Row of ERISA attorneys

Your ERISA Watch - Healthcare Provider's Bankruptcy Successor May Sue Under an Assignment of Benefits

Your ERISA Watch – Healthcare Provider's Bankruptcy Successor May Sue Under an Assignment of Benefits

Bristol SL Holding Inc. v. Cigna Health & Life Ins. Co., No. 20-56122, __ F.4th __, 2022 WL 129139 (9th Cir. Jan. 14, 2022) (Before Circuit Judges Kleinfeld, Nelson, and Vandyke).
 
The Ninth Circuit has accomplished the seemingly impossible by making an issue of derivative standing to file suit appear straightforward in a short, published decision this week. 
 
A mental health and substance abuse treatment center called Sure Haven was bankrupted when Cigna stopped reimbursing the company for services Sure Haven regularly provided to Cigna insureds. Plaintiff Bristol SL Holdings became the successor-in-interest to Sure Haven through a bankruptcy proceeding.
 
Sure Haven was an out-of-network provider for Cigna. Bristol claimed that Sure Haven obtained benefit assignments and always called to verify and seek authorization for benefit coverage before treating Cigna-covered patients. Despite these calls, Cigna ultimately began denying all claims submitted by Sure Haven. The parties dispute the contents of the verification calls and the reason for the denials.
 
Bristol filed suit asserting numerous state-law causes of action and an ERISA claim for benefits. The district court dismissed the ERISA claim with prejudice, holding that neither the text of ERISA nor the law of the Ninth Circuit permit an assignee of a healthcare provider to file suit for plan benefits.
 
The Ninth Circuit disagreed. The court first noted that it was well established that healthcare providers can assert derivative claims as assignees of their patients’ benefit claims. The district court had relied on a Ninth Circuit decision, Simon v. Value Behavioral Health, Inc., which had recognized limits to this kind of derivative standing. The court of appeals, however, saw Simon as distinguishable. Unlike Simon, which involved the aggregation by an attorney of hundreds of unrelated claims from numerous different health facilities, Bristol, as successor-in-interest to one healthcare provider whose claims were all denied for the same reason, brought claims that were much more focused and specific. Thus, the concern expressed by the Simon court with commodifying healthcare claims was absent in this case.   
 
The Ninth Circuit also reasoned that permitting standing in this situation would align with ERISA’s protective goals, while denying standing to sue would create perverse incentives by essentially allowing an insurer that succeeds in bankrupting a provider to get off scot-free. Finally, the court noted that several other circuits had extended ERISA standing beyond the healthcare provider itself. The court saw its holding as “a modest one: We hold only that the first assignee as a successor-in-interest through bankruptcy proceedings who owns all of one healthcare provider’s health benefit claims has derivative standing.”           
 
A short and, for the plaintiff, sweet decision. 
 
For the Ninth Circuit’s unpublished disposition of the remaining issues in the case, and many other interesting ERISA developments, keep reading.

Below is a summary of this past week’s notable ERISA decisions by subject matter and jurisdiction.
 
Attorneys’ Fees
 
Eighth Circuit
Hartman v. The Lincoln Nat’l Life Ins. Co., No. 4:20 CV 579 MTS, 2022 WL 103313 (E.D. Mo. Jan. 11, 2022) (Judge Matthew T. Schelp). Plaintiff Lydia Hartman moved for entry of final default judgment, and for an award of attorney’s fees and costs against defendant Patriot National, her plan’s administrator and sponsor. Ms. Hartman commenced the suit after her application for life insurance benefits for her late husband was denied. Ms. Hartman alleged that Patriot breached its fiduciary duties by failing to comply with its policy obligations, failing to correctly process her claim, and misleading her and her husband about her husband’s participation in the plan and entitlement to life insurance benefits. Although Patriot was served with the summons and complaint, it never responded. The court entered default judgment against Patriot on August 3, 2020, and provided notice of the entry of default judgment to Patriot. Patriot then filed a motion of opposition. The court granted Ms. Hartman’s motion for entry of final default judgment. Because the benefit amount at issue was capable of being ascertained on the facts of the record, the court easily determined the appropriate amount due to Ms. Hartman was the $100,000 life insurance policy she was deprived by Patriot’s breach of fiduciary duty. The court further granted Ms. Hartman’s motion for attorney’s fees and costs. Plaintiff’s counsel Adam J. Olszeki was awarded his requested $300 hourly rate, which was determined reasonable for attorneys of his experience in the St. Louis area. His requested hours of “no less than thirty hours of work” were also found reasonable. The court awarded Mr. Olszeki $10,000 in attorney’s fees. Plaintiff’s motion for the sole cost of the $400 filing fee was also granted. Because Ms. Hartman provided sufficient evidence supporting her case, the court ordered Patriot to pay Ms. Hartman a total amount of $110,400.00.
 
