burdensome for him because he would need to travel to court proceedings. Defendants’ motion to transfer venue based on the forum selection clause was granted.
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Note from the Your ERISA Watch editors:
Your ERISA Watch is edited by Elizabeth Hopkins and Peter Sessions. Each week our goal is to provide you with the benefit of the expertise of knowledgeable ERISA litigators who are on the frontline of benefit claim and fiduciary breach litigation. Although our firm represents plaintiffs, we strive to provide objective and balanced summaries so they are informative for the widest possible audience.
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