McIntyre v. Reliance Standard Life Ins. Co., No. 17-5134, 2022 WL 126236 (D. Minn. Jan. 13, 2022) (Judge John R. Tunheim). Plaintiff Melissa McIntyre brought suit against Reliance Standard Life Insurance Company following the termination of her long-term disability benefits. The court reviewed the parties’ cross motions for summary judgment and granted judgment in favor of Ms. McIntyre. After an appeal to the Eighth Circuit, the court of appeals vacated and remanded, instructing the district court to apply the abuse of discretion review standard. The district court did so, and once again granted summary judgment in favor of Ms. McIntyre. Ms. McIntyre moved for an award of attorneys’ fees and costs for the litigation. The court applied the Westerhaus factors and found Ms. McIntyre was entitled to an award of fees. First, the court held Reliance’s 114-day delay in issuing its denial on the claim was egregious and violated ERISA’s statuary mandates. This constituted bad faith and weighed in favor of awarding fees. Second, as Reliance has total assets of $17.5 billion, it would be able to satisfy an award of fees. Next, an award of fees would have a deterrent effect. Finally, Ms. McIntyre was awarded summary judgment not once, but twice, and thus had success on the merits. Ms. McIntyre requested a total amount of $72,542.44 in fees and costs, in addition to the $50,000 the court ordered Reliance to pay prior to its first appeal. Reliance did not dispute that it had previously agreed to pay $50,000, nor did it contest the reasonableness of that amount. However, Reliance argued that Ms. McIntyre was not entitled to $32,895.00 associated with fees and costs incurred on appeal, and Ms. McIntyre should have brought a motion for fees in the Eighth Circuit for this amount. The court disagreed and found the requested amount reasonable especially given her “complete success” in the case. Specifically, the court found the lodestar amount based on the hourly rate of “$425/hour for Katherine MacKinnon who billed a total of 155.2 hours and a rate of $275/hour for Nicolet Lyon who billed a total of 22 hours.” The requested $71,925.00 was appropriate given the attorneys' extensive ERISA experience, and their requested rates were in line with the local legal market rates. The $617.44 in costs was also determined to be reasonable. Accordingly, the motion for attorneys’ fees and costs was granted.
 
Breach of Fiduciary Duty
 
Eleventh Circuit
Huang v. Trinet HR III, Inc., No. 8:20-cv-2293-VMC-TGW, 2022 WL 93571 (M.D. Fla. Jan. 10, 2022) (Judge Virginia M. Hernandez). In this proposed class action, plaintiffs are participants in the TriNet 401(k) Plan and the TriNet Select 401(k) Plan, two multi-employer defined contribution plans. Plaintiffs alleged defendants breached their fiduciary duties by selecting and maintaining poorly performing actively managed funds with retail level fees rather than passively managed funds with institutional level recordkeeping and administrative fees, despite the plans’ large sizes and billions in assets. According to plaintiffs, such investments were imprudent and fiduciaries “to a large defined contribution plan as the Plans (here) can use its asset size and negotiating power to invest in the cheapest share class available,” something defendants failed to do. Finally, plaintiffs asserted that defendants failed to monitor the plans’ recordkeeping expenses charged by the third party recordkeepers TriNet employed. Defendants moved to dismiss all claims. As an initial matter, the court denied defendants’ request to include 1,000 pages of submitted documents as part of its review of the complaint or to take judicial notice of them. The court found this request during a motion to dismiss inappropriate, stating, “here, many of the documents submitted by Defendants are precisely the sort of evidence that might be submitted at summary judgment or at trial and subject to the typical rules for admission.” Therefore, the court declined to take judicial notice of the submitted documents except for the ERISA Plans themselves. Defendants argued that plaintiffs’ claims should be dismissed because: (1) plaintiffs’ use of the ICI Median to compare expense ratios was erroneous and an inappropriate comparison, (2) six of the nine challenged investments actually invested in the lowest-cost share class available, and (3) defendants' process for selecting the plans’ recordkeepers followed appropriate procedures in line with standard practices of other defined contribution plans. All of these arguments were found by the court to entail factual disputes, warranting discovery, and therefore appropriate only for later stages of the litigation. Plaintiffs’ allegations, as currently pled, were seen by the court as sufficient to plausibly allege the precise fiduciary breaches asserted. Accordingly, defendants’ motion to dismiss was denied.
 
Romano v. John Hancock Life Ins. Co., No. 19-21147-CIV-GOODMAN, 2022 WL 123905 (S.D. Fla. Jan. 14, 2022) (Magistrate Judge Jonathan Goodman). Trustees of a 401(k) plan, plaintiffs Eric and Todd Romano, brought a lawsuit against defendant John Hancock Life Insurance Company. Through a financial advisor, plaintiffs purchased a group variable annuity contract from John Hancock to perform recordkeeping services and make investments for the plan. John Hancock referred to such accounts as “Separate Accounts,” which were administered, managed, and owned by John Hancock, “but they are not chargeable with any of John Hancock’s liabilities outside of the group annuity contracts and recordkeeping agreements.” The separate accounts were then divided into “sub-accounts” corresponding to mutual funds and other investment options. In this arrangement, John Hancock pools the combined contributions to the sub-accounts, and then functions as a single shareholder buying and selling investments. Unbeknownst to plaintiffs at the time they entered into agreement with John Hancock, John Hancock was investing heavily in stocks and securities of foreign companies. These investments receive Foreign Tax Credits (“FTCs”), of which John Hancock alone was reaping the benefits. Plaintiffs alleged that John Hancock breached its fiduciary duty of loyalty by receiving the FTCs, resulting in reduction in the value of the plan’s assets. What’s more, none of the contracts or disclosures provided by John Hancock to participants disclosed it was receiving foreign tax credits from the shares owned in the separate accounts. Plaintiffs also allege that John Hancock caused the plan to enter into a prohibited transaction by not crediting the plan with the value of the FTCs. By not passing through the FTCs' benefits to the plans, “whose assets are reduced by the amount of the paid foreign taxes,” John Hancock profited from the FTC benefits from the plans in excess of $100 million during a six-year time period. Plaintiffs moved to certify a class of similarly situated trustees of defined contribution plans with which John Hancock had group annuity contracts that passed through FTCs to John Hancock. First, the court was satisfied that plaintiffs had standing to bring suit. By keeping more than $100 million which it should have credited to plaintiffs, plaintiffs suffered a concrete injury in fact. The court then turned to class certification under Rule 23(a) and Rule 23(b). Under Federal Rule of Civil Procedure Rule 23(a), plaintiffs met the numerosity, typicality, and adequacy of representation requirements easily. The only requirement which required much analysis was commonality. Plaintiffs argued that commonality exists because John Hancock’s conduct was uniform. It utilized form contracts and treated all the plans the same with respect to its FTCs, and it failed to disclose its receipt and retention of the FTCs in any documents. This argument was persuasive to the court, and the commonality requirement was satisfied. Similarly, the court concluded that Rule 23(b)’s requirement of the common question of law predominating was satisfied thanks to these same common forms and practices. The court summarized the core issue in the suit as “whether John Hancock is a fiduciary and whether it breached its statutory fiduciary duties and engaged in prohibited transactions.” Finally, the second requirement of Rule 23(b) (that a class be superior to other methods of adjudication) was satisfied because separate actions by each member of the class would be duplicative and wasteful, and thus would burden the courts. For the foregoing reasons, plaintiffs’ motion was granted.
 
Disability Benefit Claims
 
Second Circuit
Milano v. Provident Life & Cas. Ins. Co., No. 21-97-cv, __ F. App’x __, 2022 WL 103314 (2nd Cir. Jan. 11, 2022) (Before Circuit Judges Jacobs, Raggi, and Nardini). Plaintiff-appellant Alfred Derf Milano appealed the district court’s judgment dismissing his disability benefits ERISA suit. On appeal, the Second Circuit did not find the district court’s decision clearly erroneous. The lower court’s findings were all supported by the medical record. As for Mr. Milano’s self-reported symptoms, the Second Circuit concluded that district court had not discounted them but had rather found contradicting evidence in some of the treating doctors’ notes to be more persuasive. Nor did the district court err in reviewing the reports of defendants-appellees’ experts, and concluding Mr. Milano was not disabled as defined by the plan and was able to perform the material duties of his job. Altogether, the Second Circuit found that the lower court conducted a comprehensive review of the administrative record, and its conclusions based on that record were reasonable. The Second Circuit therefore affirmed the district court’s dismissal.
 
ERISA Preemption
 
Third Circuit
Gotham City Orthopedics, LLC v. United Healthcare Ins. Co., No. 21-11313 (KM) (MAH), 2022 WL 111061 (D.N.J. Jan. 12, 2022) (Judge Kevin McNulty). Healthcare practice and surgery center Gotham City Orthopedics, LLC (“Gotham”) performed surgeries on seven United Healthcare Insurance Company (“United”) insureds after receiving pre-approval of the surgeries from United. United, however, paid only a small fraction of the amount billed by Gotham for the surgeries. Gotham then sued United in state court for breach of implied in fact contract, breach of implied covenant of good faith, promissory estoppel, and negligent misrepresentation. United removed the case to federal district court, and then moved to dismiss the state law claims due to ERISA preemption and failure to state a claim. The court held that Third Circuit controlling precedent made clear that the state law claims are not preempted by ERISA. The claims require only cursory examination of ERISA plans, and plaintiff, as a provider, is neither a plan participant nor beneficiary and therefore not included in ERISA’s “civil enforcement scheme.” Further, the obligation alleged between the provider and the insurance company “was created when United represented or implied that it would cover the surgeries that Gotham performed.” As ERISA was found not to preempt the state-law claims, the court turned to United’s motion to dismiss for failure to state a claim. The court denied the motion as to breach of implied contract, promissory estoppel, and negligent misrepresentation, but granted as to the breach of implied good faith and fair dealing claim. The complaint did not sufficiently allege that United did anything beyond paying too little for the surgeries, and therefore did not satisfy the requirements necessary to state such a claim for breach of implied good faith.
 
Feldman v. Nat’l Benefits Network, Inc., No. 2:21-CV-00419-CCW, 2022 WL 125371 (W.D. Pa. Jan. 13, 2022) (Judge Christy Criswell Wiegand). Plaintiff Max C. Feldman brought suit alleging defendants intentionally failed to disclose and misrepresented material facts relating to the creation and continued contributions to the pension plan Mr. Feldman created. Mr. Feldman sued in state court alleging state law claims of fraud, negligent misrepresentation, unjust enrichment, breach of fiduciary duty, and a violation of the Pennsylvania Unfair Trade Practices and Consumer Protection Law. Defendants removed the action to the federal district court based on complete ERISA preemption. Mr. Feldman moved to remand. The court held that defendants met their burden of establishing federal jurisdiction under both prongs of the Supreme Court's decision in Davila and denied the motion to remand. First, defendants were able to prove the plan at issue is an ERISA plan. Mr. Feldman argued that his complaint focuses on pre-plan actions, which the Third Circuit has found are not expressly preempted. However, the court held that Mr. Feldman’s complaint alleges wrongdoing related to both pre-plan and post-plan actions. Based on the allegations in the complaint, the court held that fiduciary breach claims could have been brought under Section 502(a)(2), satisfying the first prong of the complete preemption test. Additionally, the same possible fiduciary breaches arose due to advice regarding the plan assets during the existence of the plan. As this fiduciary obligation depended on the ERISA plan, the second prong of complete preemption was satisfied.
 
Sixth Circuit
Hester v. Whatever It Takes, No. 3:21-CV-578-RGJ, 2022 WL 89176 (W.D. Ky. Jan. 7, 2022) (Judge Rebecca Grady Jennings). Plaintiff Kenneth Hester sued defendants, Whatever It Takes Transmissions & Parts, Inc. and its deferred compensation plan, in state court alleging defendants breached their fiduciary duties related to the plan and seeking benefits due under the plan. Defendants removed the case to federal court. Before the court were Mr. Hester’s motions to remand to state court and for attorney’s fees, and defendants’ motion to dismiss under Federal Rule of Civil Procedure 12(b)(6). At issue was ERISA preemption, and to determine that, the court had to address whether the plan in question is a top hat plan, which the parties acknowledged would be governed by ERISA, or rather a non-qualified bonus plan, which would not be. This issue turned out to be a real head-scratcher for the court. The plan states that it is “a non-qualified deferred compensation plan…designed to provide specific benefits to a select group of management and highly compensated employees who contribute materially to the continued growth, development, and future business success of (the company).” In trying to determine what type of plan it is, the court noted that “the Plan seems to say that it both is and is not a Top Hat Plan – the language refers to the ‘select group of management’ that it seeks to compensate, but it also is ‘intended to be exempt from otherwise applicable provisions of (ERISA).’ It seeks to be administered by Department of Labor Regulations but be enforced by the laws of Kentucky.” Because the plan had qualities of both a top hat plan and a bonus plan, and the clarity of frosted glass, the court could not definitively determine that the plan was ERISA-governed so as to confer jurisdiction. The court therefore concluded that doubts in the case should be resolved in favor of remand and granted Mr. Hester’s request to remand to state court. However, because the case was being remanded because of ambiguity as to what type of plan it is, the court denied the request for attorney’s fees and costs. Finally, defendants’ motion to dismiss was denied as moot.
 
Cruz v. Standard Ins. Co., No. 2:21-CV-139 (WOB-EBA), 2022 WL 109197 (E.D. Ky. Jan. 11, 2022) (Judge William O. Bertelsman). Plaintiff Julie Cruz is an insured member of the St. Elizabeth Medical Center long-term disability plan. Following a denial of her claim for disability benefits, Ms. Cruz brought suit for breach of contract against defendant Standard Insurance Company, the plan’s sponsor and claims administrator, in state court. Standard removed the case to the federal district court citing ERISA preemption. Ms. Cruz moved to remand the case. The main issue in the decision was whether the disability plan was a “church plan” and thus whether ERISA's “church-plan exemption” applied. St. Elizabeth Medical Center, while associated with the Catholic church, is itself not a church or church association. What’s more, the court held that St. Elizabeth’s principal purpose was “to provide healthcare according to the clear mandate of its articles of incorporation, not to provide benefits to employees of a church.” The court therefore concluded that St. Elizabeth was not a "principal purpose organization," and the church-plan exemption was not applicable. For this reason, the court found that ERISA preempted the breach of contract claim, and the court had federal question jurisdiction. Accordingly, the motion to remand was denied.
 
Life Insurance & AD&D Benefit Claims
 
Fourth Circuit
Allen v. MetLife, No. 5:21-CV-174-D, 2022 WL 97178 (E.D.N.C. Jan. 10, 2022) (Judge James C. Dever). On November 19, 2019, plaintiffs Kathy Allen and Jay Allen, the adult children of decedent Rebecca Johnson, sued defendants Metropolitan Life Insurance Company, ITT Industries, Harris EXELIS, Mercer Health Benefits Administration, and Lincoln Heritage Life Insurance, Co. seeking Rebecca Johnson’s life insurance policy benefits and damages in state court. After defendants removed the case to the district court, the Allens voluntarily dismissed their claims. Then on March 16, 2021, the Allens filed this suit, pro se, again in state court, and defendants again removed to federal court. The Allens then dismissed MetLife, Mercer, and Lincoln as defendants, leaving only Harris. Harris moved to dismiss. Ms. Johnson’s life insurance plan was terminated on January 1, 2016. Ms. Johnson was informed that she could convert her group life insurance to an individual policy from MetLife, and that the due date to convert was January 31, 2016. It appears Ms. Johnson never converted her policy. Then in March of 2016, she died. Defendant Harris argued that the case should be dismissed because (1) ERISA preempts the state law claims, (2) the plan was validly terminated and Harris was not acting as a fiduciary when it did so, and (3) the Allens failed to exhaust administrative remedies, and (4) the claims, having been brought after the statute of limitations had run, were time-barred. The court agreed with all of Harris’ arguments. The state law claims for breach of contract, negligence, fraud, tortious interference, wrongful death, bad faith, and unfair trade practices were all preempted by ERISA. The court agreed that the amendment terminating the plan was proper, and that Harris was not acting as a fiduciary when it amended the plan. Finally, the court found the case, brought in 2021, was not timely because the death occurred in 2016 and more than three years had passed since the Allens had actual knowledge. Although the Allens originally brought a case in 2019, they voluntarily dismissed it. For these reasons, the motion to dismiss was granted with prejudice.
 
Sixth Circuit
D.S.S. v. Prudential Ins. Co. of Am., No. 21-5315, __ F. App’x __, 2022 WL 95165 (6th Cir. Jan. 10, 2022) (Before Circuit Judges Suhrheinrich, Stranch, and Murphy). Plaintiffs D.S.S. and Javey Brown brought suit in 2020 under ERISA and several state laws seeking life insurance benefits of their mother, Jancita Malone. Ms. Malone died on March 18, 2014. The executor of her estate contacted Prudential and Time Warner, her former employer, inquiring about the children’s rights to the life insurance benefits. The executor was informed that the benefits had already been paid to another relative who was the sole designated primary beneficiary of the plan. The district court entered summary judgment in favor of defendants concluding that ERISA preempted the state law claims, and the ERISA claim was time-barred. Plaintiffs appealed. The Sixth Circuit affirmed the district court’s decision. In their appeal, the children did not contest preemption, that the proper limitations period to file suit was one year, or that their breach of fiduciary duty claim was abandoned. Instead, they argued regarding “when the cause of action accrued, whether the limitations period expired, and whether it was tolled.” The children first argued that, pursuant to plan terms, Prudential was required to employ an administrative process, and having failed to, the cause of action for benefits had never accrued. The court, however, concluded that when Prudential informed the executor on December 31, 2014, that the proceeds had been paid to the named beneficiary, this act constituted a clear repudiation of benefits that started the clock on the limitations period. The second argument, that the limitations period was tolled because no written notice of the plan’s one-year period was given, was no more persuasive to the court. Nor was their argument that the statute of limitations period was tolled because they were minors. This argument failed to save their claims because the older son, and the only one with a viable claim as the named contingency beneficiary, became an adult in 2016. Applying this date, the claim lapsed a year later in 2017. As the case was not brought until 2020, it was still found to be untimely. Accordingly, the district court’s judgment was upheld.
 
Pension Benefit Claims
 
Ninth Circuit
Sobh v. Phoenix Graphix, Inc., No. CV-19-05277-PHX-ROS, 2022 WL 112227 (D. Ariz. Jan. 12, 2022) (Judge Roslyn O. Silver). Plaintiff Sam Sobh brought suit against his former employer Phoenix Graphix seeking a hardship distribution of his pension plan, as well as a state law claim for unpaid wages, and a fiduciary breach claim and associated penalties for failure to produce plan documents upon request. The court was frustrated with Mr. Sobh because he could have received plan benefits by April of 2019 had he simply completed the necessary forms. Instead, he filed his lawsuit on November 14, 2018, and the litigation did not result in him obtaining his benefits earlier than April 2019, even had he been successful on his claim for a hardship distribution, which he had already lost in the litigation. Mr. Sobh continued to pursue his three remaining claims, for breach of fiduciary duty, statutory penalties, and unpaid wages. Mr. Sobh moved for summary judgment on his claim for not providing copies of the SPDs and requested an award of $250,000. Defendants moved for summary judgment on all three claims. The court granted summary judgment to Mr. Sobh on his claim for failure to provide documents, but only awarded him $2,750 as a penalty. Although Mr. Sobh made requests for SPDs as early as March 2016, and did not receive the appropriate documents until December 2019, the court found the document requests made before September 17, 2019, were either time-barred or overly vague. It wasn’t until September 17, 2019 that the request was clear, according to the court, and it was 30 days from this time when defendants needed to produce the documents. The court found an award of half of the maximum ($55 for 50 days totaling $2,750) to be appropriate given Mr. Sobh’s behavior. As for Mr. Sobh’s fiduciary breach claim, because it was duplicative of his Section 502(c)(1) claim, the court found defendants entitled to judgment on the claim. The court found Mr. Sobh’s unpaid wage claim untimely, and granted defendants summary judgment on this claim. Finally, the court communicated that either party may file a post-judgment motion to request an award of attorneys’ fees if it wishes to do so.
 
Pleading Issues & Procedure
 
Fourth Circuit
Williams v. Centerra Grp., No. 1:20-cv-04220-SAL, 2022 WL 88586 (D.S.C. Jan. 7, 2022) (Judge Sherri A. Lydon). Plaintiffs are employees of Centerra Group, LCC, and participants in Centerra’s defined contribution retirement plan. Plaintiffs allege defendants made imprudent investments that resulted in losses for participants’ retirement savings. They brought claims under ERISA Sections 502(a)(2) and (a)(3). Plaintiffs included in their complaint a demand for jury trial, or in the alternative, an advisory jury. Defendants moved to strike the jury trial demands. The court granted defendants’ motion, holding that claims under ERISA are equitable in nature, and thus there is no right to a jury trial. Plaintiffs countered that because one of their claims for relief sought compensatory damages, a traditionally legal form of legal relief, they are entitled to a jury trial under the Seventh Amendment. Following Fourth Circuit precedent for jury demands in suits with Section 502(a)(2) and (a)(3) trials, the court found the relief sought to be equitable, not legal, and struck the jury demand. The alternative request for an advisory jury was also struck. The court was not persuaded by plaintiffs’ argument that an advisory jury would promote judicial economy. To the contrary, it appeared to the court that it would “prolong proceedings and increase trial cost.” Nor did the court agree with plaintiff that it was necessary for the community to weigh in on the merits of the case. For these reasons defendants’ motion to strike was granted.
 
Ninth Circuit
In re LinkedIn ERISA Litig., No. 5:20-cv-05704-EJD, 2022 WL 109360 (N.D. Cal. Jan. 12, 2022) (Judge Edward J. Davila). Plaintiffs are participants in a 401(k) plan asserting breach of fiduciary duties under ERISA in this putative class action against the LinkedIn Corporation, its 401(k), the company’s board of directors, and the plan’s committee. Last November, the court granted in part and denied in part defendant’s motion to dismiss for lack of standing and for failure to state a claim as to all of the plaintiffs’ claims except for those based on the Freedom Fidelity funds. Defendants then moved to stay pending Supreme Court decisions in Hughes v. Nw. Univ., No. 141 S. Ct. 2882 (U.S. 2021), and the Ninth Circuit’s decision in Kong v. Trader Joe’s Co., No. 20-05790, 2020 WL 7062395 (C.D. Cal. Nov. 30, 2020). Defendants argued that the upcoming decisions “will be highly instructive, if not entirely dispose of the claims asserted in Plaintiffs’ Complaint.” The court disagreed, as the question in this case is whether a passively managed fund can serve as a comparable benchmark for an actively managed fund, and neither the Hughes nor the Kong case will address that question. The court also pointed out that LinkedIn had presented the same arguments in its motion to dismiss as it now makes in its motion to stay. As the court was able to rule on the motion to dismiss without relying on the forthcoming decisions, the court was “hard-pressed to understand how those appeals would resolve Plaintiffs’ remaining claims.” Furthermore, the court held that staying the case would unduly delay and prejudice plaintiffs’ ability to develop facts necessary for their case. For these reasons, the motion to stay was denied.
 
Bristol SL Holdings, Inc. v. Cigna Health & Life Ins. Co., No. 20-56122, __ F. App’x __, 2022 WL 137547 (9th Cir. Jan. 14, 2022) (Before Circuit Judges Kleinfeld, Nelson, and Vandyke). This decision is the second, and unpublished half, of the case which is this week’s notable decision. The dispute at issue revolves around $8.6 million worth of services a healthcare treatment center provided to Cigna’s insureds. The district court ruled for Cigna on all claims. Plaintiff appealed, arguing the district court erred by “(1) granting Cigna’s motion for summary judgment on the breach of contract and promissory estoppel claims; (2) dismissing Bristol’s ERISA claim; (3) dismissing Bristol’s fraudulent inducement claim; and (4) denying Bristol leave to file a third amended complaint.” The Ninth Circuit affirmed in part and denied in part. First, the Ninth Circuit concluded the district court erred in granting Cigna’s motion for summary judgment on the breach of contract and promissory estoppel claims because Bristol had presented sufficient evidence to create a genuine dispute of material fact regarding the formation of an enforceable contract. Because Bristol introduced evidence of authorization phone calls, prior dealings with Cigna, treatment plans, and percentages of rates for the services provided, there was sufficient evidence that could lead a reasonable person to believe an enforceable contract had been established. The Ninth Circuit found that the district court improperly discounted and ignored this evidence in determining no contract had been created. Accordingly, the Ninth Circuit reversed the summary judgment decision on breach of contract and promissory estoppel. However, the court affirmed the district court’s dismissal of the fraudulent inducement claim because Bristol could not prove that the circumstances at issue constituted fraud. Finally, the Ninth Circuit concluded that the district court did not abuse its discretion in denying plaintiff’s motion for leave to file a third amended complaint.
 
Retaliation Claims
 
Second Circuit
Toussaint v. Interfaith Med. Ctr., No. 21-CV-1100 (ARR) (JRC), 2022 WL 118722 (E.D.N.Y. Jan. 12, 2022) (Judge Allyne R. Ross). Plaintiff Jessie Toussaint brought suit against her former employer, Interfaith Medical Center, as well as other named defendants for wrongful termination to prevent her from obtaining health and pension benefits, and against defendant Local 1199 SEIU United Healthcare Workers East for failing to fairly represent her in her grievance process. Ms. Toussaint asserted claims under LMRA, NLRA, and ERISA, as well as several state law claims. Defendants moved to dismiss under Federal Rule of Civil Procedure 12(b)(6). Defendants claimed that Ms. Toussaint, who worked as a patient care technician, was fired for cause, following an incident where a patient under her watch attacked two security guards and struck another patient in the eye. Defendants asserted Ms. Toussaint witnessed the event and failed to report the incident of patient abuse. Ms. Toussaint contested this assertion, and claimed she was not in the room, nor did she witness the event that had occurred. The New York State Justice Center for the Protection of People with Special Needs investigated the incident and determined that the allegations against Ms. Toussaint were unsubstantiated. Nevertheless, the court found that Ms. Toussaint’s Section 510 claim did not meet her prima facie burden. Her allegations that her employer was motivated by a desire to interfere with pension benefits was based on “information and belief,” but was lacking in supporting facts. The timing of her termination also led the court to believe the termination was not connected to a desire to prevent Ms. Toussaint from receiving benefits. In this instance, her benefits “had been vested for years, and she was about ten years from being eligible for ‘full pension payouts.’” Accordingly, the court granted the motion to dismiss the ERISA cause of action, along with the rest of Ms. Toussaint’s complaint. The court thus dismissed Mr. Toussaint’s claims with prejudice and closed the case.
 
Fifth Circuit
Wilson v. L&B Realty Advisors LLP, No. 3:20-CV-2059-G, 2022 WL 102564 (N.D. Tex. Jan. 11, 2022) (Judge A. Joe Fish). Plaintiff Terry Wilson filed suit against defendants L&B Realty Advisors, LLP, his former employer, and George Andrews Smith, L&B Realty’s CIO, alleging wrongful termination that violated the Age Discrimination Employment Act (“ADEA”), the FMLA, Section 510 of ERISA, and the Texas Commission on Human Rights Act. Following a cancer diagnosis, Mr. Wilson was placed on a “high-cost claimant” report. In addition, Mr. Wilson was also placed on a list of senior employees reaching “Medicare age” of 65. Throughout his employment, Mr. Wilson received positive performance reviews. After Mr. Wilson indicated to Mr. Smith that he intended to work for several more years in his position before retiring and having recently returned to work following a brief period of Family Medical Leave to undergo prostate cancer surgery, Mr. Wilson was fired at the age of 64. In his complaint, Mr. Wilson alleged that but for his age and bout of illness he would not have been fired. Defendants moved for summary judgment. The court granted the motion. The court held that Mr. Wilson failed to provide direct evidence of age discrimination. The indirect evidence that Mr. Wilson provided shifted the burden to the employer to provide a legitimate reason for the termination. Defendants explained that they fired Mr. Wilson because his position was eliminated due to declining sales. This explanation by the employer, in conjunction with what the court deemed to be Mr. Wilson’s lack of sufficient evidence that he was fired based on his age, satisfied the court to grant summary judgment in favor of defendants on the ADEA claim. Turning to the ERISA retaliation claim, Mr. Wilson asserted that defendants intended to deprive him of continued access to his health coverage in order to save money in the self-insured healthcare plan. Mr. Wilson argued that Mr. Smith knew of his additional treatment needs when he decided to terminate him. The court, however, found Mr. Wilson failed to produce evidence sufficient to demonstrate that Mr. Smith in fact did know of Mr. Wilson’s cancer diagnosis. Even the facts that Mr. Wilson was terminated only one month after returning from his Family Medical Leave, that he had been placed on a high-cost claimant report, and the known goal of the company to reduce the overall cost of health care spending, did not sway the court that Mr. Wilson had been fired to prohibit him from obtaining healthcare benefits. Thus, on Mr. Wilson’s ERISA claim, as with all of his claims, the court entered summary judgment in favor of defendants.
 
Seventh Circuit
Malko v. CGS Premier Inc., No. 20-CV-1831, 2022 WL 103379 (E.D. Wis. Jan. 11, 2022) (Magistrate Judge Nancy Joseph). In 2019, plaintiff Frank Malko was diagnosed with skin cancer, which later metastasized into his lymph nodes. At the time he was employed by defendant CGS Premier, Inc. CGS terminated Mr. Malko a year after the cancer diagnosis and about six months after the cancer metastasized. Mr. Malko then sued CGS for violations of the Family and Medical Leave Act (“FMLA”), the Americans with Disabilities Act (“ADA”), and brought a retaliation claim under ERISA Section 510. CGS moved for summary judgment. CGS claimed that it fired Mr. Malko for cause because his performance waned. However, the court found that Mr. Malko’s performance waned only during the period when his cancer had metastasized, and he was required to undergo intense treatments and was exercising FMLA rights. It was unreasonable, the court held for the company to hold Mr. Malko to the same standards of performance while on leave as they would have had he been healthy and working full time. As a reasonable jury could conclude that Mr. Malko was fired because he was ill, summary judgment was not granted to defendant on the FMLA or the ADA claims.  However, Mr. Malko’s Section 510 claim was less successful. Mr. Malko was only able to point to the fact that his medical treatments at the time of his termination were very expensive. There was no direct evidence to show that CGS discharged him to prevent further costly health claims. The complaint did no more than speculate that Mr. Malko may have been terminated to deprive him of access to the healthcare plan coverage, or to retaliate against him for filing medical claims. Even construing all facts in the light most favorable to Mr. Malko, the court was not persuaded that the complaint was sufficient, and thus granted CGS summary judgment on this issue.

Note from the Your ERISA Watch editors:

Your ERISA Watch is written and edited by Elizabeth Hopkins and Peter Sessions, with the assistance of Emily Hopkins. 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.

We include recent cases that have been picked up by Westlaw or sent to us by one of our readers. If you have a decision you'd like to see included in Your ERISA Watch, please send it to Elizabeth Hopkins at ehopkins@kantorlaw.net.

If you have any colleagues who might want to receive this free newsletter, they can subscribe here.

And don't forget to check out the ERISA Watch podcast, which tells the true stories behind the cases. The newest episode focuses on the importance of the investment fees at issue in Hughes v. Northwestern University. Former Assistant Secretary of Labor Phyllis Borzi explains why investment fees are matters of great importance to anyone with a pension. 

You can listen to this podcast and other episodes here.

Categories